<PAGE> 1
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
DECEMBER 31, 1997
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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 __________________
COMMISSION FILE NUMBER 1-5492-1
NASHUA CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE 02-0170100
(State of incorporation) (IRS Employer Identification Number)
44 FRANKLIN STREET
PO BOX 2002
NASHUA, NEW HAMPSHIRE 03061-2002
(Address of principal executive offices) (Zip Code)
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 [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 19, 1998 was approximately $96,781,381. The number of
shares outstanding of the registrant's Common Stock as of March 19, 1998 was
6,716,931 (excluding 24,064 shares held in treasury).
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II - Portions of Registrant's Annual Report to Stockholders for
the year ended December 31, 1997.
Part III - Portions of the Registrant's Proxy Statement dated March 25,
1998 for the Annual Meeting of Stockholders to be held on April 24, 1998.
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PART I
ITEM 1. BUSINESS
GENERAL
Nashua Corporation's continuing operations consist of three divisions:
Specialty Coated Products, Label Products and Imaging Supplies. For financial
reporting, these divisions comprise the Commercial Products Group. Consolidated
sales for 1997 for continuing operations were $173.2 million. The Company plans
to divest all of its photofinishing operations as described below. The Company
also owns a 37.1 percent interest in Cerion Technologies, Inc. ("Cerion") as
described below. For financial reporting, this holding is reported as a separate
segment.
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, PO 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 March 10, 1998, the Company reached an agreement to sell its
photofinishing operations in the U.S., U.K. and Canada for consideration of
approximately $52.5 million in cash and the assumption of certain liabilities.
Management anticipates that this sale will be consummated in the first half of
1998 and is also continuing discussions for the sale of its photofinishing
business in Northern Ireland. As a result, the Company is exiting all of its
photofinishing operations and has reported this segment as a discontinued
operation in the accompanying consolidated financial statements.
During the second quarter of 1996, Cerion completed its initial public
offering of common stock, which included the sale of shares of its stock owned
by the Company, reducing the Company's ownership of Cerion to 37.1 percent.
Accordingly, the Company no longer consolidates the results of Cerion and has
accounted for its remaining interest under the equity method of accounting since
the completion of the initial public stock offering.
The Company recorded net restructuring and other unusual charges of
$4.3 million in 1997 which included charges in the fourth quarter of $.6 million
related to restructuring the corporate organization, a charge in the third
quarter of $.9 million related to the sale of excess real estate in Nashua, NH,
and a second quarter charge of $2.8 million for costs associated with
restructuring certain distribution channels and aligning the workforce with
levels of demand in the Commercial Products Group.
The Note entitled "Information About Operations" in the Company's
Consolidated Financial Statements, which appears on page 29 of the Company's
Annual Report to Stockholders, contains financial information concerning
Nashua's business segments.
FORWARD LOOKING INFORMATION: This Form 10-K contains forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995. When used in this report, the words "expects," "believes," "can,"
"will" or similar expressions are intended to identify such forward-looking
statements. Such forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ materially from those
anticipated. Such risks and uncertainties include, but are not limited to,
completion of the sales of the Company's photofinishing businesses, the
possibility of a final award of material damages in the Ricoh litigation or the
Cerion litigation, fluctuations in customer demand, intensity of competition
from other vendors, timing and acceptance of new product introductions, and
general economic and industry conditions. For additional discussion of factors
that may affect the Company's performance, refer to those described from time to
time in the Company's other filings with the Securities Exchange Commission,
press releases and other communications.
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COMMERCIAL PRODUCTS GROUP
The Commercial Products Group has three divisions: Imaging Supplies,
Specialty Coated Products and Label Products.
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 and copy paper. The Imaging
Supplies Division sales were approximately $73 million for 1997, $98 million
for 1996 and $137 million for 1995.
Nashua markets its toners, developers, copy paper and remanufactured laser
printer cartridges to national and government accounts through a network of
approximately 150 dealers located throughout the United States. Those dealers
also purchase Nashua's imaging supplies for resale directly to end-users. The
Company also sells certain of those products through its own sales force to
office supply distributors and private label machine and supply
distributors.
Nashua'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 approximately 4,000 small laser printer cartridge
rechargers which provide low volumes to small customers.
SPECIALTY COATED PRODUCTS The Specialty Coated Products Division
manufactures and sells thermal and non-thermal, thermosensitive label, Davac(R)
dry-gummed label, and carbonless papers. Specialty Coated Products Division
sales, excluding inter-divisional sales to the Company's Label Products
Division, were approximately $29 million for 1997, $33 million for 1996 and $35
million for 1995.
Thermal papers develop an image upon contact with either a heated stylus or
a thermal print head. Thermal papers are 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. Another application
for these papers is for use in thermal facsimile machines. 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 the United States, Japan and Europe.
The Division's thermosensitive label papers are coated with an adhesive
that is activated when heat is applied. Those products are usually sold through
fine paper merchants who, in turn, resell them 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(R) dry-gummed label paper is a paper which is coated with a
moisture-activated adhesive. Davac(R) 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.
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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 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 Imation Corporation.
LABEL PRODUCTS The Label Products 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
Products Division is a major supplier of labels to the supermarket industry and
of labels used in the distribution and manufacture of a wide variety of other
products. The label industry is price sensitive and competitive, and includes
competitors such as Moore Corporation Ltd., Rittenhouse Paper Company Inc.,
Hobart Corporation, Avery Dennison Corporation and UARCO, Inc. plus numerous
small regional converters. A significant amount of the thermal paper used by the
Label Division for thermal, pressure-sensitive labels is manufactured by
Nashua's Specialty Coated Products Division. Label Division sales were
approximately $71 million for 1997, $68 million for 1996 and $73 million for
1995.
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 its
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 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 unionized, 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.
CERION TECHNOLOGIES
Cerion, 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.
On May 23, 1996, the Company and Cerion completed an initial public offering of
common stock of Cerion. As a result of the offering, the Company's ownership of
Cerion was reduced to 37.1 percent and, accordingly, the Company no longer
consolidates the results of Cerion and accounts for its remaining interest under
the equity method of accounting.
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 $7.7 million in 1997, $9.2 million in 1996 and
$8.9 million in 1995.
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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 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, 1997 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 1,811 full-time employees at
March 10, 1998, including 750 full-time employees for continuing operations.
Approximately 450 employees of Nashua's Commercial Products Group segment are
members of one of several unions, principally the United Paperworkers
International Union. There are three agreements with the United Paperworkers
International Union covering a majority of the Commercial Products Group's
hourly employees. These agreements generally have a duration of two years and
expiration dates in the first quarter of the respective year.
FOREIGN OPERATIONS
The Company has decided to sell its Photo business and is therefore in the
process of disposing of all of its significant foreign operations as described
more fully in the Note to the Company's Consolidated Financial Statements
entitled "Business Changes" which has been incorporated by reference into Item 8
of Part 2 of this Report. As such, information regarding identifiable assets by
geographic region is reported as discontinued operations in the Note to the
Company's Financial Statements entitled "Information About Operations" which
appears on page 29 of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1997.
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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PRINCIPAL PROPERTIES
SQUARE PRINCIPAL
LOCATION FOOTAGE PRODUCTS PRODUCED
- -------- ------- -----------------
COMMERCIAL PRODUCTS
- -------------------
Merrimack, New Hampshire 545,000 carbonless paper, facsimile
paper, thermosensitive and
dry-gummed label papers,
chemicals, dry toners
Omaha, Nebraska 170,000 pressure-sensitive labels
and laminate paper
Nashua, New Hampshire 198,000 dry toners and developers,
chemicals
Nogales, Mexico 55,000(1) laser printer cartridges
PHOTO(2)
- --------
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 9,500(1) photofinishing
Belfast, Northern Ireland 24,000(1) photofinishing
- ----------
(1) Leased facilities.
(2) The Company intends to dispose of all the listed "Photo" properties, and
related rights and obligations, as part of exiting its photofinishing
operations.
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ITEM 3. LEGAL PROCEEDINGS
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh") brought
a lawsuit in the United States District Court, District of New Hampshire,
alleging the Company's infringement of the U.S. patents 4,611,730 and 4,878,603
relating to certain toner cartridges for Ricoh copiers. In March 1997, the
District Court enjoined Nashua from manufacturing, using or selling its NT-50
and NT-6750 toner cartridges. Sales of these products in 1996 amounted to one
percent of Nashua's total sales. The Court left the subject of damages, if any,
to subsequent proceedings. The Company disagrees with the Court's decision and
has appealed to the United States Court of Appeals for the Federal Circuit. At
the trial, Ricoh alleged that its damages would be approximately $10 million as
of the date of the trial, and the Company alleged that such damages should be in
the range of $.1 million to $.4 million. Ricoh also is seeking treble damages
and attorneys' fees for willful infringement, but the Company believes an award
for such damages is unlikely. The Company is awaiting the District Court's
decision on damages and the Court of Appeals decision.
In August and September 1996, two individual plaintiffs initiated lawsuits
in the Circuit Court of Cook County, Illinois against the Company, Cerion,
certain directors and officers of Cerion, and the Company's underwriter, on
behalf of classes consisting of all persons who purchased the common stock of
Cerion between May 24, 1996 and July 9, 1996. These two complaints were
consolidated. In March 1997, the same individual plaintiffs joined by a third
plaintiff filed a Consolidated Amended Class Action Complaint (the "Consolidated
Complaint"). The Consolidated Complaint alleged that, in connection with
Cerion's initial public offering, the defendants issued materially false and
misleading statements and omitted the disclosure of material facts regarding, in
particular, certain significant customer relationships. In October 1997, the
Court on motion by the defendants, dismissed the Consolidated Complaint. The
plaintiffs filed a Second Amended Consolidated Complaint alleging substantially
similar claims as the Consolidated Complaint seeking damages and injunctive
relief. The Company believes this lawsuit is without merit, has substantial
defenses and intends to vigorously defend against these allegations.
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, 1997, 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 $1.3 million
to $1.5 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 PRPs are unable to bear their allocated share. At
December 31, 1997, 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 the
Company's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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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:
NAME AGE POSITION
- ---- --- --------
Gerald G. Garbacz 61 Chairman, President and Chief Executive
Officer
Daniel M. Junius 45 Vice President-Finance, Chief Financial
Officer and Treasurer
Paul Buffum 53 Vice President, General Counsel and Secretary
Joseph I. Gonzalez-Rivas 42 Vice President
John J. Ireland 46 Vice President
Michael D. Jeans 49 Vice President
Eugene P. Pache 47 Vice President
Bruce T. Wright 48 Vice President
Joseph R. Matson 50 Corporate Controller
Mr. Garbacz has been Chairman of the Board of Nashua since June 1996 and
President and Chief Executive Officer 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. and Chairman of the Board of Cerion Technologies
Inc.
Mr. Junius has been the Chief Financial Officer of Nashua since November
1995, Vice President-Finance since September 1995 and Treasurer since June 1985.
He is also a director of Cerion Technologies Inc.
Mr. Buffum has been Vice President and General Counsel of Nashua since May
1996 and Secretary since April 1987. He was Counsel from November 1983 until May
1996.
Mr. Rivas has been Vice President/General Manager of the Imaging Supplies
Division of Nashua since March 1996. From October 1994 to February 1996, he was
President of the Label Group of Engraph Inc. and from July 1991 to October 1994,
he was President of the Patton Division of Engraph Inc.
Mr. Ireland has been Vice President/General Manager of the Specialty Coated
Products Division of Nashua since November 1995 and General Manager since April
1994. Prior to 1994, Mr. Ireland held various positions with Raychem
Corporation.
Mr. Jeans has been a Corporate Vice President and President of the Photo
Group of Nashua since April 1996. Prior to April 1996, he was President of
Wesson-Peter Pan Foods, Inc. (a division of Conagra), a foods processor. From
1990 to 1993 he was a Senior Vice President-Sales and Marketing of H.P. Hood
Inc. (a dairy products producer).
Mr. Pache has been Vice President/General Manager of the Label Products
Division of Nashua since December 1996 and General Manager since December 1995.
From April 1994 to December 1995, he was the Vice President/General Manager of
Sales and Marketing for the Company's Commercial Products Group. From February
1992 to April 1994, Mr. Pache was the Director of Sales, Electronics Division,
of Raychem Corporation
Mr. Wright has been Vice President-Human Resources of Nashua since October
1994. Prior to October 1994, he was Vice President of Barry Controls (a division
of Applied Power Inc.), a custom manufacturer of vibration and control systems.
From 1990 to 1993, he was a Senior Group Personnel Manager at Digital Equipment
Corporation.
Mr. Matson has been the Corporate Controller of Nashua since July 1988.
Executive officers are generally elected to their offices each year by the
Board of Directors shortly after the Annual Meeting of Shareholders.
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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 30 of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1997 and is incorporated by
reference in this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the heading "Five Year Financial Review" on
page 9 of the Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997 is incorporated by reference in this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information contained under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 10 through
13 of the Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997 is incorporated by reference in this Form 10-K. This
information should be read in conjunction with the related consolidated
financial statements incorporated by reference under Item 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained in the consolidated financial statements, notes
to consolidated financial statements, and report of independent accountants on
pages 14 through 31 of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1997 is incorporated by reference in this Form
10-K.
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
The section entitled "Nominees for Election as Directors", which appears on
pages 1 through 3 of the Company's Proxy Statement dated March 25, 1998, is
incorporated by reference in this Form 10-K. See also the section entitled
"Executive Officers of the Registrant" appearing in Part I hereof.
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ITEM 11. EXECUTIVE COMPENSATION
The sections entitled "Compensation of Directors" and "Compensation of
Executive Officers," which appear on pages 4 through 7 of the Company's Proxy
Statement dated March 25, 1998, is incorporated by reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections entitled "Security Ownership of Management" and "Security
Ownership of Certain Beneficial Owners," which appear on pages 12 through 15 of
the Company's Proxy Statement dated March 25, 1998, are incorporated by
reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions and Indebtedness," which appears
on page 9 of the Company's Proxy Statement dated March 25, 1998, is incorporated
by reference in this Form 10-K.
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) Financial statements:
Page
Consolidated statements of operations and retained earnings
for each of the three years in the period ended
December 31, 1997 14*
Consolidated balance sheets at December 31, 1997 and
December 31, 1996 15*
Consolidated statements of cash flows for each of the three
years in the period ended December 31, 1997 16*
Notes to consolidated financial statements 17-30*
Report of independent accountants 31*
(2) Financial statement schedule:
Report of independent accountants on financial
statement schedule 14
Schedule II - Valuation and qualifying accounts for each
of the three years in the period ended December 31, 1997 15
The financial statement schedule should be read in conjunction with the
financial statements in the 1997 Annual Report to Stockholders. All other
schedules have been omitted as they are not applicable, not required, or the
information is included in the consolidated financial statements or notes
thereto.
*Page references are to the 1997 Annual Report to Stockholders. The 1997
Annual Report to Stockholders is not to be deemed filed as part of this Report
except for those parts thereof specifically incorporated by reference into this
Report.
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(3) EXHIBITS:
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 Loan and Security Agreement dated as of March 28, 1997. Exhibit to the
Company's Form 10-Q for the quarterly period ended March 28, 1997 and
incorporated herein by reference.
4.02 Revolving Credit Promissory Note dated as of March 28, 1997. Exhibit to
the Company's Form 10-Q for the quarterly period ended March 28, 1997
and incorporated herein by reference.
4.03 Rights Agreement, dated as of July 19, 1996, between the Company and The
First National Bank of Boston, as Rights Agent, which includes as
Exhibit A the Form of Certificate of Designations, as Exhibit B the Form
of Rights Certificate, and as Exhibit C the Summary of Rights to
Purchase Preferred Stock. Exhibit to the Company's Form 8-K dated August
28, 1996 and incorporated herein by reference.
10.01 1987 Stock Option Plan of the Company. Exhibit to the Company's Proxy
Statement dated March 24, 1987, and incorporated herein by reference.
10.02 Amendments to the 1987 Stock Option Plan of the Company 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.
10.03 Amendments to the 1987 Stock Option Plan of the Company effective
October 24, 1997.
10.04 1993 Stock Incentive Plan of the Company. Exhibit to the Company's Proxy
Statement dated March 19, 1993, and incorporated herein by reference.
10.05 1996 Stock Incentive Plan of the Company. Exhibit to the Company's Proxy
Statement dated May 15, 1996, and incorporated herein by reference.
10.06 Retention Agreement dated as of October 24, 1997 between the Company and
Gerald G. Garbacz.
10.07 Retention Agreement dated as of October 24, 1997 between the Company and
Daniel M. Junius.
10.08 Retention Agreement dated as of October 24, 1997 between the Company and
Paul Buffum
10.09 Retention Agreement dated as of October 24, 1997 between the Company and
Joseph I. Gonzalez-Rivas.
10.10 Retention Agreement dated as of October 24, 1997 between the Company and
John J. Ireland.
10.11 Retention Agreement dated as of October 24, 1997 between the Company and
Michael D. Jeans.
10.12 Retention Agreement dated as of October 24, 1997 between the Company and
Eugene P. Pache.
10.13 Retention Agreement dated as of October 24, 1997 between the Company and
Bruce T. Wright.
10.14 Retention Agreement dated as of October 24, 1997 between the Company and
Joseph R. Matson.
10.15 Management Incentive Plan of the Company.
10.16 Master Asset Purchase Agreement dated as of March 10, 1998 between the
Company and District Photo Inc.
10.17 U.S. Asset Purchase Agreement dated as of March 10, 1998 between Nashua
Photo Inc., Promolink Corporation and District Photo Inc.
10.18 U.K. Asset Purchase Agreement dated as of March 10, 1998 between Nashua
Photo Limited and District Photo Inc.
10.19 Canada Asset Purchase Agreement dated as of March 10, 1998 between
Nashua Photo Limited and District Photo Inc.
-11-
<PAGE> 13
11.01 Statement regarding Computation of Earnings Per Share and Common
Equivalent Share.
13.01 Nashua Corporation 1997 Annual Report to Shareholders, certain portions
of which have been incorporated herein by reference.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Independent Accountants.
24.01 Powers of Attorney.
(b) Reports on Form 8-K:
On April 9, 1997, the Company filed a report on Form 8-K concerning a
ruling in the patent litigation suit brought by Ricoh Company, Ltd.
On November 20, 1997, the Company filed a report on Form 8-K regarding
the sale of its Specialty Coated Products and International
Photofinishing businesses.
On March 20, 1998, the Company filed a report on Form 8-K regarding the
sale of its photofinishing group and the retention of its Specialty
Coated Products business.
-12-
<PAGE> 14
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: March 25, 1998 By /s/ Daniel M. Junius
---------------------------------------
Daniel M. Junius
Vice President-Finance,
Chief Financial Officer and Treasurer
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Gerald G. Garbacz Chairman, President and March 25, 1998
- ------------------------- Chief Executive Officer
Gerald G. Garbacz
/s/ Daniel M. Junius Vice President-Finance, March 25, 1998
- ------------------------- Chief Financial Officer
Daniel M. Junius and Treasurer
/s/ Joseph R. Matson Corporate Controller and March 25, 1998
- ------------------------- Chief Accounting Officer
Joseph R. Matson
Sheldon A. Buckler* Director
- -------------------------
Sheldon A. Buckler
Charles S. Hoppin* Director March 25, 1998
- -------------------------
Charles S. Hoppin
John M. Kucharski* Director
- -------------------------
John M. Kucharski
David C. Miller, Jr.* Director
- -------------------------
David C. Miller, Jr.
Peter J. Murphy* Director
- -------------------------
Peter J. Murphy
James F. Orr III* Director March 25, 1998
- -------------------------
James F. Orr III
*By /s/ Daniel M. Junius March 25, 1998
---------------------
Daniel M. Junius
Attorney-In-Fact
-13-
<PAGE> 15
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 4, 1998, except as to the Business Changes Note which is as of
March 10, 1998 appearing in the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1997 (which report and consolidated financial
statements are incorporated by reference in this Form 10-K) also included an
audit of the Financial Statement Schedule 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 4, 1998, except as to the Business Changes Note which is as of
March 10, 1998.
-14-
<PAGE> 16
SCHEDULE II
-----------
NASHUA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Balance at
Previous Balance at
Description End of Year Additions Deductions End of Year
- ----------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997:
Allowance for doubtful accounts $1,884 $ 79(a) $ (770)(b)(f) $1,193
Valuation allowance on deferred tax assets 328 -- -- 328
DECEMBER 31, 1996:
Allowance for doubtful accounts $2,397 $ 558(a) $(1,071)(b) $1,884
Valuation allowance on deferred tax assets 3,300 -- (2,972)(e) 328
DECEMBER 31, 1995:
Allowance for doubtful accounts $2,628 $1,717(a) $(1,948)(b)(c) $2,397
Valuation allowance on deferred tax assets -- 3,300(d) -- 3,300
</TABLE>
(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.
(e) Tax assets deemed unrealizable.
(f) Includes decreases of $116 due to restatement of discontinued operations.
-15-
<PAGE> 1
Exhibit 10.03
1987 STOCK OPTION PLAN OF NASHUA CORPORATION
1. PURPOSE. This Plan, which shall be known as the "1987 Stock Option Plan"
and is hereinafter referred to as "the Plan", is intended to provide an
incentive for certain key employees of Nashua Corporation (the
"Corporation") and its subsidiaries, to provide such employees with a
proprietary interest or to increase their proprietary interest in the
Corporation's success, to encourage them to remain in the employ of the
Corporation and to assist in attracting new key employees to the
Corporation.
The word "Corporation" when used herein with reference to employment shall
include subsidiaries of the Corporation. The word "subsidiary" when used
herein shall mean any corporation a majority of the voting stock of which
is owned or controlled, directly or indirectly, by the Corporation.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") consisting of at least three Directors of the Corporation
appointed by the Board of Directors, provided that the Committee so
appointed shall not include any individual who holds or is eligible to
receive options under the Plan or has been eligible to receive options
under the Plan at any time within the 12-month period immediately
preceding the date on which he becomes a member of the Committee. A
majority of the members of the Committee shall constitute a quorum and the
acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved or authorized in writing by all of its
members, shall be the acts of the Committee. The Committee shall adopt,
amend and rescind such rules, regulations and agreement forms as the
Committee deems advisable in the administration of the Plan and as
hereinafter provided and construe and interpret the Plan, the rules and
regulations adopted hereunder and all agreements made hereunder and make
all other determinations deemed necessary or advisable by it for the
administration of the Plan. Subject to the provisions of the Plan, the
Committee shall have full and final authority in its discretion to
determine the employees to be granted options.
3. STOCK OPTION AWARDS.
(a) AWARDS. The Committee shall determine the number of shares of Stock
(as defined in paragraph 4) subject to each option; the option
price of the shares subject to each option, which shall not
be less than the minimum specified hereinafter; the time or times
when each option will be granted, the time or times when each option
will become exercisable and the duration of the exercise period; and
shall prescribe the terms and provisions of the instruments ("Stock
Option Agreements") evidencing options granted hereunder (which need
not be identical). Stock options awarded under the Plan may be
either incentive stock options within the meaning of Section 422A of
the Internal Revenue Code as it may be amended from time to time
("the Code") or options which are not incentive stock options.
Except as otherwise provided at time of grant, the Committee may
provide that the options will become immediately exercisable if
there is a change in control of the Corporation. For purposes of
this Plan, a "change in control of the Corporation" means any of the
following events:
(i) The acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under
<PAGE> 2
- 2 -
the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Corporation Voting Securities"), PROVIDED,
HOWEVER, that any acquisition by (x) the Corporation or any of
its subsidiaries, or any employee benefit plan (or related
trust) sponsored or maintained by the Corporation 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
Corporation Common Stock and Corporation Voting Securities
immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Corporation Common Stock and
Corporation Voting Securities, as the case may be, shall not
constitute a change in control of the Corporation; or
(ii) Individuals who, as of April 28, l989, 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 April 28, l989 whose
election or nomination for election by the Corporation'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 Corporation (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(iii) Approval by the shareholders of the Corporation 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 Corporation
Common Stock and Corporation 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 such Business
Combination in substantially the same proportion as their
ownership immediately prior to such Business Combination of
the Outstanding Corporation Common Stock and Corporation
Voting Securities, as the case may be; or
(iv) (A) a complete liquidation or dissolution of the Corporation
or a (B) sale or other disposition of all or substantially all
of the assets of the Corporation other than to a corporation
with respect to which, following such sale or
<PAGE> 3
- 3 -
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 Corporation Common
Stock and Corporation Voting Securities immediately prior to
such sale or disposition in substantially the same proportion
as their ownership of the Outstanding Corporation Common Stock
and Corporation Voting Securities, as the case may be,
immediately prior to such sale or disposition.
Notwithstanding any other provision of the Plan, the aggregate fair
market value (determined at the time the option is granted) of the
stock with respect to which incentive stock options granted after
December 31, l986 are exercisable for the first time by any employee
during any calendar year (under all stock option plans of the
Corporation and its parent and subsidiary corporations) shall not
exceed $100,000. The foregoing sentence shall be construed and
applied in accordance with Section 422A of the Code and regulations
thereunder.
(b) PRICE. In the case of each option granted under the Plan, the option
price shall be not less than the fair market value of Stock on the
date of grant of such option. The fair market value of Stock on such
date shall be determined in a manner consistent with such directions
as the Committee may from time to time issue. The date of grant of
any option shall be the date on which the Committee authorizes such
grant or such later date as may be designated by the Committee when
such grant is authorized.
(c) TERM OF OPTIONS. Each option granted under the Plan shall be
exercisable on such date or dates and during such period and for
such number of shares as shall be determined pursuant to the
provisions of the Stock Option Agreement with respect to such
option; provided, however, that in any event no incentive stock
option shall be exercised more than ten years from the date of grant
of the option, and no other option shall be exercised more than ten
years and one day from the date of grant of the option.
(d) NON-TRANSFERABILITY OF OPTION RIGHTS. No option shall be
transferable by an optionee otherwise than by will or the laws of
descent and distribution. During the lifetime of an optionee the
option shall be exercisable only by the optionee.
(e) EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. If, prior to the date
that any option shall first be exercisable, the optionee's
employment with the Corporation shall be terminated by the
Corporation, with or without cause, or by the act, death, incapacity
or retirement of the optionee, the optionee's right to exercise such
option shall terminate and all rights thereunder shall cease.
If, on or after the date that any option shall have first become
exercisable, an optionee's employment with the Corporation shall be
terminated by the Corporation or by the optionee for any reason
except death absent a determination by the Committee to the
contrary, the optionee shall have the right, within six months after
such termination, to exercise such option to the extent that it or
any installment thereof shall have accrued at the date of such
termination of employment and shall not
<PAGE> 4
- 4 -
have been exercised, subject to any other limitation on the exercise
of such option in effect at the date of exercise.
If an optionee shall die within such six month period, or shall die
while in the employ of the Corporation on or after the date that the
option shall have first become exercisable, the executor or
administrator of the estate of the decedent or the person or persons
to whom the option shall have been validly transferred pursuant to
will or the laws of descent and distribution shall have the right,
within one year from the date of the optionee's death, to exercise
the optionee's option to the extent that it or any installment
thereof shall have accrued at the date of termination of employment
by death or otherwise and shall not have been exercised, subject to
any other limitation on the exercise of such option in effect at the
date of exercise. No transfer of an option by the optionee by will
or by the laws of descent and distribution shall be effective to
bind the Corporation unless the Corporation shall have been
furnished with written notice thereof and a copy of the will and/or
such other evidence as the Committee may deem necessary to establish
the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of such option.
Nothing in the Plan or any Stock Option Agreement shall restrict the
Corporation's right to terminate the employment of the optionee at
any time with or without cause.
(f) PAYMENT FOR SHARES. Payment for shares of Stock purchased upon
exercise of an option granted hereunder shall be made in full in
cash or certified or bank or other check at the time of such
exercise.
(g) ELECTION BY COMMITTEE TO SATISFY OPTIONS BY CASH PAYMENTS. At the
time an optionee exercises a stock option, the Committee may elect
to satisfy such option by making a cash payment to the optionee in
an amount equal to the spread between the option price and the fair
market value of the shares subject to such option on date of
exercise. The Committee may not make this election, however, with
respect to an employee who is an officer or director subject to
Section 16(b) of the Act except during the period between the third
and twelfth day after quarterly or annual earnings are released and
unless the option was granted at least six months prior to exercise.
If an election is made, the shares subject to the option will not be
available for further awards.
Notwithstanding the foregoing, during the sixty-day period from and
after a change in control of the Corporation, each optionee, shall
with respect to stock option agreements which so provide have the
right (the "LSAR") with respect to any option other than (x) an
incentive stock option within the meaning of Section 422A(b) of the
Internal Revenue Code of 1986, as amended, granted prior to April
28, 1989, and (y) an option granted to any officer or director of
the Company (within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended) unless such option was granted
more than six months prior to the change in control of the
Corporation, in lieu of the payment of the full option price for the
shares of common stock of the Corporation ("Shares") subject to such
option, to elect (within such sixty-day period) to surrender all or
a part of the option to the Corporation and to receive in lieu
thereof cash in the amount by which the fair market value per Share
on the date of such election shall exceed the option price per Share
under the option multiplied by the number of Shares granted under
the option as to which a LSAR granted hereunder
<PAGE> 5
- 5 -
shall have been exercised. As used in this Section 3(g), the fair
market value of a Share on the date of exercise shall mean with
respect to an election by an optionee to receive cash in respect of
an option, the higher of (x) the highest reported sales price,
regular way, of a Share on the Composite Tape for New York Stock
Exchange Listed Stocks (the "Composite Tape") during the sixty-day
period prior to the date of the change in control of the Corporation
and (y) if the change in control of the Corporation is the result of
a transaction or series of transactions described in paragraphs (i)
or (iii) of the definition of change in control of the Corporation
set forth in Section 3(a), the highest price per Share paid in such
transaction or series of transactions. The Committee may, in its
discretion, settle LSARs in Shares equal in value to the cash that
otherwise would have been paid, if to do otherwise would render a
transaction ineligible for pooling of interests accounting.
4. STOCK. The shares to be awarded under the Plan shall be shares of the
Corporation's Common Stock of the par value of $1.00 per share ("Stock"),
and may be either authorized and unissued shares or shares held in the
treasury of the Corporation. The total amount of Stock which may be issued
pursuant to awards made under the Plan shall not exceed 600,000 shares.
Such number of shares is subject to adjustment in accordance with the
provisions of paragraph 6. Stock as to which stock options terminate or
expire without being exercised shall be available for further awards.
5. ELIGIBILITY. Awards may be granted hereunder only to persons who are
employees of the Corporation or one of its subsidiaries, whether or not
officers or members of the Board of Directors of the Corporation or any of
its subsidiaries. No member of the Board of Directors of the Corporation
who is not an employee of the Corporation or one of its subsidiaries and
no member of the Committee shall be eligible to receive an award under the
Plan.
Any individual may hold more than one award and may at any one time and
from time to time be granted incentive stock options and options which are
not incentive stock options; provided that the aggregate number of shares
of Stock which may be issued under the Plan to any one individual shall
not exceed 60,000, subject to adjustment in accordance with the provisions
of paragraph 6.
6. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION. In the event of any change in
or exchange of outstanding Stock of the Corporation by reason of a stock
dividend, recapitalization or exchange of shares, or otherwise, the class
and aggregate number of shares as to which awards may be granted under the
Plan and available for issue under the Plan, the total number of shares
which may be issued to any one individual under the Plan, the class and
number of shares subject to each outstanding award and the price per share
in each outstanding option shall be appropriately adjusted by the
Committee. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an award.
7. RIGHTS AS A STOCKHOLDER. No holder of an award shall have any rights as a
stockholder with respect to any share covered by his award until he shall
have become the holder of record of such share, and no adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights in respect of such
share for which the record date is prior to the date on which he shall
have become the holder of record thereof.
<PAGE> 6
- 6 -
8. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board of
Directors at any time may terminate, and at any time and from time to
time, and in any respect, may amend or modify, the Plan; provided,
however, that no such action of the Board of Directors, without approval
of the stockholders, may (a) increase the total amount of shares of Stock
which may be issued under the Plan, or the aggregate number of shares of
Stock which may be issued under the Plan to any one individual, except as
contemplated in paragraph 6, (b) change the manner of determining the
option price, (c) withdraw the administration of the Plan from the
Committee or (d) permit any person while a member of the Committee to be
eligible to receive an award under the Plan; and provided, further, that
no amendment, modification or termination of the Plan shall in any manner
affect any award theretofore granted under the Plan without the consent of
the holder of the award.
9. COMPLIANCE WITH LAWS. At the time of the grant, exercise or payment of any
award, the Corporation may, if it shall deem it necessary or desirable for
any reason connected with any law or regulation of any governmental
authority relating to the regulation of securities, require the holder of
the award to make such representations regarding his acquisition of the
Stock or agree to comply with such restrictions on the transfer of the
Stock as the Committee may specify. If such representations are required,
no shares shall be issued to such holder unless and until the Corporation
is satisfied as to the correctness of such representations.
Every award shall be subject to the condition that no Stock shall be
issued or other action taken pursuant to such award if such issue or
action would be contrary to any enactment or regulation for the time being
in force of the United States of America or of any other country having
jurisdiction in relation thereto. The Corporation shall not be bound to
take any action to obtain the consent of any governmental authority to
such issue or to take any action to ensure that any such issue shall be in
accordance with any such enactment or regulation if such action could in
the opinion of the Committee be unduly onerous.
10. FINALITY OF DETERMINATIONS. Each determination, interpretation or other
action made or taken pursuant to the provisions of the Plan by the Board
of Directors or the Committee shall be final and shall be binding and
conclusive for all purposes and upon all persons, including, but without
limitation thereto, the Corporation, the stockholders, the Committee and
each of the members thereof, and the Directors, officers, and employees of
the Corporation and its subsidiaries, the holders of awards under the
Plan, and their respective successors in interest.
11. WITHHOLDING TAXES. In the case of (a) disqualifying transfers with respect
to incentive stock options and (b) exercises of stock options which are
not incentive stock options, the employee or other person who received
Stock shall be required to pay to the Corporation or a subsidiary of the
Corporation the amount of any Federal or state taxes which the Corporation
or such subsidiary is required to withhold with respect to such Stock.
12. EFFECTIVE DATE AND DURATION. The Plan shall become effective on February
27, l987, subject to approval of the shareholders of the Corporation. No
awards shall be granted under the Plan after February 26, l997.
(As Amended 10/97)
<PAGE> 1
Exhibit 10.06
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and GERALD G. GARBACZ (the "Executive"), dated as of the 24th day of
October, 1997.
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:
<PAGE> 2
- 2 -
(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 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
<PAGE> 3
- 3 -
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.
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
<PAGE> 4
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.
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
<PAGE> 8
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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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, 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
<PAGE> 9
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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.
If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.
In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, 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.
Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.
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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of December 18, 1995 which is null and void. Any payments made to Executive by
the Company relating to the Executive's termination of employment under any
other agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements or
<PAGE> 11
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Restricted Stock Agreements. The Release shall also contain, at a minimum,
the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the Release shall not be
effective or enforceable until the expiration of this seven
(7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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
<PAGE> 12
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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.
14. 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
26 The Flume
Amherst, NH 03031
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.
<PAGE> 13
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(f) During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Paul Buffum /s/ Gerald G. Garbacz
---------------------------------- -------------------------------
Vice President, General Counsel Name: Gerald G. Garbacz
and Secretary
<PAGE> 1
Exhibit 10.07
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and DANIEL M. JUNIUS (the "Executive"), dated as of the 24th day of
October, 1997.
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:
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(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 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
<PAGE> 3
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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.
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
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.
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
<PAGE> 8
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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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, 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
<PAGE> 9
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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.
If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.
In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, 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.
Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.
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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of April 28, 1989 which is null and void. Any payments made to Executive by the
Company relating to the Executive's termination of employment under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements or
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Restricted Stock Agreements. The Release shall also contain, at a minimum,
the following language:
The Executive acknowledges that he has been given twenty-one (21)
days to consider the terms of this Release and that the Company
advised him to consult with an attorney of his own choosing prior to
signing this Release. The Executive may revoke this Release for a
period of seven (7) days after the execution of the Release and the
Release shall not be effective or enforceable until the expiration
of this seven (7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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
<PAGE> 12
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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.
14. 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
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.
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(f) During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Daniel M. Junius
--------------------------------------- -------------------------------
President and Chief Executive Officer Name: Daniel M. Junius
<PAGE> 1
Exhibit 10.08
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and PAUL BUFFUM (the "Executive"), dated as of the 24th day of
October, 1997.
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:
<PAGE> 2
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(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 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
<PAGE> 3
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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.
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
<PAGE> 4
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.
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
<PAGE> 8
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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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, 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
<PAGE> 9
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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.
If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.
In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, 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.
Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.
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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of April 28, 1989 which is null and void. Any payments made to Executive by the
Company relating to the Executive's termination of employment under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements or
<PAGE> 11
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Restricted Stock Agreements. The Release shall also contain, at a minimum,
the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the Release shall not be
effective or enforceable until the expiration of this seven
(7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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
<PAGE> 12
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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.
14. MISCELLANEOUS. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
--------------------
Paul Buffum
618 Isaac Frye Highway
Wilton, NH 03086
If to the Company:
------------------
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03060
Attention: President
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.
<PAGE> 13
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(f) During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Paul Buffum
----------------------------------------- -----------------------------
President and Chief Executive Officer Name: Paul Buffum
<PAGE> 1
Exhibit 10.09
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and JOSEPH I. GONZALEZ-RIVAS (the "Executive"), dated as of the 24th
day of October, 1997.
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 or the sale of the operations for which the Executive has
managing responsibility. 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 or the
possibility of such a sale 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 or the possibility of such a sale, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
or such a sale 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:
<PAGE> 2
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(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 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
<PAGE> 3
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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.
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
<PAGE> 4
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If before or during the
Employment Period the Executive's employment is terminated by the Company due to
the sale of the operations for which the Executive had managing responsibility
(whether or not the purchaser employs the Executive after the closing of the
transaction), the date such termination occurs shall constitute the Date of
Termination. For the purposes of this Agreement, the term "the sale of the
operations for which the Executive had managing responsibility" does not include
a transfer of the operations to a joint venture or entity which is 50% or more
controlled by the Company.
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.
<PAGE> 8
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(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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) before or during the Employment
Period the Executive's employment is terminated by the Company due to or in
anticipation of the sale of the operations for which the Executive had managing
responsibility (whether or not the purchaser employs the Executive after the
closing of the transaction):
(i) The Company shall pay to the Executive in a lump sum in cash within
60 days after the Date of Termination, and subject to receiving an executed
irrevocable Release as described in Section 10, the aggregate of the following
amounts:
A. all Accrued Obligations; and
B. the product of (x) two and (y) the sum of (i) Annual Base
Salary and (ii) the Highest Annual Bonus; and
<PAGE> 9
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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 for one year following
termination of employment before the Employment Period due to the
sale of the operations for which the Executive had managing
responsibility, 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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of March 4, 1996 which is null and void. Any payments made to Executive by the
Company relating to the Executive's termination of employment under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section
6(d)(i) the Executive shall execute and deliver a Release to the Company as
follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements. The
Release shall also contain, at a minimum, the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior
<PAGE> 11
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to signing this Release. The Executive may revoke this Release
for a period of seven (7) days after the execution of the
Release and the Release shall not be effective or enforceable
until the expiration of this seven (7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all
claims which it ever had or now has against the Executive, other
than for intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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.
<PAGE> 12
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14. 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:
--------------------
Joseph I. Gonzalez-Rivas
19 The Flume
Amherst, NH 03031
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 or the
commencement of the sale of the operation for which the Executive has
responsibility, 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
<PAGE> 13
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Effective Date or the commencement of the sale of the operation for which the
Executive has responsibility, 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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Joseph I. Gonzalez-Rivas
-------------------------------------- ------------------------------
President and Chief Executive Officer Name: Joseph I. Gonzalez-Rivas
<PAGE> 1
Exhibit 10.10
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and JOHN J. IRELAND (the "Executive"), dated as of the 24th day of
October, 1997.
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 or the sale of the operations for which the Executive has
managing responsibility. 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 or the
possibility of such a sale 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 or the possibility of such a sale, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
or such a sale 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:
<PAGE> 2
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(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 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
<PAGE> 3
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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.
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
<PAGE> 4
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If before or during the
Employment Period the Executive's employment is terminated by the Company due to
the sale of the operations for which the Executive had managing responsibility
(whether or not the purchaser employs the Executive after the closing of the
transaction), the date such termination occurs shall constitute the Date of
Termination. For the purposes of this Agreement, the term "the sale of the
operations for which the Executive had managing responsibility" does not include
a transfer of the operations to a joint venture or entity which is 50% or more
controlled by the Company.
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.
<PAGE> 8
-8-
(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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) before or during the Employment
Period the Executive's employment is terminated by the Company due to or in
anticipation of the sale of the operations for which the Executive had managing
responsibility (whether or not the purchaser employs the Executive after the
closing of the transaction):
(i) The Company shall pay to the Executive in a lump sum in cash within
60 days after the Date of Termination, and subject to receiving an
executed irrevocable Release as described in Section 10, 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
<PAGE> 9
-9-
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 for one year following
termination of employment before the Employment Period due to the
sale of the operations for which the Executive had managing
responsibility, 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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of February 24, 1995 which is null and void. Any payments made to Executive by
the Company relating to the Executive's termination of employment under any
other agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section
6(d)(i) the Executive shall execute and deliver a Release to the Company as
follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements. The
Release shall also contain, at a minimum, the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the
<PAGE> 11
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Release shall not be effective or enforceable until the
expiration of this seven (7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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.
14. 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
<PAGE> 12
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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 J. Ireland
27 Pine Street
Exeter, NH 03833
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 or the
commencement of the sale of the operation for which the Executive has
responsibility, 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 or the commencement of the sale of the
operation for which the Executive has responsibility, the Executive shall have
no further rights under this Agreement.
<PAGE> 13
-13-
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ John J. Ireland
---------------------------------------- -----------------------------
President and Chief Executive Officer Name: John J. Ireland
Attached letters of December 15, 1997 and January 29, 1998 are made a part of
this agreement and if there are any ambiguities between the Retention Agreement
and these letters, the letters control.
/s/ John J. Ireland
----------------------------
John J. Ireland
/s/ Gerald G. Garbacz
----------------------------
Gerald G. Garbacz
<PAGE> 1
Exhibit 10.11
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and MICHAEL D. JEANS (the "Executive"), dated as of the 24th day of
October, 1997.
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:
<PAGE> 2
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(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 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
<PAGE> 3
-3-
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.
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
<PAGE> 4
-4-
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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.
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
<PAGE> 8
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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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, 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
<PAGE> 9
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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.
If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.
In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, 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.
Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.
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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of May 3, 1996 which is null and void. Any payments made to Executive by the
Company relating to the Executive's termination of employment under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements or
<PAGE> 11
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Restricted Stock Agreements. The Release shall also contain, at a minimum,
the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the Release shall not be
effective or enforceable until the expiration of this seven
(7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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
<PAGE> 12
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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.
14. MISCELLANEOUS. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
--------------------
Michael D. Jeans
107 Westford Road
Concord, MA 01742
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.
<PAGE> 13
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(f) During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Michael D. Jeans
--------------------------------------- ------------------------------
President and Chief Executive Officer Name: Michael D. Jeans
<PAGE> 1
Exhibit 10.12
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and EUGENE P. PACHE (the "Executive"), dated as of the 24th day of
October, 1997.
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 or the sale of the operations for which the Executive has
managing responsibility. 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 or the
possibility of such a sale 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 or the possibility of such a sale, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
or such a sale 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:
<PAGE> 2
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(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 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
<PAGE> 3
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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.
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
<PAGE> 4
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If before or during the
Employment Period the Executive's employment is terminated by the Company due to
the sale of the operations for which the Executive had managing responsibility
(whether or not the purchaser employs the Executive after the closing of the
transaction), the date such termination occurs shall constitute the Date of
Termination. For the purposes of this Agreement, the term "the sale of the
operations for which the Executive had managing responsibility" does not include
a transfer of the operations to a joint venture or entity which is 50% or more
controlled by the Company.
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.
<PAGE> 8
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(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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) before or during the Employment
Period the Executive's employment is terminated by the Company due to or in
anticipation of the sale of the operations for which the Executive had managing
responsibility (whether or not the purchaser employs the Executive after the
closing of the transaction):
(i) The Company shall pay to the Executive in a lump sum in cash within
60 days after the Date of Termination, and subject to receiving an
executed irrevocable Release as described in Section 10, 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
<PAGE> 9
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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 for one year following
termination of employment before the Employment Period due to the
sale of the operations for which the Executive had managing
responsibility, 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
<PAGE> 10
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of February 24, 1995 which is null and void. Any payments made to Executive by
the Company relating to the Executive's termination of employment under any
other agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section
6(d)(i) the Executive shall execute and deliver a Release to the Company as
follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements. The
Release shall also contain, at a minimum, the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the
<PAGE> 11
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Release shall not be effective or enforceable until the
expiration of this seven (7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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.
14. 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
<PAGE> 12
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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:
--------------------
Eugene P. Pache
9729 Fieldcrest Drive
Omaha, NE 68114
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 or the
commencement of the sale of the operation for which the Executive has
responsibility, 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 or the commencement of the sale of the
operation for which the Executive has responsibility, the Executive shall have
no further rights under this Agreement.
<PAGE> 13
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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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Eugene P. Pache
--------------------------------------- ---------------------------
President and Chief Executive Officer Name: Eugene P. Pache
<PAGE> 1
Exhibit 10.13
RETENTION 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
October, 1997.
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:
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(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 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
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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.
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
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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 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.
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(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 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 14(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:
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(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 13(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 14(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. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.
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
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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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, 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
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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.
If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.
In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, 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.
Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.
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
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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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of February 24, 1995 which is null and void. Any payments made to Executive by
the Company relating to the Executive's termination of employment under any
other agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements or
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Restricted Stock Agreements. The Release shall also contain, at a minimum,
the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the Release shall not be
effective or enforceable until the expiration of this seven
(7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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
<PAGE> 12
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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.
14. 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
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.
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(f) During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Bruce T. Wright
--------------------------------------- ----------------------------
President and Chief Executive Officer Name: Bruce T. Wright
<PAGE> 1
Exhibit 10.14
RETENTION AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and JOSEPH R. MATSON (the "Executive"), dated as of the 24th day of
October, 1997.
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:
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(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 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
<PAGE> 3
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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.
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
<PAGE> 4
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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 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.
<PAGE> 5
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(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 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 14(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:
<PAGE> 6
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(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 13(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 14(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. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.
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
<PAGE> 8
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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 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, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, 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
<PAGE> 9
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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.
If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.
In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, 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.
Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.
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
<PAGE> 10
-10-
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. OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of April 28, 1989 which is null and void. Any payments made to Executive by the
Company relating to the Executive's termination of employment under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).
10. RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and
costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates,
agents and employees, including, but not limited to, all claims arising
out of his employment, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
similar state antidiscrimination laws, damages arising out of all
employment discrimination claims, wrongful discharge claims or other
common law claims and damages, provided, however, that nothing herein
shall release the Company from Executive's Stock Option Agreements or
<PAGE> 11
-11-
Restricted Stock Agreements. The Release shall also contain, at a minimum,
the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the Release shall not be
effective or enforceable until the expiration of this seven
(7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
11. 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 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
12. ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.
13. 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
<PAGE> 12
-12-
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.
14. 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:
--------------------
Joseph R. Matson
4 Pulpit Run
Amherst, NH 03031
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.
<PAGE> 13
-13-
(f) During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.
(g) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.
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.
NASHUA CORPORATION EXECUTIVE
By /s/ Gerald G. Garbacz /s/ Joseph R. Matson
-------------------------------------- --------------------------------
President and Chief Executive Officer Name: Joseph R. Matson
<PAGE> 1
EXHIBIT 10.15
- --------------------------------------------------------------------------------
NASHUA
MANAGEMENT INCENTIVE PLAN
PLAN DOCUMENT
FEBRUARY 1998
<PAGE> 2
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
PURPOSE
The purpose of Nashua Corporation's Management Incentive Plan ("Plan") is:
1. To link senior management cash compensation to the financial performance
of the organization.
2. To motivate and reinforce the following behaviors among senior managers:
- Effective goal-setting tied to key strategic priorities,
- Accountability for goal achievement.
3. To provide a means for making awards that qualify for the
performance-based compensation exception described at Section 162(m) of
the Internal Revenue Code (the "Code").
PLAN OPERATION
The Management Incentive Plan provides cash incentive payments based upon
achievement of corporate and/or divisional financial performance goals and
achievement of personal goals by Plan Participants, as described below.
1. Salary Administration
For positions covered by the Management Incentive Plan, salary levels are
established such that, when combined with target incentive opportunities
(expressed as a percent of base salary), target total cash compensation is
both competitive with comparable companies and equitable within the
internal organization.
The following definitions apply:
BASE SALARY The annualized regular cash
compensation of a Participant, excluding
incentive payments, company
contributions to employee benefit plans,
relocation, or other compensation not
designated as salary. The base salary is
the basis for regular paychecks.
Page 1
<PAGE> 3
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
1. Salary Administration (continued)
TARGET INCENTIVE That amount (described as a
percentage of a Participant's base
salary) that will be paid as an
incentive if the target financial
performance goals and personal goals are
fully (100%) achieved.
TARGET TOTAL CASH COMPENSATION The assigned compensation level for each
Participant, based on market data and
internal equity considerations.
Comprised of base salary and target
incentive amount.
Target Incentive opportunities range from 10% to 50% of base salary for
Participants depending, in part, upon the management level and unit size
of the participants.
2. Weighting of Goals
Depending on the Participant's position, individual incentive payments
will be based upon the following weighting:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Corporate Financial Division Financial Strategic/ Personal
Position Performance Performance Goals
-------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
CEO 100% NA NA
Executive Staff* 80% NA 20%
Corporate Staff** 60-80% NA 20-40%
Division General Mgmt NA 100% NA
Division Management NA 60-80% 20-40%
------------------------------------------------------------------------------------------
</TABLE>
* Direct reports to the CEO, except for Division General Managers.
** Other corporate officers and key function heads.
Page 2
<PAGE> 4
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
3. Financial Performance Goals
Prior to the beginning of the Plan Year, financial performance goals are
developed by Senior Management and reviewed by the Compensation and
Leadership Committee of the Board of Directors. Financial performance may
be defined using any of the standard financial metrics (e.g., Sales,
Income, Cash Flow), and will be determined each year. Two levels of
financial performance are defined each year, as follows:
TARGET The budgeted financial goal which represents a
realistically attainable level of corporate or divisional
financial performance for the year.
THRESHOLD A level of achievement against the budgeted financial
goal, set below target and representing the minimum level
of performance which is required in order to pay the
financial-based portion of an employee's incentive.
4. Plan Funding
The budgeted incentive pool equals the sum of the Target Incentives of all
eligible Participants company-wide. The pool is funded each year depending
upon the financial and personal goal performance of the Plan participants,
and upon the threshold levels set for that year.
5. Personal Goals
Each Plan participant is assigned a limited number (i.e., 2 - 3) of
objective pre-established Personal Goals which are typically based upon the
strategic plans for the business. These personal goals are compensable
under the Plan.
As with financial performance goals, a threshold level of personal goal
achievement is established each year, below which no payout for each
personal objective will be made. For example, if the threshold for a
manager's personal objective achievement is 80%, the manager will receive
no payout related to that goal if she achieves only 50% of that objective.
Page 3
<PAGE> 5
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
6. Distributions to Participants
The component of incentive payment tied to financial goals is paid out in
direct relationship to the financial performance if the business unit
achieves its threshold. Payout for above-target financial performance is
not capped.
The personal goals payout component is paid in relation to the proportion
of personal goal achievement if the Participant's actual results for the
plan year meet the personal goal threshold. The payout for the personal
goals component of the incentive is capped at 100%.
Incentive payout examples:
--------------------------------------------------------------------------
DIVISION MANAGEMENT INCENTIVE PAYMENT:
--------------------------
Target Incentive = $20,000
--------------------------
Financial Goal Component 60% Strategic/Personal Goal Component 40%
------------------------------------------
| |
--------------------- --------------------
20,000 x 60% = 12,000 20,000 x 40% = 8,000
--------------------- --------------------
Division financial results Strategic/Personal Goal
were 105% of Target Archievement was 95%
---------------------- --------------------
12,000 x 105% = 12,600 8,000 x 95% = 7,,600
---------------------- --------------------
| |
------------------------------------------
|
---------------------------
Total Incentive Payout
$12,000 + $7,600 = $20,000
---------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
CORPORATE STAFF INCENTIVE PAYMENT:
--------------------------
Target Incentive = $20,000
--------------------------
Financial Goal Component 80% Strategic/Personal Goal Component 20%
------------------------------------------------
| This example assumes |
--------------------- corporate financial --------------------
20,000 x 80% = 16,000 performance is below 20,000 x 20% = 4,000
--------------------- threshold, but the --------------------
manager archieves
Division financial results above-threshold Strategic/Personal Goal
were 87% of Target personal goal Archievement was 90%
performance.
---------------------------- -------------------
No payout for this component 4,000 x 90% = 3,600
---------------------------- -------------------
| |
-------------------------------------------------
|
---------------------------
Total Incentive Payout
$0 + $3,600 = $3,600
---------------------------
--------------------------------------------------------------------------
Page 4
<PAGE> 6
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
7. Timing
Payments from the Plan will be made as soon as practicable after the end
of the Plan Year, but no later than April 1 of the following year.
Incentive payments are made in a single lump-sum payment and are subject
to applicable withholding and other taxes as prescribed by local law.
PARTICIPATION
Plan Participants are senior managers and other key employees whose
responsibilities and accomplishments can be directly tied to significant
short-term business goals.
In order to be eligible for an incentive payment, a participant must have been
employed in a Plan-eligible position(s) for at least six consecutive months of
the Plan Year. For a participant who serves in a Plan-eligible position(s) for
less than a full year, the incentive payment may be pro-rated based on the
number of months, including partial months, the individual was a participant
during the Plan Year.
In all cases, the Incentive Compensation Committee (the CEO, the Chief Financial
Officer, and the Vice President of Human Resources) reserves the authority to
exercise its discretion in determining incentive payments. However, the
following guidelines have been provided as a starting point for making decisions
regarding incentive eligibility in cases of new hires, employment terminations,
periods of disability or leave, and transfers into, out of, and between
Plan-eligible positions during the Plan Year.
1. New Hires and Transfers into Eligible Positions when Employee Serves at
Least Six Consecutive Months in the Position
A non-participant hired, transferred, promoted, or re-assigned into an
eligible position during the Plan Year will be considered for an Incentive
Payment on a pro-rated basis, provided that the employee is employed for
at least six consecutive months of the Plan Year.
2. New Hires into Eligible Positions when Employee Serves Less Than Six
Consecutive Months in the Position
When offers are made to candidates for Plan-eligible positions, and the
employee will serve in the position for less than six consecutive months
in the current Plan Year, the offer may include a guaranteed cash
compensation
Page 5
<PAGE> 7
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
amount in addition to the base salary, to compensate for the missed
opportunity in the first (partial) year. This amount should be no more
than the target incentive for which the employee would have been eligible
in that year, pro-rated by the number of months employed; and is to be
paid at the same time incentives are paid in the following year. The
employee will be integrated into the Plan in the full Plan Year following
his/her hire date.
3. Transfers into Ineligible Positions
An employee transferred from an eligible position into a non-eligible
position may be considered for a pro-rated incentive payment, provided
that the employee has served at least six months in an eligible
position(s) during the Plan Year. Any incentive payment will be based on
the base salary while the employee was a Plan participant.
In these cases, an adjustment to base salary may be required in order to
achieve the appropriate salary level for the new (non-Plan) position. (For
example, the base salary may be increased to reach a reasonable
market-based pay rate if there is no longer the possibility of an
incentive payment.) When the adjustment required is a positive one, it may
be made retroactively in cases where the transfer occurs before the
employee reaches the six-month minimum service required for an incentive
payment.
4. Transfers from One Plan-Eligible Position to Another
In the event that a participant transfers from one incentive eligible
position to another before the completion of the Plan Year, an assessment
will be made to determine the relative impact of goal achievement in each
position on the final incentive payment. Typically, the participant will
be paid a pro-rated share of the incentive payment amount for each
position. However, the Incentive Compensation Committee has discretion to
determine otherwise if the duration of service in either of the
Plan-eligible positions is considered too short a period in which to
achieve results against the stated goals. In either event, the
participant's incentive payment will reflect the full twelve months of
participation.
In the case of a current Participant moving from one Target Incentive
level to another, an adjustment to base salary may be required in order to
achieve the appropriate Target Total Cash Compensation level.
Page 6
<PAGE> 8
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
5. Terminations
All Incentive Payments under the Plan will be forfeited for participants
whose employment is terminated for any reason other than normal or early
retirement under the provisions of the Company's retirement plan, death or
disability during the Plan Year, unless determined otherwise by the
Incentive Compensation Committee.
If a Plan participant is employed on the last day of the Plan Year, but
terminates employment prior to the date of the incentive payment, the
Incentive Compensation Committee shall retain discretion over whether a
payment is made to that participant.
6. Disability, Leaves of Absence, and Sabbaticals
Even if an employee meets the requirement of six or more consecutive
months in a Plan-eligible position, the employee must have rendered
services for a minimum of three consecutive months in any Plan Year when
attendance is interrupted by a period of disability, a leave of absence,
or a sabbatical in order for any incentive to be paid (including that
amount based on corporate and division/geography results).
If the employee meets the requirement of three consecutive months of
rendering services, the incentive payment would typically be pro-rated
based on the number of months in the Plan Year that the employee was
present and fully performing the job. Assessment of performance against
personal goals will be based on the amount of time the employee was
actually rendering services.
7. Pro-rating
For a participant who serves in a Plan-eligible position(s) for less than
a full year, the pro rata share of the incentive payment shall equal the
number of months, including partial months, the individual was rendering
services in a Plan-eligible position during the Plan Year divided by
twelve, times the Incentive Payment amount (based on results achieved).
EFFECT ON TAXES
Payments made under this Plan will be included in total wages in the year paid,
and are thus considered taxable income in that year.
Page 7
<PAGE> 9
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
EFFECT ON BENEFITS
Regular Management Incentive Plan payments are included in covered wages for
purposes of the 401(k) and pension plans.
TERMS AND CONDITIONS
1. The Plan shall be approved by the Board of Directors and administered by
the Incentive Compensation Committee (the "Committee"). The Committee
shall have authority, consistent with the Plan, to establish Plan periods
during which awards may be established and earned under the Plan, to
determine the size and terms of the awards to be made to each Plan
Participant, to determine the time when awards will be made, to prescribe
the form of payment for awards under the Plan, to adopt, amend and rescind
rules and regulations for the administration of the Plan and for its own
acts and proceedings, and to decide all questions and settle all
controversies and disputes which may arise in connection with the Plan.
All decisions, determinations and interpretations of the Committee shall
be binding upon all parties concerned.
The terms of an award, once fixed, shall preclude future Committee
discretion with respect to the amount or timing of payments of the award,
except that (i) no payment of an award shall be made unless and until the
Committee certifies in writing that the performance goals specified in the
award have been satisfied; (ii) the Committee may retain the discretion to
reduce payments; (iii) the Committee may permit the deferral of payments
that have been earned under an award provided such deferral is consistent
with Section 162 of the Code and (iv) the Committee may retain such other
discretion as is consistent with the qualification of the award under
Section 162(m).
2. Corporate Performance results are determined at the end of the fiscal year
when audited data is available. Adjustments may be made in order to
minimize the potential distortion of performance measurements resulting
from major unplanned/uncontrollable events, such as a major unbudgeted
acquisition, non-operating gains or losses or extraordinary operating
items, or other events or conditions during the year affecting financial
performance, so long as such adjustments are made without the involvement
of the CEO, and are in conformity with Section 162(m) of the Internal
Revenue Code. Such adjustments may be made when it is judged that the
Corporation would have been unable to anticipate said event(s) during the
corporate goal setting process.
3. The Management Incentive Plan does not, directly or indirectly, create in
any employee or class of employees any right with respect to continuation
of employment
Page 8
<PAGE> 10
MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
by the Company, and it shall not be deemed to interfere in any way with
the Company's right to terminate, or otherwise modify, an employee's
employment at any time. No employee shall have a right to be selected as a
Participant for any year nor, having been selected a Participant in the
Plan for one year, to be a Participant in any other year. Neither the Plan
nor any award thereunder shall be an element of damages in any claim based
upon discharge in violation of a contract unless the contract in question
shall be in writing and shall make specific reference to this section and
this sentence, overriding the same; nor shall this Plan or any rights
thereto be regarded as an element of damages for wrongful discharge in any
other context except to the extent that rights shall have accrued
hereunder as of the date of discharge.
4. The provisions of the Plan and the grant of any incentive payment shall
inure to the benefit of all successors of each Participant, including
without limitation such Participant's estate and the executors,
administrators or trustees thereof, heirs and legatees, and any receiver,
trustee in bankruptcy or representative of creditors of such Participant.
5. The Plan may be amended or terminated at any time, and shall continue in
effect until so terminated; provided however that no amendment or
termination of the Plan shall adversely affect any right of any Plan
Participant with respect to any incentive payment theretofore made without
such Plan Participant's written consent.
6. The Plan shall be effective with respect to the Plan Year beginning
January 1, 1998.
7. This Plan and all determinations made and actions taken hereunder shall be
construed in accordance with the laws of the State of New Hampshire.
Page 9
<PAGE> 1
EXHIBIT 10.16
EXECUTION COPY
MASTER ASSET PURCHASE AGREEMENT
FOR THE PHOTOFINISHING BUSINESS OF NASHUA CORPORATION
BETWEEN
DISTRICT PHOTO INC.
AND
NASHUA CORPORATION
Dated as of March 10, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
1. GENERAL...............................................................1
1.1 Definitions..................................................1
1.2 U.S. Dollars.................................................2
1.3 Schedules and Exhibits.......................................2
2. PURCHASE AND SALE.....................................................3
2.1 Agreement to Sell and to Purchase; Purchase Price............3
2.2 Payment of Purchase Price....................................3
2.3 Brokers......................................................3
3. [INTENTIONALLY OMITTED.]..............................................3
4. REPRESENTATIONS AND WARRANTIES OF SELLER..............................3
4.1 Organization, Good Standing and Qualification................3
4.2 Authority of Seller..........................................4
4.3 Governmental Approvals.......................................4
4.4 Litigation...................................................4
4.5 Fairness Opinion.............................................4
5. REPRESENTATIONS AND WARRANTIES OF BUYER...............................5
5.1 Organization and Good Standing...............................5
5.2 Authority of Buyer...........................................5
5.3 Governmental Approvals.......................................5
5.4 Litigation...................................................6
6. OTHER AGREEMENTS......................................................6
6.1 Conduct of the Business......................................6
6.2 Access to Records and Information............................6
6.3 Filings and Authorizations...................................6
6.4 Bulk Sales...................................................7
6.5 Maintenance of, and Access to Records........................7
6.6 Notice of Breaches; Updates..................................7
6.7 No Solicitation of Offers....................................8
6.8 Consummation of Agreement....................................9
6.9 Non-Competition..............................................9
6.10 Non-Solicitation............................................11
i
<PAGE> 3
Page
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF BUYER TO CLOSE....................................................11
7.1 Fulfillment of Covenants....................................11
7.2 Accuracy of Representations and Warranties..................11
7.3 Authorizations and Consents.................................11
7.4 No Litigation...............................................12
7.5 Seller's Certificate........................................12
7.6 Opinion of Counsel..........................................12
7.7 HSR Act and Similar Matters.................................12
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION
TO CLOSE.............................................................12
8.1 Fulfillment of Covenants....................................12
8.2 Accuracy of Representations and Warranties. ................12
8.3 Authorizations and Consents. ..............................13
8.4 No Litigation. .............................................13
8.5 Buyer's Certificate. .......................................13
8.6 Opinion of Counsel..........................................13
8.7 HSR Act and Similar Matters.................................13
9. CLOSING..............................................................13
9.1 General.....................................................13
9.2 At the Closing..............................................14
9.3. Canada......................................................14
10. INDEMNIFICATION......................................................15
10.1 Indemnification by Buyer....................................15
10.2 Indemnification by Seller...................................15
10.3 Time Limitation.............................................16
10.4 Third Party Claims..........................................16
10.5 Limitation..................................................17
10.6 Payment of Claims; Arbitration..............................18
10.7 Limitation on Remedies......................................18
11. GUARANTEES...........................................................18
12. TERMINATION..........................................................19
12.1 Termination Events..........................................19
12.2 Effect of Termination. .....................................20
ii
<PAGE> 4
Page
13. MISCELLANEOUS........................................................20
13.1 Survival of Representations and Warranties..................20
13.2 Amendments..................................................20
13.3 Notices.....................................................20
13.4 Expenses....................................................22
13.5 Waiver......................................................22
13.6 Headings....................................................22
13.7 Entire Agreement............................................22
13.8 Assignment..................................................22
13.9 Governing Law; Time of the Essence..........................23
13.10 Counterparts................................................23
13.11 Publicity...................................................23
13.12 Specific Performance........................................23
13.13 Jurisdiction................................................23
13.14 Legal Fees..................................................23
13.15 Actions.....................................................23
13.16 Terms.......................................................24
13.17 Construction................................................24
SCHEDULES [Not Included in Filing]
Schedule 1.1 - Asset Purchasers and Asset Sellers
Schedule 4.2 - Authority of Seller
Schedule 4.3 - Governmental Approvals
Schedule 4.4 - Litigation
Schedule 5.2 - Authority of Buyer
Schedule 5.3 - Governmental Approvals
Schedule 5.4 - Litigation
EXHIBITS [Not Included in Filing]
Exhibit A- Asset Purchase Agreement (U.S.)
Exhibit B- Asset Purchase Agreement (CANADA)
Exhibit C- Asset Purchase Agreement (UK)
iii
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MASTER ASSET PURCHASE AGREEMENT
This MASTER ASSET PURCHASE AGREEMENT (this "Agreement") dated as of
March 10, 1998 between Nashua Corporation, a corporation organized under the
laws of the State of Delaware ("Seller"), and District Photo Inc., a corporation
organized under the laws of the District of Columbia ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller desires to sell or cause to be sold, and Buyer desires
to acquire, the Business, as hereinafter defined; and
WHEREAS, the Business will be transferred to Buyer pursuant hereto by
means of a sale and purchase of the Acquired Assets, as hereinafter defined, and
the assumption of the Assumed Liabilities, as hereinafter defined.
NOW, THEREFORE, the parties hereto agree as follows:
1. GENERAL.
1.1 Definitions. The terms defined in this Section 1.1, whenever used
in this Agreement, shall have the following meanings for all purposes of this
Agreement:
"Acquired Assets" means the Assets purchased by Buyer or the Asset
Purchasers pursuant to the Asset Purchase Agreements.
"Acquisition Proposal" shall have the meaning given such term in
Section 6.7(a).
"Affiliate" means any entity that directly, or indirectly through one
or more entities, controls or is controlled by, or is under common control with,
the person specified. As used herein, "control", "controls" and "controlled"
means the ownership of 50% or more of the voting interests of the entity in
question.
"Assets" means substantially all of the assets, properties, rights,
privileges, claims, contracts and interests of every kind and description, real,
personal or mixed, tangible or intangible, absolute or contingent, wherever
situated, whether or not carried or reflected on the books and records of the
Asset Sellers, owned or held by the Asset Sellers and used in the conduct of the
Business.
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"Asset Purchaser" and "Asset Purchasers" means, respectively, each and
all of the entities designated in Schedule 1.1 or to be designated within seven
(7) days prior to the Closing in accordance with this Agreement.
"Asset Purchase Agreement" and "Asset Purchase Agreements" means,
respectively, each and all of those agreements attached hereto as Exhibits A, B
and C.
"Asset Seller" and "Asset Sellers" means, respectively, each and all of
the entities designated as such in Schedule 1.1.
"Business" means the business and operations conducted by the Asset
Sellers, consisting primarily of photofinishing, and marketing and sale of
photo-related products, in the United States, Canada, and the United Kingdom.
"Buyer's Knowledge" means the actual knowledge or conscious awareness,
without independent investigation, of any executive officer of Buyer.
"Closing" shall have the meaning given such term in Section 9.1.
"Closing Date" shall have the meaning given such term in Section 9.1.
"Disclosure Schedule or Disclosure Schedules" means any disclosure
schedule attached to this Agreement or to any Asset Purchase Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Purchase Price" shall have the meaning given such term in Section 2.1.
"Seller's Knowledge" means the actual knowledge or conscious awareness,
without independent investigation, of any executive officer of Seller.
"U.S." means the United States of America.
1.2 U.S. Dollars. Unless otherwise indicated herein, in the Asset
Purchase Agreements, or on the Schedules hereto or thereto, all references to
amounts in dollars ($) shall mean U.S. dollars. For purposes of determining the
application of the terms of this Agreement to items denominated in a currency
other than U.S. dollars, the relevant currency shall be converted to U.S.
dollars at the applicable spot exchange rate published in the currency crossrate
table of The Wall Street Journal (New York edition) on the date of this
Agreement (or, if applicable, on the date as of which such calculation is made).
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1.3 Schedules and Exhibits. A "Schedule" which is identified in this
Agreement or any Asset Purchase Agreement means part of the Disclosure Schedule
prepared by Seller or any Asset Seller and delivered to Buyer or any Asset
Purchaser pursuant to this Agreement or any Asset Purchase Agreement to disclose
factual matters concerning the Business. An "Exhibit" is an agreement or other
document attached to this Agreement or any Asset Purchase Agreement and made a
part hereof or thereof.
2. PURCHASE AND SALE.
2.1 Agreement to Sell and to Purchase; Purchase Price. Subject to the
terms and conditions set forth herein, Seller agrees to cause to be sold,
conveyed, assigned, transferred and delivered the Acquired Assets by the Asset
Sellers to Buyer or the Asset Purchasers pursuant to the Asset Purchase
Agreements. Subject to the terms and conditions herein set forth, Buyer agrees
to purchase, or cause to be purchased by the Asset Purchasers, the Acquired
Assets and to assume, or cause to be assumed by the Asset Purchasers, those
liabilities of the Asset Sellers specified in the Asset Purchase Agreements (the
"Assumed Liabilities"). The aggregate purchase price for the Acquired Assets
(the "Purchase Price") shall be Fifty-two Million, Five Hundred Thousand Dollars
($52,500,000), subject to adjustment as provided in the Asset Purchase
Agreements (but not subject to adjustment for Buyer's and the Asset Purchasers'
assumption of the Assumed Liabilities) and shall be allocated as reflected in
the Asset Purchase Agreements.
2.2 Payment of Purchase Price. Subject to the terms and conditions set
forth herein, in full consideration for the sale, conveyance, assignment,
transfer and delivery of the Acquired Assets, Buyer shall deliver or cause to be
delivered by the Asset Purchasers to Seller the Purchase Price payable at the
Closing by wire transfer of immediately available funds to an account or
accounts designated in writing by Seller for the benefit of each Asset Seller
(with Seller acting as agent for each Asset Seller).
2.3 Brokers. Except for BT Alex. Brown Incorporated, whose fees and
expenses shall be the sole responsibility of Seller, Seller represents and
warrants that it has not employed or incurred any liability to any broker, agent
or finder in connection with any transaction contemplated by this Agreement, nor
has it employed or retained any other person whose compensation is directly
contingent on the closing of the transactions contemplated by this Agreement.
Buyer represents and warrants that it has not employed or incurred any liability
to any broker, agent or finder in connection with any transaction contemplated
by this Agreement.
3. [INTENTIONALLY OMITTED.]
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
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Seller represents and warrants to Buyer that the statements contained
in this Article 4 are on the date hereof, and on the Closing Date will be, true
and correct:
4.1 Organization, Good Standing and Qualification. Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Seller has full corporate power and authority to
own or lease its properties and carry on its business as presently conducted.
4.2 Authority of Seller. Seller has all necessary authority and power
to enter into this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by Seller of this Agreement and
the consummation by Seller of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of Seller and no other action
on the part of Seller is required in connection therewith. This Agreement
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. The execution, delivery and performance by Seller of this Agreement does
not, and the performance by Seller of the transactions contemplated hereby will
not:
(a) violate any provision of the Certificate of Incorporation
or By-Laws of Seller; or
(b) subject to the requirements of the HSR Act, violate any
laws of the United States or other jurisdiction applicable to Seller or, except
as expressly contemplated by this Agreement, require Seller to obtain any
approval, consent or waiver of any person or entity (governmental or otherwise)
that has not been obtained or made; or
(c) except as disclosed in Schedule 4.2, result in a violation
or any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Seller is a party, except for any such
violations, breaches, defaults or other occurrences which would not in any
respect prevent or delay Seller from performing its obligations under this
Agreement.
4.3 Governmental Approvals. Except for applicable requirements of the
HSR Act, or as disclosed in Schedule 4.3, neither Seller nor any Asset Seller is
required to submit any notice, report or other filing with or to any
governmental body in connection with the execution, delivery or performance of
this Agreement by Seller and the consummation of the transactions contemplated
hereby.
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4.4 Litigation. Except as disclosed in Schedule 4.4, no litigation,
claim, administrative proceeding or other proceeding or governmental
investigation is pending or, to Seller's Knowledge, threatened, which would
prevent or delay the execution, delivery or performance of this Agreement or any
agreement, instrument or document contemplated hereby by Seller or the
consummation by Seller of the transactions contemplated hereby.
4.5 Fairness Opinion. Seller has received the opinion from BT Alex.
Brown Incorporated to Seller, dated March 8, 1998, that the consideration to be
received by Seller for the Business pursuant to this Agreement and the Asset
Purchase Agreements is fair to Seller from a financial point of view.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that the statements contained
in this Article 5 are on the date hereof, and as of the Closing Date will be,
true and correct:
5.1 Organization and Good Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
District of Columbia. Buyer has full corporate power and authority to own or
lease its properties and carry on its business as presently conducted.
5.2 Authority of Buyer. Buyer has all necessary authority and power to
enter into this Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of Buyer and no other action on the
part of Buyer is required in connection therewith. This Agreement constitutes,
or when executed and delivered will constitute the valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms. The execution,
delivery and performance by Buyer of this Agreement does not, and the
performance by Buyer of the transactions contemplated hereby, will not:
(a) violate any provision of the Articles of Incorporation or
By-Laws of Buyer; or
(b) subject to the requirements of the HSR Act, violate any
laws of the United States or other jurisdiction applicable to Buyer or, except
as expressly contemplated by this Agreement, require Buyer to obtain any
approval, consent or waiver of any person or entity (governmental or otherwise)
that has not been obtained or made; or
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<PAGE> 10
(c) except as disclosed in Schedule 5.2, result in violation
or any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Buyer is a party, except for any such
violations, breaches, defaults or other occurrences which would not in any
respect prevent or delay Buyer from performing its obligations under this
Agreement.
5.3 Governmental Approvals. Except for applicable requirements of the
HSR Act, or as disclosed in Schedule 5.3, neither Buyer nor any Asset Purchaser
is required to submit any notice, report or other filing with or to any
governmental body in connection with the execution, delivery or performance of
this Agreement by Buyer and the consummation of the transactions contemplated
hereby.
5.4 Litigation. Except as disclosed in Schedule 5.4, no litigation,
claim, administrative proceeding or other proceeding or governmental
investigation is pending or, to Buyer's Knowledge, threatened, which would
prevent or delay the execution, delivery or performance of this Agreement or any
agreement, instrument or document contemplated hereby by Buyer or the
consummation by Seller of the transactions contemplated hereby.
6. OTHER AGREEMENTS.
6.1 Conduct of the Business. During the period from the date of this
Agreement to the Closing, Seller shall, and shall cause each Asset Seller to,
conduct the Business substantially in the same manner as conducted prior to the
date hereof, shall maintain the Acquired Assets in a normal business manner
consistent with past practice and shall pay its debts (including without
limitation accounts payable) as they come due consistent with past practice.
6.2 Access to Records and Information. Buyer shall have such access as
is provided for in Section 6.6 of the Asset Purchase Agreements.
6.3 Filings and Authorizations. Each of Buyer and Seller shall make an
HSR Act filing (the "HSR Act Filing") no later than March 13, 1998 (the "HSR
Filing Date"), and shall coordinate their filing dates to enable contemporaneous
filing. Buyer shall pay the filing fee required to be paid to the Federal Trade
Commission in connection with the HSR Act Filing. Each of Buyer and Seller shall
pay all other fees and expenses incurred by
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<PAGE> 11
Buyer or Seller, respectively, in connection with the HSR Act Filing. Buyer and
Seller shall cooperate with each other and promptly take or cause to be taken
all actions and do or cause to be done all things necessary, proper or advisable
to obtain favorable review of the proposed transaction under the HSR Act. Buyer
and Seller each agrees to use commercially reasonable efforts to resolve any
objections that may be asserted with respect to the transactions contemplated
hereunder by the Department of Justice, the Federal Trade Commission, any State
Attorney General or any other governmental entity (including, without
limitation, objections under any antitrust laws); provided, however, that
neither party shall be required to accept any condition or restriction,
including, without limitation, the disposition of assets, which would materially
adversely impact the economic or business benefits of the transactions
contemplated hereby. Buyer and Seller agree to use reasonable efforts to take
such action as may be required by any federal or state court of the United
States, in any suit brought by a private party or governmental entity
challenging the transaction hereunder as violative of the antitrust laws, in
order to avoid the entry of, or to cause the withdrawal or voiding of, any
injunction, temporary restraining order or other order which has the effect of
preventing the consummation of the transactions contemplated by this Agreement.
6.4 Bulk Sales. It may not be practicable to comply or attempt to
comply with the procedures of the bulk sales or bulk transfers acts or laws of
any or all of the states or other jurisdictions in which the Acquired Assets are
situated (or of any state or jurisdiction) which may be asserted to be
applicable to the transactions contemplated hereby. Buyer and Seller therefore
waive any requirements for compliance with any or all of such laws.
6.5 Maintenance of, and Access to Records. Buyer shall, and shall cause
each Asset Purchaser to, permit Seller and the Asset Sellers to have reasonable
access to all business records turned over to Buyer or the Asset Purchasers in
accordance with this Agreement or the Asset Purchase Agreements; provided,
however, that such access shall be allowed only during normal business hours,
with reasonable advance notice and in such manner as not to interfere
unreasonably with the normal business operations of the Business. Buyer shall
preserve and maintain the records relating to the Business which are part of the
Acquired Assets for at least seven (7) years after the Closing Date or longer if
required by the Internal Revenue Service or any other government agency,
domestic or foreign.
6.6 Notice of Breaches; Updates.
(a) Seller shall promptly deliver or cause any Asset Seller to
deliver promptly to Buyer written notice of any event or development that would
(i) render any statement, representation or warranty of Seller in
this Agreement or of any Asset Seller in
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<PAGE> 12
any Asset Purchase Agreement (including exceptions set forth in any Schedule)
inaccurate or incomplete, or (ii) constitute or result in a breach by Seller or
any Asset Seller of, or a failure by Seller or any Asset Seller to comply with,
any agreement or covenant in this Agreement or any Asset Purchase Agreement or
related to the Business applicable to Seller or any Asset Seller, as the case
may be. No such disclosure shall be deemed to avoid or cure any such
misrepresentation or breach.
(b) Buyer shall promptly deliver to Seller written notice of
any event or development that would (i) render any statement, representation or
warranty of Buyer in this Agreement or any Asset Purchase Agreement inaccurate
or incomplete, or (ii) constitute or result in a breach by Buyer of, or a
failure by Buyer to comply with, any agreement or covenant in this Agreement or
any Asset Purchase Agreement or related to the Business applicable to Buyer or
any Asset Purchasers, as the case may be. No such disclosure shall be deemed to
avoid or cure any such misrepresentation or breach.
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<PAGE> 13
6.7 No Solicitation of Offers.
(a) Unless and until this Agreement shall have been terminated
by either party pursuant to Article 12 hereof, Seller covenants that following
the date hereof it and the Asset Sellers will not (and shall use its and their
best efforts to ensure that none of its officers, directors, agents,
representatives or Affiliates) take or cause, directly or indirectly, any of the
following actions with any party other than Buyer or its designees: (i) solicit,
initiate, or participate in any negotiations, inquiries or discussions with
respect to any offer or proposal to acquire all or a significant part of the
Business or the Acquired Assets whether by merger, consolidation, other business
combination, purchase of assets, tender or exchange offer or otherwise (each of
the foregoing, an "Acquisition Proposal"); (ii) disclose, in connection with an
Acquisition Proposal, any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, any effort or attempt by any other
person to do or seek any of the foregoing; (iii) enter into or execute any
agreement relating to an Acquisition Proposal; or (iv) make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Proposal other than with respect to the transactions contemplated by this
Agreement; provided, however, that nothing contained herein shall prohibit
Seller or any Asset Seller from taking any of the actions specified above or in
connection with an unsolicited Acquisition Proposal that involves consideration
that is economically superior to the consideration to be paid hereunder and does
not contemplate any condition relating to the obtaining of funds for such
Acquisition Proposal, provided, that in each case, its Board of Directors
determines in good faith, after consultation with outside legal counsel, that
such action is required by the fiduciary duties of such directors under
applicable state law. Seller shall immediately cease and terminate, and cause
any of the Asset Sellers to cease and terminate immediately all existing
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(b) In the event a Seller or an Asset Seller shall receive any
Acquisition Proposal, directly or indirectly, or any request for disclosure with
respect to information of the type referred to in clause (a)(ii) above, it
shall, prior to taking any action in response thereto, inform Buyer of such fact
and shall, in any such notice to Buyer, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. Subject to the
fiduciary obligations of the directors and officers under applicable law, Seller
agrees not to release any third party from, or waive any provision of, and shall
cause any Asset Seller not to release any third party from, or waive, any
confidentiality or standstill agreement relating to the Business and to which
such Seller or Asset Seller is a party. Notwithstanding the foregoing, Seller
shall not enter into and shall cause any Asset Seller not to enter into a
definitive agreement to transfer the Acquired Assets or any portion of
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Seller's Business to any third party until and unless this Agreement has been
terminated pursuant to Section 12 hereof.
6.8 Consummation of Agreement. Seller will use its reasonable best
efforts to cause all of the conditions set forth in Article 7 to be satisfied.
Buyer will use its reasonable best efforts to cause all of the conditions set
forth in Article 8 to be satisfied.
6.9 Non-Competition.
(a) Period and Conduct. As further consideration for the
purchase and sale of the Acquired Assets and the transactions contemplated by
this Agreement and the Asset Purchase Agreements, during the period commencing
on the Closing Date through and until the date five (5) years following the
Closing Date (the "Restricted Period"), Seller covenants and agrees that it
shall not and shall cause each of its Affiliates not to, for any reason
whatsoever, directly or indirectly, either individually or as owner, partner,
stockholder, consultant, lender or otherwise:
(i) in the Prescribed Territory (as defined in
Section 6.9(c)), compete with Buyer in the provision of photo-finishing services
or the manufacture, production, design, engineering, importation, purchase,
marketing, sale, distribution, research or development of photo-related products
(excluding paper, toner, printer cartridges and other products used, intended to
be used or capable of being used for the reproduction of images by means other
than silver halide-based processes) the same as, similar to, or having a similar
purpose or use to those services provided by Buyer or those products
manufactured, produced, designed, engineered, imported, purchased, marketed,
sold distributed or developed (or being developed) by Seller on or prior to the
Closing or by Buyer after the Closing (collectively, the "Products"); or
(ii) in the Prescribed Territory, solicit, or accept
or purchase orders or business of any kind relating to the provision of
photo-finishing services or the manufacture, production, design, engineering,
importation, purchase, marketing, sale, distribution, research or development of
any Products from any customer or supplier of Seller on or prior to the Closing
or of Buyer after the Closing.
(b) Confidential Information. Seller acknowledges and agrees
that the use, disclosure or publication by it, or by any of its Affiliates, of
any Confidential Information (defined below) after the Closing could cause the
Business substantial loss and damages that could not be readily calculated and
for which no remedy at law would be adequate. Accordingly, Seller covenants and
agrees with Buyer that Seller will not and will cause its Affiliates not to at
any time, except with the prior written consent of Buyer, directly or
indirectly, use, disclose, or publish, or permit others not so authorized to
use,
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disclose, or publish any Confidential Information. Notwithstanding the
foregoing, Seller and its Affiliates may disclose such information, only if and
to the extent: (i) Seller or its Affiliates in good faith believes on the advice
of counsel that it or they are required by law, (ii) required by court order or
subpoena (a copy of which shall be provided to Buyer ten (10) days prior to
disclosure), or (iii) available in the public domain. As used in this Agreement,
the terms "Confidential Information" includes, without limitation, information
Seller or its Affiliates have not previously disclosed to the public with
respect to Seller's or its Affiliates' past, present or future operations,
services, products, research, inventions, discoveries, drawings, designs, plans,
processes, models, technical information, facilities, methods, trade secrets,
copyrights, software, source code, systems, patents, procedures, manuals,
specifications, any other intellectual property, confidential reports, price
lists, pricing formulas, customer lists, financial information (including the
revenues, costs, or profits associated with any products or services of the
Business), business plans, lease structure, projections, prospects,
opportunities or strategies, acquisitions or mergers, advertising or promotions,
personnel matters, legal matters of the Business, any other confidential and
proprietary information, and any other information not generally known outside
the Business that may be of value to the Business but excludes any information
already properly in the public domain. "Confidential Information" also includes
confidential and proprietary information and trade secrets that third parties
entrust to Seller or its Affiliates in confidence. Seller acknowledges and
agrees that the rights and obligations set forth in this Section 6.9(b) will
continue indefinitely.
(c) Prescribed Territory. Seller and its Affiliates shall
refrain from engaging in the activities described in this Section 6.9 during the
period specified in Section 6.9(a) in the United States, the United Kingdom and
Canada (the "Prescribed Territory").
(d) Remedies. Inasmuch as any breach, or failure to comply
with, Section 6.9 of this Agreement will cause serious, substantial and
irreparable damage to Buyer, if Seller or any of its Affiliates should in any
way breach, or fail to comply with, the terms of Section 6.9 of this Agreement,
Buyer shall be entitled to an injunction restraining Seller and its Affiliates
from such breach or failure. All remedies expressly provided for herein are
cumulative of any and all other remedies now existing at law or in equity. Buyer
shall, in addition to the remedies herein provided, be entitled to avail itself
of all such other remedies as may now or hereafter exist at law or in equity for
compensation, and for the specific enforcement of the covenants contained
herein. Resort to any remedy provided for hereunder or provided for by law shall
not prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies, or preclude the recovery by Buyer of monetary damages and
compensation.
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(e) Severability. Each subsection of this Section 6.9
constitutes a separate and distinct provision hereof. In the event that any
provision of this Section 6.9 shall finally be determined to be invalid,
ineffective or unenforceable, every other provision of this Section 6.9 shall
remain in full force and effect. The invalid, ineffective or unenforceable
provision shall, without further action by the parties, be automatically amended
to effect the original purpose and intent of the invalid, ineffective or
unenforceable provision to the maximum extent enforceable under applicable law;
provided, however, that such amendment shall apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made.
6.10 Non-Solicitation. During the period commencing on the Closing Date
and through and until the date five (5) years after the Closing Date, Seller and
its Affiliates shall not, for any reason whatsoever, directly or indirectly,
call upon or solicit any Covered Employee for the purpose or with the intent of
enticing such employee away from or out of the employ of Buyer. As used herein,
"Covered Employee" means an employee of Seller or any Affiliate on the Closing
Date who accepts employment with Buyer or any Asset Purchaser on or promptly
after the Closing Date.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO CLOSE.
The obligation of Buyer to close the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the following
conditions precedent, each of which may be waived, in whole or in part, in the
sole discretion of Buyer, by a written instrument signed by Buyer.
7.1 Fulfillment of Covenants. Seller and the Asset Sellers shall have
fulfilled or complied with each covenant, obligation and agreement required to
be fulfilled or complied with by them prior to the Closing Date under this
Agreement and the Asset Purchase Agreements.
7.2 Accuracy of Representations and Warranties. The representations and
warranties of Seller and of the Asset Sellers contained in this Agreement and in
the Asset Purchase Agreements shall be true and correct on the date when made
and shall be repeated at and as of the Closing Date and shall be true and
correct as so made again (unless a representation is made as of a specific date,
and in such event it shall be true and correct as of such date); provided,
however, that in the event Seller has provided Buyer with written notice prior
to the Closing Date of an event or development arising after the date hereof and
prior to the Closing Date that causes any representation or warranty of Seller
in this Agreement not to be true and correct on the Closing Date (a "Seller's
Notice"), then Buyer shall, in its sole discretion, either (i) elect not to
close the transactions contemplated by this Agreement by reason of the failure
of the condition to Closing specified in this Section 7.2 to be satisfied, or
(ii) elect to close the transactions
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contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 7.2 to be satisfied, in which event Buyer
shall be deemed to have waived the condition to Closing specified in this
Section 7.2 with respect to the matters specified in Seller's Notice and shall
not seek or be entitled to indemnification under Article 10 with respect to only
the matters specified in Seller's Notice.
7.3 Authorizations and Consents. Seller and each Asset Seller shall
have obtained and made all governmental or other authorizations, approvals,
consents, permits, waivers and filings which are necessary under all applicable
laws and regulations for the consummation by Seller and each Asset Seller of the
transactions contemplated by this Agreement and the Asset Purchase Agreements.
7.4 No Litigation. No injunction shall be outstanding which would
prevent consummation of the transactions contemplated by this Agreement and the
Asset Purchase Agreements. No provision of any applicable domestic law or
regulation, and no judgment, injunction, order or decree of a governmental
authority that has the effect of making the Closing illegal or otherwise
restrains or prohibits the Closing from occurring shall be in effect (each party
agreeing to use commercially reasonable efforts, including appeals to higher
courts, to have any such judgment, injunction, order or decree lifted).
7.5 Seller's Certificate. Seller shall have delivered to Buyer a
certificate dated the Closing Date and executed by an executive officer of
Seller to the effect that each of the conditions specified in Sections 7.1
through 7.4 is satisfied.
7.6 Opinion of Counsel. Buyer shall have received from Hale and Dorr
LLP a legal opinion addressed to Buyer, dated as of the Closing Date, in a form
reasonable and customary for transactions of this nature.
7.7 HSR Act and Similar Matters. All applicable waiting periods (and
any extensions thereof) under the HSR Act shall have expired or otherwise been
terminated, and all necessary authorizations, approvals, consents, permits or
waivers under any similar foreign laws shall have been obtained.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to close the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the following
conditions precedent, each of which may be waived, in whole or in part, in the
sole discretion of Seller, by a written instrument signed by Seller.
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8.1 Fulfillment of Covenants. Buyer and the Asset Purchasers shall have
fulfilled or complied with each covenant, obligation and agreement required to
be fulfilled or complied with by them prior to the Closing Date under this
Agreement and the Asset Purchase Agreements.
8.2 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement and in the Asset Purchase
Agreements shall be true and correct on the date when made and shall be repeated
at and as of the Closing Date and shall be true and correct as so made again
(unless a representation is made as of a specific date, and in such event it
shall be true and correct as of such date); provided, however, that in the event
Buyer has provided Seller with written notice prior to the Closing Date of an
event or development arising after the date hereof and prior to the Closing Date
that causes any representation or warranty of Buyer in this Agreement not to be
true and correct on the Closing Date (a "Buyer's Notice"), then Seller shall, in
its sole discretion, either (i) elect not to close the transactions contemplated
by this Agreement by reason of the failure of the condition to Closing specified
in this Section 8.2 to be satisfied, or (ii) elect to close the transactions
contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 8.2 to be satisfied, in which event Seller
shall be deemed to have waived the condition to Closing specified in this
Section 8.2 with respect to the matters specified in Buyer's Notice and shall
not seek or be entitled to indemnification under Article 10 with respect to only
the matters specified in Buyer's Notice.
8.3 Authorizations and Consents. Buyer and each Asset Purchaser shall
have obtained and made all governmental or other authorizations, approvals,
consents, permits, waivers and filings which are necessary under all applicable
laws and regulations for the consummation by Buyer and each Asset Purchaser of
the transactions contemplated by this Agreement and the Asset Purchase
Agreements.
8.4 No Litigation. No injunction shall be outstanding which would
prevent consummation of the transactions contemplated by this Agreement or the
Asset Purchase Agreements. No provision of any applicable domestic law or
regulation, and no judgment, injunction, order or decree of a governmental
authority that has the effect of making the Closing illegal or otherwise
restrains or prohibits the Closing from occurring shall be in effect (each party
agreeing to use commercially reasonable efforts, including appeals to higher
courts, to have any such judgment, injunction, order or decree lifted).
8.5 Buyer's Certificate. Buyer shall have delivered to Seller a
certificate dated the Closing Date and executed by an executive officer of Buyer
to the effect that each of the conditions specified in Sections 8.1 through 8.4
is satisfied.
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8.6 Opinion of Counsel. Seller shall have received from Wilmer, Culter
& Pickering a legal opinion addressed to Seller, dated as of the Closing Date,
in a form reasonable and customary for transactions of this nature.
8.7 HSR Act and Similar Matters. All applicable waiting periods (and
any extensions thereof) under the HSR Act shall have expired or otherwise been
terminated, and all necessary authorizations, approvals, consents, permits or
waivers under any similar foreign laws shall have been obtained.
9. CLOSING.
9.1 General. Subject to the conditions set forth in Articles 7 and 8,
the consummation of the transactions contemplated by this Agreement and the
Asset Purchase Agreements (the "Closing") shall take place at the offices of
Hale and Dorr LLP, Boston, Massachusetts at 10:00 AM (Eastern Time), on the
later of (i) April 1, 1998 or (ii) the third business day following satisfaction
or waiver of each of the conditions contained in this Agreement and the Asset
Purchase Agreements, or on such other date as Buyer and Seller may mutually
agree (such date being herein referred to as the "Closing Date"). Failure to
close on such date shall not relieve either party hereto of its obligations
under this Agreement. All transactions at the Closing shall be deemed to take
place simultaneously at 12:01 a.m. Eastern Time on the Closing Date, and no
transaction shall be deemed to have been completed and no document or
certificate shall be deemed to have been delivered until all transactions are
completed and all documents are delivered.
9.2 At the Closing.
(a) Seller shall deliver to Buyer, subject to satisfaction of
the conditions precedent to the obligations of Seller stated herein, the various
certificates, instruments and documents referred to in Sections 7.5 and 7.6;
(b) Buyer shall deliver to Seller, subject to satisfaction of
the conditions precedent to the obligations of Buyer stated herein, the various
certificates, instruments and documents referred to in Sections 8.5 and 8.6;
(c) Seller shall cause each Asset Seller to perform, pursuant
to its respective Asset Purchase Agreement, all obligations to be performed by
it thereunder at the Closing;
(d) Buyer shall cause each Asset Purchaser to perform,
pursuant to its respective Asset Purchase Agreement, all obligations to be
performed by it thereunder at the Closing; and
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<PAGE> 20
(e) Buyer shall pay to Seller the Purchase Price in the manner
and the amount set forth in Sections 2.1 and 2.2.
9.3. Canada. Notwithstanding any other provision in this Agreement or
any Asset Purchase Agreement to the contrary:
(a) Seller shall use its reasonable best efforts to obtain any
consents and approvals required to assign or transfer fully all rights of its
Affiliate, Nashua Photo Limited, under the Canadian postal contract (the
"Canadian Postal Contract") to Buyer, from the date hereof until such assignment
or transfer has been obtained.
(b) Neither Buyer nor any Asset Purchaser shall be obligated
to purchase the Acquired Assets or assume the Assumed Liabilities under the
Asset Purchase Agreement by and between Buyer and Nashua Photo Limited, a
Canadian Corporation (the "Canadian Asset Purchase Agreement"), or consummate
the transactions contemplated thereunder unless and until such time as the
Canadian Postal Contract shall have been fully assigned and transferred to
Buyer; provided, that, such assignment and transfer be obtained no later than
ninety (90) days following the Closing Date.
(c) If the transactions contemplated under the Canadian Asset
Purchase Agreement are not consummated on the Closing Date because the Canadian
Postal Contract has not been fully assigned and transferred to Buyer, the
Purchase Price payable to Seller pursuant to this Agreement shall be reduced by
$2,000,000.
(d) If the Canadian Postal Contract has been fully assigned to
Buyer within ninety (90) days of the Closing Date, Buyer and Seller shall be
obligated to consummate the transactions contemplated by the Canadian Asset
Purchase Agreement; provided, that, all other terms and conditions thereunder or
hereunder have been fully satisfied, and the Purchase Price for the Acquired
Assets under the Canadian Asset Purchase Agreement shall be $2,000,000.
10. INDEMNIFICATION.
10.1 Indemnification by Buyer. From and after the Closing Date, Buyer
shall indemnify, defend and hold Seller and the Asset Sellers, and their
directors, officers and Affiliates (collectively, the "Seller Group") harmless
from and against any and all claims, losses, liabilities, damages, costs and
expenses (including reasonable attorney's fees to the extent permitted by law),
net of any benefits received by the Seller Group including tax benefits,
insurance proceeds or warranty reimbursements (collectively, "Losses") that may
be incurred by, or asserted against, Seller Group, arising from or related to,
directly or indirectly:
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(a) the failure of Buyer or any Asset Purchaser to assume,
pay, perform and discharge the Assumed Liabilities;
(b) any claim arising out of the operation of the Business or
Buyer's or any Asset Purchaser's conduct after the Closing;
(c) any breach of any representation or warranty of Buyer
contained herein (unless waived in writing by Seller prior to the Closing); or
(d) any breach of any covenant, obligation or agreement of
Buyer or the Asset Purchasers contained herein or in any Asset Purchase
Agreement (unless waived in writing by Seller prior to the Closing).
10.2 Indemnification by Seller. From and after the Closing Date, Seller
shall indemnify, defend and hold Buyer and the Asset Purchasers, and their
directors, officers and Affiliates (collectively, the "Buyer Group") harmless
from and against any and all Losses that may be incurred by, or asserted
against, Buyer Group, arising from or related to, directly or indirectly:
(a) the failure of Seller or any Asset Seller to assume, pay,
perform and discharge all liabilities other than the Assumed Liabilities;
(b) any claim arising out of the operation of the Business or
Seller's or any Assets Seller's conduct prior to or on the Closing, other than
those claims specifically disclosed on the Disclosure Schedules, Assumed
Liabilities or any other obligations or any liabilities to be paid or discharged
by Buyer as provided in this Agreement or any Asset Purchase Agreement;
(c) any breach of any representation or warranty of Seller or
the Asset Sellers contained herein or in any Asset Purchase Agreement (unless
waived in writing by Buyer prior to the Closing);
(d) any breach of any covenant, obligation or agreement of
Seller or the Asset Sellers contained herein or in any Asset Purchase Agreement
(unless waived in writing by Buyer prior to the Closing);
(e) any claims made by creditors, with respect to
non-compliance with any bulk transfer law, except to the extent that such claims
result from Buyer's failure to pay when due the Assumed Liabilities; or
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<PAGE> 22
(f) litigation matters disclosed on Schedule 5.1(m) to the
Asset Purchase Agreements (except with respect to any action taken by Buyer
after the Closing in breach of the Kaplan matter as disclosed and except for the
U.S. Postal Rate litigation referred to in Schedule 5.1(m) of the U.S. Asset
Purchase Agreement which Buyer acknowledges Seller makes no indemnification).
10.3 Time Limitation. The right of Seller Group or Buyer Group, as
applicable, to indemnification under Section 10.1 or Section 10.2, respectively,
shall apply only to those claims for indemnification which are delivered
pursuant hereto during the applicable period set forth in Section 13.1.
Notwithstanding anything in this Agreement to the contrary, there shall be no
time limitation for claims for indemnification under Sections 10.1(a), 10.1(b),
10.2(a) and 10.2(b).
10.4 Third Party Claims.
(a) Notification. If any third party shall notify any party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against the other party (the
"Indemnifying Party") under this Section 10.4, then the Indemnified Party shall
promptly (but no later than fifteen (15) days after notice is received by the
Indemnified Party of any Third Party Claim) notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Right of Indemnitor To Defend. The Indemnifying Party
shall have the right to defend the Indemnified Party against the Third Party
Claim with counsel of its choice satisfactory to the Indemnified Party so long
as (A) the Indemnifying Party notifies the Indemnified Party in writing, within
thirty (30) days after notice to the Indemnifying Party pursuant to Section
10.4(a) of such Third Party Claim, that the Indemnifying Party shall indemnify
the Indemnified Party from and against the entirety of any Losses the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with reasonable evidence that the Indemnifying
Party has the financial resources to defend against the Third Party Claim and
perform its obligations hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
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<PAGE> 23
(c) No Settlement without Consent of Indemnitor. So long as
the Indemnifying Party is conducting the defense of the Third Party Claim in
accordance with Section 10.4(b) above, the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in (but not control) the
defense of the Third Party Claim. The Indemnified Party shall not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(d) Rights of Indemnitee if Indemnitor Does Not Defend. In the
event any of the conditions in Section 10.4(b) above is unsatisfied, (A) the
Indemnified Party may defend against, and consent to the entry of any judgment
or enter into any settlement with respect to, the Third Party Claim in any
manner it may deem appropriate and the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action with its counsel at
its own expense, (B) the Indemnifying Party shall reimburse the Indemnified
Party promptly and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (C) the
Indemnifying Party shall remain responsible for any Losses (including any
amounts paid in settlement) the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 10.4.
10.5 Limitation. There shall be no liability for indemnification under
Sections 10.1 or 10.2 unless, and solely to the extent that, the aggregate
amount of Losses exceeds $325,000 (the "Indemnification Threshold"), provided,
however, that the Indemnification Threshold shall not apply to adjustments to
the Purchase Price pursuant to Section 2.1 and the Asset Purchase Agreements or
liability for Losses described in Section 10.2(e) or (f). Notwithstanding the
foregoing, the right of any indemnified party to indemnification under Section
10.1 or 10.2 shall be subject to the following provisions:
(a) No indemnification shall be payable to an indemnified
party with respect to any matters disclosed in any Disclosure Schedule (except
as provided in Section 10.2(f)).
(b) The aggregate amount of liability of either the Buyer
Group or the Seller Group under Section 10.1 or 10.2 shall not exceed 75% of the
Purchase Price, as adjusted pursuant to Section 2.1 or 9.3(c), and the Asset
Purchase Agreements.
(c) No indemnification shall be payable by an indemnifying
party to the extent that the claim would have been reduced by the indemnified
party properly performing its common law duty to mitigate any loss incurred by
it.
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10.6 Payment of Claims; Arbitration. All claims asserted under Section
10.1 or 10.2 of this Agreement shall be paid or otherwise satisfied by the
indemnifying party within sixty days after notice thereof is given by the
indemnified party; provided, however, that if within such 60-day period, the
indemnifying party indicates in a writing delivered to the indemnified party
that it disputes the nature or amount of the claim or that the indemnified party
is entitled to indemnification hereunder, the dispute upon the election of any
party hereto after such 60-day period shall be settled by arbitration by a
single arbitrator in New York City in accordance with the commercial arbitration
rules of the American Arbitration Association. The fees and expenses of the
arbitrator shall be borne by the indemnifying party and the indemnified party in
such proportions as shall be determined by the arbitration, or if there is no
such determination then such fees and expenses shall be borne equally by the
indemnifying party and the indemnified party. The determination of the
arbitrator as to the amount, if any, of the indemnification claim which is
properly allowable shall be conclusive and binding upon the parties hereto and
judgment may be entered thereon in any court having jurisdiction thereof.
10.7 Limitation on Remedies. It is specifically understood and agreed
that in the event a misrepresentation or breach of warranty or covenant is
discovered by Buyer or Asset Purchaser after the Closing, Buyer's remedies shall
be limited solely to the indemnification set forth in this Article 10 of this
Agreement.
11. GUARANTEES.
(a) Seller hereby guarantees to Buyer the full and faithful performance
by each Asset Seller of its obligations under the Asset Purchase Agreement to
which it is a party.
(b) Buyer hereby guarantees to Seller the full and faithful performance
by each Asset Purchaser or any permitted assignee of its obligations under the
Asset Purchase Agreement to which it is a party.
12. TERMINATION.
12.1 Termination Events. Subject to the other provisions of this
Article 12, this Agreement may, by written notice given at or prior to the
Closing in the manner hereinafter provided, be terminated and abandoned:
(a) By Buyer upon five (5) days written notice to Seller, in
the event that any of the conditions precedent to Buyer's obligations set forth
in Article 7 with respect to Seller are not satisfied at or during the
respective times therein indicated (other than by reason of the material breach
by such terminating party of any of its representations, warranties, covenants,
or agreements set forth herein) and such conditions are not either
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<PAGE> 25
(i) cured by Seller within five (5) days after Buyer gives Seller such notice,
or (ii) waived by Buyer at or prior to the Closing Date.
(b) By Seller upon five (5) days written notice to Buyer, in
the event that any of the conditions precedent to Seller's obligations set forth
in Article 8 with respect to Buyer are not satisfied at or during the respective
times therein indicated (other than by reason of the material breach by such
terminating party of any of its representations, warranties, covenants, or
agreements set forth herein) and such conditions are not either (i) cured by
Buyer within five (5) days after Seller gives Buyer such notice, or (ii) waived
by Seller at or prior to the Closing Date.
(c) By either Seller or Buyer if any applicable domestic law,
rule, or regulation makes consummation of this Agreement illegal or if any
judgment, injunction, order or decree of a court or governmental agency or
authority of competent jurisdiction restrains or prohibits the consummation of
this Agreement, and such judgment, injunction, order, or decree has become final
and nonappealable;
(d) By mutual written consent of Seller and Buyer;
(e) By Seller upon five (5) days written notice to Buyer, if
pursuant to receipt of an Acquisition Proposal that involves consideration that
is economically superior to the consideration to be paid hereunder and does not
contemplate any condition relating to the obtaining of funds for such
Acquisition Proposal (as determined in each case in good faith by Seller's board
of directors after consultation with outside legal counsel), Seller's board of
directors determines to consummate a transaction based on such Acquisition
Proposal. Pursuant to exercising its termination rights under this Section
12.1(e), Seller shall pay Buyer a break-up fee of $2,250,000 in cash by wire
transfer within five (5) business days of such termination; or
(f) By either Seller or Buyer if the Closing shall not have
occurred on or prior to July 1, 1998; provided, however, that no party may
exercise its rights under this Section 12.1(f) if such party is in material
breach or default under this Agreement.
12.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 12.1, all further obligations of the parties hereunder shall
terminate except Seller's payment obligation under Section 12.1(e) if this
Agreement is terminated pursuant to Section 12.1(e); provided, however, that if
this Agreement is so terminated by one party pursuant to Section 12.1(a) or
12.1(b) because one or more of the conditions to such party's obligations
hereunder is not satisfied as a result of the other party's failure to comply
with its obligations under any provision of this Agreement, it is expressly
agreed and understood that such party's right to pursue all legal remedies for
breach of contract or
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otherwise, including, without limitation, damages relating thereto, shall also
survive such termination unimpaired. No termination of this Agreement shall act
to terminate or otherwise impair the obligations set forth in Sections 13.4
(Expenses) and 13.12 (Specific Performance).
13. MISCELLANEOUS.
13.1 Survival of Representations and Warranties. All covenants and
obligations to be performed after the Closing Date contained in this Agreement
or in any other certificate or document delivered pursuant to this Agreement
shall survive the Closing and expire in accordance with their respective terms.
All representations and warranties contained in this Agreement or in any other
certificate or document delivered pursuant to this Agreement shall survive the
Closing for a period of eighteen (18) months. The indemnification obligation
under Section 10.2(e) shall survive the Closing for a period of six (6) months
beyond the applicable federal or state statute of limitations (including
extensions thereof). The waiver of any condition, based upon the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement, or other remedy based upon such representations, warranties,
covenants or obligations.
13.2 Amendments. This Agreement may be amended only by a written
agreement signed by Seller and Buyer.
13.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) upon receipt if personally delivered or by overnight courier, or (b)
on the date sent if made by facsimile transmission to the party to whom such
notice or communication is directed to the facsimile number of such person
stated below and if followed by a telephone call to such person at the same time
to the telephone number stated below (or otherwise provided to or obtained by
the sending party) advising such person (or leaving a voice mail for such
person) that the facsimile transmission has been sent, to the parties at their
respective addresses set forth below.
(a) To Buyer:
District Photo Inc.
10501 Rhode Island Avenue
Beltsville, MD 20705
Attn: Neil D. Cohen, President and Chief
Executive Officer
Facsimile: 301-937-2532
Phone: 301-937-5300
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with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: George P. Stamas, Esq.
Facsimile: 202-663-6363
Phone: 202-663-6000
(b) To Seller:
Nashua Corporation
44 Franklin Street
Nashua, NH 03062
Attn: Paul Buffum, Vice President and General Counsel
Facsimile: 603-880-2747
Phone: 603-880-2323
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: John K. P. Stone III, Esq.
Facsimile: 617-526-5000
Phone: 617-526-6000
Such addresses or persons may be changed, from time to time, by means of a
notice given in the manner provided in this Section 13.3.
13.4 Expenses.
(a) Each of Seller, Asset Seller and Buyer will bear its own
expenses in connection with the negotiation and the consummation of this
Agreement and the Asset Purchase Agreements.
(b) Buyer and Seller shall share equally the first $200,000 of
costs incurred, whether at or subsequent to the Closing, in connection with the
transfer of the Acquired Assets to Buyer as contemplated by this Agreement or
the Asset Purchase Agreements, including without limitation, all use, excise,
sales, real property, stamp duty and other transfer taxes and charges applicable
to such transfer; all recording charges and
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fees applicable to the registration and recordation of deeds and mortgages and
other instruments of transfer; and all costs of obtaining or transferring
permits, registrations, applications and other tangible and intangible
properties, and Buyer shall pay all such costs incurred in excess of $200,000.
13.5 Waiver. Waiver of any term or condition of this Agreement by any
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
13.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, constitutes the entire agreement, and supersedes all other
prior agreements (except that certain Confidentiality and Non-Disclosure
Agreement by and between Buyer and BT Alex. Brown Incorporated on behalf of
Seller, dated December 11, 1997 as modified by letter dated February 5, 1998
from Buyer to Seller so as to make Seller's U.S. photofinishing operations
subject thereto, which documents the parties agree remain in full force and
effect) and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter thereof; provided, however, that the
identity of Buyer shall not be deemed confidential.
13.8 Assignment. This Agreement shall not be assigned by either Buyer
or Seller or by operation of law or otherwise, except with the written consent
of the other party; provided, however, that Buyer shall be permitted to assign
this Agreement and each of the Asset Purchase Agreements to an Affiliate or an
otherwise related entity without Seller's consent, but any such assignment shall
not relieve Buyer of its obligations hereunder specifically including but not
limited to its obligations under Section 11 or under any Asset Purchase
Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
13.9 Governing Law; Time of the Essence. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
(excluding the conflict of laws provisions thereof). Time is of the essence in
the performance of this Agreement.
13.10 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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13.11 Publicity. Until the business day after the Closing Date and
except for any public disclosure which Buyer or Seller in good faith believes,
upon the advice of its legal counsel, is required by law or applicable stock
exchange rules, neither party shall issue any press release regarding the
transactions contemplated hereby, without the prior written approval of the
other party, which shall not be unreasonably withheld. The parties hereto shall
issue a mutually acceptable press release as soon as practicable after the
execution of this Agreement and as soon as practicable after the Closing.
13.12 Specific Performance. Each party acknowledges and agrees that the
other party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each party agrees that the other party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of any foreign
country, the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
13.13 Jurisdiction. In the event that any dispute should arise between
Buyer and Seller with respect to any matter covered by this Agreement (other
than disputes described in Section 10.6), the parties hereto consent to the sole
and exclusive jurisdiction of the state and federal courts of the United States
and the State of Delaware located in Dover, Delaware in connection with the
adjudication of any such dispute.
13.14 Legal Fees. In the event of any litigation between Seller and
Buyer arising out of this Agreement, the party prevailing in such litigation
shall be entitled to have its reasonable attorneys' fees and expenses reimbursed
by the other party.
13.15 Actions. The parties will execute and deliver to the other, from
time to time at or after the Closing, for no additional consideration and at no
additional cost to the requesting party, such further assignments, certificates,
instruments, records, or other documents, assurances or things as may be
reasonably necessary to give full effect to this Agreement and to allow each
party fully to enjoy and exercise the rights accorded and acquired by it under
this Agreement.
13.16 Terms. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
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13.17 Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction shall be applied against either party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
[Signature Page Following]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
NASHUA CORPORATION
By: __________________________
Name:_________________________
Title:________________________
DISTRICT PHOTO INC.
By: __________________________
Name:_________________________
Title:________________________
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<PAGE> 1
EXHIBIT 10.17
EXECUTION COPY
U.S. ASSET PURCHASE AGREEMENT
By and Between
DISTRICT PHOTO INC.
as Buyer
and
NASHUA PHOTO INC.
and
PROMOLINK CORPORATION
as Sellers
Dated as of March 10, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I - PURCHASE AND SALE OF ASSETS........................................1
1.1 Purchase and Sale of Assets..................................1
1.2 Retained Assets..............................................4
ARTICLE II - ASSUMPTION OF LIABILITIES.........................................4
2.1 Assumed Liabilities..........................................4
2.2 Retained Liabilities.........................................5
2.3 Prorations...................................................5
ARTICLE III - U.S. PURCHASE PRICE..............................................6
3.1 Payment......................................................6
3.2 Allocation of U.S. Purchase Price............................6
3.3 Preparation of Closing Date Net Current Asset Disclosure.....6
ARTICLE IV - CLOSING AND CONDITIONS TO CLOSING.................................8
4.1 General......................................................8
4.2 Documents Delivered by Seller................................8
4.3 Documents Delivered by Buyer.................................9
4.4 Conditions to Closing.......................................10
ARTICLE V - REPRESENTATIONS AND WARRANTIES....................................12
5.1 Representations and Warranties of Seller....................12
5.2 Representations and Warranties of Buyer.....................24
ARTICLE VI - COVENANTS OF SELLER..............................................26
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Page
6.1 Notice of Claims............................................26
6.2 Maintenance of, and Access to, Records......................26
6.3 Non-Solicitation............................................26
6.4 Limitations on Assignability................................27
6.5 Pre-Closing Operations of Seller............................27
6.6 Access to Records and Information...........................28
6.7 No Solicitation of Offers...................................28
6.8 Notices of Certain Events...................................28
6.9 Commercially Reasonable Efforts.............................29
6.10 Risk of Loss................................................29
6.11 Bulk Sales..................................................29
6.12 Employment of Employees; Benefits...........................30
6.13 Employee Benefits Plans.....................................30
ARTICLE VII - COVENANTS OF BUYER..............................................31
7.1 Maintenance of, and Access to, Records......................31
7.2 Commercially Reasonable Efforts.............................31
ARTICLE VIII - INDEMNIFICATION................................................32
ARTICLE IX - TERMINATION......................................................32
9.1 Termination Events..........................................32
9.2 Effect of Termination.......................................32
ARTICLE X - MISCELLANEOUS.....................................................32
10.1 Survival of Representations and Warranties..................32
10.2 Amendments..................................................33
10.3 Notices.....................................................33
10.4 [INTENTIONALLY OMITTED].....................................33
10.5 Waiver......................................................33
10.6 Headings....................................................33
10.7 Entire Agreement............................................33
10.8 Assignment..................................................33
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Page
10.9 Governing Law; Time of the Essence..........................33
10.10 Counterparts................................................33
10.11 Publicity...................................................34
10.12 Jurisdiction................................................34
10.13 Legal Fees..................................................34
10.14 Actions.....................................................34
10.15 Terms.......................................................34
10.16 Construction................................................34
10.17 Third Parties...............................................34
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SCHEDULES [Not Included in Filing]
Schedule 1.1(a) -- Prepaid Items
Schedule 1.1(b) -- Inventory
Schedule 1.1(c) -- Accounts Receivable
Schedule 1.1(d) -- Tangible Personal Property
Schedule 1.1(g) -- Intellectual Property
Schedule 1.1(h) -- Listed Contracts
Schedule 1.1(i) -- Licenses and Permits
Schedule 1.1(j) -- Leases
Schedule 1.2 -- Retained Assets
Schedule 3.2 -- Allocation of U.S. Purchase Price
Schedule 4.4(a)(v)-- Material Adverse Changes
Schedule 5.1(d) -- Permitted Encumbrances
Schedule 5.1(f) -- Environmental and Safety Compliance
Schedule 5.1(g) -- Material Defects
Schedule 5.1(i) -- Financial Statements
Schedule 5.1(m) -- Litigation
Schedule 5.1(n) -- Customers and Suppliers
Schedule 5.1(s) -- Labor Matters
Schedule 5.1(t) -- Employee Plans
Schedule 5.1(u) -- Taxes
Schedule 5.1(w) -- Required Consents
Schedule 5.1(v) -- Absence of Certain Changes
Schedule 5.2(f) -- Pending Litigation
Schedule 6.12 -- Transferred Employees
EXHIBITS [Not Included in Filing]
Exhibit 2.1 -- Form of Instrument of Assumption of Liabilities
Exhibit 3.3 -- Net Current Asset Disclosure
Exhibit 4.2(d) -- Form of Bill of Sale
Exhibit 4.2(f) -- Form of Assignment and Assumption of Lease
Exhibit 4.2(k) -- Form of Patent and Trademark Assignment
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March 10,
1998, is entered into by and between District Photo Inc., a District of Columbia
corporation ("Buyer"), on the one hand, and Nashua Photo Inc., a Delaware
corporation and Promolink Corporation, a Delaware corporation (collectively
referred to as "Seller"), on the other hand, both of which are wholly-owned
subsidiaries of Nashua Corporation.
W I T N E S S E T H
WHEREAS, Seller is engaged in the United States in the photofinishing
business, including the marketing and sale of photo-related products (the
"Business");
WHEREAS, Seller desires to sell the Acquired Assets (as defined in
Section 1.1) to Buyer;
WHEREAS, this Agreement is entered into between Buyer and Seller
pursuant to that certain Master Asset Purchase Agreement of even date herewith
entered into by and between Nashua Corporation and Buyer (the "Master
Agreement");
WHEREAS, Buyer desires to purchase and acquire from Seller, upon the
terms and subject to the conditions hereinafter set forth, the Acquired Assets,
in consideration of the payment of the U.S. Purchase Price (as defined in
Section 3.1) and the assumption by Buyer of the Assumed Liabilities (as defined
in Section 2.1);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, on
the basis of, and in reliance upon, the representations, warranties, covenants,
obligations and agreements set forth herein, and upon the terms and subject to
the conditions contained herein, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the provisions of this
Agreement, at the Closing (as defined in the Master Agreement), Seller shall
convey, sell, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from Seller, the Business as a going concern comprising all of the
assets, properties, rights, privileges, claims, contracts and interests of
Seller on the Closing Date (as defined in the Master Agreement), of every
<PAGE> 7
kind and description, real, personal or mixed, tangible or intangible, absolute
or contingent, wherever situated, whether or not carried or reflected on the
books and records of Seller (other than the Retained Assets (as defined in
Section 1.2)), free and clear of any and all liens, equities, claims, prior
assignments, mortgages, charges, security interests, pledges, restrictions or
encumbrances whatsoever (collectively, "Liens"), other than the Permitted
Encumbrances (as defined in Section 5.1(d)) (such assets, properties, rights,
privileges, claims, contracts and interests collectively referred to as the
"Acquired Assets"). Without limiting the generality of the foregoing, the
Acquired Assets shall include the following:
(a) Prepaid Items. All of Seller's prepaid expenses, advance
payments, deposits and prepaid items, including deposits with lessors, suppliers
or utilities (collectively, "Prepaid Items"), as described on Schedule 1.1(a);
(b) Inventory. All of Seller's inventories, including all
inventories of products, work-in-process, finished goods, raw materials,
supplies, equipment, parts, labels and packaging (including all of Seller's
rights and interests in goods in transit, consigned inventory, inventory sold on
approval and rental inventory) and all returned products, samples and obsolete
and nonsalable inventory (collectively, "Inventory"), as described on Schedule
1.1(b);
(c) Accounts Receivable. All of Seller's accounts receivable,
notes receivable and royalties receivable, any payments received by Seller with
respect thereto after the Closing Date, unpaid interest accrued thereon, and any
security or collateral relating thereto, including all past due, reserved and
written off accounts receivable (collectively, "Accounts Receivable"), as
described on Schedule 1.1(c) (including aging information with respect to the
Accounts Receivable);
(d) Tangible Personal Property. All of Seller's motor
vehicles, machinery, equipment, office furniture, furnishings, tools, fixtures,
office equipment, computer hardware and software, leasehold and other
improvements and other tangible personal property (collectively, "Tangible
Personal Property"), as described on Schedule 1.1(d);
(e) Books, Records and Written Materials. All of Seller's
business records, including all financial books and records, sales order files,
purchase order files, engineering order files, warranty and repair files,
supplier lists, customer lists, dealer, representative and distributor lists,
studies, surveys, analyses, strategies, plans, forms, designs, diagrams,
drawings, specifications, technical data, production and quality control
records, formulations, and any other information which has been reduced to
writing (collectively, "Books and Records") (but excluding those books and
records described in Section 1.2(a));
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(f) Catalogs and Advertising Materials. All of Seller's
promotional and advertising materials, including all catalogs, brochures,
videos, plans, manuals and handbooks;
(g) Intellectual Property Rights. All of Seller's trademarks,
service marks, trade names, logos, copyrights or patents (and any applications
for any of the foregoing and rights therein), together with all claims for
damages against Persons by reason of past infringement and the right to sue for
and collect such damages, licenses, shop rights, know-how, developments,
research data, designs, specifications, drawings, blueprints, technology, ideas,
compositions, manufacturing and production principles and techniques, test
procedures, processes, formulas, know-how, file reports, certifications,
customer and supplier lists, pricing and cost information, confidential
information, inventions (whether or not patentable), discoveries, business
methods, confidential or proprietary business information and trade secrets and
all other intellectual and intangible property rights owned by Seller or to, or
in, which Seller has any right or interest whatsoever (where there are multiple
copies of such material in Seller's possession or control, all copies of such
material) (collectively, the "Intellectual Property"), as described on Schedule
1.1(g) (as used herein, "Person" means a corporation, limited liability company,
association, partnership, organization, trust, joint venture or other legal
entity, an individual or a Governmental Authority);
(h) Contracts. All of Seller's licenses, contracts,
agreements, commitments and undertakings, whether oral or written, (including
unfilled customer orders) relating to the Acquired Assets or Business to which
Seller is a party or by which any of the Acquired Assets are bound
(collectively, "Contracts"), of which, only those Contracts that are reflected
in Seller's Financial Statements that constitute obligations involving more than
$10,000 annually or that are not cancelable by Buyer within thirty (30) days
without incurring liability for such cancellation, are described on Schedule
1.1(h) ("Listed Contracts");
(i) Licenses and Permits. All licenses, permits, approvals,
franchises, consents and other authorizations held by Seller or related to or
used in connection with the Business or the Acquired Assets (collectively,
"Licenses and Permits") issued to Seller by any foreign, United States, state or
local governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities"), to the extent
transferable to Buyer, which Licenses and Permits are described on Schedule
1.1(i);
(j) Leases. All of Seller's leases as described on Schedule
1.1(j) (the "Leases"); and
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(k) Other Assets. Excluding the Retained Assets described in
Section 1.2, all of the other assets, properties, rights, privileges, claims,
contracts and interests of every kind and description, real, personal or mixed,
tangible or intangible, absolute or contingent, wherever situated, whether or
not carried or reflected on the books and records of Seller, of Seller including
such assets, properties, rights, privileges, claims, contracts and interests as
are reflected on the Closing Date Net Current Asset Disclosure (as defined in
Section 3.3(b)) or which are owned by Seller on the Closing Date, including
those customer orders received (whether before, on or after Closing) relating to
the Business, which customer orders have not been opened for processing.
1.2 Retained Assets. Notwithstanding anything in this Agreement to the
contrary, Seller shall retain, and the Acquired Assets shall not include, any of
the assets described on Schedule 1.2, assets disposed of since the date hereof
in the ordinary course of business, such other assets as have been or are
disposed of pursuant to this Agreement, and the following assets of Seller
(collectively, the "Retained Assets"):
(a) Corporate Records. Seller's corporate books and records,
including stock certificates, treasury stock, stock transfer records, corporate
seals and minute books, and Seller's tax returns and tax supporting information,
records constituting privileged and confidential attorney-client communications
or work product related to the transactions contemplated hereby;
(b) Seller Rights under this Agreement. All rights of Seller
under this Agreement; and
(c) Prepaid Taxes and Tax Refunds. Prepaid foreign, federal,
state or local taxes and any rights of Seller to any tax refunds or carry backs.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. On the terms and subject to the conditions set
forth in the Assignment and Assumption Agreement attached hereto as Exhibit 2.1,
at the Closing, Buyer shall assume the following liabilities and obligations of
Seller (collectively, the "Assumed Liabilities"):
(a) Accounts Payable. All of Seller's trade and other accounts
payable reflected on the Closing Date Net Current Asset Disclosure;
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<PAGE> 10
(b) Accrued Liabilities. All of Seller's accrued liabilities
reflected on the Closing Date Net Current Asset Disclosure.
(c) Contracts. All liabilities and obligations of Seller
arising under the Contracts which accrue after the Closing; provided, however,
that Buyer shall not assume or be responsible for any such liabilities or
obligations which arise from defaults thereunder or breaches thereof by Seller
prior to or on the Closing Date (whether a claim for any such default or breach
is made before or after the Closing).
(d) Leases. All contractual liabilities and obligations of
Seller under the Leases for time periods after the Closing Date; provided,
however, that Buyer shall not assume or be responsible for any such liabilities
or obligations which arise from defaults thereunder or breaches thereof by
Seller prior to or on the Closing Date or for any Environmental Matters (as
defined in Section 2.2) related in any way to the Leases prior to or on the
Closing Date (whether a claim for any such default or breach is made before or
after the Closing);
(e) Taxes. All real and personal property taxes, sales and use
taxes attributable to the sale of inventory, payroll taxes and employee
withholding tax obligations and other taxes, relating to Buyer's operation of
the Business after the Closing.
2.2 Retained Liabilities. Except for the Assumed Liabilities, Seller
shall retain all, and Buyer shall have no responsibility for any, of Seller's
liabilities and obligations, whether or not relating to the Business or Acquired
Assets, whether fixed, contingent or otherwise, and whether known or unknown
(collectively, the "Retained Liabilities"). Without limiting the foregoing,
Buyer shall not assume or be liable for and Seller shall indemnify Buyer against
and hold Buyer harmless from any of the following liabilities for (i)
environmental matters ("Environmental Matters") arising under Environmental Laws
(as defined in Section 5.1(f)) in connection with violations, disposal, events,
occurrences or releases that occurred or are attributable to the period on or
prior to the Closing Date; (ii) liabilities incurred by Seller in connection
with this Agreement, the transactions provided for herein and any other
agreements contemplated hereby, including, without limitation, attorneys' and
accountants' fees, and expenses pertaining to the performance by Seller of its
obligations hereunder; (iii) liabilities that relate to the Retained Assets;
(iv) except for Assumed Liabilities, liabilities arising out of the operation of
the Business on or before the Closing; (v) payments, if any, to be made as a
result of the purchase and sale of the Business of Seller to certain management
personnel of Seller under certain retention and other similar agreements solely
in respect to those obligations resulting from the transactions contemplated by
this Agreement; (vi) all Federal, state and local franchise and income taxes of
Seller, whether relating to periods before or after the transactions
contemplated in this Agreement or incurred by Seller in connection with this
Agreement
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and the transactions provided for herein, including any liability for such taxes
arising out of the inclusion of Seller in any group filing consolidated,
combined or unitary tax returns or arising out of any transferee liability;
(vii) liabilities with respect to workers' compensation or other employee
related claims, including, without limitation, with respect to discrimination,
wrongful termination and employee benefits of any kind arising from any facts or
circumstances occurring prior to or on the Closing Date; (viii) the employment
contracts of Richard Kennedy, Stanley Vaughan and Michael Jeans including, but
not limited to, any and all of the employer's responsibilities under such
contracts; and (ix) any other liabilities of Seller not specifically assumed by
Buyer hereunder.
2.3 Prorations. Except as otherwise provided in Section 2.1, general
utility charges, personal property taxes and assessments, and similar proratable
items which are attributable to the Acquired Assets, shall be apportioned
between Buyer and Seller as follows: any item which relates to the period prior
to or on the Closing Date shall, to the extent not accrued on the Closing Date
Net Current Asset Disclosure, be apportioned to and paid by Seller, and any such
item which relates to the period on or after the Closing Date, whether or not
accrued on the Closing Date Net Current Asset Disclosure, shall be apportioned
to and paid by Buyer; provided, however, that any special assessments or similar
charges in effect or payable prior to the Closing Date shall be paid by Seller
prior to the Closing.
ARTICLE III
U.S. PURCHASE PRICE
3.1 Payment. In full consideration for the conveyance, sale, transfer
and assignment of the Acquired Assets, but subject to adjustment as provided in
Section 3.3 and satisfaction of all of the conditions contained herein, Buyer
shall deliver or cause to be delivered to Nashua Corporation for the account of
Seller a cash purchase price of Thirty-Million, Five-Hundred Thousand Dollars
($30,500,000) (the "U.S. Purchase Price"), payable at the Closing by wire
transfer of immediately available funds to an account or accounts designated in
writing by Seller.
3.2 Allocation of U.S. Purchase Price. Within sixty days after the
Closing, the U.S. Purchase Price shall be allocated among the Acquired Assets in
the manner required by Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code") and regulations thereunder. Schedule 3.2 shall set forth
the amount of the U.S. Purchase Price allocable to the various Acquired Assets.
Buyer and Seller agree to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060" consistent with Schedule 3.2.
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3.3 Preparation of Closing Date Net Current Asset Disclosure.
(a) Seller has delivered to Buyer an unaudited summary of the
Accounts Receivable, Inventories and other current assets of the Business as of
February 6, 1998 less accounts payable and accrued expenses and other Assumed
Liabilities as of February 6, 1998 (the "Net Current Asset Disclosure") which
are reflected on the books and records of Seller and are prepared consistently
with U.S. generally accepted accounting principles. A copy of the Net Current
Asset Disclosure is attached hereto as Exhibit 3.3. The total net amount as set
forth on the Net Current Asset Disclosure is referred to herein as the "February
6th Assets."
(b) (i) Within thirty (30) business days following the
Closing, Seller shall prepare and deliver to Buyer an unaudited summary of those
assets and liabilities specified in Section 3.3(a) as of the Closing (the
"Closing Date Net Current Asset Disclosure"). The Closing Date Net Current Asset
Disclosure shall accurately reflect all Inventories, Accounts Receivable, other
current assets, accounts payable and accrued expenses and other Assumed
Liabilities which are reflected on the books and records of Seller and shall in
all respects be prepared consistently with and utilizing the same accounting
policies and valuation procedures as set forth in the Net Current Asset
Disclosure. The total net amount as set forth on the Closing Date Net Current
Asset Disclosure is referred to herein as the "Closing Date Assets." In the
event that the Closing Date Assets have either increased or decreased by any
amount from the February 6th Assets, the amount of the increase or decrease (the
"U.S. Purchase Price Adjustment") shall be paid by Buyer to Seller (if the
Closing Date Assets exceed the February 6th Assets) or by Seller to Buyer (if
the February 6th Assets exceed the Closing Date Assets).
(ii) The U.S. Purchase Price Adjustment shall be made by
wire transfer not later than the close of business on the fifth business day
immediately following the date on which the U.S. Purchase Price Adjustment is
finally determined, and shall include simple interest on such amount at the rate
of 3% plus the prime rate of interest publicly quoted by the Chase Manhattan
Bank in New York as of and commencing on the Closing and continuing until the
date of full payment hereunder. The Closing Date Net Current Asset Disclosure
delivered by Seller and the calculation of the U.S. Purchase Price Adjustment
shall be final and binding on the parties hereto, unless within forty-five (45)
business days following Seller's delivery of the Closing Date Net Current Asset
Disclosure to Buyer, Seller receives from Buyer a report setting forth in detail
Buyer's objections to such calculation and any adjustments required. Buyer and
Seller shall use reasonable efforts to resolve any dispute, and such resolution
shall be in writing and shall be final and binding on the parties hereto. Until
the earlier to occur of (i) the mutual agreement of Seller and Buyer as to the
appropriate amount of the U.S. Purchase Price Adjustment, or
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(ii) the final determination of the U.S. Purchase Price Adjustment by the
Accounting Firm as set forth below, Buyer and Seller shall allow each other
reasonable access to each other's books, records and employees pertaining to the
Business and cooperate with each other during normal business hours for purposes
of computing and/or verifying the information set forth in the Closing Date Net
Current Asset Disclosure.
(c) If Seller and Buyer have not reached a final resolution
with respect to any U.S. Purchase Price Adjustment within thirty (30) business
days following Seller's receipt of Buyer's objections, such dispute shall be
resolved by the New York City office of Ernst & Young LLP (the "Accounting
Firm").
(d) The Accounting Firm shall be instructed to render its
decision resolving all matters presented to it within sixty (60) calendar days
of receipt by it of Seller's Closing Date Net Current Asset Disclosure or
Buyer's objections, whichever is the later.
(e) Each party shall bear its own expenses. The determination
of the U.S. Purchase Price Adjustment by Accounting Firm shall be final and
binding upon the parties.
ARTICLE IV
CLOSING AND CONDITIONS TO CLOSING
4.1 General. Subject to the conditions set forth in Sections 4.2, 4.3
and 4.4, the Closing as defined in the Master Agreement shall take place at the
offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109 at
10:00 AM (Eastern Time) on the Closing Date as defined in the Master Agreement.
Failure to close on such date shall not relieve either party hereto of its
obligations under this Agreement. All transactions at the Closing shall be
deemed to take place simultaneously at 12:01 a.m. Eastern Time on the Closing
Date, and no transaction shall be deemed to have been completed and no document
or certificate shall be deemed to have been delivered until all transactions are
completed and all documents are delivered.
4.2 Documents Delivered by Seller. At the Closing, Seller shall deliver
to Buyer the following, duly executed by the appropriate parties, subject to
satisfaction of the conditions precedent to the obligations of Seller stated
herein:
(a) Secretary's Certificate. A certificate executed by the
Secretary of Seller confirming the existence, incorporation and good standing of
Seller on the Closing Date, attaching copies of the certificate of incorporation
and by-laws of Seller, and resolutions
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authorizing and approving the execution, delivery and performance of this
Agreement and all other documents and the taking of all action required
thereunder or in connection therewith on behalf of Seller, together with an
incumbency certificate for Seller;
(b) Opinion of Seller's Counsel. An opinion, dated as of the
Closing Date, from Hale and Dorr LLP in a form reasonable and customary for
similar transactions;
(c) Assignment and Assumption of Contracts and Liabilities. An
Assignment and Assumption Agreement in the form of Exhibit 2.1;
(d) Bill of Sale. A bill of sale and assignment conveying,
selling, transferring and assigning the Acquired Assets to Buyer, free and clear
of any and all Liens, in the form of Exhibit 4.2(d);
(e) Required Consents. All of the Required Consents (as
defined in Section 5.1(w)) which are identified on Schedule 5.1(w) as being
necessary for consummating the sale of the Acquired Assets and the transactions
relating thereto;
(f) Assignment and Assumption of Leases. An Assignment and
Assumption of each of the Leases in form and substance substantially similar to
the attached Exhibit 4.2(f) (which shall include landlords' consents, if
required, and confirmation that all rent that is due and owing has been paid and
that the landlord knows of no default under such lease);
(g) Other Documents. Such other deeds, bills of sale,
endorsements, assignments, affidavits, and other instruments of sale,
assignment, conveyance and transfer, in form and substance reasonably
satisfactory to Buyer and its counsel, as are required to effectively vest in
Buyer all of Seller's right, title and interest in and to all of the Acquired
Assets, free and clear of any and all Liens;
(h) Lien Releases. Such releases and termination statements as
are necessary for the termination and release of any and all Liens (other than
the Permitted Encumbrances (as defined in Section 5.1(d)) on the Acquired
Assets;
(i) Releases of Seller Employees from Confidentiality
Agreements. Such releases from Seller as are necessary to permit employees of
Seller who have signed confidentiality or secrecy agreements with Seller to
disclose information to Buyer;
(j) Officer's Certificate. A certificate dated the Closing
Date and executed by an executive officer of Seller to the effect that each of
the conditions specified in Section 4.4(a) is satisfied; and
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(k) Patent and Trademarks. Patent and trademark assignments in
form and substance substantially similar to the attached Exhibit 4.2(k).
4.3 Documents Delivered by Buyer. At the Closing, Buyer shall deliver
to Seller the following, duly executed by the appropriate parties, subject to
satisfaction of the conditions precedent to the obligations of Buyer stated
herein:
(a) Secretary's Certificate. A certificate executed by the
Secretary of Buyer, confirming the existence, incorporation and good standing of
Buyer on the Closing Date, attaching copies of the articles of incorporation and
by-laws of Buyer, and resolutions authorizing and approving the execution,
delivery and performance of this Agreement and all other documents and the
taking of all action required thereunder or in connection therewith on behalf of
Buyer, together with an incumbency certificate for Buyer;
(b) Assignment and Assumption of Contracts and Liabilities. An
Instrument of Assumption of Liabilities in the form of Exhibit 2.1;
(c) Assignment and Assumption of Leases. An Assignment and
Assumption of each of the Leases in form and substance substantially similar to
the attached Exhibit 4.2(f);
(d) Officer's Certificate. A certificate dated the Closing
Date and executed by an executive officer of Buyer to the effect that each of
the conditions specified in Section 4.4(b) is satisfied;
(e) Payment of U.S. Purchase Price. Payment of the U.S.
Purchase Price in the manner and the amount set forth in Article III; and
(f) Opinion of Buyer's Counsel. An opinion, dated as of the
Closing Date, from Wilmer, Cutler & Pickering in a form reasonable and customary
for similar transactions.
4.4 Conditions to Closing.
(a) Conditions to Obligations of Buyer. The obligation of
Buyer to close the transactions contemplated by this Agreement shall be subject
to the satisfaction of each of the following conditions precedent, each of which
may be waived, in whole or in part, in the sole discretion of Buyer, by a
written instrument signed by Buyer.
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(i) Fulfillment of Seller's Covenants. Each of Nashua
Corporation, Seller and the Asset Sellers shall have fulfilled or complied with
each covenant, obligation and agreement required to be fulfilled or complied
with by it prior to the Closing Date under this Agreement, the Master Agreement
and the Asset Purchase Agreements.
(ii) Accuracy of Seller's Representations. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on the date when made and shall be repeated at and as of the
Closing Date and shall be true and correct as so made again (unless a
representation is made as of a specific date, and in such event it shall be true
and correct as of such date); provided, however, that in the event Seller has
provided Buyer with written notice prior to the Closing Date of an event or
development arising after the date hereof and prior to the Closing Date that
causes any representation or warranty of Seller in this Agreement not to be true
and correct on the Closing Date (a "Seller's Notice"), then Buyer shall, in its
sole discretion, either (i) elect not to close the transactions contemplated by
this Agreement by reason of the failure of the condition to Closing specified in
this Section 4.4(a)(ii) to be satisfied, or (ii) elect to close the transactions
contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 4.4(a)(ii) to be satisfied, in which event
Buyer shall be deemed to have waived the condition to Closing specified in this
Section 4.4(a)(ii) with respect to the matters specified in Seller's Notice and
shall not seek or be entitled to indemnification under Article VIII with respect
to only the matters specified in Seller's Notice.
(iii) Authorizations and Consents. Seller shall have
obtained and made all governmental or other authorizations, approvals, consents,
permits, waivers and filings which are necessary under all applicable laws and
regulations for the consummation by Seller of the transactions contemplated by
this Agreement.
(iv) No Litigation. No injunction shall be
outstanding which would prevent consummation of the transactions contemplated by
this Agreement. No provision of any applicable domestic law or regulation, and
no judgment, injunction, order or decree of a governmental authority that has
the effect of making the Closing illegal or otherwise restrains or prohibits the
Closing from occurring shall be in effect (each party agreeing to use
commercially reasonable efforts, including appeals to higher courts, to have any
such judgment, injunction, order or decree lifted).
(v) No Material Adverse Changes. Since December 31,
1997, there shall have been no material adverse changes in Seller's business
operations, affairs, prospects, properties, assets existing and potential
liabilities, obligations, profits or condition (financial or otherwise) of the
Business ("Material Adverse Change") or an adverse change in Seller which would
have a material adverse effect on Seller's ability to perform its obligations
under this Agreement except as set forth on Schedule 4.4(a)(v).
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(b) Conditions to Obligations of Seller. The obligation of
Seller to close the transactions contemplated by this Agreement shall be subject
to the satisfaction of each of the following conditions precedent, each of which
may be waived, in whole or in part, in the sole discretion of Seller, by a
written instrument signed by Seller.
(i) Fulfillment of Buyer's Covenants. Buyer shall
have fulfilled or complied with each covenant, obligation and agreement required
to be fulfilled or complied with by it prior to the Closing Date under this
Agreement.
(ii) Accuracy of Buyer's Representations. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct on the date when made and shall be repeated at and as of the
Closing Date and shall be true and correct as so made again (unless a
representation is made as of a specific date, and in such event it shall be true
and correct as of such date); provided, however, that in the event Buyer has
provided Seller with written notice prior to the Closing Date of an event or
development arising after the date hereof and prior to the Closing Date that
causes any representation or warranty of Buyer in this Agreement not to be true
and correct on the Closing Date (a "Buyer's Notice"), then Seller shall, in its
sole discretion, either (i) elect not to close the transactions contemplated by
this Agreement by reason of the failure of the condition to Closing specified in
this Section 4.4(b)(ii) to be satisfied, or (ii) elect to close the transactions
contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 4.4(b)(ii) to be satisfied, in which event
Seller shall be deemed to have waived the condition to Closing specified in this
Section 4.4(b)(ii) with respect to the matters specified in Buyer's Notice and
shall not seek or be entitled to indemnification under Article VIII with respect
to only the matters specified in Buyer's Notice.
(iii) Authorizations and Consents. Buyer shall have
obtained and made all governmental or other authorizations, approvals, consents,
permits, waivers and filings which are necessary under all applicable laws and
regulations for the consummation by Buyer of the transactions contemplated by
this Agreement.
(iv) No Litigation. No injunction shall be
outstanding which would prevent consummation of the transactions contemplated by
this Agreement. No provision of any applicable domestic law or regulation, and
no judgment, injunction, order or decree of a governmental authority that has
the effect of making the Closing illegal or otherwise restrains or prohibits the
Closing is in effect (each party agreeing to use commercially reasonable
efforts, including appeals to higher courts, to have any such judgment,
injunction, order or decree lifted).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Except as set forth on an
appropriate Disclosure Schedule, Seller represents and warrants to Buyer that
the statements contained in this Section 5.1 are on the date hereof true and
correct and on the Closing Date will be, repeated true and correct as so made
again:
(a) Organization and Standing; Power and Authority.
(i) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to operate the Business, to own or lease the
Acquired Assets, to carry on the Business as now being conducted, and to make
and perform this Agreement, and the transactions and other agreements and
instruments contemplated by this Agreement. Seller is qualified to do business
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect upon the Business or the Acquired Assets.
(ii) This Agreement has been, and all other
agreements and instruments to be executed and delivered by Seller in connection
herewith have been, or as of the Closing Date will have been, duly executed and
delivered by Seller. This Agreement constitutes, and the other agreements and
instruments all executed or to be executed by Seller in connection with the
transactions contemplated hereby constitute, or when executed and delivered by
Seller will constitute, the valid and binding obligations of Seller, enforceable
in accordance with their respective terms, except to the extent that
enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity ("Debtor
Relief Laws").
(iii) The execution, delivery and performance of this
Agreement and all other agreements and instruments to be executed and delivered
by Seller have been approved by all necessary corporate action by Seller.
(b) Certificates of Incorporation and By-Laws. The copies of
the Certificate of Incorporation and By-Laws of Seller, certified by its
Secretary and delivered by Seller to Buyer, are true, correct and complete as of
the date of this Agreement and have not been amended or modified in any respect.
(c) Conflicts; Defaults.
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(i) Neither the execution and delivery of this
Agreement and the other agreements and instruments executed in connection
herewith by Seller, nor the performance by Seller of the transactions
contemplated hereby or thereby, will (A) violate, conflict with, or constitute a
default under, any of the terms of Seller's Certificate of Incorporation or
By-Laws, or any provisions thereof, or, subject to obtaining the Required
Consents (as defined in Section 5.1(w)), result in the acceleration of any
obligation under, any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease, agreement, instrument,
order, judgment or decree relating to the Business or the Acquired Assets, or by
which Seller or the Acquired Assets are bound, including the Contracts, (B)
result in the creation or imposition of any Liens in favor of any third person
or entity upon any of the Acquired Assets, (C) violate any law, statute,
judgment, decree, order, rule or regulation of any Governmental Authority, or
(D) constitute an event which, after notice or lapse of time or both, would
result in such violation, conflict, default, acceleration, or creation or
imposition of Liens.
(ii) Seller is not, as of the date of this Agreement,
in violation of or in default under its Certificate of Incorporation or By-Laws,
or any provision of any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease, agreement, instrument,
order, judgment or decree relating to the Business or the Acquired Assets, or by
which Seller or the Acquired Assets is bound, including the Contracts, or in the
payment of any of Seller's monetary obligations or debts, and there exists no
condition or event which, after notice or lapse of time or both, would result in
any such violation or default.
(d) Acquired Assets; Title; Required Consents.
(i) The Acquired Assets and the Retained Assets are
the only properties and assets owned by Seller. The Acquired Assets being
conveyed to Buyer under this Agreement constitute all of the assets used in or
necessary to conduct the Business in substantially the same manner as currently
conducted by Seller. The Acquired Assets set forth in the Net Current Asset
Disclosure are not stated in amounts in excess of their respective realizable
values.
(ii) Seller has good and indefeasible right, title
and interest in and to all of the Acquired Assets, and Seller has the right to
use and, subject to obtaining the Required Consents, to transfer to Buyer all of
the Acquired Assets. All of the Acquired Assets are free and clear of all Liens
and claims of any kind or nature whatsoever, except for the Liens set forth on
Schedule 5.1(d) (the "Permitted Encumbrances"). Except as disclosed on Schedule
5.1(d), all of the Acquired Assets are in the sole possession and under the sole
control of Seller. The delivery to Buyer of the instruments of transfer of
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ownership contemplated by this Agreement will vest good and indefeasible title
to the Acquired Assets in Buyer, free and clear of all Liens and claims of any
kind or nature whatsoever, except the Permitted Encumbrances.
(iii) Each leasehold interest in any personal
property ("Leased Personal Property") or any real property ("Leased Real
Property"), which leasehold interest is part of the Acquired Assets, is in full
force and effect and enforceable against Seller and the other parties thereto,
in accordance with its terms, and there does not exist any material violation,
breach or default by Seller or to Seller's knowledge by any other party thereto,
thereof or thereunder.
(iv) The Tangible Personal Property and the Leased
Personal Property are in reasonably good operating condition and repair,
reasonable wear and tear excepted, and adequate for the intended purposes
thereof and no material maintenance, replacement or repair has been deferred or
neglected. The Leased Personal Property is in a condition suitable for return to
the lessor of such equipment, as required under the applicable lease therefor.
(v) The conveyance, sale, transfer and assignment of
the Acquired Assets does not require any consents or approvals of any entity,
individual or Governmental Authority other than the Required Consents (as
defined in Section 5.1(w));
(e) Real Property. Seller owns no real property that is used
in the Business.
(f) Environmental and Safety Compliance. Except as disclosed
on Schedule 5.1(f):
(i) Neither (A) the operation of the Business by
Seller or agents under the direction and control of Seller, (B) the ownership,
use or operation of the Acquired Assets by Seller or agents under the direction
and control of Seller, nor (C) the manufacture or sale by Seller or agents under
the direction and control of Seller of the processes, results or products of
Seller, has violated or violates any foreign, federal, state or local statute,
law, common law, rule, regulation, ordinance or order relating to air, water or
noise pollution, employee health and safety, or the production, storage,
labeling, transportation or disposition of waste or hazardous or toxic
substances, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Toxic Substances Control Act
of 1976, as amended, the Resource Conservation Recovery Act of 1976, as amended,
the Clean Air Act, as amended, the Federal Water Pollution Control Act, as
amended, or the Occupational Safety and Health Act of 1970 ("OSHA")
(collectively, the "Environmental Laws"). Notwithstanding
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the foregoing, Seller's operation of the Business complies only in all material
respects with OSHA. Seller has not received notice of any violation of any of
the Environmental Laws, which has not been or is not being corrected, provided
that Seller makes no representation hereunder with respect to Buyer's operation
of the Business or the Acquired Assets after the Closing.
(ii) Seller has timely obtained all licenses and
permits and timely filed all reports required to be filed under the
Environmental Laws.
(iii) Seller has not, and no other person has, stored
any chemical substances, including any "Hazardous Substances", "Pollutants" or
"Contaminants" (as such terms are defined in CERCLA), or petroleum (including
crude oil or any fraction thereof), all of which are collectively referred to as
"Chemical Substances", on, beneath or about any of the properties to be
transferred to Buyer in connection with Seller's operations of the Business,
except for inventories of such Chemical Substances to be used, and wastes
generated therefrom, in the ordinary course of the business of Seller (which
inventories and wastes, if any, were stored and disposed of in compliance with
the Environmental Laws, including storage so that there was no release of any
Chemical Substance to the environment which violated, or created any liability
or obligation under, the Environmental Laws).
(iv) Seller has not, and no other person has, buried,
dumped or otherwise disposed of, or permitted the intentional or accidental
release of, any Chemical Substances, including any Hazardous Substances,
Pollutants or Contaminants on, beneath or about the properties to be transferred
to Buyer in connection with Seller's operation of the Business.
(v) Seller has not received any notice from any
Governmental Authority or private or public entity advising Seller that it is
potentially responsible for response costs with respect to a release or
threatened release of Hazardous Substances, Pollutants or Contaminants in
respect to the properties to be transferred to Buyer.
(vi) Seller has not, and no other person has
installed, used, owned or operated any underground storage tank on or beneath
the properties to be transferred to Buyer in connection with Seller's operation
of the Business.
(vii) There are no polychlorinated biphenyls,
asbestos-containing materials or radioactive substances on, beneath or about the
properties to be transferred to Buyer in connection with Seller's operation of
the Business.
(viii) To Seller's knowledge, no environmental
approvals, clearances or consents are required under applicable law from any
entity or authority in order for the
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parties to consummate the transactions contemplated by this Agreement (other
than such as correspond to Licenses and Permits) or for Buyer to transact the
Business after the Closing Date.
(ix) Seller has disclosed, prior to the date of this
Agreement, its waste practices, its use of Chemical Substances and all
potentially material environmental matters and has disclosed all material
reports, assessments, remedial action plans or other similar documents relating
to the environmental condition of Seller's properties to be transferred to Buyer
and operations.
(g) Leases. Schedule 1.1(j) contains a description of all real and
personal property leased by Seller in the conduct of the Business and all Leases
thereto.
(i) True, complete and accurate copies of all Leases,
together with all amendments thereto, have previously been provided to Buyer.
With respect to any Lease to which Seller is a party, Seller warrants that: (a)
each such Lease has been duly authorized and executed by Seller, has not been
modified, altered, terminated or revoked and is in full force and effect; and
(b) Seller, as the present tenant under the Leases, is not in default under or
in breach of any of such Leases. Seller knows of no existing fact or condition
which could give rise to any such breach or default, or any claim against
Seller, under the Leases. To the best of Seller's knowledge, the present lessors
under the Leases are not in default thereunder, or in breach thereof, and Seller
knows of no existing fact or condition which could give rise to any such breach
or default, or any claim against such lessors under such leases.
(ii) Taxes. To Seller's knowledge, there are no taxes
or betterment assessments other than ordinary real estate taxes, business and
occupation tax or franchise tax (reimbursed to the landlords pursuant to the
applicable Leases) pending or payable against the Leased Real Property.
(iii) Utilities. All water, sewer, gas, electric,
telephone, drainage and other utility equipment required by law or necessary for
the current operation of the Leased Real Property are installed and connected to
the Leased Real Property and such utilities are available in sufficient
quantities and such connections are adequate to service the Leased Real Property
as it is currently used and operated.
(iv) Conditions. Except as set forth on Schedule
5.1(g), to Seller's knowledge, there are no material defects in the physical
condition of any improvements constituting a part of the Leased Real Property.
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(v) Compliance with Law; Government Approvals. Seller
has received no notice from any governmental authority of any violation of any
law, ordinance, regulation, license, permit or authorization issued with respect
to any of the Leased Real Property that has not been corrected heretofore and no
such violation exists which could have a material adverse effect.
(h) Contracts. Each of the Listed Contracts as set forth on
Schedule 1.1(h) is in full force and effect, and is a legal, binding and
enforceable obligation of Seller and, to Seller's knowledge, of the other
parties thereto or against the parties thereto, subject to the Debtor Relief
Laws. Neither Seller nor, to Seller's knowledge, any other party to any Contract
is currently in breach or has improperly terminated any such Contract, or is in
default under any Contract by which it is bound, and there exists no condition
or event which, after notice or lapse of time or both, would constitute any such
breach, termination or default. Except where third party consent to disclose has
not been obtained, Seller has delivered to Buyer true, correct and complete
copies of such Contracts, an accurate and complete description of such oral
Contracts, if any, and all modifications and amendments thereto.
(i) Financial Statements of Seller.
(i) In respect to the Business, Seller has delivered
to Buyer its unaudited financial statements including: (i) Balance Sheets, (ii)
Statements of Income and (iii) Statements of Cash Flow for the fiscal years
ended 1995, 1996 and 1997 (collectively, the "Financial Statements", copies of
which are attached hereto as Schedule 5.1(i)). The Financial Statements have
been prepared in accordance with U.S. generally accepted accounting principles
consistently followed throughout the periods covered by such statements, and, at
the statement dates and for the periods of the income statements, present
fairly, in all material respects, the assets, liabilities, financial position
and results of operations of the Business.
(ii) The Net Current Asset Disclosure has been
prepared in accordance with U.S. generally accepted accounting principles.
(j) Liabilities. Seller has no liabilities or obligations (in
excess of $50,000 individually or $100,000 in the aggregate) of any nature
whatsoever, whether absolute, accrued, contingent or otherwise, except for those
(i) reflected or reserved on the Net Current Asset Disclosure or Closing Date
Net Current Asset Disclosure (ii) incurred or accrued since February 6, 1998 in
transactions involving the purchase or sale of goods and services in the
ordinary course of business, and consistent with the representations,
warranties, covenants, obligations and agreements contained herein, or (iii)
under the Contracts (exclusive of any liabilities or obligations which arise
from defaults thereunder
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or breaches thereof prior to the Closing). There exists no event or circumstance
which, after notice or lapse of time or both, might create any other obligations
or liabilities of Seller with respect to the Business.
(k) Accounts Receivable. All Accounts Receivable reflected on
the Net Current Asset Disclosure have arisen in the ordinary course of the
Business and are collectible in accordance with their terms net of any
respective reserves shown on the Seller's books and records as of the date
hereof. All Accounts Receivable represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
There is no contest, claim or right of set-off, other than rebates and returns
or exchanges in kind arisen in the ordinary course of business, under any
contract with any obligor of an Account Receivable relating to the contract or
validity of such Account Receivable.
(l) Inventories. All of Seller's Inventory reflected on the
Net Current Asset Disclosure or Closing Date Net Current Asset Disclosure are
usable or salable in the ordinary and normal course of business, of which the
value is carried at the lower of cost or market and reflects write-offs,
write-downs or reserves for damaged, excess or obsolete items in accordance with
the historical inventory policy and practices of Seller.
(m) Pending Litigation. Except as set forth on Schedule
5.1(m), there is no litigation, claim, action, suit, proceeding, governmental
investigation or inquiry pending or, to Seller's knowledge, threatened, against
or in any manner involving Seller, relating to the Business, the Acquired
Assets, the Assumed Liabilities or the transactions contemplated hereby. Seller
is not subject to any judgment, decree, injunction, award or order outstanding
relating to the Business or the Acquired Assets or the transactions contemplated
hereby.
(n) Customers and Suppliers. Except for employees of Seller,
no parties or individuals other than those listed on Schedule 5.1(n) have had
access to its customer lists, and Seller has maintained reasonably adequate
measures to maintain the confidentiality of its customer lists. Since September
30, 1997, no substantial supplier has: (i) stopped, or indicated an intention to
stop, trading with or supplying Seller, (ii) reduced, or indicated an intention
to reduce, substantially its trading with or provision of goods or services to
Seller, or (iii) changed, or indicated an intention to change, materially the
terms and conditions on which it is prepared to trade with or supply Seller. No
substantial supplier has informed Seller that, as a result of the transactions
contemplated by this Agreement, that it intends to (i) not trade with or supply
Buyer, (ii) reduce substantially its trading with or provision of goods or
services to Buyer, or (iii) change the terms and conditions on which it is
prepared to trade with or supply Buyer, as compared to Seller. Seller has no
knowledge of any facts, conditions or events which might give rise to a claim
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by Seller against any of its suppliers or any claim by a supplier against
Seller. Seller has not entered into any agreement or commitment with suppliers,
except in the ordinary course, consistent with past practice. Except as set
forth on Schedule 5.1(n), none of Seller's suppliers of materials to the
Business is the sole source of such supply.
(o) Regulatory Compliance. The Business has been conducted,
and the Acquired Assets have been owned, used, operated and maintained, in full
compliance with all applicable laws, regulations and other requirements of
Governmental Authorities. Seller is not now in violation of any applicable laws,
regulations or orders of any Governmental Authority, and no material
expenditures are or will be required in order for the conduct of the Business or
the ownership, use, operation or maintenance of the Acquired Assets to comply
with any applicable laws, regulations or orders of any Governmental Authorities.
(p) Brokers, Finders and Agents. Except for BT Alex. Brown
Incorporated, whose fees and expenses shall be the sole responsibility of Seller
or its Affiliates, Seller is not directly or indirectly obligated to anyone
acting as a broker, finder or in any other similar capacity in connection with
this Agreement or the transactions contemplated hereby.
(q) Intellectual Property. Except as set forth on Schedule
1.1(g), Seller owns or has the exclusive right to use, free and clear of any
payment, restriction or encumbrance, all Intellectual Property owned by Seller
or used in the conduct of the Business as presently conducted. There is no claim
or demand of any person pertaining to, or any proceedings which are pending or,
to the best of Seller's knowledge, threatened, which relate to any Intellectual
Property owned by Seller or used in the conduct of the Business as presently
conducted. No Intellectual Property owned by Seller or used in the conduct of
the Business as presently conducted is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any Governmental Authority or
infringes, violates or constitutes a misappropriation of the rights of others,
or is being infringed, violated or misappropriated by others or used by others
(whether or not such use constitutes infringement). The Business does not
involve employment of any person in a manner which violates any non-competition
or non-disclosure agreement which such person entered into in connection with
any former employment. All statements of fact contained in any application for
patents in any country, for trademark registration in any country or copyright
registration in any country, that were filed by or on behalf of Seller are true,
accurate, and complete in every material respect, and are in material compliance
with applicable patent laws, and all pending patent applications, issued
patents, pending trademark registration applications and copyright registration
applications, and issued trademark and copyright registrations have been duly
and properly filed.
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(r) Licenses and Permits. Set forth on Schedule 1.1(i) is a
true and complete list of all Licenses and Permits. The Licenses and Permits
include all licenses, permits and other authorizations from all Governmental
Authorities (i) currently used by Seller in connection with the Business, or
(ii) required to permit Seller to operate the Business in the manner in which it
presently is conducted.
(s) Labor Matters. Except as set forth on Schedule 5.1(s),
with respect to employees of and service providers to Seller:
(i) Seller is and has been in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice; and no sex, age, disability, gender, race or
religious discrimination claim has been made against Seller;
(ii) there is not now, nor within the past three
years has there been any unfair labor practice complaint against Seller pending
or threatened before the National Labor Relations Board or any other comparable
authority; there is not now, nor within the past three years has there been any
labor strike, lock-out, slowdown or work stoppage actually pending or threatened
against or directly affecting the Business; no labor representation organization
effort exists nor has there been any such activity within the past three years;
and no grievance or any arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist or have
been threatened;
(iii) with respect to employees of the Business in
the United States, the employees of Seller are not represented by any labor
union and no collective bargaining agreement is binding and in force against
Seller or currently being negotiated by Seller;
(iv) all employees of Seller who are transferred
pursuant to Section 6.12 are employed on an at-will basis and may be terminated
without cause and without penalty or liability to Seller; and
(v) All individuals who are or were performing
services and are or were classified as "independent contractors" for tax
purposes qualify or qualified for such classification, and Seller has fully and
accurately reported their compensation on IRS Forms 1099 when required to do so.
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(t) Employee Plans.
(i) As used in this Section 5.1(t), the following
terms have the meanings set forth below.
(I) "Benefit Arrangement" means any benefit
arrangement, obligation, custom, or practice, whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, agents, or
independent contractors, other than any obligation, arrangement, custom or
practice that is a Plan, including, without limitation, employment agreements,
severance agreements, executive compensation arrangements, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock option or purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, any plans subject to Section 125
of the Internal Revenue Code of 1986, as amended (the "Code"), and any plans
providing benefits or payments in the event of a change of control, change in
ownership, or sale of a substantial portion (including all or substantially all)
of the assets of any business or portion thereof, in each case with respect to
any present or former employees, directors, or agents.
(II) "ERISA Affiliate" means any person
that, together with Seller, would be or was at any time treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA and any general
partnership of which Seller is or has been a general partner.
(III) "Multiemployer Plan" means any plan
described in Section 3(37) of ERISA.
(IV) "Qualified Plan" means any Seller Plan
that meets, purports to meet, or is intended to meet the requirements of Section
401(a) of the Code.
(V) "Pension Plan" means any plan described
in Section 3(2)(A) of ERISA and any comparable plan that is not subject to ERISA
because it applies to non-U.S. employees.
(VI) "Seller Benefit Arrangement" means any
Benefit Arrangement sponsored or maintained by Seller or with respect to which
Seller has or may have any liability (whether actual, contingent, with respect
to any of its assets or
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otherwise), in each case with respect to any present or former directors,
employees, or agents of Seller.
(VII) "Seller Plan" means any Plan for which
Seller is or has been the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Plan maintained by Seller or to which Seller is obligated to make
payments, in each case with respect to any present or former employees of
Seller.
(ii) Schedule 5.1(t) contains a complete and accurate
list of all Seller Plans and Seller Benefit Arrangements. Schedule 5.1(t)
identifies all Seller Plans that (i) are Qualified Plans, or (ii) provide for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
coverage or benefits that meet only the requirements of Part 6 of Title I of
ERISA or Section 4980B(f) of the Code where the cost of such coverage or
benefits is paid 100% by the participant or beneficiary.
(iii) With respect to Plans and Benefit Arrangements,
(I) true, correct and complete copies all of
the following documents with respect to all Seller Plans and Seller Benefit
Arrangements have been delivered to Buyer: (A) all plan documents, including but
not limited to trust agreements, insurance policies, service agreements and
formal and informal amendments thereto, (B) summary plan descriptions and
summaries of material modifications, (C) the written descriptions of all
non-written agreements relating to any such plan or arrangement, and (D)
employee manuals or handbooks containing personnel or employee relations
policies;
(II) all group health plans of Seller and
its ERISA Affiliate have been operated in material compliance with the
requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and
Seller has provided, or will have provided before the Closing Date, to
individuals entitled thereto all required notices and coverage pursuant to
Section 4980B with respect to any "qualifying event" (as defined therein)
occurring before or on the Closing Date; and
(III) no Transferred Employee has been
promised or provided, and no Seller Plan or Seller Benefit Arrangement provides,
with respect to Transferred Employees, medical or other welfare benefit coverage
beyond the termination of employment except as required by COBRA or comparable
state law.
(iv) With respect to Plans and Benefit Arrangements,
Seller has not declared or paid any bonus or incentive compensation in
contemplation of the transactions contemplated by this Agreement in respect to
which Buyer shall be obligated.
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(u) Taxes. Seller has timely filed or received an appropriate
time extension for the filing of all Federal, state, local and foreign income,
personal property, FICA, withholding, excise, unemployment, sales and franchise
tax returns and reports relating to Seller and the Business due as of the date
hereof, and has fully paid and discharged all taxes due as indicated on such
returns. Except as set forth in Schedule 5.1(u), no deficiencies for any taxes,
assessment or other governmental charges have been asserted in writing or
assessed against Seller which remain unpaid. Seller is not under audit with
respect to any sales taxes related to the Business.
(v) [INTENTIONALLY OMITTED]
(w) Required Consents. Except for those consents or approvals
which may be required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and described on Schedule 5.1(w), no consent,
approval, order or authorization of or from, or registration, notification,
declaration or filing with any individual, entity or Governmental Authority
(collectively, "Required Consents") is required in connection with the
execution, delivery or performance of this Agreement by Seller or the
consummation by Seller of the transactions contemplated herein.
(x) Absence of Certain Changes. Since December 31, 1997,
except as set forth on Schedule 5.1(v) and Schedule 4.4(a)(v), there has not
been:
(i) any Material Adverse Change;
(ii) any acquisition or disposition of any asset or
property, or any agreement to do the same other than in the ordinary and regular
course of business;
(iii) created, incurred or permitted to exist any
Lien on any of the Acquired Assets, except for Permitted Encumbrances;
(iv) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting, either in any case or
in the aggregate, the financial condition, results of operations or properties
of the Business;
(v) any increase in salary, bonuses or other
compensation of any officers, employees, agents or independent contracts
employed by Seller, except in the ordinary course of business, consistent with
past practice, or any increase in executive compensation nor has Seller entered
into any employment, severance or other agreements, nor amended any Seller Plan
or Seller Benefit Arrangement in a manner that increases liabilities;
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(vi) any individual capital expenditures in excess of
$50,000 related to the Business;
(vii) any non-cash dividend or non-cash distribution
out of the Business;
(viii) any change in accounting methods or practices,
credit practices or collection policies used by Seller that would affect the
Financial Statements; or
(ix) any other event or condition experienced by
Seller of any character which has materially adversely affected or could so
materially adversely affect the assets, liabilities, financial position, results
or operations, net worth or prospects of Seller.
(y) Books and Records. The Books and Records are complete and
correct in all material respects. Seller has made available to Buyer for
examination the original or true and correct copies of all the Books and
Records.
(z) Affiliate Transactions. No director, officer or employee
of any Affiliate of Seller, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with Seller.
(aa) Accuracy of Representations. None of the representations,
warranties or statements of Seller contained in this Agreement, in the Schedules
and Exhibits hereto or in any other agreement or instrument executed or
delivered by or on behalf of Seller at the Closing in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the representations, warranties or statements made, in the
context in which made, not false or misleading.
5.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that the statements contained in this Section 5.2 are on the
date hereof true and correct and on the Closing Date will be repeated true and
correct as so made again:
(a) Organization and Standing; Power and Authority.
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(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the District of Columbia, and
has full corporate power and authority to make and perform this Agreement, and
to perform the transactions contemplated by this Agreement.
(ii) This Agreement has been, and all other
agreements and instruments to be executed and delivered by Buyer in connection
herewith have been, or as of the Closing Date will have been, duly executed and
delivered by Buyer. This Agreement constitutes, and the other agreements and
instruments all executed or to be executed by Buyer in connection with the
transactions contemplated hereby constitute, or when executed and delivered by
Buyer will constitute, the valid and binding obligations of Buyer, enforceable
in accordance with their respective terms, except to the extent that
enforceability may be limited by Debtor Relief Laws.
(iii) The execution, delivery and performance of this
Agreement and all other agreements and instruments to be executed and delivered
by Buyer have been approved by all necessary corporate action by Buyer.
(b) Articles of Incorporation and By-Laws. The copies of the
Articles of Incorporation and By-Laws of Buyer, certified by its Secretary and
delivered by Buyer to Seller, are true, correct and complete as of the date of
this Agreement and have not been amended or modified in any respect.
(c) Conflicts; Defaults.
(i) Neither the execution and delivery of this
Agreement and the other agreements and instruments executed in connection
herewith by Buyer, nor the performance by Buyer of the transactions contemplated
hereby or thereby, will (A) violate, conflict with, or constitute a default
under, any of the terms of Buyer's Articles of Incorporation or By-Laws, or any
provisions of, or result in the acceleration of any obligation under, any
contract, sales commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement, instrument, order, judgment or
decree to which Buyer is party or subject, (B) result in the creation or
imposition of any Liens in favor of any third person or entity upon any of the
assets of Buyer, (C) violate any law, statute, judgment, decree, order, rule or
regulation of any Governmental Authority, or (D) constitute an event which,
after notice or lapse of time or both, would result in such violation, conflict,
default, acceleration, or creation or imposition of Liens.
(ii) Buyer is not, as of the date of this Agreement,
in violation of or in default under its Articles of Incorporation or By-Laws, or
any provision of any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien,
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<PAGE> 32
lease, agreement, instrument, order, judgment or decree relating to its
business, or by which Buyer is bound or in the payment of any of Buyer's
monetary obligations or debts.
(d) Brokers, Finders and Agents. Buyer is not directly or
indirectly obligated to anyone as a broker, finder or in any other similar
capacity in connection with this Agreement or the transactions contemplated
hereby.
(e) Required Consents. To the knowledge of Buyer, all Required
Consents, which must be obtained or satisfied by Buyer for the consummation of
the transactions contemplated by this Agreement have been obtained and
satisfied.
(f) Pending Litigation. Except as set forth on Schedule
5.2(f), no action, suit, or proceeding is pending or, to Buyer's knowledge,
threatened against it before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge which would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation, or (iii) affect
adversely the right of Buyer to own the Acquired Assets and to operate the
Business and no written notice of the initiation of any such action, suit or
proceeding has been received.
(g) Accuracy of Representations. None of the representations,
warranties or statements of Buyer contained in this Agreement or in any other
agreement or instrument executed or delivered by or on behalf of Buyer at the
Closing in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the representations,
warranties or statements made, in the context in which made, not false or
misleading.
ARTICLE VI
COVENANTS OF SELLER
6.1 Notice of Claims. Seller covenants and agrees with Buyer that for
the first twelve (12) months after the Closing Date, it shall give Buyer ten
(10) days' prior written notice of its intent to assert any claim against any
former supplier of Seller which, at the time of the assertion, is a supplier of
Buyer.
6.2 Maintenance of, and Access to, Records. After the Closing Date,
Seller shall provide Buyer with reasonable access (with an opportunity to make
copies at Buyer's expense), during normal business hours, and upon reasonable
advance notice, to all books
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<PAGE> 33
records relating to the Business which are retained by it in accordance with
this Agreement. Seller shall preserve and maintain the books and records
relating to the Business retained by Seller for at least seven (7) years after
the Closing Date or longer if required by any governmental agency.
6.3 Non-Solicitation. During the period commencing on the Closing Date
and through and until the date five (5) years after the Closing Date, Seller and
its Affiliates shall not, for any reason whatsoever, directly or indirectly,
call upon or solicit any Covered Employee for the purpose or with the intent of
enticing such employee away from or out of the employ of Buyer. As used herein,
"Covered Employee" means an employee of Seller on the Closing Date who accepts
employment with Buyer on or promptly after the Closing Date.
6.4 Limitations on Assignability. To the extent that any of the
contract rights of Seller to be sold, transferred or assigned hereunder are not
assignable without the consent of a third party, neither this Agreement, nor any
of the instruments or documents executed and delivered in connection herewith or
contemplated hereby, shall constitute an assignment or assumption thereof, or
attempted assignment or attempted assumption thereof, if such assignment or
attempted assignment, or assumption or attempted assumption, would constitute a
breach thereof. If Seller has not obtained a consent or approval necessary for
the assignment of any contract right to be assigned hereunder, then Seller shall
use commercially reasonable efforts where required by Buyer to obtain such
consents and approvals after the Closing, or, at Buyer's request, shall
cooperate in any reasonable and mutually acceptable arrangement to provide to
Buyer the benefits thereof subject to the performance by Buyer of Seller's
obligations arising or to be performed after the Closing thereunder. Nothing
contained in this Section 6.4 shall require Buyer to enter into, or to accept as
a substitute for performance by Seller hereunder, any arrangement that would
impose any additional cost, expense or liability on Buyer, or that would deprive
Buyer of any benefits contemplated by this Agreement. In respect to any Contract
that is not a Listed Contract nor is required to be a Listed Contract under
Schedule 1.1(h), and provided Seller provides a list of such Contracts prior to
Closing, Buyer shall have the option to assume or reject any such Contracts. In
the event Buyer elects to assume such a Contract, Buyer shall assume its
liabilities and obligations pursuant to Section 2.1(c). In the event Buyer
elects to reject such a Contract, Seller shall retain all rights, obligations
and liabilities associated therewith. In respect to any Contract that is not a
Listed Contract nor is required to be a Listed Contract under Schedule 1.1(h)
and of which Seller does not provide notice prior to Closing, Buyer shall assume
any such Contracts, provided that if Buyer incurs any net loss by reason of any
such assumption, Seller shall reimburse Buyer for Buyer's losses with respect to
all such Contracts in excess of $25,000 in the aggregate.
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6.5 Pre-Closing Operations of Seller. Except as contemplated by this
Agreement or as otherwise approved in writing by Buyer, from the date hereof
until the Closing Date, Seller will conduct the Business in the ordinary course
consistent with past practice (including, but not limited to, payment of all
accounts payable as they come due consistent with past practice). Buyer shall
have no access to Seller's employees or facilities except pursuant to Section
6.6. Subject to the foregoing exceptions, from the date hereof until the Closing
Date:
(a) Mergers and Sales. Seller will not merge, consolidate, or
enter into a share exchange with any other corporation or other business entity,
acquire any material stock or any material amount of assets of any other
corporation or business entity, sell, lease, license, mortgage, pledge, or
otherwise dispose of any material assets;
(b) New Commitments; Non-Disclosure. Seller will not make any
commitment or enter into any contract or agreement that is not in the ordinary
course of business consistent with past practice, and neither Seller, nor any
officer, employee, agent or representative of Seller shall sell or disclose
Seller's customer lists to any third party except in the ordinary course of
business consistent with past practice and to third parties as disclosed in
Schedule 5.1(n); and
(c) Compensation Increase. Seller will not increase in any
manner the compensation or fringe benefits of any of its directors or officers,
pay any pension or retirement allowance to any directors or officers, or become
a party to, amend, or commit itself to any pension, retirement, profit-sharing,
welfare benefit plan, or employment agreement with or for the benefit of any
director or officer or amend any Seller Plan or Seller Benefit Arrangement,
other than general increases in the compensation of, and the payment of bonuses
to, officers in the ordinary course of business consistent with past practice.
6.6 Access to Records and Information. From the date hereof until the
Closing Date, Seller will, upon reasonable advance notice, give Buyer's
authorized representatives reasonable access during regular business hours to
the offices, properties, books, and records of Seller, and will furnish to its
authorized representatives such financial and operating data and other
information as such persons may reasonably request, for the purpose of
evaluating changes in the financial condition, results of operations, or
business of Seller after the date of this Agreement except any information in
respect to prices or other competitive practices of Seller and will instruct
Seller's employees having custody of such data, counsel, and financial advisors
to cooperate with Buyer in its evaluation. Buyer shall communicate with respect
to obtaining such data only with such employees of Seller as Seller has
designated to Buyer in advance.
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<PAGE> 35
6.7 No Solicitation of Offers. Except as permitted in the Master
Agreement, Seller shall use its best efforts to ensure that it does not take,
directly or indirectly, any of the following actions with any party other than
Buyer or its designees: (i) solicit, initiate, or participate in any
negotiations, inquiries or discussions with respect to any Acquisition Proposal
(as defined in the Master Agreement); (ii) disclose, in connection with an
Acquisition Proposal, any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, any effort or attempt by any other
person to do or seek any of the foregoing; (iii) enter into or execute any
agreement relating to an Acquisition Proposal; or (iv) make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Proposal other than with respect to the transactions contemplated by this
Agreement.
6.8 Notices of Certain Events. In addition to any notices required
under the Master Agreement, Seller shall promptly notify Buyer of the following:
(a) Notice of Third Party that Consent is Required. Any notice
or other communication from any person alleging that the consent of any third
party is or may be required in connection with the transactions contemplated by
this Agreement;
(b) Notice from Governmental Authority. Any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement;
(c) Legal Proceedings. Any actions, suits, claims,
investigations, or proceedings commenced or threatened against, relating to, or
involving or otherwise affecting Seller that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant hereto or
that relate to the consummation of the transactions contemplated by this
Agreement; and
(d) Agreement Default. Any notice of, or other communication
relating to, a default, or an event with notice or lapse of time or both would
become a default, under any material agreement that is received by Seller
subsequent to the date of this Agreement.
6.9 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Seller will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or advisable under applicable laws or regulations to
consummate the transactions contemplated by this Agreement, and will use
commercially reasonable efforts to obtain such approvals and take such actions
as are necessary, including without limitation using its best efforts to obtain
all consents of any Person, whether private or governmental, so that the
transactions
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<PAGE> 36
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby.
6.10 Risk of Loss. Seller will bear the risk of loss or damage to the
Acquired Assets resulting from fire, theft, or other casualty at all times prior
to and on the Closing. If any such loss or damage is so substantial as to
prevent normal operation of any material portion of Seller's Business or the
replacement or restoration of the lost or damaged material Asset within thirty
(30) days after the occurrence of the event resulting in such loss or damage,
Seller will immediately notify Buyer and Buyer, at any time within ten (10) days
after receipt of such notice, may elect by written notice to Seller either (a)
to waive such defect and proceed toward consummation of the acquisition of the
Acquired Assets in accordance with the terms hereof, or (b) terminate this
Agreement. If Buyer elects to consummate the transactions contemplated by this
Agreement, there will be no separate adjustment in the U.S. Purchase Price
related to such loss or damage but all insurance proceeds payable as a result of
the occurrence of the event resulting in such loss or damage will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer and Seller will pay to Buyer (or Buyer may withhold from the U.S. Purchase
Price) an amount equal to any deductible amount charged to Seller against the
proceeds due for such loss.
6.11 Bulk Sales. It may not be practicable to comply or attempt to
comply with the procedures of the bulk sales or bulk transfers acts or laws of
any or all of the states or other jurisdictions in which the Assets are situated
(or of any state or jurisdiction) which may be asserted to be applicable to the
transactions contemplated hereby. Buyer and Seller therefore waive any
requirements for compliance with any or all of such laws.
6.12 Employment of Employees; Benefits. At or prior to the Closing,
Buyer shall offer employment as of the Closing Date to all employees of Seller
employed by Seller in the conduct of the Business to whom it would be legal for
Buyer to offer employment at Seller's facility located in Parkersburg, West
Virginia, except to the President of Nashua Photo Inc. and those Shift B
employees of Seller who were laid off or suspended effective February 17, 1998
(the "Transferred Employees"). The Transferred Employees are listed on Schedule
6.12 to be provided at Closing. Schedule 6.12 shall also set forth each
Transferred Employee's salary level, years of uninterrupted employment and years
of service for benefit plan purposes. Buyer shall offer employment to each
Transferred Employee at the same or substantially equivalent cash compensation
as that provided by Seller to Transferred Employee immediately prior to the
Closing Date. For purposes of severance benefits solely, Buyer shall, to the
extent applicable, recognize with respect solely to each salaried employee who
is a Transferred Employee, such salaried employee's years of service and level
of seniority with Seller or any of its subsidiaries and such severance benefits
shall be (i) provided during the first year after Closing and (ii) be equivalent
to the greater of Seller's severance benefits or that required under the Warn
Act,
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as defined in Section 6.13(c). At or prior to the Closing, at Buyer's sole
discretion, Buyer may offer employment as of the Closing Date to those employees
of Seller located at Seller's facility located in Nashua, New Hampshire.
6.13 Employee Benefits Plans.
(a) The rights of all Sellers' employees, participating under
the Nashua Corporation's qualified defined benefit plans, to wit: Nashua
Corporation's Retirement Plan for Salaried Employees and Nashua Corporation's
Hourly Retirement Plan ("Defined Benefit Plan" and collectively the "Defined
Benefit Plans") who become employees of Buyer shall be governed by the
provisions of the Defined Benefit Plans as amended to the date of such
employees' termination of employment with Seller. If it is determined that the
sale of the Business and the termination of the employment of the employees of
Seller as a result thereof did not constitute a "partial termination" of the
Defined Benefit Plans, or either of them, within the meaning of Section
411(d)(3) of the Code, then Seller shall take such steps as are necessary to
amend such Defined Benefit Plan or Plans so that service with Buyer shall
constitute service under such Defined Benefit Plan or Plans but only for
purposes of and only to the extent that such service with Buyer would have
constituted vesting service under such Defined Benefit Plan or Plans if such
service had been rendered to the Seller rather than Buyer.
(b) Seller will retain and discharge all of the rights and
duties and obligations of Seller relating to and arising under Seller's Plans
and Seller Benefit Arrangements with respect to employees of the Business for
and with respect to the period on or before the Closing Date without regard to
whether Buyer hires such employees. Seller will retain and discharge any
obligations to the employees of the Business with respect to vacation, sick
leave and severance benefits relating to the period on or before the Closing
Date.
(c) If Buyer terminates the employment of any employee of the
Business after Closing, Buyer shall be responsible for all obligations in
connection with such termination, including, without limitation, obligations
under the Worker Adjustment and Retraining Notification Act of 1988 ("Warn Act")
or COBRA. Seller will be responsible for providing coverage under ERISA Section
601 et seq. and all notices under the Warn Act for persons employed or formerly
employed by the Business (and their beneficiaries) relating to any terminations
or other qualifying events occurring on or before the Closing Date.
(d) The parties agree that no provision in this Agreement
requires Buyer to retain any employee or to establish or maintain any Benefit
Arrangement or Plan other
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than, for one year after the Closing Date, the severance arrangement for
salaried Transferred Employees described in Section 6.12.
ARTICLE VII
COVENANTS OF BUYER
7.1 Maintenance of, and Access to, Records. Buyer shall provide Seller
with reasonable access (with an opportunity to make copies at Seller's expense)
during normal business hours, and upon reasonable advance notice, to all books
and records turned over to Buyer in accordance with this Agreement. Buyer shall
preserve and maintain such books and records for at least seven (7) years after
the Closing Date or longer if required by guidelines of the Internal Revenue
Service.
7.2 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Buyer will use its commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement, and will use
commercially reasonable efforts to obtain such approvals and take such actions
as are necessary, including without limitation using its best efforts to obtain
all consents of any Person, whether private or governmental, so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby.
ARTICLE VIII
INDEMNIFICATION
The indemnification provisions of the Master Agreement shall apply to
Buyer and Seller.
ARTICLE IX
TERMINATION
9.1 Termination Events. Subject to the other provisions of this Article
IX, this Agreement may, by written notice given at or prior to the Closing in
the manner hereinafter provided, be terminated and abandoned:
(a) By Buyer or Seller upon termination of the Master
Agreement;
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(b) By mutual written consent of Seller and Buyer;
(c) By Buyer pursuant to Section 4.4(a);
(d) By Seller pursuant to Section 4.4(b);
(e) As otherwise provided in Article 12 of the Master
Agreement; or
(f) By Buyer pursuant to Section 6.10.
9.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 9.1, all further obligations of the parties hereunder shall
terminate, except as provided in Section 12.2 of the Master Agreement. No
termination of this Agreement shall act to terminate or otherwise impair the
obligations set forth in Section 13.4 of the Master Agreement (Expenses).
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. All covenants and
obligations to be performed after the Closing Date contained in this Agreement
or in any other certificate or document delivered pursuant to this Agreement
shall survive the Closing and expire in accordance with their respective terms.
All representations and warranties contained in this Agreement or in any other
certificate or document delivered pursuant to this Agreement shall survive the
Closing for a period of eighteen (18) months; provided, however, that any
representations and warranties contained herein related to tax, benefits and
environmental matters and the covenants under Section 6.13 of this Agreement
shall survive the Closing for a period of six (6) months beyond the applicable
federal or state statute of limitations (including extensions thereto). The
waiver of any condition, based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement, or
other remedy based upon such representations, warranties, covenants or
obligations.
10.2 Amendments. This Agreement may be amended only by a written
agreement signed by Seller and Buyer.
10.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered or sent in accordance with Section 13.3 of the Master
Agreement.
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10.4 [INTENTIONALLY OMITTED]
10.5 Waiver. Waiver of any term or condition of this Agreement by any
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
10.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, constitutes the entire agreement, and supersedes all other
prior agreements (except as identified in the Master Agreement) and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter thereof.
10.8 Assignment. This Agreement shall not be assigned by either Buyer
or Seller or by operation of law or otherwise, except with the written consent
of the other party; provided, however, that Buyer shall be permitted to assign
this Agreement as set forth in Section 13.8 of the Master Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
10.9 Governing Law; Time of the Essence. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
(excluding the conflict of laws provisions thereof). Time is of the essence in
the performance of this Agreement.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.
10.11 Publicity. No press releases or public disclosure, written or
oral, of the transactions contemplated by this Agreement shall be made by Buyer
or Seller except in accordance with Section 13.11 of the Master Agreement.
10.12 Jurisdiction. In the event that any dispute should arise between
Buyer and Seller with respect to any matter covered by this Agreement (other
than disputes described in Section 3.3(c)), the parties hereto consent to the
sole and exclusive jurisdiction of the state and federal courts of the United
States and the State of Delaware located in Dover, Delaware in connection with
the adjudication of any such dispute.
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10.13 Legal Fees. In the event of any litigation between Seller and
Buyer arising out of this Agreement, the party prevailing in such litigation
shall be entitled to have its reasonable attorneys' fees and expenses reimbursed
by the other party.
10.14 Actions. The parties will execute and deliver to the other, from
time to time at or after the Closing, for no additional consideration and at no
additional cost to the requesting party, such further assignments, certificates,
instruments, records, or other documents, assurances or things as may be
reasonably necessary to give full effect to this Agreement and to allow each
party fully to enjoy and exercise the rights accorded and acquired by it under
this Agreement.
10.15 Terms. All capitalized terms used herein shall have the meanings
specified in this Agreement, or, if not so specified, the meanings specified in
the Master Agreement. The word "include" and derivatives of that word are used
in this Agreement in an illustrative sense rather than limiting sense. The term
"Buyer's knowledge" or "Seller's knowledge" or words of similar import or
limitation means the actual knowledge or conscious awareness, without
independent investigation, of any executive officer of Buyer or Seller, as the
case may be.
10.16 Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction shall be applied against either party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
10.17 Third Parties. Nothing expressed or implied herein is intended,
or shall be construed, to confer upon or give any person or entity, including
any employee of Seller, other than Seller and Buyer any rights or remedies under
or by reason of this Agreement.
[Signature Page Following]
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
BUYER
DISTRICT PHOTO INC.
By:________________________________
Name:
Title:
SELLER
NASHUA PHOTO INC.
By:________________________________
Name:
Title:
PROMOLINK CORPORATION
By:________________________________
Name:
Title:
37
<PAGE> 1
EXHIBIT 10.18
EXECUTION COPY
U.K. ASSET PURCHASE AGREEMENT
By and Between
DISTRICT PHOTO INC.
as Buyer
and
NASHUA PHOTO LIMITED
as Seller
Dated as of March 10, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I - PURCHASE AND SALE OF ASSETS........................................1
1.1 Purchase and Sale of Assets..................................1
1.2 Retained Assets..............................................4
ARTICLE II - ASSUMPTION OF LIABILITIES.........................................4
2.1 Assumed Liabilities..........................................4
2.2 Retained Liabilities.........................................5
2.3 Prorations...................................................5
ARTICLE III - PURCHASE PRICE...................................................6
3.1 Payment......................................................6
3.2 Allocation of U.K. Purchase Price............................6
3.3 Preparation of Closing Date Net Current Asset Disclosure.....6
ARTICLE IV - CLOSING AND CONDITIONS TO CLOSING.................................7
4.1 General......................................................7
4.2 Documents Delivered by Seller................................7
4.3 Documents Delivered by Buyer.................................9
4.4 Conditions to Closing........................................9
ARTICLE V - REPRESENTATIONS AND WARRANTIES....................................11
5.1 Representations and Warranties of Seller....................11
5.2 Representations and Warranties of Buyer.....................23
ARTICLE VI - COVENANTS OF SELLER..............................................25
6.1 Notice of Claims............................................25
6.2 Maintenance of, and Access to, Records......................25
6.3 Non-Solicitation............................................25
6.4 Limitations on Assignability................................26
6.5 Pre-Closing Operations of Seller............................26
6.6 Access to Records and Information...........................27
6.7 No Solicitation of Offers...................................27
6.8 Notices of Certain Events...................................27
6.9 Commercially Reasonable Efforts.............................28
6.10 Risk of Loss................................................28
6.11 Transfer of Undertakings Regulations........................28
ARTICLE VII - COVENANTS OF BUYER..............................................28
7.1 Maintenance of, and Access to, Records......................28
7.2 Commerically Reasonable Efforts.............................29
7.3 Pension Plan................................................29
ARTICLE VIII - REAL PROPERTY..................................................29
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8.1 General.....................................................29
8.2 Conditions of Sale..........................................30
8.3 Assignment of Leased Real Property.........................31
ARTICLE IX - INDEMNIFICATION..................................................35
ARTICLE X - TERMINATION.......................................................35
10.1 Termination Events..........................................35
10.2 Effect of Termination.......................................35
ARTICLE XI - MISCELLANEOUS....................................................36
11.1 Survival of Representations and Warranties..................36
11.2 Amendments..................................................36
11.3 Notices.....................................................36
11.4 [Intentionally Omitted].....................................36
11.5 Waiver......................................................36
11.6 Headings....................................................36
11.7 Entire Agreement............................................36
11.8 Assignment..................................................36
11.9 Governing Law; Time of the Essence..........................37
11.10 Counterparts................................................37
11.11 Publicity...................................................37
11.12 Jurisdiction................................................37
11.13 Legal Fees..................................................37
11.14 Actions.....................................................37
11.15 Terms.......................................................37
11.16 Construction................................................37
11.17 Third Parties...............................................37
11.18 Value Added Tax.............................................38
11.19 Phase II Environmental Report...............................38
11.20 U.K. Statutes...............................................39
11.21 Transfer of Employees.......................................39
11.22 Restrictive Trade Practices Act.............................39
11.23 Temporary Services Agreement................................39
iii
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SCHEDULES [Not Included in Filing]
Schedule 1.1(a) -- Prepaid Items
Schedule 1.1(b) -- Inventory
Schedule 1.1(c) -- Accounts Receivable
Schedule 1.1(d) -- Tangible Assets
Schedule 1.1(g) -- Intellectual Property
Schedule 1.1(h) -- Listed Contracts
Schedule 1.1(i) -- Licenses and Permits
Schedule 1.1(k) -- Leases
Schedule 1.2 -- Retained Assets
Schedule 3.2 -- Allocation of Purchase Price
Schedule 4.4(a)(v) -- Material Adverse Change
Schedule 5.1(d) -- Permitted Encumbrances
Schedule 5.1(e) -- Leased Real Property
Schedule 5.1(f) -- Environmental and Safety Compliance
Schedule 5.1(g) -- Leases
Schedule 5.1(i) -- Financial Statements
Schedule 5.1(m) -- Litigation
Schedule 5.1(n) -- Customers and Suppliers
Schedule 5.1(s) -- Labor Matters
Schedule 5.1(t) -- Employee Plans
Schedule 5.1(v) -- Required Consents
Schedule 5.1(w) -- Absence Certain Changes
Schedule 8.2(d) -- Assurances of Leased Real Property
iv
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EXHIBITS [Not Included in Filing]
Exhibit 2.1 -- Form of Assignment and Assumption Agreement
Exhibit 3.3 -- Net Current Asset Disclosure
Exhibit 4.2(d) -- Form of Bill of Sale
Exhibit 4.2(k) -- Patent and Trade Mark Assignments
Exhibit 11.23 -- Temporary Services Agreement
v
<PAGE> 6
INDEX OF DEFINED TERMS
Accounts Receivable............................................................2
Accounting Firm................................................................7
Acquired Assets................................................................2
Acquisition Proposal............................................Master Agreement
Affiliate.......................................................Master Agreement
Agreement......................................................................1
Application...................................................................33
Assumed Liabilities............................................................4
Assurance.....................................................................31
Benefit Arrangements..........................................................22
Books and Records..............................................................2
Business.......................................................................1
Buyer..........................................................................1
Buyer's Notice................................................................11
Chemical Substances...........................................................17
Closing.........................................................Master Agreement
Closing Date....................................................Master Agreement
Closing Date Assets............................................................6
Closing Date Net Current Asset Disclosure......................................6
Contracts......................................................................3
Debtor Relief Laws............................................................12
Environmental Laws............................................................17
<PAGE> 7
Environmental Matters..........................................................5
February 6th Assets............................................................6
Financial Statements..........................................................18
Governmental Authorities.......................................................3
Intellectual Property..........................................................3
Inventory......................................................................2
Leased Assets.................................................................14
Leased Real Property...........................................................3
Leases.........................................................................3
Licenses and Permits...........................................................3
Liens..........................................................................2
Listed Contracts...............................................................3
Master Agreement...............................................................1
Material Adverse Change.......................................................10
National Conditions...........................................................30
Net Current Asset Disclosure...................................................6
OFT...........................................................................40
Order.........................................................................39
Pension Plan..................................................................22
Pensionable Employees.........................................................30
Permitted Encumbrances........................................................13
Person.........................................................................3
Prepaid Items..................................................................2
Required Consents.............................................................23
Retained Assets................................................................4
Retained Liabilities...........................................................5
<PAGE> 8
RPTA..........................................................................40
Seller.........................................................................1
Seller Benefit Arrangements...................................................22
Seller's Notice...............................................................10
Tangible Assets................................................................2
Transfer of Undertakings Regulations..........................................21
UK Purchase Price..............................................................6
UK Purchase Price Adjustment...................................................6
VAT...........................................................................39
VATA..........................................................................39
<PAGE> 9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March 10,
1998, is entered into by and between District Photo Inc, a District of Columbia
corporation ("Buyer"), on the one hand, and Nashua Photo Limited, a company
incorporated in England and Wales having its registered office at Brunel Road,
Newton Abbot, Devon TQ12 4PB on the other hand, which is a wholly-owned
subsidiary of Nashua Corporation ("Seller").
W I T N E S S E T H
WHEREAS, Seller is engaged in the United Kingdom in the photofinishing
business, including the marketing and sale of photo-related products (the
"Business");
WHEREAS, Seller desires to sell the Acquired Assets (as defined in
Section 1.1) to Buyer;
WHEREAS, this Agreement is entered into between Buyer and Seller
pursuant to that certain Master Asset Purchase Agreement of even date herewith
entered into by and between Nashua Corporation and Buyer (the "Master
Agreement");
WHEREAS, Buyer desires to purchase and acquire from Seller, upon the
terms and subject to the conditions hereinafter set forth, the Acquired Assets,
in consideration of the payment of the UK Purchase Price (as defined in Section
3.1) and the assumption by Buyer of the Assumed Liabilities (as defined in
Section 2.1);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, on
the basis of, and in reliance upon, the representations, warranties, covenants,
obligations and agreements set forth herein, and upon the terms and subject to
the conditions contained herein, hereby agree as follows:
<PAGE> 10
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the provisions of this
Agreement, at the Closing (as defined in the Master Agreement), Seller shall
convey, sell, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from Seller, the Business as a going concern comprising all of the
assets, properties, rights, privileges, claims, contracts and interests of
Seller on the Closing Date (as defined in the Master Agreement), of every kind
and description, real, personal or mixed, tangible or intangible, absolute or
contingent, wherever situated, whether or not carried or reflected on the books
and records of Seller (other than the Retained Assets (as defined in Section
1.2)), free and clear of any and all liens, equities, claims, prior assignments,
mortgages, charges, security interests, pledges, restrictions or encumbrances
whatsoever (collectively, "Liens"), other than the Permitted Encumbrances (as
defined in Section 5.1(d)) (such assets, properties, rights, privileges, claims,
contracts and interests collectively referred to as the "Acquired Assets").
Without limiting the generality of the foregoing, the Acquired Assets shall
include the following:
(a) Prepaid Items. All of Seller's prepaid expenses, advance
payments, deposits and prepaid items, including deposits with lessors,
suppliers, or utilities (collectively, "Prepaid Items"), as described on
Schedule 1.1(a);
(b) Inventory. All of Seller's inventories, including all
inventories of products, work-in-process, finished goods, raw materials,
supplies, equipment, parts, labels and packaging (including all of Seller's
rights and interests in goods in transit, consigned inventory, inventory sold on
approval and rental inventory) and all returned products, samples and obsolete
and nonsalable inventory (collectively, "Inventory"), as described on Schedule
1.1(b);
(c) Accounts Receivable. All of Seller's accounts receivable,
notes receivable and royalties receivable, any payments received by Seller with
respect thereto after the Closing Date, unpaid interest accrued thereon, and any
security or collateral relating thereto, including all past due, reserved and
written off accounts receivable (collectively, "Accounts Receivable"), as
described on Schedule 1.1(c) (including aging information with respect to the
Accounts Receivable);
(d) Tangible Assets. All of Seller's tangible assets (other
than Leased Real Property and Inventory) including motor vehicles, machinery,
equipment, office furniture, furnishings, tools, fixtures, office equipment,
computer hardware and software, leasehold and other improvements
<PAGE> 11
(collectively, "Tangible Assets"), as described on Schedule 1.1(d);
(e) Books, Records and Written Materials. All of Seller's
business records, including all financial books and records, sales order files,
purchase order files, engineering order files, warranty and repair files,
supplier lists, customer lists, dealer, representative and distributor lists,
studies, surveys, analyses, strategies, plans, forms, designs, diagrams,
drawings, specifications, technical data, production and quality control
records, formulations, and any other information which has been reduced to
writing (collectively, "Books and Records") (but excluding those books and
records described in Section 1.2(a));
(f) Catalogs and Advertising Materials. All of Seller's
promotional and advertising materials, including all catalogs, brochures,
videos, plans, manuals and handbooks;
(g) Intellectual Property Rights. All of Seller's trademarks,
service marks, trade names, logos, copyrights or patents (and any applications
for any of the foregoing and rights therein), together with all claims for
damages against Persons by reason of past infringement and the right to sue for
and collect such damages, licenses, shop rights, know-how, developments,
research data, designs, specifications, drawings, blueprints, technology, ideas,
compositions, manufacturing and production principles and techniques, test
procedures, processes, formulas, know-how, file reports, certifications,
customer and supplier lists, pricing and cost information, confidential
information, inventions (whether or not patentable), discoveries, business
methods, confidential or proprietary business information and trade secrets and
all other intellectual and intangible property rights owned by Seller or to, or
in, which Seller has any right or interest whatsoever (where there are multiple
copies of such material in Seller's possession or control, all copies of such
material) (collectively, the "Intellectual Property"), as described on Schedule
1.1(g) (as used herein, "Person" or "Persons" means a corporation, limited
liability company, association, partnership, organization, trust, joint venture
or other legal entity, an individual or a Governmental Authority);
(h) Contracts. All of Seller's licenses, contracts,
agreements, commitments and undertakings, whether oral or written, (including
unfilled customer orders) relating to the Acquired Assets or Business to which
Seller is a party or by which any of the Acquired Assets are bound excluding the
leases for the Leased Real Property (collectively, "Contracts"), of which, only
those Contracts that are reflected in Seller's Financial Statements that
constitute obligations involving more than $10,000 annually or that are not
cancelable by Buyer within thirty (30) days without incurring liability for such
cancellation are described on Schedule 1.1(h) ("Listed Contracts");
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<PAGE> 12
(i) Licenses and Permits. All licenses, permits, approvals,
franchises, consents and other authorizations held by Seller or related to or
used in connection with the Business or the Acquired Assets (collectively,
"Licenses and Permits") issued to Seller by any foreign, United Kingdom or local
governmental entity or municipality or subdivision thereof or any authority,
department, commission, board, bureau, agency, court or instrumentality
(collectively, "Governmental Authorities"), to the extent transferable to Buyer,
which Licenses and Permits are described on Schedule 1.1(i);
(j) Leased Real Property. All of Seller's leasehold interest
in real property used in connection with the Business ("Leased Real Property");
(k) Leases. All of Seller's leases as described on Schedule
1.1(k) (the "Leases") excluding Leased Real Property; and
(l) Other Assets. Excluding the Retained Assets described in
Section 1.2, all of the other assets, properties, rights, privileges, claims,
contracts and interests of every kind and description, real, personal or mixed,
tangible or intangible, absolute or contingent, wherever situated, whether or
not carried or reflected on the books and records of Seller, of Seller including
such assets, properties, rights, privileges, claims, contracts and interests as
are reflected on the Closing Date Net Current Asset Disclosure (as defined in
Section 3.3(b)) or which are owned by Seller on the Closing Date, including
those customer orders received (whether before, on or after Closing) relating to
the Business, which customer orders have not been opened for processing.
1.2 Retained Assets. Notwithstanding anything in this Agreement to the
contrary, Seller shall retain, and the Acquired Assets shall not include, any of
the assets described on Schedule 1.2, assets disposed of since the date hereof
in the ordinary course of business, such other assets as have been or are
disposed of pursuant to this Agreement, and the following assets of Seller
(collectively, the "Retained Assets"):
(a) Corporate Records. Seller's corporate books, registers and
records, including share certificates, share transfer records, corporate seals
and minute books, and Seller's tax returns and tax supporting information,
records constituting privileged and confidential attorney-client communications
or work product related to the transactions contemplated hereby;
(b) Seller Rights under this Agreement. All rights of Seller
under this Agreement;
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<PAGE> 13
and
(c) Prepaid Taxes and Tax Refunds. Prepaid foreign or United
Kingdom taxes and any rights of Seller to any tax refunds or carry backs.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. On the terms and subject to the conditions set
forth in the Assignment and Assumption Agreement attached hereto as Exhibit 2.1,
at the Closing, Buyer shall assume the following liabilities and obligations of
Seller (collectively, the "Assumed Liabilities"):
(a) Accounts Payable. All of Seller's trade and other accounts
payable reflected on the Closing Date Net Current Asset Disclosure;
(b) Accrued Liabilities. All of Seller's accrued liabilities
reflected on the Closing Date Net Current Asset Disclosure;
(c) Contracts. All liabilities and obligations of Seller
arising under the Contracts which accrue after the Closing; provided, however,
that Buyer shall not assume or be responsible for any such liabilities or
obligations which arise from defaults thereunder or breaches thereof by Seller
prior to or on the Closing Date (whether a claim for any such default or breach
is made before or after the Closing);
(d) Leases. All contractual liabilities and obligations of
Seller under the Leases and the leases of the Leased Real Property for time
periods after the Closing Date; provided, however, that (subject in the case of
the Leased Real Property to the provisions of the relevant Assurance) Buyer
shall not assume or be responsible for any such liabilities or obligations which
arise from defaults thereunder or breaches thereof by Seller prior to the
Closing Date or for any Environmental Matters (as defined in Section 2.2)
related in any way to the Leases or the leases of the Leased Real Property prior
to or on the Closing Date (whether a claim for any such default or
5
<PAGE> 14
breach is made before or after the Closing);
(e) Taxes. All taxes attributable to the sale of inventory,
payroll taxes and employee withholding tax obligations and other taxes, relating
to Buyer's operation of the Business after the Closing.
2.2 Retained Liabilities. Except for the Assumed Liabilities, Seller
shall retain all, and Buyer shall have no responsibility for any, of Seller's
liabilities and obligations, whether or not relating to the Business or Acquired
Assets, whether fixed, contingent or otherwise, and whether known or unknown
(collectively, the "Retained Liabilities"). Without limiting the foregoing,
Buyer shall not assume or be liable for and Seller shall indemnify Buyer against
and hold Buyer harmless from any of the following liabilities for (i)
environmental matters ("Environmental Matters") arising under Environmental Laws
(as defined in Section 5.1(f)) in connection with violations, disposal, events,
occurrences or releases that occurred or are attributable to the period on or
prior to the Closing Date; (ii) liabilities incurred by Seller in connection
with this Agreement, the transactions provided for herein and any other
agreements contemplated hereby, including, without limitation, attorneys' and
accountants' fees, and expenses pertaining to the performance by Seller of its
obligations hereunder; (iii) liabilities that relate to the Retained Assets;
(iv) except for Assumed Liabilities, liabilities arising out of the operation of
the Business on or before the Closing; (v) payments, if any, to be made as a
result of the purchase and sale of the Business of Seller to certain management
personnel of Seller under certain retention and other similar agreements and, in
the case of Nigel Jeffers under his employment contract, solely in respect of
those obligations resulting from the transactions contemplated by this
Agreement; (vi) subject to Section 11.18 all tax liabilities of Seller, whether
relating to periods before or after the transactions contemplated in this
Agreement or incurred by Seller in connection with this Agreement and the
transactions provided for herein, including any liability for such taxes arising
out of the inclusion of Seller in any group filing consolidated, combined or
unitary tax returns or arising out of any transferee liability; (vii)
liabilities with respect to workers' compensation or other employee related
claims, including, without limitation, with respect to discrimination, unfair
dismissal, redundancy, wrongful termination and employee benefits of any kind
arising from any acts or omissions occurring prior to or on the Closing Date;
and (viii) any other liabilities of Seller not specifically assumed by Buyer
hereunder.
2.3 Prorations. Except as otherwise provided in Section 2.1, general
utility charges, rates, water rates, council tax, and assessments, and similar
proratable items which are attributable to the Acquired Assets, shall be
apportioned between Buyer and Seller as follows: any item which relates to the
period prior to or on the Closing Date shall, to the extent not accrued on the
Closing Date Net Current Asset Disclosure, be apportioned to and paid by Seller,
and any such item which relates to the period on or after the Closing Date,
whether or not accrued on the Closing Date Net Current Asset Disclosure, shall
be apportioned to and paid by Buyer, provided, however, that any special
6
<PAGE> 15
assessments or similar charges in effect or payable prior to the Closing Date
shall be paid by Seller prior to the Closing.
ARTICLE III
PURCHASE PRICE
3.1 Payment. In full consideration for the conveyance, sale, transfer
and assignment of the Acquired Assets, but subject to adjustment as provided in
Section 3.3 and satisfaction of all of the conditions contained herein, Buyer
shall deliver or cause to Nashua Corporation for the account of Seller a cash
purchase price of Twenty Million US Dollars ($20,000,000) (the "UK Purchase
Price"), payable at the Closing by wire transfer of immediately available funds
to an account or accounts designated in writing by Seller.
3.2 Allocation of UK Purchase Price. Within 60 days after the Closing
the parties shall use all reasonable endeavours to agree in good faith an
allocation of the UK Purchase Price among the Acquired Assets to be set forth on
Schedule 3.2.
3.3 Preparation of Closing Date Net Current Asset Disclosure.
(a) Seller has delivered to Buyer an unaudited summary of the
Accounts Receivable, Inventories and other current assets of the Business as of
February 6, 1998 less accounts payable and accrued expenses and other Assumed
Liabilities as of February 6, 1998 (the "Net Current Asset Disclosure") which
are reflected in the books and records of Seller and are prepared consistently
with US generally accepted accounting principles. A copy of the Net Current
Asset Disclosure is attached hereto as Exhibit 3.3. The total net amount as set
forth on the Net Current Asset Disclosure is referred to herein as the "February
6th Assets."
(b) Within thirty (30) business days following the Closing,
Seller shall prepare and deliver to Buyer an unaudited summary of those assets
and liabilities specified in paragraph 3.3(a) as of the Closing (the "Closing
Date Net Current Asset Disclosure"). The Closing Date Net Current Asset
Disclosure shall accurately reflect all Inventories, Accounts Receivable, other
current assets, accounts payable and accrued expenses and other Assumed
Liabilities which are reflected on the books and records of Seller and shall in
all respects be prepared consistently with and utilizing the same accounting
policies and valuation procedures as set forth in the Net Current Asset
Disclosure.
7
<PAGE> 16
The total net amount as set forth on the Closing Date Net Current Asset
Disclosure is referred to herein as the "Closing Date Assets." In the event that
the Closing Date Assets have either increased or decreased by any amount from
the February 6th Assets, the amount of the increase or decrease (the "UK
Purchase Price Adjustment") shall be paid by Buyer to Seller (if the Closing
Date Assets exceed the February 6th Assets) or by Seller to Buyer (if the
February 6th Assets exceed the Closing Date Assets). The UK Purchase Price
Adjustment shall be made by wire transfer not later than the close of business
on the fifth business day immediately following the date on which the UK
Purchase Price Adjustment is finally determined, and shall include simple
interest on such amount at the rate of 3% plus the prime rate of interest
publicly quoted by the Chase Manhattan Bank in New York as of and commencing on
the Closing and continuing until the date of full payment hereunder. The Closing
Date Net Current Asset Disclosure delivered by Seller and the calculation of the
UK Purchase Price Adjustment shall be final and binding on the parties hereto,
unless within forty-five (45) business days following Seller's delivery of the
Closing Date Net Current Asset Disclosure to Buyer, Seller receives from Buyer a
report setting forth in detail Buyer's objections to such calculation and any
adjustments required. Buyer and Seller shall use reasonable efforts to resolve
any dispute, and such resolution shall be in writing and shall be final and
binding on the parties hereto. Until the earlier to occur of (i) the mutual
agreement of Seller and Buyer as to the appropriate amount of the UK Purchase
Price Adjustment, or (ii) the final determination of the UK Purchase Price
Adjustment by the Accounting Firm as set forth below, Buyer and Seller shall
allow each other reasonable access to each other's books, records and employees
pertaining to the Business and cooperate with each other during normal business
hours for purposes of computing and/or verifying the information set forth in
the Closing Date Net Current Asset Disclosure.
(c) If Seller and Buyer have not reached a final resolution
with respect to any UK Purchase Price Adjustment within thirty (30) business
days following Seller's receipt of Buyer's objections, such dispute shall be
resolved by the New York City office of Ernst & Young (the "Accounting Firm").
(d) The Accounting Firm shall be instructed to render its
decision resolving all matters presented to it within sixty (60) calendar days
of receipt by it of Seller's Closing Date Net Current Asset Disclosure or
Buyer's objections, whichever is the later.
(e) Each party shall bear its own expenses. The determination
of the UK Purchase Price Adjustment by Accounting Firm shall be final and
binding upon the parties.
ARTICLE IV
8
<PAGE> 17
CLOSING AND CONDITIONS TO CLOSING
4.1 General. Subject to the conditions set forth in Sections 4.2, 4.3
and 4.4, the Closing as defined in the Master Agreement shall take place at the
offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109 at
10:00AM (Eastern Time) on the Closing Date as defined in the Master Agreement.
Failure to close on such date shall not relieve either party hereto of its
obligations under this Agreement. All transactions at the Closing shall be
deemed to take place simultaneously at 12:01 a.m. Eastern Time on the Closing
Date, and no transaction shall be deemed to have been completed and no document
or certificate shall be deemed to have been delivered until all transactions are
completed and all documents are delivered.
4.2 Documents Delivered by Seller. At the Closing, Seller shall deliver
to Buyer the following, duly executed by the appropriate parties, subject to
satisfaction of the conditions precedent to the obligations of Seller stated
herein:
(a) Secretary's Certificate. A certificate executed by the
Secretary or a Director of Seller confirming the existence, incorporation and
good standing of Seller on the Closing Date, attaching copies of the Certificate
of Incorporation, Memorandum and Articles of Association of Seller, and
resolutions authorizing and approving the execution, delivery and performance of
this Agreement and all other documents and the taking of all action required
thereunder or in connection therewith on behalf of Seller;
(b) Opinion of Seller's Counsel. An opinion, dated as of the
Closing Date, from Brobeck, Hale and Dorr International in a form reasonable and
customary for similar transactions;
(c) Assignment and Assumption of Contracts and Liabilities. An
Assignment and Assumption Agreement in the form of Exhibit 2.1 (excluding the
Leased Real Property);
(d) Bill of Sale. A bill of sale and assignment conveying,
selling, transferring and assigning the Acquired Assets (excluding the Leased
Real Property) to Buyer, free and clear of any and all Liens, in the form of
Exhibit 4.2(d);
(e) Required Consents. All of the Required Consents (as
defined in Section
9
<PAGE> 18
5.1(v)) which are identified on Schedule 5.1(v) as being necessary for
consummating the sale of the Acquired Assets (other than the Leased Real
Property)and the transactions relating thereto;
(f) Assignment of Leases. An assignment or transfer of each
Leased Real Property and all other documents which Seller is obliged to deliver
to Buyer at Closing in accordance with Article VIII;
(g) Other Documents. Such other deeds, bills of sale,
endorsements, assignments, affidavits, and other instruments of sale,
assignment, conveyance and transfer, in form and substance reasonably
satisfactory to Buyer and its counsel, as are required to effectively vest in
Buyer all of Seller's right, title and interest in and to all of the Acquired
Assets free and clear of any and all Liens (subject to landlord's consent being
required in respect of the Leased Real Property);
(h) Lien Releases. Such releases and termination statements as
are necessary for the termination and release of any and all Liens (other than
the Permitted Encumbrances (as defined in Section 5.1(d)) on the Acquired Assets
(subject to landlord's consent being required in respect of the Leased Real
Property);
(i) Releases of Seller Employees from Confidentiality
Agreements. Such releases from Seller as are necessary to permit employees of
Seller who have signed confidentiality or secrecy agreements with Seller to
disclose information to Buyer;
(j) Officer's Certificate. A certificate dated the Closing
Date and executed by a director of Seller to the effect that each of the
conditions specified in Section 4.4(a) is satisfied; and (k) Patent and
Trademarks. Patent and trademark assignments in form and substance substantially
similar to the attached Exhibit 4.2(k).
(k) Patent and Trademarks. Patent and trademark assignments
in form and substance substantially similar to the attached Exhibit 4.2(k).
4.3 Documents Delivered by Buyer. At the Closing, Buyer shall deliver
to Seller the following, duly executed by the appropriate parties, subject to
satisfaction of the conditions precedent to the obligations of Buyer stated
herein:
(a) Secretary's Certificate. A certificate executed by the
Secretary or a Director of Buyer, confirming the existence, incorporation and
good standing of Buyer on the Closing Date, attaching copies of the Articles of
Incorporation and By Laws of Buyer, and resolutions authorizing
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<PAGE> 19
and approving the execution, delivery and performance of this Agreement and all
other documents and the taking of all action required thereunder or in
connection therewith on behalf of Buyer;
(b) Assignment and Assumption of Contracts and Liabilities. An
Assignment and Assumption Agreement in the form of Exhibit 2.1 (except in
relation to the Leased Real Property);
(c) Assignment of Leases. A counterpart Assignment of each
Leased Real Property in accordance with Article VIII;
(d) Officer's Certificate. A certificate dated the Closing
Date and executed by an executive officer of Buyer to the effect that each of
the conditions specified in Section 4.4(b) is satisfied;
(e) Payment of UK Purchase Price. Payment of the UK Purchase
Price in the manner and the amount set forth in Article III;
(f) Opinion of Buyer's Counsel. An opinion, dated as of the
Closing Date, from Wilmer, Cutler and Pickering in a form reasonable and
customary for similar transactions.
4.4 Conditions to Closing.
(a) Conditions to Obligations of Buyer. The obligation of
Buyer to close the transactions contemplated by this Agreement shall be subject
to the satisfaction of each of the following conditions precedent, each of which
may be waived, in whole or in part, in the sole discretion of Buyer, by a
written instrument signed by Buyer.
(i) Fulfillment of Seller's Covenants. Each of Nashua
Corporation, Seller and the Asset Sellers shall have fulfilled or complied with
each covenant, obligation and agreement required to be fulfilled or complied
with by it prior to the Closing Date under this Agreement, the Master Agreement
and the Asset Purchase Agreement.
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(ii) Accuracy of Seller's Representations. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on the date when made and shall be repeated at and as of the
Closing Date and shall be true and correct as so made again (unless a
representation is made as of a specific date, and in such event it shall be true
and correct as of such date); provided, however, that in the event Seller has
provided Buyer with written notice prior to the Closing Date of an event or
development arising after the date hereof and prior to the Closing Date that
causes any representation or warranty of Seller in this Agreement not to be true
and correct on the Closing Date (a "Seller's Notice"), then Buyer shall, in its
sole discretion, either (i) elect not to close the transactions contemplated by
this Agreement by reason of the failure of the condition to Closing specified in
this Section 4.4(a)(ii) to be satisfied, or (ii) elect to close the transactions
contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 4.4(a)(ii) to be satisfied, in which event
Buyer shall be deemed to have waived the condition to Closing specified in this
Section 4.4(a)(ii) with respect to the matters specified in Seller's Notice and
shall not seek or be entitled to indemnification under Article IX with respect
to only the matters specified in Seller's Notice.
(iii) Authorizations and Consents. Seller shall have
obtained and made all governmental or other authorizations, approvals, consents
(other than from the landlords of the Leased Real Property), permits, waivers
and filings which are necessary under all applicable laws and regulations for
the consummation by Seller of the transactions contemplated by this Agreement.
(iv) No Litigation. No injunction shall be
outstanding which would prevent consummation of the transactions contemplated by
this Agreement. No provision of any applicable domestic law or regulation, and
no judgment, injunction, order or decree of a governmental authority that has
the effect of making the Closing illegal or otherwise restrains or prohibits the
Closing from occurring shall be in effect (each party agreeing to use
commercially reasonable efforts, including appeals to higher courts, to have any
such judgment, injunction, order or decree lifted).
(v) No Material Adverse Changes. Since December 31,
1997 there have been no material adverse changes in Seller's business
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits or condition (financial or otherwise) of the
Business ("Material Adverse Change") or an adverse change to Seller which would
have a material adverse effect on Seller's ability to perform its obligations
under this Agreement, except as set forth on Schedule 4.4(a)(v).
(b) Conditions to Obligations of Seller. The obligation of
Seller to close the transactions contemplated by this Agreement shall be subject
to the satisfaction of each of the following conditions precedent, each of which
may be waived, in whole or in part, in the sole
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discretion of Seller, by a written instrument signed by Seller.
(i) Fulfillment of Buyer's Covenants. Buyer shall
have fulfilled or complied with each covenant, obligation and agreement required
to be fulfilled or complied with by it prior to the Closing Date under this
Agreement.
(ii) Accuracy of Buyer's Representations. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct on the date when made and shall be repeated at and as of the
Closing Date and shall be true and correct as so made again (unless a
representation is made as of a specific date, and in such event it shall be true
and correct as of such date); provided, however, that in the event Buyer has
provided Seller with written notice prior to the Closing Date of an event or
development arising after the date hereof and prior to the Closing Date that
causes any representation or warranty of Buyer in this Agreement not to be true
and correct on the Closing Date (a "Buyer's Notice"), then Seller shall, in its
sole discretion, either (i) elect not to close the transactions contemplated by
this Agreement by reason of the failure of the condition to Closing specified in
this Section 4.4(b)(ii) to be satisfied, or (ii) elect to close the transactions
contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 4.4(b)(ii) to be satisfied, in which event
Seller shall be deemed to have waived the condition to Closing specified in this
Section 4.4(b)(ii) with respect to the matters specified in Buyer's Notice and
shall not seek or be entitled to indemnification under Article IX with respect
to only the matters specified in Buyer's Notice.
(iii) Authorizations and Consents. Buyer shall have
obtained and made all governmental or other authorizations, approvals, consents,
permits, waivers and filings which are necessary under all applicable laws and
regulations for the consummation by Buyer of the transactions contemplated by
this Agreement.
(iv) No Litigation. No injunction shall be
outstanding which would prevent consummation of the transactions contemplated by
this Agreement. No provision of any applicable domestic law or regulation, and
no judgment, injunction, order or decree of a governmental authority that has
the effect of making the Closing illegal or otherwise restrains or prohibits the
Closing is in effect (each party agreeing to use commercially reasonable
efforts, including appeals to higher courts, to have any such judgment,
injunction, order or decree lifted).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Except as set forth in an
appropriate Disclosure Schedule, Seller represents and warrants to Buyer that
the statements contained in this Section 5.1 are on the date hereof true and
correct, and on the Closing Date will be, true and correct as so made again:
(a) Organization and Standing; Power and Authority.
(i) Seller is a company duly organized, validly
existing and in good standing under the laws of England and Wales, and has full
corporate power and authority to operate the Business, to own or lease the
Acquired Assets, to carry on the Business as now being conducted, and to make
and perform this Agreement, and the transactions and other agreements and
instruments contemplated by this Agreement. Seller is qualified to do business
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect upon the Business or the Acquired Assets.
(ii) This Agreement has been, and all other
agreements and instruments to be executed and delivered by Seller in connection
herewith have been, or as of the Closing Date will have been, duly executed and
delivered by Seller. This Agreement constitutes, and the other agreements and
instruments all executed or to be executed by Seller in connection with the
transactions contemplated hereby constitute, or when executed and delivered by
Seller will constitute, the valid and binding obligations of Seller, enforceable
in accordance with their respective terms, except to the extent that
enforceability may be limited by insolvency, bankruptcy, receivership,
moratorium, conservatorship, reorganization or other laws of general application
affecting the rights of creditors generally or by general principles of equity
("Debtor Relief Laws") or by public policy.
(iii) The execution, delivery and performance of this
Agreement and all other agreements and instruments to be executed and delivered
by Seller have been approved by all necessary corporate action by Seller.
(b) Certificate of Incorporation and Memorandum and Articles
of Association. The copies of the Certificate of Incorporation and Memorandum
and Articles of Association of
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Seller, certified by its Secretary and delivered by Seller to Buyer, are true,
correct and complete as of the date of this Agreement and have not been amended
or modified in any respect.
(c) Conflicts; Defaults.
(i) Neither the execution and delivery of this
Agreement and the other agreements and instruments executed in connection
herewith by Seller, nor the performance by Seller of the transactions
contemplated hereby or thereby, will (A) violate, conflict with, or constitute a
default under, any of the terms of Seller's Certificate of Incorporation or
Memorandum and Articles of Association, or any provisions thereof, or subject to
obtaining any Required Consent (as defined in Section 5.1(v)), result in the
acceleration of any obligation under, any contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed, lien, lease,
agreement, instrument, order, judgment or decree relating to the Business or the
Acquired Assets or by which Seller or the Acquired Assets are bound, including
the Contracts (save in each case as may result from the requirement to obtain
the appropriate landlords' consent for the assignment of the Leased Real
Property) (B) result in the creation or imposition of any Liens in favor of any
third person or entity upon any of the Acquired Assets, (C) violate any law,
statute, judgment, decree, order, rule or regulation of any Governmental
Authority, or (D) constitute an event which, after notice or lapse of time or
both, would result in such violation, conflict, default, acceleration, or
creation or imposition of Liens.
(ii) Seller is not, as of the date of this Agreement,
in violation of or in default under its Certificate of Incorporation or
Memorandum and Articles of Association, or any provision of any contract, sales
commitment, license, purchase order, security agreement, mortgage, note, deed,
lien, lease, agreement, instrument, order, judgment or decree relating to the
Business or the Acquired Assets or by which Seller or the Acquired Assets is
bound including the Contracts (other than arising out of any requirement to
obtain landlords' consent for the assignment of the Leased Real Property), or in
the payment of any of Seller's monetary obligations or debts, and there exists
no condition or event which, after notice or lapse of time or both, would result
in any such violation or default.
(d) Acquired Assets; Title; Required Consents.
(i) The Acquired Assets and the Retained Assets are
the only properties and assets owned by Seller and used in connection with the
Business. The Acquired Assets being conveyed to Buyer under this Agreement
constitute all of the assets used in or necessary to conduct
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the Business in substantially the same manner currently as conducted by Seller.
The Acquired Assets set forth in the February 6th Net Current Asset Disclosure
are not stated in amounts in excess of their respective realizable values.
(ii) Seller has good and indefeasible right, title
and interest in and to all of the Acquired Assets, and Seller has the right to
use and, subject to obtaining the landlords' consent in respect of the Leased
Real Property, to transfer to Buyer all of the Acquired Assets. All of the
Acquired Assets are free and clear of all Liens and claims of any kind or nature
whatsoever, except for the Liens set forth on Schedule 5.1(d) (the "Permitted
Encumbrances"). Except as disclosed on Schedule 5.1(d), all of the Acquired
Assets are in the sole possession and under the sole control of Seller (save for
any landlords' rights in respect of the Leased Real Property). The delivery to
Buyer of the instruments of transfer of ownership contemplated by this Agreement
will vest good and indefeasible title to the Acquired Assets in Buyer, free and
clear of all Liens and claims of any kind or nature whatsoever, except the
Permitted Encumbrances and any landlords' consent in respect of the Leased Real
Property.
(iii) Each leasehold interest of Seller in any of the
Tangible Assets ("Leased Assets") excluding the Leased Real Property, which
leasehold interest is part of the Acquired Assets, is in full force and effect
and enforceable against Seller and the other parties thereto, in accordance with
its terms, and there does not exist any material violation, breach or default by
Seller or to Seller's knowledge by any other party thereto, thereof or
thereunder.
(iv) The Tangible Assets and the Leased Assets are in
reasonably good operating condition and repair, reasonable wear and tear
excepted, and adequate for the intended purposes thereof and no material
maintenance, replacement or repair has been deferred or neglected. The Leased
Assets are in a condition suitable for return to the lessor of such equipment,
as required under the applicable lease therefor.
(v) The conveyance, sale, transfer and assignment of
the Acquired Assets does not require any consents or approvals of any entity,
individual or Governmental Authority other than any landlords' consent in
respect of the Leased Real Property and the Required Consents (as defined in
Section 5.1(v)).
(e) Real Property:
(i) Seller owns no freehold real property that is
used in the Business. Seller does not use or occupy any real property in
connection with the Business other than the Leased
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Real Property.
(ii) The particulars of the Leased Real Property (and
of any leases, underleases, tenancies, licences and other agreements subject to
and with the benefit of which the Leased Real Property is held) set out in
Schedule 5.1(e) are true, complete and accurate.
Title.
(iii) Seller is solely entitled at law and in equity
to the Leased Real Property and has a good and marketable title to the Leased
Real Property.
(iv) Seller has disclosed to Buyer copies of all the
title deeds and documents relating to the Leased Real Property of which Seller
is aware and the documents of title to which Seller (or a predecessor in title
under the relevant lease) was a party to be delivered to Buyer on completion of
the Assurance will consist of original documents.
(v) So far as Seller is aware, no right, easement,
licence or informal arrangement, public or private, is enjoyed or is in the
course of being acquired by or against the Leased Real Property and none has
been proposed or is necessary for the present use and continued occupation of
the Leased Real Property for the purpose of the business currently carried on at
each Leased Real Property.
Encumbrances.
(vi) Save as specifically stated in Schedule 5.1(g),
the Leased Real Property is free from any mortgage, debenture, charge, lien or
other encumbrance of a financial nature.
(vii) The Leased Real Property is not subject to any
outgoings other than business rates, water rates, effluent charges, insurance
premiums, rent and service charges.
(viii) So far as Seller is aware, the Leased Real
Property is not subject to
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any restrictive covenants, restrictions, stipulations, easements, profits a
prendre, wayleaves, licences, grants, reservations or other similar rights
vested in third parties (other than as disclosed in Schedule 5.1(g)).
(ix) So far as Seller is aware, no Leased Real
Property is subject to any overriding interest as specified in Section 70 Land
Registration Act 1925.
Planning matters and Adverse Orders.
(x) No development has been carried out in material
breach of the "Planning Acts" (as defined in the UK Town and Country Planning
Act 1990).
(xi) The current use of the Leased Real Property is
in all material respects authorised under the Planning Acts.
(xii) There are no outstanding enforcement or other
notices or proceedings or any proposals for compulsory acquisition or for any
closing, demolition or clearance orders in each case issued or made by the local
or other competent authority and relating to the Leased Real Property which have
been served on Seller (or any Affiliate) nor is Seller aware of any circumstance
which is likely to lead to any being made or issued.
Statutory obligations.
(xiii) Seller is complying in all material respects
with all applicable statutory and by-law requirements with respect to the Leased
Real Property.
Condition of the properties.
(xiv) Seller is not in dispute with any neighbouring
owner with respect to boundary walls and fences or with respect to any easement
or right over or means of access to the
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Leased Real Property.
(xv) All buildings and structures comprised in the
Leased Real Property are in such state of repair and condition as enables them
to be used for the purposes of the Business as currently carried on by Seller at
the Leased Real Property.
(xvi) Each of the Leased Real Property has the
benefit of all rights necessary for the continued present use and enjoyment of
the same such rights not being capable of withdrawal by any person.
Compliance with Leases, etc.
(xvii) Seller has paid the rent and has in all
material respects observed and performed the covenants on the part of the tenant
and the conditions contained in the Leased Real Property and the last demands
(or receipts for rent if issued) were unqualified.
(xviii) There are no rent reviews under the Leased
Real Property in progress.
(xix) There is not outstanding and unobserved or
unperformed any obligation necessary to comply with any notice or other written
requirement given by the landlord of the Leased Real Property.
(xx) There is no obligation to reinstate any of the
Leased Real Property by removing or dismantling any material alteration made to
them by Seller or any predecessor-in-title to Seller.
(xxi) Any of the leases of the Leased Real Property
which was granted for more than 21 years and less than 40 years is either
registered at HM Land Registry or not registered because the reversion to it was
not registered at the time of grant.
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Tenancies.
(xxii) The Leased Real Property is not held subject
to and with the benefit of the tenancies (which expression in this clause
includes subtenancies) except as set out in Schedule 5.1(e). Seller is not aware
of any material or persistent breaches of covenant (including the covenants to
pay rent) by the tenants under any such tenancies.
(f) Environmental and Safety Compliance. Except as disclosed
on Schedule 5.1(f):
(i) Neither (A) the operation of the Business by
Seller or agents under the direction and control of Seller, (B) the ownership,
use or operation of the Acquired Assets by Seller or agents under the direction
and control of Seller, nor (C) the manufacture or sale by Seller or agents under
the direction and control of Seller of the processes, results or products of
Seller, has violated or violates any statute, law, common law, rule, regulation,
ordinance or order relating to air, water or noise pollution, employee health
and safety, or the production, storage, labeling, transportation or disposition
of waste or hazardous or toxic substances ("Environmental Laws"), and Seller has
not received notice of any violation of any of the Environmental Laws, which has
not been or is not being corrected, provided that Seller makes no representation
hereunder with respect to Buyer's operation of the Business or the Acquired
Assets after the Closing.
(ii) Seller has timely obtained all licenses and
permits and timely filed all reports required to be filed under the
Environmental Laws.
(iii) Seller has not, and no other person has, stored
any chemical substances or petroleum (including crude oil or any fraction
thereof), all of which are collectively referred to as "Chemical Substances",
on, beneath or about any of the properties to be transferred to Buyer in
connection with Seller's operation of the Business, except for inventories of
such Chemical Substances to be used, and wastes generated therefrom, in the
ordinary course of the business of Seller (which inventories and wastes, if any,
were stored and disposed of in compliance with the Environmental Laws, including
storage so that there was no release of any Chemical Substance to the
environment which violated, or created any liability or obligation under, the
Environmental Laws).
(iv) Seller has not, and no other person has, buried,
dumped or otherwise disposed of, or permitted the intentional or accidental
release of, any Chemical Substances, beneath or about any property to be
transferred to Buyer in connection with Seller's operation of the Business.
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(v) Seller has not, and no other Person has
installed, used, owned or operated any underground storage tank on or beneath
any property to be transferred to Buyer in connection with Seller's operation of
the Business.
(vi) There are no polychorinated biphenyls,
asbestos-containing materials or radioactive substances on, beneath or about any
property to be transferred to Buyer in connection with Seller's operation of the
Business.
(vii) To Seller's knowledge, no environmental
approvals, clearances or consents are required under applicable law from any
entity or authority in order for the parties to consummate the transactions
contemplated by this Agreement other than such as correspond to Licenses and
Permits or for Buyer to transact the Business after the Closing Date.
(viii) Seller has disclosed, prior to the date of
this Agreement, its waste practices, its use of Chemical Substances and all
potentially material environmental matters and has disclosed all material
reports, assessments, remedial action plans or other similar documents relating
to the environmental condition of Seller's properties to be transferred to Buyer
and operations.
(g) Leases. Schedule 1.1(k) contains a description of all
assets leased by Seller in the conduct of the Business and all Leases thereto.
True, complete and accurate copies of all Leases, together with all amendments
thereto, have previously been provided to Buyer. With respect to any Lease to
which Seller is a party, Seller warrants that: (a) each such Lease has been duly
authorized and executed by Seller, has not been modified, altered, terminated or
revoked and is in full force and effect; and (b) Seller, as the present tenant
under the Leases, is not in default under or in breach of any of the terms of
such Leases. Seller knows of no existing fact or condition which could give rise
to any such breach or default, or any claim against Seller, under the Leases. To
the best of Seller's knowledge, the present lessors under the Leases are not in
default thereunder, or in breach thereof, and Seller knows of no existing fact
or condition which could give rise to any such breach or default, or any claim
against such lessors under such leases.
(h) Contracts. Each of the Listed Contracts as set forth on
Schedule 1.1(h) is in full force and effect and is a legal, binding and
enforceable obligation of Seller and, to Seller's knowledge, of the parties
thereto or against the parties thereto, subject to the Debtor Relief Laws.
Neither Seller nor, to Seller's knowledge, any other party to any Contract is
currently in breach or has improperly terminated any such Contract, or is in
default under any Contract by which it is bound,
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and there exists no condition or event which, after notice or lapse of time or
both, would constitute any such breach, termination or default. Except where
third party consent to disclose has not been obtained, Seller has delivered to
Buyer true, correct and complete copies of such Contracts, an accurate and
complete description of each such oral Contract, if any, and all modifications
and amendments thereto.
(i) Financial Statements of Seller.
(i) In respect to the Business, Seller has delivered
to Buyer (A) its unaudited balance sheets and profit and loss accounts for the
fiscal years ended December 31, 1995, 1996 and 1997, (collectively, the
"Financial Statements"), copies of which are attached hereto as Schedule
5.1(i)). The Financial Statements have been prepared in accordance with U.S.
generally accepted accounting principles consistently followed throughout the
periods covered by such statements, and, at the statement dates and for the
periods of the income statements, present fairly, in all material respects, the
assets, liabilities, financial position and results of operations of the
Business.
(ii) The Net Current Asset Disclosure has been
prepared in accordance with US generally accepted accounting principles.
(j) Liabilities. Seller has no liabilities or obligations (in
excess of $50,000 individually or $100,000 in the aggregate) of any nature
whatsoever, whether absolute, accrued, contingent or otherwise, except for those
(i) reflected or reserved on the Net Current Asset Disclosure or Closing Date
Net Current Asset Disclosure, (ii) incurred or accrued since February 6, 1998 in
transactions involving the purchase or sale of goods and services in the
ordinary course of business, and consistent with the representations,
warranties, covenants, obligations and agreements contained herein, or (iii)
under the Contracts (exclusive of any liabilities or obligations which arise
from defaults thereunder or breaches thereof prior to the Closing). There exists
no event or circumstance which, after notice or lapse of time or both, might
create any other obligations or liabilities of Seller with respect to the
Business.
(k) Accounts Receivable. All Accounts Receivable reflected on
the Net Current Asset Disclosure have arisen in the ordinary course of the
Business and are collectible in accordance with their terms net of any
respective reserves shown on Seller's books and records as of the date hereof.
All Accounts Receivable represent valid obligations arising from sales actually
made or services actually performed in the ordinary course of business. There is
no contest, claim or right of
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set-off, other than rebates and returns or exchanges in kind arisen in the
ordinary course of business, under any contract with any obligor of an Account
Receivable relating to the contract or validity of such Account Receivable.
(l) Inventories. All of Seller's Inventory reflected on the
Net Current Asset Disclosure or Closing Date Net Current Asset Disclosure are
usable or salable in the ordinary and normal course of business, of which the
value is carried at the lower of cost or market and reflects write-offs,
write-downs or reserves for damaged, excess or obsolete items in accordance with
the historical inventory policy and practices of Seller.
(m) Pending Litigation. Except as set forth on Schedule
5.1(m), there is no litigation, claim, action, suit, proceeding, governmental
investigation or inquiry pending or, to Seller's knowledge, threatened, against
or in any manner involving Seller, relating to the Business, the Acquired
Assets, the Assumed Liabilities or the transactions contemplated hereby. Seller
is not subject to any judgment, decree, injunction, award or order outstanding
relating to the Business or the Acquired Assets or the transactions contemplated
hereby.
(n) Customers and Suppliers Except for the employees of
Seller, no parties or individuals other than those listed on Schedule 5.1(n)
have had access to its customer lists, and Seller has maintained reasonably
adequate measures to maintain the confidentiality of its customer lists. Since
September 30, 1997, no substantial supplier has: (i) stopped, or indicated an
intention to stop, trading with or supplying Seller, (ii) reduced, or indicated
an intention to reduce, substantially its trading with or provision of goods or
services to Seller, or (iii) changed, or indicated an intention to change,
materially the terms and conditions on which it is prepared to trade with or
supply Seller. No substantial supplier has informed Seller that as a result of
the transactions contemplated by this Agreement that it intends to (i) not trade
with or supply Buyer, (ii) reduce substantially its trading with or provision of
goods or services to Buyer, or (iii) change the terms and conditions on which it
is prepared to trade with or supply Buyer, as compared to Seller. Seller has no
knowledge of any facts, conditions or events which might give rise to a claim by
Seller against any of its suppliers or any claim by a supplier against Seller.
Seller has not entered into any agreement or commitment with suppliers, except
in the ordinary course, consistent with past practice. Except as set forth on
Schedule 5.1(n), none of Seller's suppliers of materials to the Business is the
sole source of such supply.
(o) Regulatory Compliance. The Business has been conducted,
and the Acquired Assets have been owned, used, operated and maintained, in full
compliance with all applicable laws, regulations and other requirements of
Governmental Authorities. Seller is not now in violation of any applicable laws,
regulations or orders of any Governmental Authority, and no material
expenditures
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are or will be required in order for the conduct of the Business or the
ownership, use, operation or maintenance of the Acquired Assets to comply with
any applicable laws, regulations or orders of any Governmental Authorities.
(p) Brokers, Finders and Agents. Except for BT Alex. Brown
Incorporated, whose fees and expenses shall be the sole responsibility of Seller
or its Affiliates, Seller is not directly or indirectly obligated to anyone
acting as a broker, finder or in any other similar capacity in connection with
this Agreement or the transactions contemplated hereby.
(q) Intellectual Property. Except as set forth on Schedule
1.1(g), Seller owns or has the exclusive right to use, free and clear of any
payment, restriction or encumbrance, all Intellectual Property owned by Seller
or used in the conduct of the Business as presently conducted. There is no claim
or demand of any person pertaining to, or any proceedings which are pending or,
to the best of Seller's knowledge, threatened, which relate to any Intellectual
Property owned by Seller or used in the conduct of the Business as presently
conducted. No Intellectual Property owned by Seller or used in the conduct of
the Business as presently conducted is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any Governmental Authority or
infringes, violates or constitutes a misappropriation of the rights of others,
or is being infringed, violated or misappropriated by others or used by others
(whether or not such use constitutes infringement). The Business does not
involve employment of any person in a manner which violates any non-competition
or non-disclosure agreement which such person entered into in connection with
any former employment. All statements of fact contained in any application for
patents in any country, for trademark registration in any country or copyright
registration in any country, that were filed by or on behalf of Seller are true,
accurate, and complete in every material respect, and are in material compliance
with applicable patent laws, and all pending patent applications, issued
patents, pending trademark registration applications and copyright registration
applications, and issued trademark and copyright registrations have been duly
and properly filed.
(r) Licenses and Permits. Set forth on Schedule 1.1(i) is a
true and complete list of all Licenses and Permits. The Licenses and Permits
include all licenses, permits and other authorizations from all Governmental
Authorities (i) currently used by Seller in connection with the Business, or
(ii) required to permit Seller to operate the Business in the manner in which it
presently is conducted.
(s) Labor Matters. Except as set forth in Schedule 5.1(s) with
respect to employees of and service providers to Seller:
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(i) Seller is and has been in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, and occupational safety and health
requirements; and no sex, race or other discrimination claim has been made
against Seller;
(ii) there is not now, nor within the past three
years has there been any labor strike, lock-out, slowdown or work stoppage
actually pending or threatened against or directly affecting the Business; there
are no agreements or arrangements (whether or not legally binding) between
Seller and any trade union or other body representing employees and, to Seller's
knowledge, no trade union or other labor representation organization is seeking
to be formally recognized by Seller in relation to all or part of its workforce
nor has there been any such activity within the past three (3) years; and no
grievance or any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claims therefor exist or have been
threatened;
(iii) the employees of Seller are not represented by
any trade union and no collective bargaining agreement is binding and in force
against Seller or currently being negotiated by Seller;
(iv) All individuals who are or were performing
services and are or were classified as "independent contractors" for tax
purposes qualify or qualified for such classification, and Seller has fully and
accurately reported their compensation to the Inland Revenue when required to do
so;
(v) As at the Closing Date, subject to compliance by
Buyer with its obligations to provide information thereunder (to the extent such
compliance is required), Seller has complied with Regulation 10 of the UK
Transfer of Undertakings (Protection of Employment) Regulations 1981 (as
amended) (the "Transfer of Undertakings Regulations");
(vi) No employee of Seller (other than in accordance
with Regulation 5(4A) of the Transfer of Undertakings Regulations) will be
entitled to give notice terminating his or her employment as a result of the
provisions or consummation of this Agreement;
(vii) Within 15 business days from the date of this
Agreement, and in any event before Closing, full particulars of the terms and
conditions of employment (including current
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levels of salary and benefits) of all the persons currently employed by Seller
with respect to the Business will be provided to Buyer; and
(vii) Since December 31, 1997, no change has been
made in the rate of remuneration, emoluments, pension benefits or other terms of
employment of any of the persons employed by Seller with respect to the
Business, and no negotiations for any such change are current.
(t) Employee Plans.
(i) As used in this Section 5.1(t), the following
terms have the meanings set forth below.
(I) "Benefit Arrangement" means any benefit
arrangement, obligation, custom, or practice, whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, agents, or
independent contractors other than the Pension Plan, including, without
limitation, employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, company car arrangements, sick
leave, vacation pay, severance pay policies, redundancy benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, share option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, and any plans providing benefits or
payments in the event of a change of control, change in ownership, or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or their dependents.
(II) "Pension Plan" means the Nashua Cash
Balance Plan.
(III) "Seller Benefit Arrangement" means any
Benefit Arrangement administered, sponsored or maintained by Seller or any
Affiliate of Seller or with respect to which Seller or any Affiliate of Seller
has or may have any liability (whether actual, contingent, with respect to any
of its assets or otherwise), in each case with respect to any present or former
directors, or employees of Seller.
(ii) Schedule 5.1(t) contains a complete and accurate
list of all Seller
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Benefit Arrangements.
(iii) With respect to Seller Benefit Arrangements,
true, correct and complete copies all of the following documents with respect to
all Seller Benefit Arrangements have been delivered to Buyer: (A) all plan
documents, including but not limited to trust agreements, insurance policies,
service agreements and formal and informal amendments thereto, (B) summary plan
descriptions and summaries of material modifications, (C) the written
descriptions of all non-written agreements relating to any such plan or
arrangement, and (D) employee manuals or handbooks containing personnel or
employee relations policies;
(iv) With respect to Seller Benefit Arrangements,
Seller has not declared or paid any bonus or incentive compensation in
contemplation of the transactions contemplated by this Agreement in respect to
which Buyer shall be obligated.]
(u) [Intentionally Omitted]
(v) Required Consents. No consent, approval, order or
authorization of or from, or registration, notification, declaration or filing
with any individual, entity or Governmental Authority (collectively, "Required
Consents") is required in connection with the execution, delivery or performance
of this Agreement by Seller or (except for consent of any landlord of the Leased
Real Property) the consummation by Seller of the transactions contemplated
herein.
(w) Absence of Certain Changes. Since December 31, 1997,
except as set forth on Schedule 5.1(w) and Schedule 4.4(a)(v), there has not
been:
(i) any Material Adverse Change;
(ii) any acquisition or disposition of any asset or
property, or any agreement to do the same other than in the ordinary and regular
course of business;
(iii) created, incurred or permitted to exist any
Lien on any of the Acquired Assets, except for Permitted Encumbrances;
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(iv) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting, either in any case or
in the aggregate, the financial condition, results of operations or properties
of the Business;
(v) any increase in salary, bonuses or other
compensation of any officers, employees, agents or independent contracts
employed by Seller, except in the ordinary course of business, consistent with
past practice, or any increase in executive compensation nor has Seller entered
into any employment, severance or other agreements, nor amended any Seller Plan
or Seller Benefit Arrangement in a manner that increases liabilities;
(vi) any individual capital expenditures in excess of
$50,000 related to the Business;
(vii) any non-cash dividend or non-cash distribution
out of the Business;
(viii) any change in accounting methods or practices,
credit practices or collection policies used by Seller that would affect the
Financial Statements; or
(ix) any other event or condition experienced by
Seller of any character which has materially adversely affected or could so
materially adversely affect the assets, liabilities, financial position, results
or operations, net worth or prospects of Seller.
(x) Books and Records. The Books and Records are complete and
correct in all material respects. Seller has made available to Buyer for
examination the original or true and correct copies of all the Books and
Records.
(y) Affiliate Transactions. No director, officer or employee
of any Affiliate of Seller, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with Seller.
(z) Accuracy of Representations. None of the representations,
warranties or statements of Seller contained in this Agreement, in the Schedules
and Exhibits hereto or in any other
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agreement or instrument executed or delivered by or on behalf of Seller at the
Closing in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the representations,
warranties or statements made, in the context in which made, not false or
misleading.
5.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that the statements contained in this Section 5.2 are on the
date hereof true and correct, and on the Closing Date will be repeated true and
correct as so made again:
(a) Organization and Standing; Power and Authority.
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the District of Columbia, and
has full corporate power and authority to make and perform this Agreement, and
to perform the transactions contemplated by this Agreement.
(ii) This Agreement has been, and all other
agreements and instruments to be executed and delivered by Buyer in connection
herewith have been, or as of the Closing Date will have been, duly executed and
delivered by Buyer. This Agreement constitutes, and the other agreements and
instruments all executed or to be executed by Buyer in connection with the
transactions contemplated hereby constitute, or when executed and delivered by
Buyer will constitute, the valid and binding obligations of Buyer, enforceable
in accordance with their respective terms, except to the extent that
enforceability may be limited by Debtor Relief Laws and public policy.
(iii) The execution, delivery and performance of this
Agreement and all other agreements and instruments to be executed and delivered
by Buyer have been approved by all necessary corporate action by Buyer.
(b) Articles of Incorporation and By-Laws. The copies of the
Articles of Incorporation and By-Laws of Buyer, certified by its Secretary and
delivered by Buyer to Seller, are true, correct and complete as of the date of
this Agreement and have not been amended or modified in any respect.
(c) Conflicts; Defaults.
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(i) Neither the execution and delivery of this
Agreement and the other agreements and instruments executed in connection
herewith by Buyer, nor the performance by Buyer of the transactions contemplated
hereby or thereby, will (A) violate, conflict with, or constitute a default
under, any of the terms of Buyer's Articles of Incorporation or By Laws, or any
provisions of, or result in the acceleration of any obligation under, any
contract, sales commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement, instrument, order, judgment or
decree to which Buyer is party or subject, (B) result in the creation or
imposition of any Liens in favor of any third person or entity upon any of the
assets of Buyer, (C) violate any law, statute, judgment, decree, order, rule or
regulation of any Governmental Authority, or (D) constitute an event which,
after notice or lapse of time or both, would result in such violation, conflict,
default, acceleration, or creation or imposition of Liens.
(ii) Buyer is not, as of the date of this Agreement,
in violation of or in default under its Articles of Incorporation or By-Laws, or
any provision of any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease, agreement, instrument,
order, judgment or decree relating to its business, or by which Buyer is bound
or in the payment of any of Buyer's monetary obligations or debts.
(d) Brokers, Finders and Agents. Buyer is not directly or
indirectly obligated to anyone as a broker, finder or in any other similar
capacity in connection with this Agreement or the transactions contemplated
hereby.
(e) Required Consents. To the knowledge of Buyer, all Required
Consents which must be obtained or satisfied by Buyer for the consummation of
the transactions contemplated by this Agreement have been obtained and
satisfied.
(f) Pending Litigation. Except as set forth in Schedule
5.1(m), no action, suit, or proceeding is pending, or, to Buyer's knowledge,
threatened against it before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge which would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation, or (iii) affect
adversely the right of Buyer to own the Acquired Assets and to operate the
Business and no written notice of the initiation of any such action, suit or
proceeding has been received.
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(g) Accuracy of Representations. None of the representations,
warranties or statements of Buyer contained in this Agreement or in any other
agreement or instrument executed or delivered by or on behalf of Buyer at the
Closing in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the representations,
warranties or statements made, in the context in which made, not false or
misleading.
ARTICLE VI
COVENANTS OF SELLER
6.1 Notice of Claims. Seller covenants and agrees with Buyer that for
the first twelve (12) months after the Closing Date, it shall give Buyer ten
(10) days' prior written notice of its intent to assert any claim against any
former supplier of Seller which, at the time of the assertion, is a supplier of
Buyer.
6.2 Maintenance of, and Access to, Records. After the Closing Date,
Seller shall provide Buyer with reasonable access (with an opportunity to make
copies at Buyer's expense), during normal business hours, and upon reasonable
advance notice, to all books and records relating to the Business which are
retained by it in accordance with this Agreement. Seller shall preserve and
maintain the books and records relating to the Business retained by Seller for
at least seven (7) years after the Closing Date or longer if required by any
government agency.
6.3 Non-Solicitation. During the period commencing on the Closing Date
and through and until the date five (5) years after the Closing Date, Seller and
its Affiliates shall not, for any reason whatsoever, directly or indirectly,
call upon or solicit any Covered Employee for the purpose or with the intent of
enticing such employee away from or out of the employ of Buyer. As used herein,
"Covered Employee" means an employee of Seller on the Closing Date who is
transferred to Buyer on or promptly after the Closing Date.
6.4 Limitations on Assignability. To the extent that any of the
contract rights of Seller to be sold, transferred or assigned hereunder (other
than in respect of Leased Real Property) are not assignable without the consent
of a third party, neither this Agreement, nor any of the instruments or
documents executed and delivered in connection herewith or contemplated hereby,
shall constitute an assignment or assumption thereof, or attempted assignment or
attempted assumption thereof, if
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such assignment or attempted assignment, or assumption or attempted assumption,
would constitute a breach thereof. If Seller has not obtained a consent or
approval necessary for the assignment of any contract right to be assigned
hereunder other than in respect of Leased Real Property, then Seller shall use
commercially reasonable efforts where required by Buyer to obtain such consents
and approvals after the Closing, or, at Buyer's request, shall cooperate in any
reasonable and mutually acceptable arrangement to provide to Buyer the benefits
thereof subject to the performance by Buyer of Seller's obligations arising or
to be performed after the Closing thereunder. Nothing contained in this Section
6.4 shall require Buyer to enter into, or to accept as a substitute for
performance by Seller hereunder, any arrangement that would impose any
additional cost, expense or liability on Buyer, or that would deprive Buyer of
any benefits contemplated by this Agreement. In respect to any Contract that is
not a Listed Contract nor is required to be a Listed Contract under Schedule
1.1(h), and provided Seller provides a list of such Contracts prior to Closing,
Buyer shall have the option to assume or reject any such Contracts. In the event
Buyer elects to assume such a Contract, Buyer shall assume its liabilities and
obligations pursuant to Section 2.1(c). In the event Buyer elects to reject such
a Contract, Seller shall retain all rights, obligations and liabilities
associated therewith. In respect to any Contract that is not a Listed Contract
nor is required to be a Listed Contract under Schedule 1.1(h) and of which
Seller does not provide notice prior to Closing, Buyer shall assume any such
Contracts, provided that if Buyer incurs any net loss by reason of any such
assumption, Seller shall reimburse Buyer for Buyer's losses with respect to all
such Contracts in excess of $25,000 in the aggregate.
6.5 Pre-Closing Operations of Seller. Except as contemplated by this
Agreement or as otherwise approved in writing by Buyer, from the date hereof
until the Closing Date, Seller will conduct the Business in the ordinary course
consistent with past practice (including, but not limited to, payment of all
accounts payable as they come due consistent with past practice). Buyer shall
have no access to Seller's employees or facilities except pursuant to Section
6.6. Subject to the foregoing exceptions, from the date hereof until the Closing
Date:
(a) Mergers and Sales. Seller will not merge, consolidate, or
enter into a share exchange with any other corporation or other business entity,
acquire any material stock, shares or any material amount of assets of any other
corporation or business entity, sell, lease, license, mortgage, pledge, or
otherwise dispose of any material assets;
(b) New Commitments; Non-Disclosure. Seller will not make any
commitment or enter into any contract or agreement that is not in the ordinary
course of business consistent with past practice and neither Seller, nor any
officer, employee, agent or representative of Seller shall sell or disclose
Seller's customer list to any third party except in the ordinary course of
business consistent with past practice and to third parties as disclosed in
Schedule 5.1(n); and
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(c) Compensation Increase. Seller will not increase in any
manner the compensation or fringe benefits of any of its directors or managers,
pay any pension or retirement allowance to any directors or officers, or become
a party to, amend, or commit itself to any pension, retirement, profit-sharing,
welfare benefit plan, or employment agreement with or for the benefit of any
director or manager or amend any Seller Plan or Seller Benefit Arrangement,
other than general increases in the compensation of, and the payment of bonuses
to, directors or managers in the ordinary course of business consistent with
past practice.
6.6 Access to Records and Information. From the date hereof until the
Closing Date, Seller will, upon reasonable advance notice, give Buyer's
authorized representatives reasonable access during regular business hours to
the offices, properties, books, and records of Seller, and will furnish to its
authorized representatives such financial and operating data and other
information as such persons may reasonably request, for the purpose of
evaluating changes in the financial condition, results of operations, or
business of Seller after the date of this Agreement except any information in
respect to prices or other competitive practices of Seller and will instruct
Seller's employees having custody of such data, counsel, and financial advisors
to cooperate with Buyer in its evaluation. Buyer shall communicate with respect
to obtaining such data only with such employees of Seller as Seller has
designated to Buyer in advance.
6.7 No Solicitation of Offers. Except as permitted in the Master
Agreement, Seller shall use its best efforts to ensure that it does not take,
directly or indirectly, any of the following actions with any party other than
Buyer or its designees: (i) solicit, initiate, or participate in any
negotiations, inquiries or discussions with respect to any Acquisition Proposal
(as defined in the Master Agreement); (ii) disclose, in connection with an
Acquisition Proposal, any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, any effort or attempt by any other
person to do or seek any of the foregoing; (iii) enter into or execute any
agreement relating to an Acquisition Proposal; or (iv) make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Proposal other than with respect to the transactions contemplated by this
Agreement.
6.8 Notices of Certain Events. In addition to any notices required
under the Master Agreement, Seller shall promptly notify Buyer of the following:
(a) Notice of Third Party that Consent is Required. Any notice
or other communication from any person alleging that the consent of any third
party is or may be required in connection with the transactions contemplated by
this Agreement;
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(b) Notice from Governmental Authority. Any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement;
(c) Legal Proceedings. Any actions, suits, claims,
investigations, or proceedings commenced or threatened against, relating to, or
involving or otherwise affecting Seller that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant hereto or
that relate to the consummation of the transactions contemplated by this
Agreement; and
(d) Agreement Default. Any notice of, or other communication
relating to, a default, or an event with notice or lapse of time or both would
become a default, under any material agreement that is received by Seller
subsequent to the date of this Agreement.
6.9 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Seller will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or advisable under applicable laws or regulations to
consummate the transactions contemplated by this Agreement, and will use
commercially reasonable efforts to obtain such approvals and take such actions
as are necessary, including without limitation using its best efforts to obtain
all consents of any Person, whether private or governmental, so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby.
6.10 Risk of Loss. Seller will bear the risk of loss or damage to the
Acquired Assets resulting from fire, theft, or other casualty at all times prior
to and on the Closing. If any such loss or damage is so substantial as to
prevent normal operation of any material portion of Seller's Business or the
replacement or restoration of the lost or damaged material Asset within thirty
(30) days after the occurrence of the event resulting in such loss or damage,
Seller will immediately notify Buyer and Buyer, at any time within ten (10) days
after receipt of such notice, may elect by written notice to Seller either (a)
to waive such defect and proceed toward consummation of the acquisition of the
Acquired Assets in accordance with the terms hereof, or (b) terminate this
Agreement. If Buyer elects to consummate the transactions contemplated by this
Agreement, there will be no separate adjustment in the UK Purchase Price related
to such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer and Seller will pay to Buyer (or Buyer may withhold from the UK Purchase
Price) an amount equal to any deductible amount charged to Seller against the
proceeds due for such loss.
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6.11 Transfer of Undertakings Regulations. Seller will comply with the
provisions of Regulation 10 of the Transfer of Undertakings Regulations (as
amended). Seller shall indemnify Buyer against any order to pay compensation
made pursuant to Regulation 11 of such Regulations provided that the order is
not made as a result of any act or omission of Buyer.
ARTICLE VII
COVENANTS OF BUYER
7.1 Maintenance of, and Access to, Records. Buyer shall provide Seller
with reasonable access (with an opportunity to make copies at Seller's expense)
during normal business hours, and upon reasonable advance notice, to all books
and records turned over to Buyer in accordance with this Agreement. Buyer shall
preserve and maintain such books and records for at least seven (7) years after
the Closing Date or longer if required by guidelines of tax authorities.
7.2 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Buyer will use its commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement, and will use
commercially reasonable efforts to obtain such approvals and take such actions
as are necessary, including without limitation using its best efforts to obtain
all consents of any Person, whether private or governmental, so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby.
7.3 Pension Plan.
(a) Buyer undertakes to Seller that it will procure that those
persons employed in the Business who immediately prior to Closing were members
of the Nashua Cash Balance Plan (the "Pensionable Employees") will be provided
with pension and life assurance benefits.
(b) Buyer hereby agrees with Seller to indemnify Seller
against all liabilities and costs and expenses reasonably incurred by Seller
arising or which may arise directly or indirectly out of any failure by Buyer
(i) to provide or procure to be provided life assurance benefits for the
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Pensionable Employees and their dependants which are equivalent in value to
those applicable to the Pensionable Employees immediately prior to Closing; or
(ii) to establish or procure to be established for the Pensionable Employees
pension arrangements to which employer contributions are made in respect of the
Pensionable Employees which are equal to or higher than those employer
contributions made to the Nashua Cash Balance Plan in respect of the Pensionable
Employees immediately prior to Closing.
ARTICLE VIII
REAL PROPERTY
The following provisions shall apply in relation to the sale of the
Leased Real Property:
8.1 General. The National Conditions of Sale (Twentieth Edition) (the
"National Conditions") as set out on pages 2 and 3 of the printed form of
contract published by the Solicitors Law Stationery Society PLC shall apply to
the sale and purchase of the Leased Real Property and are incorporated in this
Agreement so far as they are applicable to a sale by private treaty and are not
inconsistent with any condition or provision contained in this Agreement or with
the following paragraphs of this Article save that National Conditions 1(1) to
(5) (inclusive), 2, 4, 5, 6(1) to (3) (inclusive), 7, 8, 9(1), 9(3) to (6)
(inclusive), 11(5), 15(2), 15(3), 15(4), 21 and 22(3) shall not so apply.
8.2 Conditions of Sale.
(a) Vacant possession of the Leased Real Property shall be
given on completion of the Assurance subject to the sub-lease referred to in
Schedule 5.1(e) and rights of occupation of Buyer pursuant to the provisions of
this Article VIII.
(b) Seller shall sell the Leased Real Property with full title
guarantee (within the meaning of the U.K. Law of Property (Miscellaneous
Provisions) Act 1994) save as qualified in the transfer or assignment to Buyer
of the Leased Real Property pursuant to this Agreement (the "Assurance").
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(c) Each Leased Real Property is sold subject to and with the
benefit of all and any of the following existing on or prior to completion of
the relevant Assurances:
(i) all existing rights, privileges, easements,
liabilities (and in particular but without prejudice to the generality of the
foregoing, drainage and other service rights and easements) and quasi or reputed
easements affecting any Leased Real Property.
(ii) any local land charge or any matter capable of
registration as a local land charge.
(iii) any notice, order, demand, proposal or
requirement made by any statutory undertaking or any local or other public
authority (whether before or after the date of this Agreement).
(iv) any actual or proposed charge, notice, order,
restriction, agreement, condition, or other matter arising under any applicable
UK Town and Country planning legislation.
(v) any matters mentioned or referred to or in the
documents mentioned or referred to in the Property Proprietorship and Charges
Register of the title number(s) set out in relation to each Leased Real Property
in Schedule 5.1(e) or in any Lease or in any document supplied to Buyer or its
solicitors by Seller or its solicitors prior to the date hereof.
(vi) any matter now recorded in registers open to
public inspection and evident or ascertainable from the documents of title.
(vii) any overriding interest (as defined in Section
70(1) of the UK Land Registration Act 1925).
(d) The Assurances of the Leased Real Property to Buyer shall
be:
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(i) in the form set out in Schedule 8.2(d).
(ii) Prepared in original and counterpart. The
original will be executed by Seller and the counterpart will be executed by
Buyer which will arrange for the counterpart Assurance to be stamped and denoted
and returned with 21 days after completion of the relevant Assurance.
8.3. Assignment of Leased Real Property
In this Section 8.3, "Lease" means the lease of the respective Leased
Real Property as described in Schedule 5.1(e).
(a) Subject to the provisions of Section 8.4, the sale of the
Leased Real Property is for the unexpired residue of the term of the Lease and
is at the rent reserved by and subject to the covenants on the part of the
tenant and the conditions contained in the Lease.
(b) The assignment of the Lease shall be completed on Closing
(subject to Sections 8.3(f) and (g) and 8.4).
(c) Seller shall promptly and (subject as hereinafter
provided) at its own expense use all reasonable endeavours to obtain the grant
of any reversioners' licences necessary to enable the Lease to be assigned and
shall in so far as is required by any Lease enter into an Authorised Guarantee
Agreement with the relevant reversioner.
(d) Buyer shall promptly and at its own expense supply such
information and references as may reasonably be required by the relevant
reversioners and where reasonably required by the relevant reversioner (having
regard to the provisions of the Leases and section 19(1) of the Landlord and
Tenant Act 1927) Buyer will covenant direct with the reversioners to pay the
rents reserved by and observe and perform the covenants contained in the Leases
and will provide or cause to be provided all such guarantees and/or other
financial security as may reasonably be required by the reversioner.
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(e) (i) If the reversioner reasonably requires as a
precondition of or condition to the grant of such licence the carrying out of
any works to the Leased Real Property or the payment of any sums properly due
under the lease, Seller shall, as soon as reasonably practicable (and subject as
hereinafter provided), carry out or agree to have carried out or pay such sums
as are so reasonably required in order to facilitate the grant of the licence.
(ii) Buyer shall be liable in respect of any such
works required or sums due under sub-clause (i) above which arise on or after
the Closing Date (other than any such liabilities or obligations which arise
from defaults under the relevant lease or breaches thereof by Seller prior to
the Closing Date) and Buyer shall reimburse Seller for all costs properly
incurred in carrying out such works and in respect of all such sums paid.
(f) Where the reversioner's licence is required to enable the
Lease to be assigned but such licence is not obtained on or before Closing the
provisions of this paragraph shall apply:
(i) Buyer may enter the Leased Real Property and
occupy it as licensee of Seller and Seller shall hold the Leased Real Property
upon trust for Buyer.
(ii) Buyer will pay for and reimburse Seller in
respect of all rates, water rates, insurance premiums, telephone, electricity
and gas charges and other outgoings of an annual or recurring nature
(apportioned on a day to day basis).
(iii) Buyer will pay to Seller amounts equal to the
rents reserved by the Lease (including any VAT chargeable thereon) as and when
the rents fall due pursuant to the Lease and any other sum or sums payable
thereunder and shall act or conduct itself in such a manner that the covenants,
obligations, conditions and stipulations (other than for the payment of rents
and any other sums which shall be paid to Seller as aforesaid) on the part of
the tenant contained in the Lease are fully observed and performed and shall
indemnify Seller against any breach, non-observance or non-performance of the
covenants, obligations, conditions and stipulations in the relevant Lease
(including for the avoidance of doubt as a result of its occupation of the
Leased Real Property pursuant to this Section 8.3(f)) and all costs, claims,
damages, liabilities, expenses or losses arising out of or in connection
therewith and shall comply with any final court order issued following any
proceedings by the reversioner.
(iv) Buyer shall bear all third party, public
liability and employer's liability
39
<PAGE> 48
risks attached to the occupation and use of the Leased Real Property and shall
indemnify Seller against them.
(g) (i) Where a relevant reversioner's licence is required to
enable the Lease to be assigned but such licence is not obtained by the date
three months after the Closing Date or if at any time prior to that date the
reversioner gives to Seller notice that the reversioner either refuses to grant
the licence or proposes placing any pre-condition on its grant or any condition
in it which Seller or Buyer, on reasonable grounds (which shall be stated in
detail and in writing to the other party/ies as soon as practicable), finds
unacceptable, then Seller may or Buyer may require Seller to, as soon as
practicable after such notice from the reversioner, submit to a Queen's Counsel
experienced in landlord and tenant matters as Seller shall reasonably select
("Counsel") instructions (in the joint names of Seller and Buyer, and otherwise
in such form, setting out such details and requesting such advice as shall first
be approved in writing by Buyer, such approval not to be unreasonably withheld
or delayed) to advise in conference as to the reasonableness of any conditions
imposed by the reversioner and/or the prospects of Seller succeeding in an
application to the Court for a declaration that the reversioner is unreasonably
withholding the licence (the "Application").
(ii) Seller shall procure:
(1) that such conference takes place as soon as
practicable after the submission of the instructions thereof; and
(2) that Buyer and its representatives are permitted
to attend at and participate in the conference; and
(3) that Buyer is supplied with a copy of Counsel's
written advice within two Working Days after it is issued.
(iii) If Counsel advises in such conference that there is
a reasonable prospect of success in the Application, Seller shall (at the joint
cost of Seller and Buyer) make and pursue such Application with all due speed
and diligence, and shall conduct Seller's part of the Application in a good and
efficient manner, employing Counsel and such other professional advisers as
shall be appropriate in the circumstances and the costs of the reference to
Counsel shall be borne equally by the parties.
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<PAGE> 49
(iv) If Counsel advises that any precondition as to grant of
the licence or any condition in it proposed by the reversioner is reasonable
then:
(1) (in the case of any such condition as relates to
breach of any of the tenant's obligations in the Lease arising prior to the date
of Closing and/or any obligation imposed by the Lease on any intending assignor)
Seller; and
(2) (in the case of any such condition as relates to
the status of Buyer or to breach of any of the tenant's obligations in the Lease
arising on or after the Closing Date (other than any such liabilities or
obligations which arise from defaults under the relevant lease or breaches
thereof by Seller prior to the Closing Date) and/or any obligation imposed by
the Lease on any prospective assignee) Buyer,
shall forthwith comply or agree to comply with such
condition in so far as is required in order to procure the grant of the relevant
licence and the party who is to comply with the condition in question shall bear
all costs incurred in the reference to Counsel.
(v) For the purposes of this Agreement, the licence to assign
shall be deemed to be granted on the earlier of:
(1) the grant thereof by the reversioner; and
(2) if the Court issues a declaration that the
reversioner is unreasonably withholding the licence, the date of the
declaration,
and the assignment of the Lease shall be completed
within ten Working Days from the deemed date of the grant.
(vi) Seller shall keep Buyer fully informed in writing from
time to time of the progress of any application made by Seller under this
Section and, in particular, within three
41
<PAGE> 50
Working Days after receipt by Seller or Seller's Solicitors of:
(1) any order made by the Court in connection with
the Application; or
(2) the licence to assign
shall procure that an original or certified copy of
it is sent to Buyer's Solicitors.
(h) Buyer shall indemnify Seller in respect of any of the
costs properly incurred by Seller (or the appropriate proportion thereof) where
this Section 8.3 provides for such costs to be borne by Buyer.
8.4 (a) If Counsel has advised that the court is likely to reject
an application for a declaration that the reversioner's consent is being
unreasonably withheld or such application to the Court is rejected then Seller
shall use its reasonable endeavours on the same basis as aforesaid to obtain in
relation the relevant Leased Real Property a licence for the grant of a new
underlease to Buyer and the provisions of Section 8.3(c) to (f) and (h) shall
apply as if reference to assignment were to the grant of a new underlease and if
the reversioners consent is obtained the transfer of the property from Seller to
Buyer shall be effected by means of the grant of the new underlease.
(b) The new underlease shall mean an underlease of the
relevant Leased Real Property for a term commencing on the date of grant,
expiring three days before the expiry of the relevant Lease, at the same rents
as are from time to time payable under the Lease incorporating (fully or by
reference to the Lease) the covenants on (in so far as applicable) the
landlord's and on the tenant's respective parts as set out in the Lease,
incorporating a covenant on the part of Seller to use reasonable endeavours to
procure the observance by the reversioner of the landlord's covenants set out in
the Lease and otherwise on such reasonable and proper terms and conditions as
Seller and Buyer may agree (both acting reasonably).
(c) In the absence of agreement as to the terms of such
underlease any dispute shall be referred to Counsel admitted to the relevant Bar
for a period of not less than 10 years and
42
<PAGE> 51
nominated in the absence of agreement between the parties to this Agreement by
the President or Dean of the relevant Bar or his nominee on the application of
Seller or Buyer and the costs of such reference shall be paid by the party in
whose favour the dispute is resolved.
(d) The underlease shall be completed ten (10) Working Days
after the grant of the licence referred to in Section 8.4(a).
8.5 On completion of the Assurance of the Leased Real Property at
Telford Seller shall assign to Buyer such rights as it has under the Agreement
dated 23 June 1989 between Dixons Colour Laboratories Ltd (1) Hedley Taylor plc
(2) Dixons Group plc (3) and pending such transfer shall hold the benefit of
such rights upon trust for Seller and Buyer according to their respective
liability for dilapidations as referred to in clause 1 of that agreement.
8.6 This Article VIII shall not merge with any Assurance, but shall
continue in full force and effect to the extent that anything remains to be
performed or observed under it.
ARTICLE IX
INDEMNIFICATION
The indemnification provisions of the Master Agreement shall apply to
Buyer and Seller.
ARTICLE X
TERMINATION
10.1 Termination Events. Subject to the other provisions of this
Article X, this Agreement may, by written notice given at or prior to the
Closing in the manner hereinafter provided, be terminated and abandoned:
43
<PAGE> 52
(a) By Buyer or Seller upon termination of the Master
Agreement;
(b By mutual written consent of Seller and Buyer;
(c) By Buyer pursuant to Section 4.4(a);
(d) By Seller pursuant to Section 4.4(b);
(e) As otherwise provided in Section 12 of the Master
Agreement; or
(f) By Buyer pursuant to Section 6.10.
10.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 9.1, all further obligations of the parties hereunder shall
terminate, except as provided in Section 12.2 of the Master Agreement. No
termination of this Agreement shall act to terminate or otherwise impair the
obligations set forth in Section 13.4 of the Master Agreement.
44
<PAGE> 53
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations and Warranties. All covenants and
obligations to be performed after the Closing Date contained in this Agreement
or in any other certificate or document delivered pursuant to this Agreement
shall survive the Closing and expire in accordance with their respective terms.
All representations and warranties contained in this Agreement or in any other
certificate or document delivered pursuant to this Agreement shall survive the
Closing for a period of eighteen (18) months; provided, however, that any
representations and warranties contained herein related to tax, benefits and
environmental matters shall survive Closing for a period of (6) months beyond
the applicable statutory limitation period (including extensions thereof). The
waiver of any condition, based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement, or
other remedy based upon such representations, warranties, covenants or
obligations.
11.2 Amendments. This Agreement may be amended only by a written
agreement signed by Seller and Buyer.
11.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered or sent in accordance with Section 13.3 of the Master
Agreement.
11.4 [Intentionally Omitted]
11.5 Waiver. Waiver of any term or condition of this Agreement by any
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
11.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto,
45
<PAGE> 54
constitutes the entire agreement, and supersedes all other prior agreements
(except as identified in the Master Agreement) and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
thereof.
11.8 Assignment. This Agreement shall not be assigned by either Buyer
or Seller or by operation of law or otherwise, except with the written consent
of the other party; provided, however, that Buyer shall be permitted to assign
this Agreement as set forth in Section 13.8 of the Master Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
11.9 Governing Law; Time of the Essence. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
(excluding the conflict of laws provisions thereof). Time is of the essence in
the performance of this Agreement.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.
11.11 Publicity. No press releases or public disclosure, written or
oral, of the transactions contemplated by this Agreement shall be made by Buyer
or Seller except in accordance with Section 13.11 of the Master Agreement.
11.12 Jurisdiction. In the event that any dispute should arise between
Buyer and Seller with respect to any matter covered by this Agreement, the
parties hereto consent to the sole and exclusive jurisdiction of the state and
federal courts of the United States and the State of Delaware located in Dover,
Delaware in connection with the adjudication of any such dispute.
11.13 Legal Fees. In the event of any litigation between Seller and
Buyer arising out of this Agreement, the party prevailing in such litigation
shall be entitled to have its reasonable attorneys' fees and expenses reimbursed
by the other party.
11.14 Actions. The parties will execute and deliver to the other, from
time to time at or after the Closing, for no additional consideration and at no
additional cost to the requesting party,
46
<PAGE> 55
such further assignments, certificates, instruments, records, or other
documents, assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy and exercise the
rights accorded and acquired by it under this Agreement.
11.15 Terms. All capitalized terms used herein shall have the meanings
specified in this Agreement, or, if not so specified, the meanings specified in
the Master Agreement. The word "include" and derivatives of that word are used
in this Agreement in an illustrative sense rather than limiting sense. The term
"Buyer's knowledge" or "Seller's knowledge" or words of similar import or
limitation means the actual knowledge or conscious awareness, without
independent investigation, of any executive officer of Buyer or any director of
Seller, as the case may be.
11.16 Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction shall be applied against either party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
11.17 Third Parties. Nothing expressed or implied herein is intended,
or shall be construed, to confer upon or give any person or entity, including
any employee of Seller, other than Seller and Buyer any rights or remedies under
or by reason of this Agreement.
11.18 Value Added Tax.
(a) The parties acknowledge and agree that Section 49(1) of
the Value Added Tax Act 1994 (the "VATA") and Article 5 of the Value Added Tax
(Special Provisions) Order 1995 (the "Order") are intended to apply to the sale
and purchase of the Acquired Assets and accordingly Buyer undertakes and
warrants that it currently intends to use the Acquired Assets to carry on the
same kind of business as the Business with effect from the Closing. Buyer shall
on or before the Closing notify the Commissioners of Customs and Excise that it
has acquired or agreed to acquire the Business on a going concern basis to the
intent that, in accordance with the provisions of the Order, the transfer of the
Business (including the Acquired Assets) shall be treated as neither a supply of
goods nor a supply of services for the purposes of Value Added Tax ("VAT"). If,
however, notwithstanding the intention of the parties expressed in this section
the Commissioners of Customs and Excise issue a determination in writing that
VAT is chargeable in respect of the Acquired Assets or any of them sold to
Buyer, Buyer shall pay such VAT to Seller in cash against provision of a Value
Added Tax invoice and shall indemnify Seller and keep it indemnified (on an
after tax basis) against any claim by the Commissioners of Customs and Excise
for penalties and/or interest arising in relation to such VAT to the extent that
such claim has resulted from any specific action or inaction of Buyer.
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<PAGE> 56
Seller shall notify Buyer in writing:
(i) no later than seven days before the Closing Date,
whether Seller has exercised an election to waive exemption from VAT under VATA
1994, Section 10, Paragraph 2 in respect of any of the Leases Real Property; and
(ii) within 28 days after Closing, whether any of the
Acquired Assets are capital items within the meaning of Part XI of the Value
Added Tax Regulations 1995.
(b) Except as expressly provided otherwise, any sum payable
under the terms of the Agreement shall be deemed to be exclusive of VAT and VAT
calculated by reference to the appropriate rate of VAT prevailing at the time
shall be payable in addition by Buyer (where appropriate).
(c) Buyer and Seller each respectively declare that as at
Closing (or within 30 days after) it will be a taxable person for the purposes
of the VATA and will supply such evidence of this as the other party reasonably
request.
11.19 Phase II Environmental Report. Seller agrees to undertake at its
cost a Phase II environmental investigation at the Telford property of the
Business. Seller agrees to undertake at its cost any remedial work required as a
result of such report.
11.20 U.K. Statutes. In this Agreement, a reference to or citation of a
statute or any legislative provisions that is preceded by the initials "U.K."
means such statute or provision as enacted and applicable in the United Kingdom
or any constituent part thereof.
11.21 Transfer of Employees. Seller and Buyer acknowledge and agree
that pursuant to (and except as otherwise provided in) the Transfer of
Undertakings Regulations the contracts of employment between Seller and the
employees employed in the Business will have effect after the Closing Date as if
originally made between Buyer and those employees.
11.22 Restrictive Trade Practices Act. Insofar as any of the
restrictions contained in this
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<PAGE> 57
Agreement and the Master Agreement are registerable under the Restrictive Trade
Practices Act 1976 (the "RTPA") such restrictions shall to such extent not come
into force until the day following the day upon which such particulars relating
thereto as are required to be filed with the Office of Fair Trading ("OFT")
pursuant to the RTPA shall have been received by the OFT for filing. Buyer shall
be responsible for making such filing and Seller agrees to provide reasonable
cooperation and assistance in relation thereto.
11.23 Temporary Services Agreement . At Closing Buyer shall execute and
deliver to Seller on behalf of Nashua Belmont Limited and Seller shall procure
that Nashua Belmont Limited shall execute and deliver to Buyer the Temporary
Services Agreement in the form set out in Exhibit 11.23.
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<PAGE> 58
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
BUYER
DISTRICT PHOTO INC.
By:________________________________
Name:
Title:
SELLER
NASHUA PHOTO LIMITED
By:________________________________
Name:
Title:
50
<PAGE> 1
Exhibit 10.19
EXECUTION COPY
CANADA ASSET PURCHASE AGREEMENT
By and Between
DISTRICT PHOTO INC.
as Buyer
and
NASHUA PHOTO LIMITED
as Seller
Dated as of March 10, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - PURCHASE AND SALE OF ASSETS......................................1
1.1 Purchase and Sale of Assets......................................1
1.2 Retained Assets..................................................4
ARTICLE II - ASSUMPTION OF LIABILITIES.......................................4
2.1 Assumed Liabilities..............................................4
2.2 Retained Liabilities.............................................5
2.3 Prorations.......................................................6
ARTICLE III - CANADIAN PURCHASE PRICE........................................6
3.1 Payment..........................................................6
3.2 Allocation of Canadian Purchase Price............................6
3.3 Preparation of Closing Date Net Current Asset
Disclosure.......................................................6
ARTICLE IV - CLOSING AND CONDITIONS TO CLOSING...............................8
4.1 General..........................................................8
4.2 Documents Delivered by Seller....................................8
4.3 Documents Delivered by Buyer.....................................9
4.4 Conditions to Closing...........................................10
ARTICLE V - REPRESENTATIONS AND WARRANTIES..................................12
5.1 Representations and Warranties of Seller........................12
5.2 Representations and Warranties of Buyer.........................23
ARTICLE VI - COVENANTS OF SELLER............................................25
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.1 Notice of Claims................................................25
6.2 Maintenance of, and Access to, Records..........................25
6.3 Non-Solicitation................................................25
6.4 Limitations on Assignability....................................26
6.5 Pre-Closing Operations of Seller................................26
6.6 Access to Records and Information...............................27
6.7 No Solicitation of Offers.......................................27
6.8 Notices of Certain Events.......................................27
6.9 Commercially Reasonable Efforts.................................28
6.10 Risk of Loss....................................................28
6.11 Employment of Employees; Benefits...............................29
6.12 Employee Benefits Plans.........................................29
ARTICLE VII - COVENANTS OF BUYER............................................29
7.1 Maintenance of, and Access to, Records..........................29
7.2 Commercially Reasonable Efforts.................................29
ARTICLE VIII - OTHER COVENANTS..............................................30
ARTICLE IX - INDEMNIFICATION................................................30
ARTICLE X - TERMINATION.....................................................30
10.1 Termination Events..............................................30
10.2 Effect of Termination...........................................31
ARTICLE XI - MISCELLANEOUS..................................................31
11.1 Survival of Representations and Warranties......................31
11.2 Amendments......................................................31
11.3 Notices.........................................................31
11.4 [INTENTIONALLY OMITTED].........................................31
11.5 Waiver..........................................................31
11.6 Headings........................................................32
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.7 Entire Agreement................................................32
11.8 Assignment......................................................32
11.9 Governing Law; Time of the Essence..............................32
11.10 Counterparts....................................................32
11.11 Publicity.......................................................32
11.12 Jurisdiction....................................................32
11.13 Legal Fees......................................................32
11.14 Actions.........................................................32
11.15 Terms...........................................................33
11.16 Construction....................................................33
11.17 Third Parties...................................................33
</TABLE>
iii
<PAGE> 5
SCHEDULES [Not Included in Filing]
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule 1.1(a) -- Prepaid Items
Schedule 1.1(b) -- Inventory
Schedule 1.1(c) -- Accounts Receivable
Schedule 1.1(d) -- Tangible Personal Property
Schedule 1.1(g) -- Intellectual Property
Schedule 1.1(h) -- Listed Contracts
Schedule 1.1(i) -- Licenses and Permits
Schedule 1.1(j) -- Leases
Schedule 1.1(k) -- Real Property
Schedule 1.2 -- Retained Assets
Schedule 3.2 -- Allocation of Canadian Purchase Price
Schedule 4.4(a)(v) -- Material Adverse Changes
Schedule 5.1(d) -- Permitted Encumbrances
Schedule 5.1(f) -- Environmental and Safety Compliance
Schedule 5.1(g) -- Material Defects
Schedule 5.1(i) -- Financial Statements
Schedule 5.1(m) -- Litigation
Schedule 5.1(n) -- Customers and Suppliers
Schedule 5.1(s) -- Labor Matters
Schedule 5.1(t) -- Employee Plans
Schedule 5.1(u) -- Taxes
Schedule 5.1(w) -- Required Consents
Schedule 5.1(x) -- Absence of Certain Changes
Schedule 5.2(f) -- Pending Litigation
Schedule 6.11 -- Transferred Employees
EXHIBITS [Not Included in Filing]
Exhibit 2.1 -- Form of Instrument of Assumption of Liabilities
Exhibit 3.3 -- Net Current Asset Disclosure
Exhibit 4.2(d) -- Form of Bill of Sale
Exhibit 4.2(k) -- Form of Patent and Trademark Assignment
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March 10,
1998, is entered into by and between District Photo Inc., a District of Columbia
corporation ("Buyer"), on the one hand, and Nashua Photo Limited, a corporation
organized under the laws of Canada ("Seller"), a wholly-owned subsidiary of
Nashua Photo Inc.
W I T N E S S E T H
WHEREAS, Seller is engaged in Canada in the photofinishing business,
including the marketing and sale of photo-related products (the "Business");
WHEREAS, Seller desires to sell the Acquired Assets (as
defined in Section 1.1) to Buyer;
WHEREAS, this Agreement is entered into between Buyer and Seller pursuant
to that certain Master Asset Purchase Agreement of even date herewith entered
into by and between Nashua Corporation and Buyer (the "Master Agreement");
WHEREAS, Buyer desires to purchase and acquire from Seller, upon the terms
and subject to the conditions hereinafter set forth, the Acquired Assets, in
consideration of the payment of the Canadian Purchase Price (as defined in
Section 3.1) and the assumption by Buyer of the Assumed Liabilities (as defined
in Section 2.1);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, on the basis
of, and in reliance upon, the representations, warranties, covenants,
obligations and agreements set forth herein, and upon the terms and subject to
the conditions contained herein, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the provisions of this
Agreement, at the Closing (as defined in Master Agreement), Seller shall convey,
sell, assign, transfer and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, the Business as a going concern comprising all of the
assets, properties, rights, privileges, claims, contracts and interests of
Seller on the Closing Date (as defined in Master Agreement), of every kind and
description, real, personal or mixed, tangible or intangible, absolute or
contingent,
<PAGE> 7
wherever situated, whether or not carried or reflected on the books and records
of Seller (other than the Retained Assets (as defined in Section 1.2)), free and
clear of any and all liens, equities, claims, prior assignments, mortgages,
charges, security interests, pledges, restrictions or encumbrances whatsoever
(collectively, "Liens"), other than the Permitted Encumbrances (as defined in
Section 5.1(d)) (such assets, properties, rights, privileges, claims, contracts
and interests collectively referred to as the "Acquired Assets"). Without
limiting the generality of the foregoing, the Acquired Assets shall include the
following:
(a) Prepaid Items. All of Seller's prepaid expenses, advance
payments, deposits and prepaid items, including deposits with lessors, suppliers
or utilities (collectively, "Prepaid Items"), as described on Schedule 1.1(a);
(b) Inventory. All of Seller's inventories, including all
inventories of products, work-in-process, finished goods, raw materials,
supplies, equipment, parts, labels and packaging (including all of Seller's
rights and interests in goods in transit, consigned inventory, inventory sold on
approval and rental inventory) and all returned products, samples and obsolete
and nonsalable inventory (collectively, "Inventory"), as described on Schedule
1.1(b);
(c) Accounts Receivable. All of Seller's accounts receivable, notes
receivable and royalties receivable, any payments received by Seller with
respect thereto after the Closing Date, unpaid interest accrued thereon, and any
security or collateral relating thereto, including all past due, reserved and
written off accounts receivable (collectively, "Accounts Receivable"), as
described on Schedule 1.1(c) (including aging information with respect to the
Accounts Receivable);
(d) Tangible Personal Property. All of Seller's motor vehicles,
machinery, equipment, office furniture, furnishings, tools, fixtures, office
equipment, computer hardware and software, leasehold and other improvements and
other tangible personal property (collectively, "Tangible Personal Property"),
as described on Schedule 1.1(d);
(e) Books, Records and Written Materials. All of Seller's business
records, including all financial books and records, sales order files, purchase
order files, engineering order files, warranty and repair files, supplier lists,
customer lists, dealer, representative and distributor lists, studies, surveys,
analyses, strategies, plans, forms, designs, diagrams, drawings, specifications,
technical data, production and quality control records, formulations, and any
other information which has been reduced to writing (collectively, "Books and
Records") (but excluding those books and records described in Section 1.2(a));
2
<PAGE> 8
(f) Catalogs and Advertising Materials. All of Seller's promotional
and advertising materials, including all catalogs, brochures, videos, plans,
manuals and handbooks;
(g) Intellectual Property Rights. All of Seller's trademarks,
service marks, trade names, logos, copyrights or patents (and any applications
for any of the foregoing and rights therein), together with all claims for
damages against Persons by reason of past infringement and the right to sue for
and collect such damages, licenses, shop rights, know-how, developments,
research data, designs, specifications, drawings, blueprints, technology, ideas,
compositions, manufacturing and production principles and techniques, test
procedures, processes, formulas, know-how, file reports, certifications,
customer and supplier lists, pricing and cost information, confidential
information, inventions (whether or not patentable), discoveries, business
methods, confidential or proprietary business information and trade secrets and
all other intellectual and intangible property rights owned by Seller or to, or
in, which Seller has any right or interest whatsoever (where there are multiple
copies of such material in Seller's possession or control, all copies of such
material) (collectively, the "Intellectual Property"), as described on Schedule
1.1(g) (as used herein, "Person" means a corporation, limited liability company,
association, partnership, organization, trust, joint venture or other legal
entity, an individual or a Governmental Authority);
(h) Contracts. All of Seller's licenses, contracts, agreements,
commitments and undertakings, whether oral or written, (including unfilled
customer orders) relating to the Acquired Assets or Business to which Seller is
a party or by which any of the Acquired Assets are bound (collectively,
"Contracts"), of which, only those Contracts that are reflected in Seller's
Financial Statements that constitute obligations involving more than $10,000
annually or that are not cancelable within thirty (30) days without incurring
liability for such cancellation, are described on Schedule 1.1(h) ("Listed
Contracts");
(i) Licenses and Permits. All licenses, permits, approvals,
franchises, consents and other authorizations held by Seller or related to or
used in connection with the Business or the Acquired Assets (collectively,
"Licenses and Permits") issued to Seller by any foreign, federal, provincial,
state or local governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities"), to the extent
transferable to Buyer, which Licenses and Permits are described on Schedule
1.1(i);
(j) Leases. All of Seller's leases as described on Schedule 1.1(j)
(the "Leases");
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(k) Real Property. All of Seller's real property located in
Saskatoon, Saskatchewan and described on Schedule 1.1(k) (the "Real Property");
and
(l) Other Assets. Excluding the Retained Assets described in Section
1.2, all of the other assets, properties, rights, privileges, claims, contracts
and interests of every kind and description, real, personal or mixed, tangible
or intangible, absolute or contingent, wherever situated, whether or not carried
or reflected on the books and records of Seller, of Seller including such
assets, properties, rights, privileges, claims, contracts and interests as are
reflected on the Closing Date Net Current Asset Disclosure (as defined in
Section 3.3(b)) or which are owned by Seller on the Closing Date, including
those customer orders received (whether before, on or after Closing) relating to
the Business, which customer orders have not been opened for processing.
1.2 Retained Assets. Notwithstanding anything in this Agreement to the
contrary, Seller shall retain, and the Acquired Assets shall not include, any of
the assets described on Schedule 1.2, assets disposed of since the date hereof
in the ordinary course of business, such other assets as have been or are
disposed of pursuant to this Agreement, and the following assets of Seller
(collectively, the "Retained Assets"):
(a) Corporate Records. Seller's corporate books and records,
including stock certificates, treasury stock, stock transfer records, corporate
seals and minute books, and Seller's tax returns and tax supporting information,
records constituting privileged and confidential attorney-client communications
or work product related to the transactions contemplated hereby;
(b) Seller Rights under this Agreement. All rights of Seller under
this Agreement; and
(c) Prepaid Taxes and Tax Refunds. Prepaid foreign, federal,
provincial or local taxes and any rights of Seller to any tax refunds or carry
backs.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. On the terms and subject to the conditions set
forth in the Assignment and Assumption Agreement attached hereto as Exhibit 2.1,
at the Closing, Buyer shall assume the following liabilities and obligations of
Seller (collectively, the "Assumed Liabilities"):
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(a) Accounts Payable. All of Seller's trade and other accounts
payable reflected on the Closing Date Net Current Asset Disclosure;
(b) Accrued Liabilities. All of Seller's accrued liabilities
reflected on the Closing Date Net Current Asset Disclosure.
(c) Contracts. All liabilities and obligations of Seller arising
under the Contracts which accrue after the Closing; provided, however, that
Buyer shall not assume or be responsible for any such liabilities or obligations
which arise from defaults thereunder or breaches thereof by Seller prior to or
on the Closing Date (whether a claim for any such default or breach is made
before or after the Closing).
(d) Leases. All contractual liabilities and obligations of Seller
under the Leases for time periods after the Closing Date; provided, however,
that Buyer shall not assume or be responsible for any such liabilities or
obligations which arise from defaults thereunder or breaches thereof by Seller
prior to or on the Closing Date or for any Environmental Matters (as defined in
Section 2.2) related in any way to the Leases prior to or on the Closing Date
(whether a claim for any such default or breach is made before or after the
Closing);
(e) Taxes. All real and personal property taxes, sales, goods and
services and use taxes attributable to the sale of inventory, payroll taxes and
employee withholding tax obligations and other taxes, relating to Buyer's
operation of the Business after the Closing.
2.2 Retained Liabilities. Except for the Assumed Liabilities, Seller shall
retain all, and Buyer shall have no responsibility for any, of Seller's
liabilities and obligations, whether or not relating to the Business or Acquired
Assets, whether fixed, contingent or otherwise, and whether known or unknown
(collectively, the "Retained Liabilities"). Without limiting the foregoing,
Buyer shall not assume or be liable for and Seller shall indemnify Buyer against
and hold Buyer harmless from any of the following liabilities for (i)
environmental matters ("Environmental Matters") arising under Environmental Laws
(as defined in Section 5.1(f)) in connection with violations, disposal, events,
occurrences or releases that occurred or are attributable to the period on or
prior to the Closing Date; (ii) liabilities incurred by Seller in connection
with this Agreement, the transactions provided for herein and any other
agreements contemplated hereby, including, without limitation, attorneys' and
accountants' fees, and expenses pertaining to the performance by Seller of its
obligations hereunder; (iii) liabilities that relate to the Retained Assets;
(iv) except for Assumed Liabilities, liabilities arising out of the operation of
the Business on or before the Closing; (v) payments, if any, to be made as a
result of the purchase and sale of the Business of Seller to certain management
personnel of Seller under certain retention and other similar agreements solely
in respect to those obligations resulting from
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the transactions contemplated by this Agreement; (vi) all federal, provincial
and local franchise and income taxes of Seller, whether relating to periods
before or after the transactions contemplated in this Agreement or incurred by
Seller in connection with this Agreement and the transactions provided for
herein, including any liability for such taxes arising out of the inclusion of
Seller in any group filing consolidated, combined or unitary tax returns or
arising out of any transferee liability; (vii) liabilities with respect to
workers' compensation or other employee related claims, including, without
limitation, with respect to discrimination, wrongful termination and employee
benefits of any kind arising from any facts or circumstances occurring prior to
or on the Closing Date; (viii) the employment contracts of Richard Kennedy,
Stanley Vaughan and Michael Jeans including, but not limited to, any and all of
the employer's responsibilities under such contracts; and (ix) any other
liabilities of Seller not specifically assumed by Buyer hereunder.
2.3 Prorations. Except as otherwise provided in Section 2.1, general
utility charges, personal property taxes and assessments, and similar proratable
items which are attributable to the Acquired Assets, shall be apportioned
between Buyer and Seller as follows: any item which relates to the period prior
to or on the Closing Date shall, to the extent not accrued on the Closing Date
Net Current Asset Disclosure, be apportioned to and paid by Seller, and any such
item which relates to the period on or after the Closing Date, whether or not
accrued on the Closing Date Net Current Asset Disclosure, shall be apportioned
to and paid by Buyer; provided, however, that any special assessments or similar
charges in effect or payable prior to the Closing Date shall be paid by Seller
prior to the Closing.
ARTICLE III
CANADIAN PURCHASE PRICE
3.1 Payment. In full consideration for the conveyance, sale, transfer and
assignment of the Acquired Assets, but subject to adjustment as provided in
Section 3.3 and satisfaction of all of the conditions contained herein, Buyer
shall deliver or cause to be delivered to Nashua Corporation for the account of
Seller a cash purchase price of Two Million Dollars ($2,000,000) (the "Canadian
Purchase Price"), payable at the Closing by wire transfer of immediately
available funds to an account or accounts designated in writing by Seller.
3.2 Allocation of Canadian Purchase Price. Within sixty days after the
Closing, Buyer and Seller agree to allocate the Canadian Purchase Price among
the Acquired Assets. Schedule 3.2 shall set forth the amount of the Canadian
Purchase Price allocable to the various Acquired Assets.
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3.3 Preparation of Closing Date Net Current Asset Disclosure.
(a) Seller has delivered to Buyer an unaudited summary of the
Accounts Receivable, Inventories and other current assets of the Business as of
February 6, 1998 less accounts payable and accrued expenses and other Assumed
Liabilities as of February 6, 1998 (the "Net Current Asset Disclosure") which
are reflected on the books and records of Seller and are prepared consistently
with U.S. generally accepted accounting principles. A copy of the Net Current
Asset Disclosure is attached hereto as Exhibit 3.3. The total net amount as set
forth on the Net Current Asset Disclosure is referred to herein as the "February
6th Assets."
(b) (i) Within thirty (30) business days following the Closing,
Seller shall prepare and deliver to Buyer an unaudited summary of those assets
and liabilities specified in Section 3.3(a) as of the Closing (the "Closing Date
Net Current Asset Disclosure"). The Closing Date Net Current Asset Disclosure
shall accurately reflect all Inventories, Accounts Receivable, other current
assets, accounts payable and accrued expenses and other Assumed Liabilities
which are reflected on the books and records of Seller and shall in all respects
be prepared consistently with and utilizing the same accounting policies and
valuation procedures as set forth in the Net Current Asset Disclosure. The total
net amount as set forth on the Closing Date Net Current Asset Disclosure is
referred to herein as the "Closing Date Assets." In the event that the Closing
Date Assets have either increased or decreased by any amount from the February
6th Assets, the amount of the increase or decrease (the "Canadian Purchase Price
Adjustment") shall be paid by Buyer to Seller (if the Closing Date Assets exceed
the February 6th Assets) or by Seller to Buyer (if the February 6th Assets
exceed the Closing Date Assets).
(ii) The Canadian Purchase Price Adjustment shall be made by
wire transfer not later than the close of business on the fifth business day
immediately following the date on which the Canadian Purchase Price Adjustment
is finally determined, and shall include simple interest on such amount at the
rate of 3% plus the prime rate of interest publicly quoted by the Chase
Manhattan Bank in New York as of and commencing on the Closing and continuing
until the date of full payment hereunder. The Closing Date Net Current Asset
Disclosure delivered by Seller and the calculation of the Canadian Purchase
Price Adjustment shall be final and binding on the parties hereto, unless within
forty-five (45) business days following Seller's delivery of the Closing Date
Net Current Asset Disclosure to Buyer, Seller receives from Buyer a report
setting forth in detail Buyer's objections to such calculation and any
adjustments required. Buyer and Seller shall use reasonable efforts to resolve
any dispute, and such resolution shall be in writing and shall be final and
binding on the parties hereto. Until the earlier to occur of (i) the mutual
agreement of Seller and Buyer as to the appropriate amount of the Canadian
Purchase Price Adjustment, or (ii) the final determination of the Canadian
Purchase Price
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Adjustment by the Accounting Firm as set forth below, Buyer and Seller shall
allow each other reasonable access to each other's books, records and employees
pertaining to the Business and cooperate with each other during normal business
hours for purposes of computing and/or verifying the information set forth in
the Closing Date Net Current Asset Disclosure.
(c) If Seller and Buyer have not reached a final resolution with
respect to any Canadian Purchase Price Adjustment within thirty (30) business
days following Seller's receipt of Buyer's objections, such dispute shall be
resolved by the New York City office of Ernst & Young LLP (the "Accounting
Firm").
(d) The Accounting Firm shall be instructed to render its decision
resolving all matters presented to it within sixty (60) calendar days of receipt
by it of Seller's Closing Date Net Current Asset Disclosure or Buyer's
objections, whichever is the later.
(e) Each party shall bear its own expenses. The determination of the
Canadian Purchase Price Adjustment by Accounting Firm shall be final and binding
upon the parties.
ARTICLE IV
CLOSING AND CONDITIONS TO CLOSING
4.1 General. Subject to the conditions set forth in Sections 4.2, 4.3 and
4.4, the Closing as defined in the Master Agreement shall take place at the
offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109 at
10:00 AM (Eastern Time) on the Closing Date as defined in the Master Agreement.
Failure to close on such date shall not relieve either party hereto of its
obligations under this Agreement. All transactions at the Closing shall be
deemed to take place simultaneously at 12:01 a.m. Eastern Time on the Closing
Date, and no transaction shall be deemed to have been completed and no document
or certificate shall be deemed to have been delivered until all transactions are
completed and all documents are delivered.
4.2 Documents Delivered by Seller. At the Closing, Seller shall deliver to
Buyer the following, duly executed by the appropriate parties, subject to
satisfaction of the conditions precedent to the obligations of Seller stated
herein:
(a) Secretary's Certificate. A certificate executed by the Secretary
of Seller confirming the existence, incorporation and good standing under the
laws of Canada and Saskatchewan of Seller on the Closing Date, attaching copies
of the certificate of
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incorporation and by-laws of Seller, and resolutions authorizing and approving
the execution, delivery and performance of this Agreement and all other
documents and the taking of all action required thereunder or in connection
therewith on behalf of Seller, together with an incumbency certificate for
Seller;
(b) Opinion of Seller's Counsel. An opinion, dated as of the Closing
Date, from Hale and Dorr LLP in a form reasonable and customary for similar
transactions;
(c) Assignment and Assumption of Contracts and Liabilities. An
Instrument of Assumption of Liabilities in the form of Exhibit 2.1;
(d) Bill of Sale. A bill of sale and assignment conveying, selling,
transferring and assigning the Acquired Assets to Buyer, free and clear of any
and all Liens, in the form of Exhibit 4.2(d);
(e) Required Consents. All of the Required Consents (as defined in
Section 5.1(w)) which are identified on Schedule 5.1(w) as being necessary for
consummating the sale of the Acquired Assets and the transactions relating
thereto;
(f) Assignment and Assumption of Leases. An Assignment and
Assumption of each of the Leases in form and substance substantially similar to
the attached Exhibit 4.2(f);
(g) Other Documents. Such other deeds, bills of sale, endorsements,
assignments, affidavits, and other instruments of sale, assignment, conveyance
and transfer, in form and substance reasonably satisfactory to Buyer and its
counsel, as are required to effectively vest in Buyer all of Seller's right,
title and interest in and to all of the Acquired Assets, free and clear of any
and all Liens;
(h) Lien Releases. Such releases and termination statements as are
necessary for the termination and release of any and all Liens (other than the
Permitted Encumbrances (as defined in Section 5.1(d)) on the Acquired Assets;
(i) Releases of Seller Employees from Confidentiality Agreements.
Such releases from Seller as are necessary to permit employees of Seller who
have signed confidentiality or secrecy agreements with Seller to disclose
information to Buyer;
(j) Officer's Certificate. A certificate dated the Closing Date and
executed by an executive officer of Seller to the effect that each of the
conditions specified in Section 4.4(a) is satisfied;
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(k) Patent and Trademarks. Patent and trademark assignments in form
and substance substantially similar to the attached Exhibit 4.2(k); and
(l) Real Property. A registrable transfer of title, in favor of
Buyer, and the duplicate certificate of title for, the Real Property, together
with a real property report (otherwise referred to as a surveyor's certificate)
showing that the improvements on the Real Property do not encroach on any other
property and there are no encroachments on the Real Property.
4.3 Documents Delivered by Buyer. At the Closing, Buyer shall deliver to
Seller the following, duly executed by the appropriate parties, subject to
satisfaction of the conditions precedent to the obligations of Buyer stated
herein:
(a) Secretary's Certificate. A certificate executed by the Secretary
of Buyer, confirming the existence, incorporation and good standing of Buyer on
the Closing Date, attaching copies of the articles of incorporation and by-laws
of Buyer, and resolutions authorizing and approving the execution, delivery and
performance of this Agreement and all other documents and the taking of all
action required thereunder or in connection therewith on behalf of Buyer,
together with an incumbency certificate for Buyer;
(b) Assignment and Assumption of Contracts and Liabilities. An
Assignment and Assumption Agreement in the form of Exhibit 2.1;
(c) Assignment and Assumption of Leases. An Assignment and
Assumption of each of the Leases in form and substance substantially similar to
the attached Exhibit 4.2(f);
(d) Officer's Certificate. A certificate dated the Closing Date and
executed by an executive officer of Buyer to the effect that each of the
conditions specified in Section 4.4(b) is satisfied;
(e) Payment of Canadian Purchase Price. Payment of the Canadian
Purchase Price in the manner and the amount set forth in Article III;
(f) Opinion of Buyer's Counsel. An opinion, dated as of the Closing
Date, from Wilmer, Cutler & Pickering in a form reasonable and customary for
similar transactions; and
(g) GST Registration. Evidence that Buyer is registered for the
purposes of Part IX of the Excise Tax Act (Canada) (the "GST Legislation").
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4.4 Conditions to Closing.
(a) Conditions to Obligations of Buyer. Subject to Section 9.3 of
the Master Agreement, the obligation of Buyer to close the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the following conditions precedent, each of which may be waived, in whole or in
part, in the sole discretion of Buyer, by a written instrument signed by Buyer.
(i) Fulfillment of Seller's Covenants. Each of Nashua
Corporation, Seller and the Asset Sellers shall have fulfilled or complied with
each covenant, obligation and agreement required to be fulfilled or complied
with by it prior to the Closing Date under this Agreement, the Master Agreement
and the Asset Purchase Agreements.
(ii) Accuracy of Seller's Representations. The representations
and warranties of Seller contained in this Agreement shall be true and correct
on the date when made and shall be repeated at and as of the Closing Date and
shall be true and correct as so made again (unless a representation is made as
of a specific date, and in such event it shall be true and correct as of such
date); provided, however, that in the event Seller has provided Buyer with
written notice prior to the Closing Date of an event or development arising
after the date hereof and prior to the Closing Date that causes any
representation or warranty of Seller in this Agreement not to be true and
correct on the Closing Date (a "Seller's Notice"), then Buyer shall, in its sole
discretion, either (i) elect not to close the transactions contemplated by this
Agreement by reason of the failure of the condition to Closing specified in this
Section 4.4(a)(ii) to be satisfied, or (ii) elect to close the transactions
contemplated by this Agreement, notwithstanding the failure of the condition to
Closing specified in this Section 4.4(a)(ii) to be satisfied, in which event
Buyer shall be deemed to have waived the condition to Closing specified in this
Section 4.4(a)(ii) with respect to the matters specified in Seller's Notice and
shall not seek or be entitled to indemnification under Article IX with respect
to only the matters specified in Seller's Notice.
(iii) Authorizations and Consents. Seller shall have obtained
and made all governmental or other authorizations, approvals, consents, permits,
waivers and filings which are necessary under all applicable laws and
regulations for the consummation by Seller of the transactions contemplated by
this Agreement.
(iv) No Litigation. No injunction shall be outstanding which
would prevent consummation of the transactions contemplated by this Agreement.
No provision of any applicable domestic law or regulation, and no judgment,
injunction, order or decree of a governmental authority that has the effect of
making the Closing illegal or otherwise restrains or prohibits the Closing from
occurring shall be in effect (each party
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agreeing to use commercially reasonable efforts, including appeals to higher
courts, to have any such judgment, injunction, order or decree lifted).
(v) No Material Adverse Changes. Since December 31, 1997,
there shall have been no material adverse changes in Seller's business
operations, affairs, prospects, properties, assets existing and potential
liabilities, obligations, profits or condition (financial or otherwise) of the
Business ("Material Adverse Change") or an adverse change in Seller which would
have a material adverse effect on Seller's ability to perform its obligations
under this Agreement except as set forth on Schedule 4.4(a)(v).
(b) Conditions to Obligations of Seller. The obligation of Seller to
close the transactions contemplated by this Agreement shall be subject to the
satisfaction of each of the following conditions precedent, each of which may be
waived, in whole or in part, in the sole discretion of Seller, by a written
instrument signed by Seller.
(i) Fulfillment of Buyer's Covenants. Buyer shall have
fulfilled or complied with each covenant, obligation and agreement required to
be fulfilled or complied with by it prior to the Closing Date under this
Agreement.
(ii) Accuracy of Buyer's Representations. The representations
and warranties of Buyer contained in this Agreement shall be true and correct on
the date when made and shall be repeated at and as of the Closing Date and shall
be true and correct as so made again (unless a representation is made as of a
specific date, and in such event it shall be true and correct as of such date);
provided, however, that in the event Buyer has provided Seller with written
notice prior to the Closing Date of an event or development arising after the
date hereof and prior to the Closing Date that causes any representation or
warranty of Buyer in this Agreement not to be true and correct on the Closing
Date (a "Buyer's Notice"), then Seller shall, in its sole discretion, either (i)
elect not to close the transactions contemplated by this Agreement by reason of
the failure of the condition to Closing specified in this Section 4.4(b)(ii) to
be satisfied, or (ii) elect to close the transactions contemplated by this
Agreement, notwithstanding the failure of the condition to Closing specified in
this Section 4.4(b)(ii) to be satisfied, in which event Seller shall be deemed
to have waived the condition to Closing specified in this Section 4.4(b)(ii)
with respect to the matters specified in Buyer's Notice and shall not seek or be
entitled to indemnification under Article IX with respect to only the matters
specified in Buyer's Notice.
(iii) Authorizations and Consents. Buyer shall have obtained
and made all governmental or other authorizations, approvals, consents, permits,
waivers and filings which are necessary under all applicable laws and
regulations for the consummation by Buyer of the transactions contemplated by
this Agreement.
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(iv) No Litigation. No injunction shall be outstanding which
would prevent consummation of the transactions contemplated by this Agreement.
No provision of any applicable domestic law or regulation, and no judgment,
injunction, order or decree of a governmental authority that has the effect of
making the Closing illegal or otherwise restrains or prohibits the Closing is in
effect (each party agreeing to use commercially reasonable efforts, including
appeals to higher courts, to have any such judgment, injunction, order or decree
lifted).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Except as set forth on an
appropriate Disclosure Schedule, Seller represents and warrants to Buyer that
the statements contained in this Section 5.1 are on the date hereof true and
correct and on the Closing Date will be, repeated true and correct as so made
again:
(a) Organization and Standing; Power and Authority.
(i) Seller is a corporation duly organized, validly existing
and in good standing under the laws of Canada, and has full corporate power and
authority to operate the Business, to own or lease the Acquired Assets, to carry
on the Business as now being conducted, and to make and perform this Agreement,
and the transactions and other agreements and instruments contemplated by this
Agreement. Seller is qualified to do business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect upon the Business or the Acquired Assets.
(ii) This Agreement has been, and all other agreements and
instruments to be executed and delivered by Seller in connection herewith have
been, or as of the Closing Date will have been, duly executed and delivered by
Seller. This Agreement constitutes, and the other agreements and instruments all
executed or to be executed by Seller in connection with the transactions
contemplated hereby constitute, or when executed and delivered by Seller will
constitute, the valid and binding obligations of Seller, enforceable in
accordance with their respective terms, except to the extent that enforceability
may be limited by bankruptcy, receivership, moratorium, conservatorship,
reorganization or other laws of general application affecting the rights of
creditors generally or by general principles of equity ("Debtor Relief Laws").
(iii) The execution, delivery and performance of this
Agreement and all other agreements and instruments to be executed and delivered
by Seller have been approved by all necessary corporate action by Seller.
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(b) Articles of Incorporation and By-Laws. The copies of the
Articles of Incorporation and By-Laws of Seller, certified by its Secretary and
delivered by Seller to Buyer, are true, correct and complete as of the date of
this Agreement and have not been amended or modified in any respect.
(c) Conflicts; Defaults.
(i) Neither the execution and delivery of this Agreement and
the other agreements and instruments executed in connection herewith by Seller,
nor the performance by Seller of the transactions contemplated hereby or
thereby, will (A) violate, conflict with, or constitute a default under, any of
the terms of Seller's Articles of Incorporation or By-Laws, or any provisions
thereof, or, subject to obtaining the Required Consents (as defined in Section
5.1(w)), result in the acceleration of any obligation under, any contract, sales
commitment, license, purchase order, security agreement, mortgage, note, deed,
lien, lease, agreement, instrument, order, judgment or decree relating to the
Business or the Acquired Assets, or by which Seller or the Acquired Assets are
bound, including the Contracts, (B) result in the creation or imposition of any
Liens in favor of any third person or entity upon any of the Acquired Assets,
(C) violate any law, statute, judgment, decree, order, rule or regulation of any
Governmental Authority, or (D) constitute an event which, after notice or lapse
of time or both, would result in such violation, conflict, default,
acceleration, or creation or imposition of Liens.
(ii) Seller is not, as of the date of this Agreement, in
violation of or in default under its Articles of Incorporation or By-Laws, or
any provision of any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease, agreement, instrument,
order, judgment or decree relating to the Business or the Acquired Assets, or by
which Seller or the Acquired Assets is bound, including the Contracts, or in the
payment of any of Seller's monetary obligations or debts, and there exists no
condition or event which, after notice or lapse of time or both, would result in
any such violation or default.
(d) Acquired Assets; Title; Required Consents.
(i) The Acquired Assets and the Retained Assets are the only
properties and assets owned by Seller. The Acquired Assets being conveyed to
Buyer under this Agreement constitute all of the assets used in or necessary to
conduct the Business in substantially the same manner as currently conducted by
Seller. The Acquired Assets set forth in the Net Current Asset Disclosure are
not stated in amounts in excess of their respective realizable values.
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(ii) Seller has good and indefeasible right, title and
interest in and to all of the Acquired Assets, and Seller has the right to use
and, subject to obtaining the Required Consents, to transfer to Buyer all of the
Acquired Assets. All of the Acquired Assets are free and clear of all Liens and
claims of any kind or nature whatsoever, except for the Liens set forth on
Schedule 5.1(d) (the "Permitted Encumbrances"). Except as disclosed on Schedule
5.1(d), all of the Acquired Assets are in the sole possession and under the sole
control of Seller. The delivery to Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good and indefeasible title
to the Acquired Assets in Buyer, free and clear of all Liens and claims of any
kind or nature whatsoever, except the Permitted Encumbrances.
(iii) Each leasehold interest in any personal property
("Leased Personal Property") or any real property ("Leased Real Property"),
which leasehold interest is part of the Acquired Assets, is in full force and
effect and enforceable against Seller and the other parties thereto, in
accordance with its terms, and there does not exist any material violation,
breach or default by Seller or to Seller's knowledge by any other party thereto,
thereof or thereunder.
(iv) The Tangible Personal Property and the Leased Personal
Property are in reasonably good operating condition and repair, reasonable wear
and tear excepted, and adequate for the intended purposes thereof and no
material maintenance, replacement or repair has been deferred or neglected. The
Leased Personal Property is in a condition suitable for return to the lessor of
such equipment, as required under the applicable lease therefor.
(v) The conveyance, sale, transfer and assignment of the
Acquired Assets does not require any consents or approvals of any entity,
individual or Governmental Authority other than the Required Consents (as
defined in Section 5.1(w));
(e) Real Property. Seller is the registered owner of an estate in
fee simple of and in the Real Property subject to:
(i) the Permitted Encumbrances registered against title to the
Real Property, which Permitted Encumbrances will not interfere with the use of
the Real Property in the Business as presently conducted by Seller;
(ii) the exceptions and reservations contained in the original
grant of the Real Property from the Crown;
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(iii) any exceptions, qualifications, reservations, liens,
estates or interests contained in, or implied by, The Land Titles Act
(Saskatchewan) with respect to Real Property; and
(iv) all applicable building and zoning by-law restrictions
and regulations set forth by any relevant governmental or municipal authority
having jurisdiction.
(f) Environmental and Safety Compliance. Except as disclosed on
Schedule 5.1(f):
(i) Neither (A) the operation of the Business by Seller or
agents under the direction and control of Seller, (B) the ownership, use or
operation of the Acquired Assets by Seller or agents under the direction and
control of Seller, nor (C) the manufacture or sale by Seller or agents under the
direction and control of Seller of the processes, results or products of Seller,
has violated or violates any foreign, federal, provincial or local statute, law,
common law, rule, regulation, ordinance or order relating to air, water or noise
pollution, employee health and safety, or the production, storage, labeling,
transportation or disposition of waste or hazardous or toxic substances,
(collectively, the "Environmental Laws"). Notwithstanding the foregoing,
Seller's operation of the Business complies only in all material respects with
any federal, provincial or local occupational, safety or health related laws or
regulations. Seller has not received notice of any violation of any of the
Environmental Laws, which has not been or is not being corrected, provided that
Seller makes no representation hereunder with respect to Buyer's operation of
the Business or the Acquired Assets after the Closing.
(ii) Seller has timely obtained all licenses and permits and
timely filed all reports required to be filed under the Environmental Laws.
(iii) Seller has not, and no other person has, stored any
chemical substances, including any hazardous substances, pollutants or
contaminants, or petroleum (including crude oil or any fraction thereof), all of
which are collectively referred to as "Chemical Substances", on, beneath or
about any of the properties to be transferred to Buyer in connection with
Seller's operations of the Business, except for inventories of such Chemical
Substances to be used, and wastes generated therefrom, in the ordinary course of
the business of Seller (which inventories and wastes, if any, were stored and
disposed of in compliance with the Environmental Laws, including storage so that
there was no release of any Chemical Substance to the environment which
violated, or created any liability or obligation under, the Environmental Laws).
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(iv) Seller has not, and no other person has, buried, dumped
or otherwise disposed of, or permitted the intentional or accidental release of,
any Chemical Substances, on, beneath or about the properties to be transferred
to Buyer in connection with Seller's operation of the Business.
(v) Seller has not received any notice from any Governmental
Authority or private or public entity advising Seller that it is potentially
responsible for response costs with respect to a release or threatened release
of hazardous substances, pollutants or contaminants in respect to the properties
to be transferred to Buyer.
(vi) Seller has not, and no other person has installed, used,
owned or operated any underground storage tank on or beneath the properties to
be transferred to Buyer in connection with Seller's operation of the Business.
(vii) There are no polychlorinated biphenyls,
asbestos-containing materials or radioactive substances on, beneath or about the
properties to be transferred to Buyer in connection with Seller's operation of
the Business.
(viii) To Seller's knowledge, no environmental approvals,
clearances or consents are required under applicable law from any entity or
authority in order for the parties to consummate the transactions contemplated
by this Agreement (other than such as correspond to Licenses and Permits) or for
Buyer to transact the Business after the Closing Date.
(ix) Seller has disclosed, prior to the date of this
Agreement, its waste practices, its use of Chemical Substances and all
potentially material environmental matters and has disclosed all material
reports, assessments, remedial action plans or other similar documents relating
to the environmental condition of Seller's properties to be transferred to Buyer
and operations.
(g) Leases. Schedule 1.1(j) contains a description of all real and
personal property leased by Seller in the conduct of the Business and all Leases
thereto.
(i) True, complete and accurate copies of all Leases, together
with all amendments thereto, have previously been provided to Buyer. With
respect to any Lease to which Seller is a party, Seller warrants that: (a) each
such Lease has been duly authorized and executed by Seller, has not been
modified, altered, terminated or revoked and is in full force and effect; and
(b) Seller, as the present tenant under the Leases, is not in default under or
in breach of any of such Leases. Seller knows of no existing fact or condition
which could give rise to any such breach or default, or any claim against
Seller, under the Leases. To the best of Seller's knowledge, the present lessors
under the Leases
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are not in default thereunder, or in breach thereof, and Seller knows of no
existing fact or condition which could give rise to any such breach or default,
or any claim against such lessors under such leases.
(ii) Taxes. To Seller's knowledge, there are no taxes or local
improvement levies payable by Seller other than ordinary property taxes pending,
business and occupation tax payable against the Real Property.
(iii) Utilities. All water, sewer, gas, electric, telephone,
drainage and other utility equipment required by law or necessary for the
current operation of the Real Property are installed and connected to the Real
Property and such utilities are available in sufficient quantities and such
connections are adequate to service the Real Property as it is currently used
and operated.
(iv) Conditions Except as set forth on Schedule 5.1(g), to
Seller's knowledge, there are no material defects in the physical condition of
any improvements constituting a part of the Real Property.
(v) Compliance with Law; Government Approvals. Seller has
received no notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect to
any of the Real Property that has not been corrected heretofore and no such
violation exists which could have a material adverse effect.
(h) Contracts. Each of the Listed Contracts as set forth on Schedule
1.1(h) is in full force and effect, and is a legal, binding and enforceable
obligation of Seller and, to Seller's knowledge, of the other parties thereto or
against the parties thereto, subject to the Debtor Relief Laws. Neither Seller
nor, to Seller's knowledge, any other party to any Contract is currently in
breach or has improperly terminated any such Contract, or is in default under
any Contract by which it is bound, and there exists no condition or event which,
after notice or lapse of time or both, would constitute any such breach,
termination or default. Except where third party consent to disclose has not
been obtained, Seller has delivered to Buyer true, correct and complete copies
of such Contracts, an accurate and complete description of such oral Contracts,
if any, and all modifications and amendments thereto.
(i) Financial Statements of Seller.
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(i) In respect to the Business, Seller has delivered to Buyer
its unaudited financial statements including: (i) Balance Sheets, (ii)
Statements of Income and (iii) Statements of Cash Flow for the fiscal years
ended 1995, 1996 and 1997 (collectively, the "Financial Statements", copies of
which are attached hereto as Schedule 5.1(i)). The Financial Statements have
been prepared in accordance with U.S. generally accepted accounting principles
consistently followed throughout the periods covered by such statements, and, at
the statement dates and for the periods of the income statements, present
fairly, in all material respects, the assets, liabilities, financial position
and results of operations of the Business.
(ii) The Net Current Asset Disclosure has been prepared in
accordance with U.S. generally accepted accounting principles.
(j) Liabilities. Seller has no liabilities or obligations (in excess
of $50,000 individually or $100,000 in the aggregate) of any nature whatsoever,
whether absolute, accrued, contingent or otherwise, except for those (i)
reflected or reserved on the Net Current Asset Disclosure or Closing Date Net
Current Asset Disclosure (ii) incurred or accrued since February 6, 1998 in
transactions involving the purchase or sale of goods and services in the
ordinary course of business, and consistent with the representations,
warranties, covenants, obligations and agreements contained herein, or (iii)
under the Contracts (exclusive of any liabilities or obligations which arise
from defaults thereunder or breaches thereof prior to the Closing). There exists
no event or circumstance which, after notice or lapse of time or both, might
create any other obligations or liabilities of Seller with respect to the
Business.
(k) Accounts Receivable. All Accounts Receivable reflected on the
Net Current Asset Disclosure have arisen in the ordinary course of the Business
and are collectible in accordance with their terms net of any respective
reserves shown on the Seller's books and records as of the date hereof. All
Accounts Receivable represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. There is no
contest, claim or right of set-off, other than rebates and returns or exchanges
in kind arisen in the ordinary course of business, under any contract with any
obligor of an Account Receivable relating to the contract or validity of such
Account Receivable.
(l) Inventories. All of Seller's Inventory reflected on the Net
Current Asset Disclosure or Closing Date Net Current Asset Disclosure are usable
or salable in the ordinary and normal course of business, of which the value is
carried at the lower of cost or market and reflects write-offs, write-downs or
reserves for damaged, excess or obsolete items in accordance with the historical
inventory policy and practices of Seller.
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(m) Pending Litigation. Except as set forth on Schedule 5.1(m),
there is no litigation, claim, action, suit, proceeding, governmental
investigation or inquiry pending or, to Seller's knowledge, threatened, against
or in any manner involving Seller, relating to the Business, the Acquired
Assets, the Assumed Liabilities or the transactions contemplated hereby. Seller
is not subject to any judgment, decree, injunction, award or order outstanding
relating to the Business or the Acquired Assets or the transactions contemplated
hereby.
(n) Customers and Suppliers. Except for employees of Seller, no
parties or individuals other than those listed on Schedule 5.1(n) have had
access to its customer lists, and Seller has maintained reasonably adequate
measures to maintain the confidentiality of its customer lists. Since September
30, 1997, no substantial supplier has: (i) stopped, or indicated an intention to
stop, trading with or supplying Seller, (ii) reduced, or indicated an intention
to reduce, substantially its trading with or provision of goods or services to
Seller, or (iii) changed, or indicated an intention to change, materially the
terms and conditions on which it is prepared to trade with or supply Seller. No
substantial supplier has informed Seller that, as a result of the transactions
contemplated by this Agreement, that it intends to (i) not trade with or supply
Buyer, (ii) reduce substantially its trading with or provision of goods or
services to Buyer, or (iii) change the terms and conditions on which it is
prepared to trade with or supply Buyer, as compared to Seller. Seller has no
knowledge of any facts, conditions or events which might give rise to a claim by
Seller against any of its suppliers or any claim by a supplier against Seller.
Seller has not entered into any agreement or commitment with suppliers, except
in the ordinary course, consistent with past practice. Except as set forth on
Schedule 5.1(n), none of Seller's suppliers of materials to the Business is the
sole source of such supply.
(o) Regulatory Compliance. The Business has been conducted, and the
Acquired Assets have been owned, used, operated and maintained, in full
compliance with all applicable laws, regulations and other requirements of
Governmental Authorities. Seller is not now in violation of any applicable laws,
regulations or orders of any Governmental Authority, and no material
expenditures are or will be required in order for the conduct of the Business or
the ownership, use, operation or maintenance of the Acquired Assets to comply
with any applicable laws, regulations or orders of any Governmental Authorities.
(p) Brokers, Finders and Agents. Except for BT Alex. Brown
Incorporated, whose fees and expenses shall be the sole responsibility of Seller
or its Affiliates, Seller is not directly or indirectly obligated to anyone
acting as a broker, finder or in any other similar capacity in connection with
this Agreement or the transactions contemplated hereby.
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(q) Intellectual Property. Except as set forth on Schedule 1.1(g),
Seller owns or has the exclusive right to use, free and clear of any payment,
restriction or encumbrance, all Intellectual Property owned by Seller or used in
the conduct of the Business as presently conducted. There is no claim or demand
of any person pertaining to, or any proceedings which are pending or, to the
best of Seller's knowledge, threatened, which relate to any Intellectual
Property owned by Seller or used in the conduct of the Business as presently
conducted. No Intellectual Property owned by Seller or used in the conduct of
the Business as presently conducted is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any Governmental Authority or
infringes, violates or constitutes a misappropriation of the rights of others,
or is being infringed, violated or misappropriated by others or used by others
(whether or not such use constitutes infringement). The Business does not
involve employment of any person in a manner which violates any non-competition
or non-disclosure agreement which such person entered into in connection with
any former employment. All statements of fact contained in any application for
patents in any country, for trademark registration in any country or copyright
registration in any country, that were filed by or on behalf of Seller are true,
accurate, and complete in every material respect, and are in material compliance
with applicable patent laws, and all pending patent applications, issued
patents, pending trademark registration applications and copyright registration
applications, and issued trademark and copyright registrations have been duly
and properly filed.
(r) Licenses and Permits. Set forth on Schedule 1.1(i) is a true and
complete list of all Licenses and Permits. The Licenses and Permits include all
licenses, permits and other authorizations from all Governmental Authorities (i)
currently used by Seller in connection with the Business, or (ii) required to
permit Seller to operate the Business in the manner in which it presently is
conducted.
(s) Labor Matters. Except as set forth on Schedule 5.1(s), with
respect to employees of and service providers to Seller:
(i) Seller is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Saskatchewan Human Rights Code and
occupational safety and health requirements, and has not and is not engaged in
any unfair labor practice; and no sex, age, disability, gender, race or
religious discrimination claim has been made against Seller;
(ii) there is not now, nor within the past three years has
there been any unfair labor practice complaint against Seller pending or
threatened before the Saskatchewan Labor Relations Board or any other comparable
authority; there is not now,
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nor within the past three years has there been any labor strike, lock-out,
slowdown or work stoppage actually pending or threatened against or directly
affecting the Business; no labor representation organization effort exists nor
has there been any such activity within the past three years; and no grievance
or any arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claims therefor exist or have been threatened;
(iii) except those employees subject to the Collective
Agreement (as defined in Section 6.12(a)), all employees of Seller are employed
on an at-will basis and may be terminated without cause and without penalty or
liability to Seller; and
(iv) All individuals who are or were performing services and
are or were classified as "independent contractors" for tax purposes qualify or
qualified for such classification, and Seller has fully and accurately reported
their compensation on the applicable tax form.
(t) Employee Plans.
(i) Disclosure. Schedule 5.1(t) contains a list of all
pension, bonus, profit sharing, retirement, employee share option, deferred
compensation, welfare, insurance, disability, salary continuation and other
similar plans, programs and agreements, currently maintained by Seller for the
benefit of employees of Seller employed in the conduct of the Business
("Employee Benefit Plans"). The pension plans included in the Employee Benefit
Plans are registered under and are in material compliance with all applicable
federal and provincial legislation, and all reports, returns and filings
required to be made thereunder have been made except where the failure to do so
would not have a material adverse effect. Such pension plans have been
administered in material compliance with their terms and the provisions of
applicable law. Each such pension plan has been funded in accordance with the
requirements of such plans and based on actuarial assumptions which are
appropriate to the employees of the Business. Based on such assumptions, to the
knowledge of Seller, there is no unfunded liability under any such pension plan.
No funds have been withdrawn by Seller from any such pension plan or other
Employee Benefit Plan. No Employee Benefit Plan is the subject of any law suit,
arbitration or other proceeding concerning any benefit claim, breach of
fiduciary duty or other matter, whether brought by or against a participant, a
beneficiary, a trustee, a plan administrator, Seller or any officer, employee or
director thereof.
(ii) Claims and Litigation. Except as set forth on Schedule
5.1(t), there are no pending or, to Seller's knowledge, threatened claims, suits
or other proceedings by present or former employees of Seller employed by Seller
in the conduct of the Business, plan participants, beneficiaries or spouses of
any of the above with respect
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to or involving any of Seller's Employee Benefit Plans, or any rights or
benefits thereunder, other than claims by participants or beneficiaries of such
Plans for ordinary and usual benefits to which such beneficiaries of
participants are entitled under the terms of such Plans.
(u) Taxes. Seller has timely filed or received an appropriate time
extension for the filing of all federal, provincial, local and foreign income,
personal property, withholding, excise, unemployment, sales, goods and services
and franchise tax returns and reports relating to Seller and the Business due as
of the date hereof, and has fully paid and discharged all taxes due as indicated
on such returns. Except as set forth in Schedule 5.1(u), no deficiencies for any
taxes, assessment or other governmental charges have been asserted in writing or
assessed against Seller which remain unpaid. Seller is not under audit with
respect to any sales or income taxes related to the Business.
(v) [INTENTIONALLY OMITTED]
(w) Required Consents. Except as described on Schedule 5.1(w), no
consent, approval, order or authorization of or from, or registration,
notification, declaration or filing with any individual, entity or Governmental
Authority (collectively, "Required Consents") is required in connection with the
execution, delivery or performance of this Agreement by Seller or the
consummation by Seller of the transactions contemplated herein.
(x) Absence of Certain Changes. Since December 31, 1997, except as
set forth on Schedule 5.1(x) and Schedule 4.4(a)(v), there has not been:
(i) any Material Adverse Change;
(ii) any acquisition or disposition of any asset or property,
or any agreement to do the same other than in the ordinary and regular course of
business;
(iii) created, incurred or permitted to exist any Lien on any
of the Acquired Assets, except for Permitted Encumbrances;
(iv) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting, either in any case or in the
aggregate, the financial condition, results of operations or properties of the
Business;
(v) any increase in salary, bonuses or other compensation of
any officers, employees, agents or independent contracts employed by Seller,
except in the ordinary course of business, consistent with past practice, or any
increase in executive
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compensation nor has Seller entered into any employment, severance or other
agreements, in a manner that increases liabilities;
(vi) any individual capital expenditures in excess of $50,000
related to the Business;
(vii) any non-cash dividend or non-cash distribution out of
the Business;
(viii) any change in accounting methods or practices, credit
practices or collection policies used by Seller that would affect the Financial
Statements; or
(ix) any other event or condition experienced by Seller of any
character which has materially adversely affected or could so materially
adversely affect the assets, liabilities, financial position, results or
operations, net worth or prospects of Seller.
(y) Books and Records. The Books and Records are complete and
correct in all material respects. Seller has made available to Buyer for
examination the original or true and correct copies of all the Books and
Records.
(z) Affiliate Transactions. No director, officer or employee of any
Affiliate of Seller, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with Seller.
(aa) Accuracy of Representations. None of the representations,
warranties or statements of Seller contained in this Agreement, in the Schedules
and Exhibits hereto or in any other agreement or instrument executed or
delivered by or on behalf of Seller at the Closing in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the representations, warranties or statements made, in the
context in which made, not false or misleading.
(bb) Goods and Services Exemption. Seller is registered for purposes
of the GST Legislation, and the Acquired Assets comprise all or substantially
all of the property used in the Business.
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(cc) Zoning and Building Restrictions. The improvements on the Real
Property comply with all applicable building and zoning restrictions and
regulations. The Real Property is zoned in a manner which permits its present
use. There are no outstanding work orders by any governmental authority
respecting the Real Property or the improvements located thereon.
5.2 Representations and Warranties of Buyer. Buyer represents and warrants
to Seller that the statements contained in this Section 5.2 are on the date
hereof true and correct and on the Closing Date will be repeated true and
correct as so made again:
(a) Organization and Standing; Power and Authority.
(i) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the District of Columbia, and has full
corporate power and authority to make and perform this Agreement, and to perform
the transactions contemplated by this Agreement.
(ii) This Agreement has been, and all other agreements and
instruments to be executed and delivered by Buyer in connection herewith have
been, or as of the Closing Date will have been, duly executed and delivered by
Buyer. This Agreement constitutes, and the other agreements and instruments all
executed or to be executed by Buyer in connection with the transactions
contemplated hereby constitute, or when executed and delivered by Buyer will
constitute, the valid and binding obligations of Buyer, enforceable in
accordance with their respective terms, except to the extent that enforceability
may be limited by Debtor Relief Laws.
(iii) The execution, delivery and performance of this
Agreement and all other agreements and instruments to be executed and delivered
by Buyer have been approved by all necessary corporate action by Buyer.
(b) Articles of Incorporation and By-Laws. The copies of the
Articles of Incorporation and By-Laws of Buyer, certified by its Secretary and
delivered by Buyer to Seller, are true, correct and complete as of the date of
this Agreement and have not been amended or modified in any respect.
(c) Conflicts; Defaults.
(i) Neither the execution and delivery of this Agreement and
the other agreements and instruments executed in connection herewith by Buyer,
nor the performance by Buyer of the transactions contemplated hereby or thereby,
will (A) violate, conflict with, or constitute a default under, any of the terms
of Buyer's Articles of Incorporation or By-Laws, or any provisions of, or result
in the acceleration of any
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obligation under, any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease, agreement, instrument,
order, judgment or decree to which Buyer is party or subject, (B) result in the
creation or imposition of any Liens in favor of any third person or entity upon
any of the assets of Buyer, (C) violate any law, statute, judgment, decree,
order, rule or regulation of any Governmental Authority, or (D) constitute an
event which, after notice or lapse of time or both, would result in such
violation, conflict, default, acceleration, or creation or imposition of Liens.
(ii) Buyer is not, as of the date of this Agreement, in
violation of or in default under its Articles of Incorporation or By-Laws, or
any provision of any contract, sales commitment, license, purchase order,
security agreement, mortgage, note, deed, lien, lease, agreement, instrument,
order, judgment or decree relating to its business, or by which Buyer is bound
or in the payment of any of Buyer's monetary obligations or debts.
(d) Brokers, Finders and Agents. Buyer is not directly or indirectly
obligated to anyone as a broker, finder or in any other similar capacity in
connection with this Agreement or the transactions contemplated hereby.
(e) Required Consents. To the knowledge of Buyer, all Required
Consents, which must be obtained or satisfied by Buyer for the consummation of
the transactions contemplated by this Agreement have been obtained and
satisfied.
(f) Pending Litigation. Except as set forth on Schedule 5.2(f), no
action, suit, or proceeding is pending or, to Buyer's knowledge, threatened
against it before any court or quasi-judicial or administrative agency of any
federal, provincial, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
which would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (iii) affect adversely the
right of Buyer to own the Acquired Assets and to operate the Business and no
written notice of the initiation of any such action, suit or proceeding has been
received.
(g) Accuracy of Representations. None of the representations,
warranties or statements of Buyer contained in this Agreement or in any other
agreement or instrument executed or delivered by or on behalf of Buyer at the
Closing in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the representations,
warranties or statements made, in the context in which made, not false or
misleading.
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ARTICLE VI
COVENANTS OF SELLER
6.1 Notice of Claims. Seller covenants and agrees with Buyer that for the
first twelve (12) months after the Closing Date, it shall give Buyer ten (10)
days' prior written notice of its intent to assert any claim against any former
supplier of Seller which, at the time of the assertion, is a supplier of Buyer.
6.2 Maintenance of, and Access to, Records. After the Closing Date, Seller
shall provide Buyer with reasonable access (with an opportunity to make copies
at Buyer's expense), during normal business hours, and upon reasonable advance
notice, to all books records relating to the Business which are retained by it
in accordance with this Agreement. Seller shall preserve and maintain the books
and records relating to the Business retained by Seller for at least seven (7)
years after the Closing Date or longer if required by any governmental agency.
6.3 Non-Solicitation. During the period commencing on the Closing Date and
through and until the date five (5) years after the Closing Date, Seller and its
Affiliates shall not, for any reason whatsoever, directly or indirectly, call
upon or solicit any Covered Employee for the purpose or with the intent of
enticing such employee away from or out of the employ of Buyer. As used herein,
"Covered Employee" means an employee of Seller on the Closing Date who accepts
employment with Buyer on or promptly after the Closing Date.
6.4 Limitations on Assignability. To the extent that any of the contract
rights of Seller to be sold, transferred or assigned hereunder are not
assignable without the consent of a third party, neither this Agreement, nor any
of the instruments or documents executed and delivered in connection herewith or
contemplated hereby, shall constitute an assignment or assumption thereof, or
attempted assignment or attempted assumption thereof, if such assignment or
attempted assignment, or assumption or attempted assumption, would constitute a
breach thereof. If Seller has not obtained a consent or approval necessary for
the assignment of any contract right to be assigned hereunder, then Seller shall
use commercially reasonable efforts where required by Buyer to obtain such
consents and approvals after the Closing, or, at Buyer's request, shall
cooperate in any reasonable and mutually acceptable arrangement to provide to
Buyer the benefits thereof subject to the performance by Buyer of Seller's
obligations arising or to be performed after the Closing thereunder. Nothing
contained in this Section 6.4 shall require Buyer to enter into, or to accept as
a substitute for performance by Seller hereunder, any arrangement that would
impose any additional cost, expense or liability on Buyer, or that would deprive
Buyer of any benefits contemplated by this Agreement. In respect to any Contract
that is not a Listed Contract nor is required to be a Listed Contract under
Schedule 1.1(h), and
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provided Seller provides a list of such Contracts prior to Closing, Buyer shall
have the option to assume or reject any such Contracts. In the event Buyer
elects to assume such a Contract, Buyer shall assume its liabilities and
obligations pursuant to Section 2.1(c). In the event Buyer elects to reject such
a Contract, Seller shall retain all rights, obligations and liabilities
associated therewith. In respect to any Contract that is not a Listed Contract
nor is required to be a Listed Contract under Schedule 1.1(h) of which Seller
does not provide notice prior to Closing, Buyer shall assume any such Contracts,
provided that if Buyer incurs any net loss by reason of any such assumption
Seller shall reimburse Buyer for Buyer's losses with respect to all such
Contracts in excess of $25,000 in the aggregate.
6.5 Pre-Closing Operations of Seller. Except as contemplated by this
Agreement or as otherwise approved in writing by Buyer, from the date hereof
until the Closing Date, Seller will conduct the Business in the ordinary course
consistent with past practice (including, but not limited to, payment of all
accounts payable as they come due consistent with past practice). Buyer shall
have no access to Seller's employees or facilities except pursuant to Section
6.6. Subject to the foregoing exceptions, from the date hereof until the Closing
Date:
(a) Mergers and Sales. Seller will not merge, consolidate, or enter
into a share exchange with any other corporation or other business entity,
acquire any material stock or any material amount of assets of any other
corporation or business entity, sell, lease, license, mortgage, pledge, or
otherwise dispose of any material assets;
(b) New Commitments; Non-Disclosure. Seller will not make any
commitment or enter into any contract or agreement that is not in the ordinary
course of business consistent with past practice, and neither Seller, nor any
officer, employee, agent or representative of Seller shall sell or disclose
Seller's customer lists to any third party except in the ordinary course of
business consistent with past practice and to third parties as disclosed in
Schedule 5.1(n); and
(c) Compensation Increase. Seller will not increase in any manner
the compensation or fringe benefits of any of its directors or officers, pay any
pension or retirement allowance to any directors or officers, or become a party
to, amend, or commit itself to any pension, retirement, profit-sharing, welfare
benefit plan, or employment agreement with or for the benefit of any director or
officer or amend any Seller Plan or Seller Benefit Arrangement, other than
general increases in the compensation of, and the payment of bonuses to,
officers in the ordinary course of business consistent with past practice.
6.6 Access to Records and Information. From the date hereof until the
Closing Date, Seller will, upon reasonable advance notice, give Buyer's
authorized representatives reasonable access during regular business hours to
the offices, properties, books, and
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<PAGE> 34
records of Seller, and will furnish to its authorized representatives such
financial and operating data and other information as such persons may
reasonably request, for the purpose of evaluating changes in the financial
condition, results of operations, or business of Seller after the date of this
Agreement except any information in respect to prices or other competitive
practices of Seller and will instruct Seller's employees having custody of such
data, counsel, and financial advisors to cooperate with Buyer in its evaluation.
Buyer shall communicate with respect to obtaining such data only with such
employees of Seller as Seller has designated to Buyer in advance.
6.7 No Solicitation of Offers. Except as permitted in the Master
Agreement, Seller shall use its best efforts to ensure that it does not take,
directly or indirectly, any of the following actions with any party other than
Buyer or its designees: (i) solicit, initiate, or participate in any
negotiations, inquiries or discussions with respect to any Acquisition Proposal
(as defined in the Master Agreement); (ii) disclose, in connection with an
Acquisition Proposal, any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, any effort or attempt by any other
person to do or seek any of the foregoing; (iii) enter into or execute any
agreement relating to an Acquisition Proposal; or (iv) make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Proposal other than with respect to the transactions contemplated by this
Agreement.
6.8 Notices of Certain Events. In addition to any notices required under
the Master Agreement, Seller shall promptly notify Buyer of the following:
(a) Notice of Third Party that Consent is Required. Any notice or
other communication from any person alleging that the consent of any third party
is or may be required in connection with the transactions contemplated by this
Agreement;
(b) Notice from Governmental Authority. Any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement;
(c) Legal Proceedings. Any actions, suits, claims, investigations,
or proceedings commenced or threatened against, relating to, or involving or
otherwise affecting Seller that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant hereto or that relate to the
consummation of the transactions contemplated by this Agreement; and
(d) Agreement Default. Any notice of, or other communication
relating to, a default, or an event with notice or lapse of time or both would
become a default,
29
<PAGE> 35
under any material agreement that is received by Seller subsequent to the date
of this Agreement.
6.9 Commercially Reasonable Efforts. Subject to the terms and conditions
of this Agreement, Seller will use its commercially reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or advisable under applicable laws or regulations to consummate the
transactions contemplated by this Agreement, and will use commercially
reasonable efforts to obtain such approvals and take such actions as are
necessary, including without limitation using its best efforts to obtain all
consents of any Person, whether private or governmental, so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby.
6.10 Risk of Loss. Seller will bear the risk of loss or damage to the
Acquired Assets resulting from fire, theft, or other casualty at all times prior
to and on the Closing. If any such loss or damage is so substantial as to
prevent normal operation of any material portion of Seller's Business or the
replacement or restoration of the lost or damaged material Asset within thirty
(30) days after the occurrence of the event resulting in such loss or damage,
Seller will immediately notify Buyer and Buyer, at any time within ten (10) days
after receipt of such notice, may elect by written notice to Seller either (a)
to waive such defect and proceed toward consummation of the acquisition of the
Acquired Assets in accordance with the terms hereof, or (b) terminate this
Agreement. If Buyer elects to consummate the transactions contemplated by this
Agreement, there will be no separate adjustment in the Canadian Purchase Price
related to such loss or damage but all insurance proceeds payable as a result of
the occurrence of the event resulting in such loss or damage will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer and Seller will pay to Buyer (or Buyer may withhold from the Canadian
Purchase Price) an amount equal to any deductible amount charged to Seller
against the proceeds due for such loss.
6.11 Employment of Employees; Benefits. At or prior to the Closing, Buyer
shall offer employment as of the Closing Date to all employees of Seller
employed by Seller in the conduct of the Business to whom it would be legal for
Buyer to offer employment at Seller's facility located in Saskatoon,
Saskatchewan (the "Transferred Employees"). The Transferred Employees shall be
listed on Schedule 6.11 to be provided at Closing. Schedule 6.11 shall also set
forth each Transferred Employee's salary level, years of uninterrupted
employment and years of service for benefit plan purposes. Buyer shall offer
employment to each Transferred Employee at the same or substantially equivalent
cash compensation as that provided by Seller to Transferred Employee immediately
prior to the Closing Date.
30
<PAGE> 36
6.12 Employee Benefits Plans.
(a) For purposes hereof, "Collective Agreement" means the collective
bargaining agreement respecting the unionized employees of the Business. Buyer
agrees that, as of the Closing Date, it shall become the successor employer
under the terms of the Collective Agreement and Buyer agrees that it shall
advise the Transferred Employees who are subject to the Collective Agreement
that they will be employed by Buyer as of and from the Closing Date, subject to
the terms of the Collective Agreement. Buyer and Seller shall jointly give
notice to the Transferred Employees in respect of the purchase and sale of the
Acquired Assets pursuant to this Agreement and the consequential change of
employer from Seller to Buyer.
(b) If Buyer terminates the employment of any employee of the
Business after Closing, Buyer shall be responsible for all obligations incurred
after Closing and in connection with such termination.
ARTICLE VII
COVENANTS OF BUYER
7.1 Maintenance of, and Access to, Records. Buyer shall provide Seller
with reasonable access (with an opportunity to make copies at Seller's expense)
during normal business hours, and upon reasonable advance notice, to all books
and records turned over to Buyer in accordance with this Agreement. Buyer shall
preserve and maintain such books and records for at least seven (7) years after
the Closing Date or longer if required by guidelines of any governmental
authority.
7.2 Commercially Reasonable Efforts. Subject to the terms and conditions
of this Agreement, Buyer will use its commercially reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, and will use commercially
reasonable efforts to obtain such approvals and take such actions as are
necessary, including without limitation using its best efforts to obtain all
consents of any Person, whether private or governmental, so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby.
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<PAGE> 37
ARTICLE VIII
OTHER COVENANTS
Seller and Buyer will jointly execute in prescribed form, and Buyer will
file within the required time, an election under subsection 167(1) of the Excise
Tax Act (Canada) that no tax be payable pursuant to the GST Legislation with
respect to the purchase and sale of the Acquired Assets hereunder.
ARTICLE IX
INDEMNIFICATION
The indemnification provisions of the Master Agreement shall apply to
Buyer and Seller, and in addition, in the event the sale of the Acquired Assets
pursuant to the terms of this Agreement is not eligible for the joint election
or Revenue Canada, Customs & Excise, does not accept such an election by Seller
and Buyer, Buyer shall indemnify and save harmless Seller from any goods and
services tax, penalties, interest or other amounts which may be payable by or
assessed against Seller under the Excise Tax Act (Canada).
ARTICLE X
TERMINATION
10.1 Termination Events. Subject to the other provisions of this Article
X, this Agreement may, by written notice given at or prior to the Closing in the
manner hereinafter provided, be terminated and abandoned:
(a) By Buyer or Seller upon termination of the Master Agreement;
(b) By mutual written consent of Seller and Buyer;
(c) By Buyer pursuant to Section 4.4(a);
(d) By Seller pursuant to Section 4.4(b);
(e) As otherwise provided in Article 12 of the Master Agreement; or
(f) By Buyer pursuant to Section 6.10.
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<PAGE> 38
10.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 10.1, all further obligations of the parties hereunder shall
terminate, except as provided in Section 12.2 of the Master Agreement. No
termination of this Agreement shall act to terminate or otherwise impair the
obligations set forth in Section 13.4 of the Master Agreement (Expenses).
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations and Warranties. All covenants and
obligations to be performed after the Closing Date contained in this Agreement
or in any other certificate or document delivered pursuant to this Agreement
shall survive the Closing and expire in accordance with their respective terms.
All representations and warranties contained in this Agreement or in any other
certificate or document delivered pursuant to this Agreement shall survive the
Closing for a period of eighteen (18) months; provided, however, that any
representations and warranties contained herein related to tax, benefits and
environmental matters, and the indemnification obligation under Article IX of
this Agreement shall survive the Closing for a period of six (6) months beyond
the applicable federal or provincial statute of limitations (including
extensions thereto). The waiver of any condition, based upon the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement, or other remedy based upon such representations, warranties,
covenants or obligations.
11.2 Amendments. This Agreement may be amended only by a written agreement
signed by Seller and Buyer.
11.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered or sent in accordance with Section 13.3 of the Master
Agreement.
11.4 [INTENTIONALLY OMITTED]
11.5 Waiver. Waiver of any term or condition of this Agreement by any
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
33
<PAGE> 39
11.6 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, constitutes the entire agreement, and supersedes all other
prior agreements (except as identified in the Master Agreement) and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter thereof.
11.8 Assignment. This Agreement shall not be assigned by either Buyer or
Seller or by operation of law or otherwise, except with the written consent of
the other party; provided, however, that Buyer shall be permitted to assign this
Agreement as set forth in Section 13.8 of the Master Agreement. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
11.9 Governing Law; Time of the Essence. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
(excluding the conflict of laws provisions thereof). Time is of the essence in
the performance of this Agreement.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.
11.11 Publicity. No press releases or public disclosure, written or oral,
of the transactions contemplated by this Agreement shall be made by Buyer or
Seller except in accordance with Section 13.11 of the Master Agreement.
11.12 Jurisdiction. In the event that any dispute should arise between
Buyer and Seller with respect to any matter covered by this Agreement (other
than disputes described in Section 3.3(c)), the parties hereto consent to the
sole and exclusive jurisdiction of the state and federal courts of the United
States and the State of Delaware located in Dover, Delaware in connection with
the adjudication of any such dispute.
11.13 Legal Fees. In the event of any litigation between Seller and Buyer
arising out of this Agreement, the party prevailing in such litigation shall be
entitled to have its reasonable attorneys' fees and expenses reimbursed by the
other party.
11.14 Actions. The parties will execute and deliver to the other, from
time to time at or after the Closing, for no additional consideration and at no
additional cost to the requesting party, such further assignments, certificates,
instruments, records, or other
34
<PAGE> 40
documents, assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy and exercise the
rights accorded and acquired by it under this Agreement.
11.15 Terms. All capitalized terms used herein shall have the meanings
specified in this Agreement, or, if not so specified, the meanings specified in
the Master Agreement. The word "include" and derivatives of that word are used
in this Agreement in an illustrative sense rather than limiting sense. The term
"Buyer's knowledge" or "Seller's knowledge" or words of similar import or
limitation means the actual knowledge or conscious awareness, without
independent investigation, of any executive officer of Buyer or Seller, as the
case may be.
11.16 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against either party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
11.17 Third Parties. Nothing expressed or implied herein is intended, or
shall be construed, to confer upon or give any person or entity, including any
employee of Seller, other than Seller and Buyer any rights or remedies under or
by reason of this Agreement.
[Signature Page Following]
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<PAGE> 41
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
BUYER
DISTRICT PHOTO INC.
By:________________________________
Name:
Title:
SELLER
NASHUA PHOTO LIMITED
By:________________________________
Name:
Title:
36
<PAGE> 1
EXHIBIT 11.01
-------------
NASHUA CORPORATION
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
(In thousands, except per share data)
Year Ended December 31,
-------------------------------------
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Income (loss) from continuing operations $(6,006) $ 19,575 $(20,878)
Income (loss) from discontinued operations, net of taxes (2,816) (2,558) 6,147
Gain on sale of discontinued operation, net of taxes -- 8,434 --
------- -------- --------
Income (loss) before extraordinary loss (8,822) 25,451 (14,731)
Extraordinary loss on extinguishment of debt, net of tax benefit -- (1,257) --
------- -------- --------
Net income (loss) $(8,822) $ 24,194 $(14,731)
======== ======== =========
Shares:
Weighted average common shares
outstanding during the period 6,385 6,378 6,374
Common equivalent shares -- 24 --
------- -------- --------
6,385 6,402 6,374
======= ======== ========
Earnings (loss) per common share(1):
Income (loss) from continuing operations $ (.94) $ 3.07 $ (3.28)
Income (loss) from discontinued operations (.44) (.40) .97
Gain on sale of discontinued operation -- 1.32 --
------- -------- --------
Income (loss) before extraordinary loss (1.38) 3.99 (2.31)
Extraordinary loss on extinguishment of debt -- (.20) --
------- -------- --------
Net income (loss) $ (1.38) $ 3.79 $ (2.31)
======== ======== =========
</TABLE>
(1) The computation of earnings (loss) per common share on a fully diluted
basis for the years ended December 31, 1997 and 1995 results in no change to the
earnings per common share amounts indicated above.
For the year ended December 31, 1996, income from continuing operations per
common share assuming dilution was $3.06 and net income per common share
assuming dilution was $3.78.
-16-
<PAGE> 1
Nashua Corporation and Subsidiaries
FIVE YEAR FINANCIAL REVIEW
<TABLE>
<CAPTION>
(In thousands, except per share data,
number of employees and percentages) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net sales $ 173,202 $ 218,310 $ 273,062 $ 273,447 $ 278,825
Gross margin percentage 23.1% 22.2% 15.7% 17.5% 19.2%
Selling, distribution and administrative
expenses as a percentage of sales 22.3% 20.7% 15.3% 17.7% 17.8%
Income (loss) before interest expense
and taxes as a percentage of sales(1) (5.7)% 16.3% (8.6)% (4.2)% (5.2)%
Income (loss) before taxes as a percentage of sales(1) (5.8)% 15.1% (10.6)% (5.1)% (6.0)%
Income (loss) as a percentage of sales(1) (3.5)% 9.0% (7.6)% (13.1)% (3.7)%
Effective tax rate (39.9)% 40.5% (28.0)% (38.7)% (39.4)%
Income (loss) before income taxes(1) $ (9,994) $ 32,922 $ (28,996) $ (13,850) $ (16,815)
Income (loss) after taxes(1) (6,006) 19,575 (20,878) (8,486) (10,194)
Income (loss) from discontinued operations (2,816) (2,558) 6,147 10,633 (8,975)
Gain on disposal of discontinued operation -- 8,434 -- -- --
Extraordinary loss -- (1,257) -- -- --
Net income (loss) (8,822) 24,194 (14,731) 2,147 (19,169)
Earnings (loss) per common share(2)
Continuing operations(1) $ (.94) $ 3.07 $ (3.28) $ (1.33) $ (1.61)
Discontinued operations (.44) (.40) .97 1.67 (1.41)
Gain on disposal of discontinued operation -- 1.32 -- -- --
Extraordinary loss -- (.20) -- -- --
Net income (loss) (1.38) 3.79 (2.31) .34 (3.02)
Financial Position
Working capital $ 18,892 $ 21,173 $ 31,787 $ 46,789 $ 23,728
Total assets 146,762 176,689 231,372 227,825 219,065
Long-term debt 3,489 2,044 68,350 49,166 20,342
Total debt 4,000 2,855 68,850 49,816 25,742
Total capital employed 99,022 104,772 143,725 142,512 118,865
Total debt as a percentage of capital employed 4.0% 2.7% 47.9% 35.0% 21.7%
Shareholders' equity $ 95,022 $ 101,917 $ 74,875 $ 92,696 $ 93,123
Shareholders' equity per common share 14.76 15.90 11.75 14.55 14.74
Other Selected Data
Investment in plant and equipment $ 4,418 $ 8,977 $ 11,144 $ 12,306 $ 11,470
Depreciation and amortization 7,554 9,845 10,572 8,888 8,422
Dividends per common share -- -- .54 .72 .72
Return on average shareholders' equity (9.0)% 27.4% (17.6)% 2.3% (18.2)%
Common stock price range:
High $ 14 3/4 $ 19 5/8 $ 21 $ 30 3/4 $ 31 3/4
Low 9 1/2 9 1/8 12 1/4 19 3/4 25 1/4
Year-end closing price 11 5/8 12 13 5/8 20 1/2 27 1/2
Number of employees 2,041 2,398 3,447 3,054 4,011
Average common and potential common shares 6,433 6,402 6,374 6,360 6,343
</TABLE>
See Business Changes Note to Consolidated Financial Statements for a description
of certain matters relevant to this data.
(1)Income (loss) is from continuing operations and includes restructuring and
other unusual charges/(income) of $4.3 million for 1997 (2.5% of sales),
$(1.7) million for 1996 (0.8% of sales), $16.2 million for 1995 (5.9% of
sales), $2.6 million for 1994 (1.0% of sales) and $11.8 million for 1993
(4.2% of sales). Also, 1996 includes gains from the disposition of Cerion
stock and Cerion's public stock offering of $32 million and $7.3 million,
respectively.
(2)For the year ended December 31, 1996, net income per common share assuming
dilution and net income per common share from continuing operations assuming
dilution were $3.78 and $3.06, respectively. For the year ended December 31,
1994, net income per common share assuming dilution and net loss per common
share from continuing operations assuming dilution were $.33 and $1.33,
respectively.
9
<PAGE> 2
Nashua Corporation and Subsidiaries
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Corporate Matters
In the fourth quarter of 1997, the Company announced its intention to sell its
Specialty Coated Products Division and its international photofinishing
businesses in Canada, Northern Ireland and the United Kingdom. In February 1998,
the Company received an unsolicited offer to buy its photofinishing operations
in the U.S., U.K. and Canada.
On March 10, 1998, the Company reached an agreement to sell these operations
for consideration of approximately $52.5 million in cash and the assumption of
certain liabilities. Management anticipates that this sale will be consummated
in the first half of 1998 and is also continuing discussions for the sale of its
photofinishing business in Northern Ireland. As a result, the Company is exiting
all of its photofinishing operations and has reported this segment as a
discontinued operation in the accompanying consolidated financial statements.
The Company has also decided to retain the Specialty Coated Products Division in
light of its improved operating performance and prospects.
During the second quarter of 1996, Cerion Technologies, Inc. ("Cerion")
completed its initial public offering of common stock, which included the sale
of shares of its stock owned by the Company, reducing the Company's ownership of
Cerion to 37.1 percent. Accordingly, the Company no longer consolidates the
results of Cerion and has accounted for its remaining interest under the equity
method of accounting since the completion of the initial public stock offering.
Results of Continuing Operations - 1997 Compared to 1996
Net sales from continuing operations for 1997 were $173.2 million, a 21 percent
decrease compared to 1996. Excluding the net sales related to Cerion and to the
liquid toner and the organic photoconductor ("OPC") drum product lines, which
the Company exited during 1997, sales decreased 8 percent. Sales declines in the
Imaging Supplies Division and Specialty Coated Products Division were partially
offset by higher sales in the Label Products Division. The sales decrease was
primarily due to lower volumes and pricing in the toner and developer, laser
cartridge and paper product lines of the Imaging Supplies Division and in the
carbonless and facsimile paper product lines of the Specialty Coated Products
Division. Higher sales in the Label Products Division resulted from increased
volume of higher margin products.
In 1997, the Company recorded a net loss from continuing operations of $6
million, compared to net income from continuing operations of $19.6 million in
1996. The 1997 results included restructuring and other unusual charges of $4.3
million. The 1996 results included restructuring and other unusual income of
$1.7 million, a $32 million pretax gain on the disposition of a portion of the
Company's ownership in Cerion and a $7.3 million pretax gain from the Company's
interest in the shares sold by Cerion. The Company's pretax operating results
before all gains from dispositions and restructuring and other unusual charges
improved from a loss of $8.1 million in 1996 to a loss of $5.7 million in 1997
due to improved profitability in the Commercial Products Group of $3.6 million
and a $3.6 million decrease in Corporate expenses, including interest, partially
offset by lower operating income from Cerion of $4.8 million. The increase in
operating income in the Commercial Products Group resulted from improved
productivity and a reduction in the group's manufacturing and operating
expenses, partially offset by a reduction in sales volumes within the Imaging
Supplies Division. Corporate expenses decreased in 1997 compared to 1996
primarily due to $2.3 million lower net interest expense and reduced incentive
compensation expense. Operating income from Cerion declined in 1997 due to the
Company's reduced ownership and Cerion's decrease in profitability in 1997
compared to 1996.
The restructuring and other unusual charges of $4.3 million in 1997 included
charges in the fourth quarter of $.6 million related to restructuring the
corporate organization, a charge in the third quarter of $.9 million related to
the sale of excess real estate in Nashua, NH, and a second quarter charge of
$2.8 million for costs associated with restructuring certain distribution
channels and aligning the workforce with levels of demand in the Commercial
Products Group. The Company expects the actions being taken in the Commercial
Products Group to be completed in the first half of 1998 and to result in an
annualized benefit of approximately $5 million. The Company expects the actions
being taken to reduce corporate expenses will be substantially completed by the
end of 1998 and result in annualized savings in excess of $1 million. Details of
the charges related to continuing operations and the activity recorded during
1997 are as follows:
10
<PAGE> 3
<TABLE>
<CAPTION>
Balance Current Current Balance
Dec. 31, Year Year Dec. 31,
(In thousands) 1996 Provision Charges 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 Activity:
Provisions for severance related to workforce reductions $ 475 $2,604 $1,166 $1,913
Provisions for assets to be sold or discarded 1,178 1,650 2,078 750
Other 841 - 476 365
------ ------ ------ ------
Total $2,494 $4,254 $3,720 $3,028
====== ====== ====== ======
</TABLE>
The 1997 provision for workforce reductions included amounts for salary and
benefit continuation for 116 employees as part of the Commercial Products Group
and Corporate reorganizations. The restructuring activities provided for in the
balance at December 31, 1996 were substantially completed in 1997. Amounts
incurred did not change materially from the reserve balance of $2.5 million at
December 31, 1996.
Administrative expenses were relatively unchanged from the prior year.
Selling and distribution expenses decreased by 12 percent from 1996 as lower
sales volume in the Commercial Products Group resulted in lower distribution
costs, and lower sales commissions and bonuses reduced selling expense. Research
and development expenses decreased by 15 percent year over year primarily due to
the spin-off of Cerion and the reduction in spending in the Commercial Products
Group.
The effective tax rate for continuing operations was a benefit of 39.9
percent in 1997 compared to a charge of 40.5 percent in 1996. The 1997 tax
benefit was greater than the U.S. statutory rate primarily due to state and
local income taxes. The 1996 effective tax rate was greater than the U.S.
statutory rate primarily due to state and local income taxes and the write-off
of certain tax assets.
Results of Continuing Operations - 1996 Compared to 1995
Net sales of $218.3 million decreased 20 percent from 1995, primarily due to
lower volumes in the Commercial Products Group. The Company recorded net income
from continuing operations of $19.6 million in 1996, compared to a net loss from
continuing operations of $20.9 million in 1995. The 1996 results included
restructuring and other unusual income of $1.7 million, a $32 million pretax
gain on the disposition of a portion of the Company's ownership in Cerion and a
$7.3 million pretax gain from the Company's interest in the shares sold by
Cerion. The 1995 results included restructuring and other unusual charges of
$16.2 million and the recognition of a $3.3 million valuation allowance against
tax assets due to the probability that such assets would not be realized. The
Company's pretax operating results before all gains from dispositions and
restructuring and other unusual charges improved from a loss of $12.7 million in
1995 to a loss of $8.1 million in 1996, due to improved operating results in the
Commercial Products Group and lower interest expense. This was partially offset
by decreases in operating income in Cerion, including recognition of losses from
the Company's continuing investment in Cerion.
During 1996, the Company completed the sale of its Tape Products Division.
The Company received $28 million for the net assets of the business resulting in
an after-tax gain of $8.4 million. The results of the Tape Products Division's
operations and the gain on the sale are reported as a discontinued operation.
Also during 1996, the Company recorded an extraordinary after-tax charge of $1.3
million associated with the extinguishment of debt.
Net restructuring and other unusual income of $1.7 million in 1996 included
charges of $1.1 million for the cost of divesting the OPC drum product line and
$1.4 million for functional realignments in Corporate, offset by income of $4.2
million associated with reassessment in 1996 of certain charges recorded in 1995
for product and channel rationalizations in the Commercial Products Group.
Details of the charges related to continuing operations and the activity
recorded during 1996 are as follows:
<TABLE>
<CAPTION>
Balance Current Current Balance
Dec. 31, Year Year Dec. 31,
(In thousands) 1995 Provision Charges 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 Activity:
Provisions for severance related to workforce reductions $2,600 $ - $2,125 $ 475
Provisions for assets to be sold or discarded - 2,178 1,000 1,178
Other 2,200 401 1,760 841
------ ------ ------ ------
Total $4,800 $2,579 $4,885 $2,494
====== ====== ====== ======
</TABLE>
The provision for assets to be sold or discarded relates primarily to the net
assets of the OPC drum product line. All charges, excluding asset write-downs,
are principally cash in nature and are expected to be funded from operations.
Disposal of the assets was completed in 1997. The restructuring activities
provided for in the balance at December 31, 1995 were substantially completed at
December 31, 1996 and resulted in annualized savings of approximately $5
million.
Net sales for the Commercial Products Group decreased $46.5 million, or 18.9
percent, due to lower volume across several product lines and the disposal of
the office catalog supplies business in December 1995. Volume
11
<PAGE> 4
declines were experienced in facsimile, carbonless and copy papers, label
rollstock, toner, remanufactured laser printer cartridges and diskettes. Volumes
increased slightly in certain converted label, dry gum and thermal facesheet
products. The operating loss before restructuring and other unusual charges
(income) decreased $4.6 million compared to 1995, primarily due to lower raw
material costs, improved manufacturing productivity and reduced selling,
distribution and administrative expenses.
During the second quarter of 1996, Cerion completed the initial public
offering of its common stock at a price of $13.00 per share. A total of
4,416,000 shares were sold, of which 1,615,000 were sold by Cerion and 2,801,000
were sold by the Company. The Company received net proceeds of $33.1 million and
recorded a $32 million pretax gain on its sale of Cerion shares and a $7.3
million pretax gain from the Company's interest in the shares sold by Cerion. As
a result of the sale, the Company's ownership of Cerion was reduced to 37.1
percent, and accordingly, the Company no longer consolidates the results of
Cerion and has accounted for its remaining interest under the equity method of
accounting since the completion of the initial public stock offering.
On March 1, 1996, Cerion distributed a dividend to the Company in the form of
a promissory note payable in the principal sum of $10 million bearing interest
at the rate of 7.32 percent per annum from March 1, 1996 to September 30, 1996.
The promissory note was repaid on May 31, 1996.
Net sales recorded by the Company in 1996 related to Cerion were $19.3
million, compared to $27.5 million for 1995. The 1996 net sales were through May
23, 1996, the date immediately prior to the initial public offering of Cerion
common stock. In 1996, the Company recorded $5.1 million of operating income
from its equity interest in Cerion, compared to operating income on a
consolidated basis of $6 million for 1995.
Administrative expenses increased 3 percent as a result of increases in
non-recurring legal expenses and increases in performance incentives. Selling
and distribution expenses decreased 11 percent due to lower volumes in the
Commercial Products Group. Research and development expenses increased 3 percent
due to increased spending on Corporate projects and at Cerion prior to the
transaction described above.
The effective tax rate for continuing operations was 40.5 percent in 1996
compared to a benefit of 28 percent in 1995. The 1996 effective rate was greater
than the U.S. statutory rate primarily due to state and local income taxes and
the write-off of certain tax assets. The 1995 effective tax benefit was less
than the U.S. statutory rate primarily due to the establishment of a valuation
allowance against long-term tax assets.
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 $2.3 million from December 31, 1996, primarily due to
a reduction in cash offset to a large extent by an increase in other current
assets and decreases in accounts payable and accrued expenses, net of the
effects of the reclassification of assets and liabilities to discontinued
operations. Cash was used to fund operating losses and reduce accounts payable
and accrued expenses. Other current assets increased due to tax benefits related
to the operating losses. At December 31, 1997, the total debt as a percentage of
equity increased to 4.2 percent from 2.8 percent at December 31, 1996. The
Company suspended its quarterly dividend in 1995 and intends to review this
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 1997 were approximately $4.4 million.
During 1997, the Company renegotiated a new secured $18 million line of
credit of which $5 million is available exclusively for letters of credit.
Borrowings under this facility are collateralized by a security interest in the
Company's receivables and inventory. Interest on amounts outstanding under the
line of credit is payable at 2 percent above the LIBOR rate. The maturity of
this line of credit is April 3, 1999. The agreement contains certain financial
covenants with respect to tangible net worth, liquidity and other ratios. In
addition, without prior consent of the lenders, the agreement does not allow the
payment of dividends and restricts, among other things, the incurrence of
additional debt, guarantees, lease arrangements or the sale of certain assets.
As of December 31, 1997, the Company was in compliance with these covenants. At
December 31, 1997, borrowings of $2 million were outstanding under this secured
revolving credit facility.
On December 26, 1996, the Company entered into a note agreement under which
the Company borrowed $2.6 million. The note is to be paid back in sixty equal
monthly payments, starting in January 1997. The note bears interest per annum
equal to 2.5 percent above the LIBOR rate which was 6 percent at December 31,
1997. The note is collateralized by a security interest in certain equipment.
At December 31, 1997, the Company had $5.8 million and $2.3 million of net
operating loss carryforward benefits and tax credit carryforwards, respectively,
which are primarily available to offset certain future domestic taxable
earnings. The net operating loss carryforward benefits expire as follows: $.5
million in 1999; $2.6 million in
12
<PAGE> 5
2000; and $2.7 million thereafter. The tax credit carryforwards expire as
follows: $.1 million in 1998; $.1 million in 1999; $.2 million in 2000; and $1.9
million thereafter. Management believes that the Company will generate
sufficient future taxable income to realize deferred tax assets prior to the
expiration of any net operating loss carryforwards or tax credit carryforwards
and that realization of the net deferred tax assets is more likely than not.
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh") brought a
lawsuit in the United States District Court of New Hampshire, alleging the
Company's infringement of the U.S. patents 4,611,730 and 4,878,603 relating to
certain toner cartridges for Ricoh copiers. In March 1997, the District Court
enjoined Nashua from manufacturing, using or selling its NT-50 and NT-6750 toner
cartridges. Sales of these products in 1996 amounted to one percent of Nashua's
total sales. The Court left the subject of damages, if any, to subsequent
proceedings. The Company disagrees with the Court's decision and has appealed to
the United States Court of Appeals for the Federal Circuit. At the trial, Ricoh
alleged that its damages would be approximately $10 million as of the date of
the trial, and the Company alleged that such damages should be in the range of
$.1 million to $.4 million. Ricoh is also seeking treble damages and attorneys'
fees for willful infringement, but the Company believes an award for such
damages is unlikely. The Company is awaiting the District Court's decision on
damages and the Court of Appeals' decision.
In August and September 1996, two individual plaintiffs initiated lawsuits in
the Circuit Court of Cook County, Illinois against the Company, Cerion, certain
directors and officers of Cerion, and the Company's underwriter, on behalf of
classes consisting of all persons who purchased the common stock of Cerion
between May 24, 1996 and July 9, 1996. These two complaints were consolidated.
In March 1997, the same individual plaintiffs joined by a third plaintiff filed
a Consolidated Amended Class Action Complaint (the "Consolidated Complaint").
The Consolidated Complaint alleged that, in connection with Cerion's initial
public offering, the defendants issued materially false and misleading
statements and omitted the disclosure of material facts regarding, in
particular, certain significant customer relationships. In October 1997, the
Court on motion by the defendants, dismissed the Consolidated Complaint. The
plaintiffs filed a Second Amended Consolidated Complaint alleging substantially
similar claims as the Consolidated Complaint seeking damages and injunctive
relief. The Company believes this lawsuit is without merit, has substantial
defenses and intends to vigorously defend against these allegations.
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, 1997, 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 $1.3 million to $1.5
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 PRPs are unable to bear their allocated share. At December 31, 1997,
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 the Company's 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.
The Company is in the process of addressing the Year 2000 issue and expects
to substantially complete the necessary conversions and implementations in 1998
and to be primarily testing changes in 1999. The Company does not expect the
cost of this project to be material to the Company's business, operations or
financial condition.
Matters Affecting Future Results
This Annual Report contains forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. When used in this
Annual Report, the words "expects," "anticipates," "believes," "can," "will" or
similar expressions are intended to identify such forward-looking statements.
Such forward-looking statements are subject to risks and uncertainties which
could cause actual results to differ materially from those anticipated. Such
risks and uncertainties include, but are not limited to, completion of the sales
of the Company's photofinishing businesses, the possibility of a final award of
material damages in the patent litigation brought against the Company by Ricoh
Company, Ltd. and the Cerion Litigation, fluctuations in customer demand,
intensity of competition from other vendors, timing and acceptance of new
product introductions, and general economic and industry conditions. The Company
assumes no obligation to update the information contained in this Annual Report.
13
<PAGE> 6
Nashua Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
(In thousands, except per share data) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 173,202 $ 218,310 $ 273,062
Cost of products sold 133,175 169,933 230,178
Selling, distribution and administrative expenses 38,557 45,123 41,699
Research and development expense 7,749 9,159 8,924
Restructuring and other unusual charges (income) 4,254 (1,733) 16,247
Equity in net (income) loss of Cerion Technologies (306) 135 --
Gain on disposition of Cerion Technologies stock -- (31,962) --
Gain on Cerion Technologies public stock offering -- (7,353) --
Interest expense 129 2,604 5,500
Interest income (362) (518) (490)
--------- --------- ---------
Total costs and expenses, net of Cerion Technologies gains 183,196 185,388 302,058
--------- --------- ---------
Income (loss) from continuing operations before income taxes (9,994) 32,922 (28,996)
Income taxes (benefit) (3,988) 13,347 (8,118)
--------- --------- ---------
Income (loss) from continuing operations (6,006) 19,575 (20,878)
Income (loss) from discontinued operations, net of taxes (2,816) (2,558) 6,147
Gain on disposal of discontinued operation, net of taxes -- 8,434 --
--------- --------- ---------
Income (loss) before extraordinary loss (8,822) 25,451 (14,731)
Extraordinary loss on extinguishment of debt, net of taxes -- (1,257) --
--------- --------- ---------
Net income (loss) (8,822) 24,194 (14,731)
Retained earnings, beginning of period 85,757 61,563 79,744
Dividends -- -- (3,450)
--------- --------- ---------
Retained earnings, end of period $ 76,935 $ 85,757 $ 61,563
========= ========= =========
Earnings per share
Income (loss) from continuing operations per common share $ (.94) $ 3.07 $ (3.28)
Income (loss) from discontinued operations per common share (.44) (.40) .97
Gain on disposal of discontinued operation -- 1.32 --
Extraordinary loss on extinguishment of debt -- (.20) --
--------- --------- ---------
Net income (loss) per common share $ (1.38) $ 3.79 $ (2.31)
--------- --------- ---------
Income (loss) from continuing operations per common
share assuming dilution $ (.94) $ 3.06 $ (3.28)
Income (loss) from discontinued operations
per common share assuming dilution (.44) (.40) .97
Gain on disposal of discontinued operation -- 1.32 --
Extraordinary loss on extinguishment of debt -- (.20) --
--------- --------- ---------
Net income (loss) per common share assuming dilution $ (1.38) $ 3.78 $ (2.31)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE> 7
Nashua Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31,
---------------------------
(In thousands, except share data) 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 3,736 $ 20,018
Accounts receivable 14,915 20,112
Inventories
Materials and supplies 6,196 6,676
Work in process 3,650 2,498
Finished goods 4,791 7,494
--------- ---------
14,637 16,668
Other current assets 12,362 15,367
Net current assets of discontinued operations 120 --
--------- ---------
45,770 72,165
--------- ---------
Plant and equipment
Land 789 1,137
Buildings and improvements 27,371 35,754
Machinery and equipment 50,654 77,063
Construction in progress 2,206 4,623
--------- ---------
81,020 118,577
Accumulated depreciation (40,605) (58,459)
--------- ---------
40,415 60,118
--------- ---------
Investment in unconsolidated affiliate 7,524 7,218
Other assets 11,859 37,188
Net non-current assets of discontinued operations 41,194 --
--------- ---------
Total assets $ 146,762 $ 176,689
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 511 $ 811
Accounts payable 12,595 22,678
Accrued expenses 13,772 24,880
Income taxes payable -- 2,623
--------- ---------
26,878 50,992
--------- ---------
Long-term debt 3,489 2,044
Other long-term liabilities 21,373 21,736
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 6,715,495 shares in 1997 and 6,647,255 shares in 1996 6,716 6,647
Additional capital 12,129 12,107
Retained earnings 76,935 85,757
Cumulative translation adjustment -- (1,837)
Treasury stock, at cost (758) (757)
--------- ---------
95,022 101,917
--------- ---------
Commitments and contingencies
Total liabilities and shareholders' equity $ 146,762 $ 176,689
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE> 8
Nashua Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
(In thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
of Continuing Operations
Net income (loss) $ (8,822) $ 24,194 $(14,731)
Adjustments to reconcile net income (loss) to cash provided by (used in)
continuing operating activities:
Depreciation and amortization 7,554 9,845 10,572
Deferred income taxes (3,988) 8,622 (8,118)
Write-down of long-lived assets to net realizable value -- 990 509
Loss on sale of excess real estate 900 -- --
(Income) loss from discontinued operations 2,816 2,558 (6,147)
Gain on disposal of discontinued operation -- (8,434) --
Extraordinary loss on extinguishment of debt -- 1,257 --
Equity in net (income) loss of Cerion Technologies (306) 135 --
Gain on disposition of Cerion Technologies stock -- (31,962) --
Gain on Cerion Technologies public stock offering -- (7,353) --
Change in operating assets and liabilities, net of effects
from acquisition and disposal of businesses:
Accounts receivable 1,045 1,344 7,477
Inventories (370) 2,785 9,631
Other assets (1,481) 3,728 9,871
Accounts payable (4,624) 2,214 (6,280)
Accrued expenses (4,375) (6,322) 9,692
Other long-term liabilities (61) 643 (3,848)
Income taxes payable (149) 4,725 639
-------- -------- --------
Cash provided by (used in) operating activities (11,861) 8,969 9,267
Cash Flows from Investing Activities
of Continuing Operations
Investment in plant and equipment (4,418) (8,977) (11,144)
Proceeds from sale of plant and equipment 825 -- --
Proceeds from repayment of Cerion Technologies notes -- 11,142 --
Proceeds from sale of Cerion Technologies stock, net -- 33,080 --
-------- -------- --------
Cash provided by (used in) investing activities (3,593) 35,245 (11,144)
Cash Flows from Financing Activities
of Continuing Operations
Proceeds from borrowings 2,000 3,434 32,800
Repayment of borrowings (855) (69,429) (13,766)
Dividends paid -- -- (3,450)
Proceeds and tax benefits from shares issued under stock option plans 91 73 14
Extinguishment of debt -- (952) --
Purchase and reissuance of treasury stock (1) (6) 36
-------- -------- --------
Cash provided by (used in) financing activities 1,235 (66,880) 15,634
Proceeds from sale of discontinued operations -- 35,174 6,950
Cash applied to activities of discontinued operations (2,025) (1,289) (22,546)
Effect of exchange rate changes on cash (38) 409 10
-------- -------- --------
Increase (decrease) in cash and cash equivalents (16,282) 11,628 (1,829)
Cash and cash equivalents at beginning of year 20,018 8,390 10,219
-------- -------- --------
Cash and cash equivalents at end of year $ 3,736 $ 20,018 $ 8,390
======== ======== ========
Interest paid $ 92 $ 3,387 $ 7,532
======== ======== ========
Income taxes paid $ 2,428 $ 4,476 $ 6,580
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 9
Nashua Corporation and Subsidiaries
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 wholly-owned subsidiaries
("the Company").
Revenue Recognition: Sales are recognized at the time the goods are shipped or
when title passes.
Sale of Stock by a Subsidiary: The Company recognizes gains and losses on its
subsidiary's direct sale of shares of stock in which the selling price of the
subsidiary's shares is greater than or less than the Company's carrying value.
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,
postretirement 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 remaining maturity of three months or less to be cash
equivalents. The Company held no cash equivalents at December 31, 1997. At
December 31, 1996, the Company held $13.9 million of various money market
instruments carried at cost, which approximated market.
Accounts Receivable: The consolidated balance is net of allowance for doubtful
accounts of $1.2 million at December 31, 1997 and $1.8 million at December 31,
1996.
Inventories: Inventories are carried at the lower of cost or market. Cost is
determined by the first-in, first-out ("FIFO") method for approximately 61
percent and 66 percent of the inventories at December 31, 1997 and 1996,
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 $2.8 million and $2.9 million higher at December 31,
1997 and 1996, respectively.
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.
For financial reporting purposes, depreciation is computed using the
straight-line method over the following estimated useful lives of the assets:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Buildings and improvements 5-40 years
Machinery and equipment 3-20 years
</TABLE>
The Company reviews the value of its plant and equipment whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Goodwill: Included in "Other Assets" and in "Net Non-current Assets of
Discontinued Operations" 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 40 years. Goodwill amounted
to $19.5 million and $22 million at December 31, 1997 and 1996, respectively,
which is net of accumulated amortization of $10.4 million and $9 million,
respectively. Goodwill included in "Net Non-current Assets of Discontinued
Operations" amounted to $19.3 million at December 31, 1997. Goodwill included in
"Other Assets" was $.2 million at December 31, 1997 and $22 million at December
31, 1996. The Company reviews the value of its goodwill whenever events or
changes in circumstances indicate that the carrying value may not be fully
recoverable. See the Business Changes note.
Research and Development: Research and development costs are expensed as
incurred.
17
<PAGE> 10
Stock Compensation: The Company's employee stock option plans are accounted for
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." The Company follows disclosure requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
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 and other tax credits.
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 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.
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.
The Company places its temporary cash investments with high credit quality
financial institutions and in high quality commercial paper 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
ongoing 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 commitments 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 ongoing
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 Potential Common Shares: In the fourth quarter of 1997,
the Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." Earnings per share for the years ended December 31, 1996
and 1995 have been restated accordingly.
18
<PAGE> 11
Fair Value of Financial Instruments: The recorded amounts for cash and cash
equivalents, other current assets, accounts receivable and accounts payable and
other current liabilities approximate fair value due to the short-term nature of
these financial instruments. The fair values of amounts outstanding under the
Company's debt instruments approximates their book values in all material
respects due to the variable nature of the interest rate provisions associated
with such instruments.
Reclassification: Certain amounts from the prior year have been reclassified to
conform to the present year presentation.
BUSINESS CHANGES
During the second quarter of 1996, the Company and Cerion completed the initial
public offering of common stock of Cerion at a price of $13.00 per share. A
total of 4,416,000 shares were sold, of which 1,615,000 were sold by Cerion and
2,801,000 were sold by the Company. The Company received net proceeds of $33.1
million and recorded a $32 million pretax gain on its sale of Cerion shares and
a $7.3 million pretax gain from the Company's interest in the shares sold by
Cerion. As a result of the sale, the Company's ownership of Cerion was reduced
to 37.1 percent, and accordingly, the Company now uses the equity method of
accounting for its investment in Cerion common stock.
During the fourth quarter of 1996, the Company completed the sale of its
mainland European photo business. The Company received proceeds of approximately
$7 million and recorded a net pretax loss of $1.7 million. During the second
quarter of 1996, the Company recorded a $7 million charge in the mainland
European photo business to write-down the value of its goodwill.
In 1995, the Company acquired the mainland European photo business, along
with a wholesale film processing business in Northern Ireland from Nexus Photo
Ltd. 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, of which $12.7 million
related to the mainland European photo business.
Discontinued Operations: On March 10, 1998, the Company reached an agreement to
sell the photofinishing businesses in the United States, the United Kingdom and
Canada for consideration of approximately $52.5 million in cash and the
assumption of certain liabilities. Management anticipates that the sale will be
consummated in the first half of 1998. The Company is in discussions for the
sale of its photofinishing business in Northern Ireland. The photofinishing
businesses' results of operations are reported as discontinued operations for
all periods presented. During the second quarter of 1996, the Company sold its
Tape Products Division for approximately $28 million and, as a result, recorded
an after tax gain of $8.4 million. The Tape Products Division results for 1996
and 1995, as well as the Photo Group's results for 1997, 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
(In millions) 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 143.5 $ 195.0 $ 237.6
Income (loss) before income taxes (3.1) (3.4) 10.0
Income taxes (benefit) (.3) (.8) 3.9
------- ------- -------
Income (loss) from discontinued operations $ (2.8) $ (2.6) $ 6.1
======= ======= =======
</TABLE>
The net assets of the discontinued operations in the December 31, 1997
consolidated balance sheet include:
<TABLE>
<CAPTION>
(In thousands)
- -----------------------------------------------------------------
<S> <C>
Accounts receivable $ 2,874
Inventories 2,846
Accounts payable (6,028)
Accrued payroll and other expenses (5,449)
Other, net 5,877
--------
Net current assets of discontinued operations $ 120
--------
Plant and equipment, net $ 13,420
Long-term liabilities (863)
Other, net 28,637
--------
Net non-current assets of discontinued operations $ 41,194
========
</TABLE>
19
<PAGE> 12
Restructuring and Other Unusual Charges: The restructuring and other unusual
charges from continuing operations of $4.3 million in 1997 included charges in
the fourth quarter of $.6 million related to restructuring corporate activities,
a charge in the third quarter of $.9 million related to the sale of excess real
estate in Nashua, NH and a second quarter charge of $2.8 million for costs
associated with restructuring certain distribution channels and aligning the
workforce with levels of demand in the Commercial Products Group. The Company
expects the actions being taken in the Commercial Products Group to be completed
in the first half of 1998 and to result in an annualized benefit of
approximately $5 million. The Company expects the actions being taken to reduce
corporate expenses will be substantially completed by the end of 1998 and result
in annualized savings in excess of $1 million. Details of the charges related to
continuing operations and the activity recorded during 1997 are as follows:
<TABLE>
<CAPTION>
Balance Current Current Balance
Dec. 31, Year Year Dec. 31,
(In thousands) 1996 Provision Charges 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 Activity:
Provisions for severance related to workforce reductions $ 475 $2,604 $1,166 $1,913
Provisions for assets to be sold or discarded 1,178 1,650 2,078 750
Other 841 - 476 365
------ ------ ------ ------
Total $2,494 $4,254 $3,720 $3,028
====== ====== ====== ======
</TABLE>
The 1997 provision for workforce reductions included amounts for salary and
benefit continuation for 116 employees as part of the Commercial Products Group
and Corporate reorganizations. The restructuring activities provided for in the
balance at December 31, 1996 were substantially completed in 1997. Amounts
incurred did not change materially from the reserve balance of $2.5 million at
December 31, 1996.
Net restructuring and other unusual income of $1.7 million in 1996 included
charges of $1.1 million for the cost of divesting the OPC drum product line,
$1.4 million for functional realignments in Corporate, offset by income of $4.2
million associated with reassessment in 1996 of certain charges recorded in 1995
for product and channel rationalizations in the Commercial Products Group.
Details of the charges related to continuing operations and the activity
recorded during 1996 are as follows:
<TABLE>
<CAPTION>
Balance Balance
Dec. 31, 1996 1996 Dec. 31,
(In thousands) 1995 Provision Charges 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 Activity:
Provisions for severance related to workforce reductions $2,600 $ - $2,125 $ 475
Provisions for assets to be sold or discarded - 2,178 1,000 1,178
Other 2,200 401 1,760 841
------ ------ ------ ------
Total $4,800 $2,579 $4,885 $2,494
====== ====== ====== ======
</TABLE>
The provision for assets to be sold or discarded related primarily to the net
assets of the OPC drum product line. All charges, excluding asset write-downs,
were principally cash in nature. The restructuring activities provided for in
the balance at December 31, 1995 were substantially completed at December 31,
1996 and resulted in an annualized savings of approximately $5 million.
Restructuring and other unusual charges from continuing operations 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 included charges of $8.2 million and $8
million in the third and fourth quarters, respectively.
The 1995 provision for workforce reductions included amounts for salary and
benefit continuation for approximately 110 employees as part of the Commercial
Products Group reorganization and product rationalization. The 1995 provision
for assets to be sold or discarded included approximately $5.6 million related
to cartridge inventory write-downs, as well as other asset write-downs resulting
from product and channel rationalization within the Commercial Products Group.
The cartridge inventory charges related primarily to excess empty cartridges
received in 1995 under rebate programs and contractual obligations, most of
which had been terminated by the end of 1995.
20
<PAGE> 13
INDEBTEDNESS
During 1997, the Company negotiated a new secured $18 million line of credit of
which $5 million is available exclusively for letters of credit. Borrowings
under this facility are collateralized by a security interest in the Company's
receivables and inventory. Interest on amounts outstanding under the line of
credit is payable at 2 percent above the LIBOR rate which was 6 percent at
December 31, 1997. The maturity of this line of credit is April 3, 1999. The
agreement contains certain financial covenants with respect to tangible net
worth, liquidity and other ratios. In addition, without prior consent of the
lenders, the agreement does not allow the payment of dividends and restricts,
among other things, the incurrence of additional debt, guarantees, lease
arrangements or sale of certain assets. As of December 31, 1997, the Company was
in compliance with these covenants. At December 31, 1997, borrowings of $2
million were outstanding under the secured revolving credit facility.
On December 26, 1996, the Company entered into a note agreement under which
the Company borrowed $2.6 million. The note is to be paid back in sixty equal
monthly payments, starting in January 1997. The note bears interest per annum
equal to 2.5 percent above the LIBOR rate which was 6 percent at December 31,
1997. The note is collateralized by a security interest in certain equipment. At
December 31, 1997, borrowings of $2 million were outstanding under this note
agreement.
During 1996, the Company renegotiated its unsecured $75 million revolving
credit facility and its senior note agreement. Since September 29, 1995, the
Company had not been in compliance with certain financial covenants and the
lenders provided the Company with a forbearance during which time the parties
negotiated amendments to the lending agreements in order to allow the Company to
remain in compliance. As a result of the 1996 negotiations, the revolving credit
facility was replaced by a bank facility (the "Bank Facility"). The Bank
Facility designated $48 million that was outstanding under the previous
revolving credit facility as a term loan with the remainder as outstanding under
a new revolving credit facility. The Bank Facility had a total of $10 million of
credit available under its revolving credit facility, of which $5 million was
available exclusively for letters of credit. At December 31, 1996, the Company
was obligated under approximately $3.7 million in standby letters of credit.
Interest on amounts outstanding under the Bank Facility was payable at prime
rate plus .5 percent. At December 31, 1996, there were no borrowings outstanding
under the revolving credit facility portion of the Bank Facility. The revised
senior note agreement increased the interest rate from 9.67 percent to 11.85
percent per annum. The Bank Facility required a commitment fee of .5 percent per
annum on unused amounts, as well as a 2 percent per annum fee on letters of
credit.
INCOME TAXES
The domestic and foreign components of income (loss) from continuing operations
before income taxes are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(8,359) $ 33,711 $(28,371)
Foreign (1,635) (789) (625)
------- -------- --------
Consolidated $(9,994) $ 32,922 $(28,996)
======= ======== ========
</TABLE>
Income tax expense (benefit) charged to continuing operations consists of the
following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $ -- $ 4,180 $ --
State and local -- 545 --
------- -------- --------
Total current -- 4,725 --
Deferred:
United States (2,821) 7,206 (5,699)
Foreign (502) (260) (205)
State and local (665) 1,676 (2,214)
------- -------- --------
Total deferred (3,988) 8,622 (8,118)
------- -------- --------
Income tax expense (benefit) $(3,988) $ 13,347 $ (8,118)
======= ======== ========
</TABLE>
21
<PAGE> 14
Deferred tax liabilities (assets) from continuing operations are comprised of
the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 3,033 $ 3,249
Basis in Cerion stock 3,022 2,893
Other 2,238 1,027
-------- --------
Gross deferred tax liabilities 8,293 7,169
-------- --------
Restructuring (4,418) (2,663)
Pension and postretirement benefits (8,718) (9,461)
Loss and credit carryforwards (8,100) (7,004)
Workers compensation accrual (474) (903)
Inventory reserve (2,247) (1,139)
Bad debt reserve (338) (811)
Other (3,085) (1,893)
-------- --------
Gross deferred tax asset (27,380) (23,874)
Deferred tax assets valuation allowance 300 328
-------- --------
$(18,787) $(16,377)
======== ========
</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:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States statutory rate (benefit) (35.0)% 35.0% (35.0)%
State and local income taxes, net of federal tax benefit (4.3) 4.4 (5.0)
Tax asset valuation 1.5 .7 11.4
Rate difference-foreign subsidiaries .7 .1 --
Other, net (2.8) .3 .6
----- ---- -----
Effective tax rate (benefit) (39.9)% 40.5% (28.0)%
===== ==== =====
</TABLE>
At December 31, 1997, $11.6 million and $11.9 million of net tax assets were
included in "Other Current Assets" and "Other Assets," respectively. At December
31, 1996, $7.7 million and $8.7 million of net tax assets were included in
"Other Current Assets" and "Other Assets," respectively.
At December 31, 1997, the Company had $5.8 million and $2.3 million of net
operating loss carryforward benefits and tax credit carryforwards, respectively,
which are primarily available 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 $2.7 million thereafter. The tax
credit carryforwards expire as follows: $.1 million in 1998; $.1 million in
1999; $.2 million in 2000; and $1.9 million thereafter. Management believes that
the Company will generate sufficient future taxable income to realize deferred
tax assets prior to the expiration of any net operating loss carryforwards or
tax credit carryforwards and that realization of the net deferred tax assets is
more likely than not.
During 1997, the Company settled the dispute in connection with interest
assessed as part of the 1990 and 1991 tax settlement.
SHAREHOLDERS' EQUITY
On July 19, 1996, the Company's Board of Directors adopted a Shareholder Rights
Plan in which preferred stock purchase rights ("Rights") were distributed on
September 2, 1996 to holders of record on August 15, 1996 ("Record Date") as a
dividend at the rate of one Right for each share of the Company's common stock
outstanding as of the close of business on the Record Date. These Rights
replaced the rights outstanding under the Company's August 22, 1986 Rights
Agreement, which expired on September 2, 1996. Rights will also attach to shares
of common stock issued after the Record Date.
Each Right will entitle the holders of common stock of the Company to
purchase one one-hundredth of a share of Series B Junior Participating Preferred
Stock of the Company ("Series B Stock") at an exercise price of $75.00 (subject
to adjustment). Each share of Series B Stock would entitle its holder to a
quarterly dividend of $1.00 per share, an aggregate dividend of 100 times any
dividend declared on common stock and, in the event of liquidation of the
Company, each such share would entitle its holder to a payment of $1.00 plus 100
times the payment made per share of common stock. Initially, the Rights will be
attached to all certificates representing outstanding shares of common stock.
The Rights will detach and become exercisable only after a person or group
22
<PAGE> 15
acquires beneficial ownership of 10 percent or more of the common stock of the
Company or announces a tender or exchange offer that would result in such person
or group owning 10 percent or more of the common stock of the Company.
After a person becomes the beneficial owner of 10 percent or more of the
shares of common stock of the Company, except pursuant to a tender or exchange
offer for all shares at a fair price as determined by the outside Board members,
each Right not owned by the 10 percent or more shareholder will enable its
holder to purchase that number of shares of the Company's common stock which
equals the exercise price of the Right divided by one-half of the current market
price of such common stock at the date of the occurrence of the event
("Triggering Event"). After the occurrence of a Triggering Event, the Company's
Board of Directors may, at their option, exchange one share of common stock or
one one-hundredth of a share of Series B Stock for each Right (other than Rights
held by the 10 percent or more shareholder). In addition, if the Company is
involved in a merger or other business combination transaction with another
person or group in which it is not the surviving corporation or in connection
with which its common stock is changed or converted, or it sells or transfers 50
percent or more of its assets or earning power to another person, each Right
that has not previously been exercised will entitle its holder (other than the
10 percent or more shareholder) to purchase that number of shares of common
stock of such other person which equals the exercise price of the Right divided
by one-half of the current market price of such common stock at the date of the
occurrence of the event.
The Company will generally be entitled to redeem the Rights at $.01 per Right
at any time until the 10th day following public announcement that a 10 percent
stock position has been acquired and in certain other circumstances. The Rights
will expire on September 2, 2006, unless earlier redeemed or exchanged.
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, 1997, the Company had
purchased 435,659 shares under this authorization.
The following summarizes the changes in selected shareholders' equity
accounts for each of the three years in the period ended December 31, 1997:
<TABLE>
<CAPTION>
Common Stock Cumulative Treasury Stock
------------------------ Additional Translation -------------------
(In thousands, except share data) Shares Par Value Capital Adjustment Shares Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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) -- -- --
Purchase of treasury shares -- -- -- -- (110) (2)
Reissuance of treasury shares -- -- -- -- 1,140 38
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 6,502,570 6,503 12,178 (4,618) (23,620) (751)
Stock issued for Director compensation 4,685 4 69 -- -- --
Translation adjustments and gains and losses
from certain inter-company balances -- -- -- 2,781 -- --
Restricted stock issuances 145,000 145 1,873 -- -- --
Deferred compensation -- -- (1,951) -- -- --
Restricted stock forfeiture (5,000) (5) (62) -- -- --
Purchase of treasury shares -- -- -- -- (410) (6)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 6,647,255 6,647 12,107 (1,837) (24,030) (757)
Stock issued for Director compensation 7,740 8 82 -- -- --
Translation adjustments and gains and losses
from certain inter-company balances -- -- -- (1,445) -- --
Restricted stock issuances 85,500 86 1,077 -- -- --
Deferred compensation -- -- (1,162) -- -- --
Restricted stock forfeiture (25,000) (25) (275) -- -- --
Deferred compensation forfeiture -- -- 300 -- -- --
Purchase of treasury shares -- -- -- -- (34) (1)
Discontinuance of photofinishing segment -- -- -- 3,282 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 6,715,495 $ 6,716 $ 12,129 $ -- (24,064) $(758)
========= ======= ======== ======= ======= =====
</TABLE>
23
<PAGE> 16
STOCK OPTION AND STOCK AWARD PLANS
The Company has three stock compensation plans at December 31, 1997: the 1987
Stock Option Plan (1987 plan), the 1993 Stock Incentive Plan (1993 plan), and
the 1996 Stock Incentive Plan (1996 plan). Awards may no longer be granted under
the 1987 plan and the 1993 plan. Awards under the 1996 plan are made at the
discretion of the Leadership and Compensation Committee of the Board of
Directors (the "Committee").
Under the 1987 plan, nonqualified stock options and incentive stock options
have been awarded and 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 Committee. Certain
options may become exercisable immediately in the event of a change of control
as defined under this plan. 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.
Nonstatutory stock options, incentive stock options and shares of performance
based restricted stock have been awarded under the 1993 plan and may be awarded
under the 1996 plan. Stock options under both plans generally 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 Committee. Certain options may become
exercisable immediately in the event of a change in control as defined under
these plans. Nonstatutory stock options under both plans expire 10 years and one
day from the date of grant, and incentive stock options expire 10 years from the
date of grant. Performance based restricted stock awards under both plans have
been 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 1997, the Company granted 85,500 shares of performance
based restricted stock under the 1996 plan. Restrictions on such shares lapse
either (i) in equal amounts when the average closing price of the Company's
common stock reaches $20 and $25 for a consecutive 10 trading day period; (ii)
in equal amounts when the average closing price of the Company's common stock
reaches $18 and $20 for a consecutive 10 trading day period; or (iii) 100% upon
the occurrence of certain significant events. Shares issued under the plans are
initially recorded at their fair market value on the date of grant with a
corresponding charge to additional capital representing the unearned portion of
the award. Shares of performance based restricted stock are forfeited if the
specified average closing prices of the Company's common stock are not met
within five years of grant, the executive leaves the Company or if the said
events do not take place within one year.
In the event of a change in control, as defined in the 1987 plan, certain
option holders 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.
A summary of the status of the Company's fixed stock option plans as of
December 31, 1997, 1996 and 1995 and changes during the years ended on those
dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year 469,714 $ 18.12 505,909 $ 22.88 385,834 $ 29.06
Granted 465,500 12.33 150,000 11.86 298,500 17.24
Exercised -- -- -- -- (1,000) 13.75
Forfeited - non-vested (33,950) 13.65 (35,775) 17.39 (88,775) 23.22
Forfeited - exercisable (42,060) 24.86 (147,520) 28.22 (88,650) 30.56
Expired (5,284) 28.75 (2,900) 19.38 -- --
- --------------------------------------------------------------------------------------------------------------------------
Outstanding end of year 853,920 $ 14.75 469,714 $ 18.12 505,909 $ 22.88
Options exercisable at end of year 402,420 $ 17.66 251,214 $ 22.04 239,459 $ 28.80
Weighted average fair value of
options granted during the year
(exercise price equals market price) $ 5.11 $ 4.88 $ 4.92
</TABLE>
24
<PAGE> 17
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ --------------------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price at 12/31/97 Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 9.63 - $12.75 561,850 9.1 years $11.97 120,350 $11.59
13.38 - $19.75 209,800 7.9 years 16.63 199,800 16.69
22.63 - $27.00 42,570 6.0 years 25.74 42,570 25.74
28.13 - $34.63 39,700 2.2 years 32.26 39,700 32.26
---------------------------------------------------------------------------------------------------------------------
$ 9.63 - $34.63 853,920 8.3 years $14.75 402,420 $17.66
</TABLE>
The number and weighted average fair value per share of restricted stock granted
during 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restricted Stock:
Number of shares 85,500 145,000 105,000
Weighted average fair value per restricted share $ 5.56 $ 2.06 $ 2.56
Weighted average share price at grant date $ 13.59 $ 13.91 $ 13.38
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation."
The Company continues to measure compensation cost using the intrinsic value
based method of accounting prescribed by APB Opinion 25. If the Company had
elected to recognize compensation cost based on the fair value of the options
and restricted stock granted at grant date as prescribed by SFAS No. 123, net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) - as reported $ (8,822) $ 24,194 $ (14,731)
Net income (loss) - pro forma $ (10,675) $ 23,445 $ (15,188)
Earnings (loss) per common share - as reported $ (1.38) $ 3.79 $ (2.31)
Earnings (loss) per common share assuming dilution - as reported $ (1.38) $ 3.78 $ (2.31)
Earnings (loss) per share - pro forma $ (1.67) $ 3.66 $ (2.38)
Earnings (loss) per share - pro forma assuming dilution $ (1.67) $ 3.66 $ (2.38)
</TABLE>
The assumptions and methods used in estimating the fair value at the grant date
of options and restricted shares granted are listed below:
<TABLE>
<CAPTION>
Grant Year
--------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Volatility of share price:
Options 33.0% 31.0% 28.0%
Restricted stock 11.0% 6.0% 6.0%
Dividend yield:
Options -- -- 2.9%
Restricted stock -- -- --
Interest rate:
Options 6.3% 6.2% 6.4%
Restricted stock 5.9% 5.6% 5.7%
Expected life of options 5.3 years 5.6 years 5.9 years
Valuation methodology:
Options Black-Scholes Option Pricing Model
Restricted stock Binomial Pricing Model
</TABLE>
Because the determination of the fair value of all options granted includes
vesting periods over several years and additional option grants are expected to
be made each year, the above pro forma disclosures are not representative of pro
forma effects of reported net income for future periods.
25
<PAGE> 18
EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." As such, reconciliations of
the numerators and denominators used in the earnings per share ("EPS")
calculations are presented below:
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-----------------------------------------
Income Shares Per Share
(In thousands, except per share data) (Numerator) (Denominator) Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations $19,575
Basic EPS ------------------------------------
Income available to common stockholders $19,575 6,376 $3.07
Effect of dilutive securities
Stock options -- 26
------------------------------------
Diluted EPS
Income available to common stockholders plus assumed conversions $19,575 6,402 $3.06
====================================
</TABLE>
Since the effect of stock options of 49,542 shares in 1997 and 21,294 shares in
1995 would be antidilutive to loss per share computations, Basic EPS and Diluted
EPS are identical for the years ended December 31, 1997 and 1995. The
computations of EPS for 1997 and 1995 include shares (denominator) of 6,385 and
6,374, respectively.
Performance based restricted stock of 305,500, 245,000 and 105,000 shares for
the years ended December 31, 1997, 1996 and 1995, respectively, were not
included in the above computations. Such shares may be issued in the future
subject to the occurrence of certain events as described in the "Stock Option
and Stock Award Plans" note.
COMMITMENTS AND CONTINGENCIES
Rent expense for office equipment, facilities and vehicles was $.8 million, $1
million and $1.1 million for 1997, 1996 and 1995, respectively. At December 31,
1997, the Company was committed, under non-cancelable operating leases, to
minimum annual rentals as follows: 1998 - $.6 million; 1999 - $.3 million; 2000
- - $.3 million; 2001 - $.2 million; thereafter - $.5 million.
At December 31, 1997, the Company was obligated under approximately $1.5
million in standby letters of credit.
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh") brought a
lawsuit in the United States District Court, District of New Hampshire, alleging
the Company's infringement of the U.S. patents 4,611,730 and 4,878,603 relating
to certain toner cartridges for Ricoh copiers. In March 1997, the District Court
decided to enjoin Nashua from manufacturing, using or selling its NT-50 and
NT-6750 toner cartridges. Sales of these products in 1996 amounted to one
percent of Nashua's total sales. The Court left the subject of damages, if any,
to subsequent proceedings. The Company disagrees with the Court's decision and
has appealed to the United States Court of Appeals for the Federal Circuit. At
the trial, Ricoh alleged that its damages would be approximately $10 million as
of the date of the trial, and the Company alleged that such damages should be in
the range of $.1 million to $.4 million. Ricoh also is seeking treble damages
and attorneys' fees for willful infringement, but the Company believes an award
for such damages is unlikely. The Company is awaiting the District Court's
decision on damages and the Court of Appeals' decision.
In August and September 1996, two individual plaintiffs initiated lawsuits in
the Circuit Court of Cook County, Illinois against the Company, Cerion, certain
directors and officers of Cerion, and the Company's underwriter, on behalf of
classes consisting of all persons who purchased the common stock of Cerion
between May 24, 1996 and July 9, 1996. These two complaints were consolidated.
In March 1997, the same individual plaintiffs joined by a third plaintiff filed
a Consolidated Amended Class Action Complaint (the "Consolidated Complaint").
The Consolidated Complaint alleged that, in connection with Cerion's initial
public offering, the defendants issued materially false and misleading
statements and omitted the disclosure of material facts regarding, in
particular, certain significant customer relationships. In October 1997, the
Court on motion by the defendants, dismissed the Consolidated Complaint. The
plaintiffs filed a Second Amended Consolidated Complaint alleging substantially
similar claims as the Consolidated Complaint seeking damages and injunctive
relief. The Company believes this lawsuit is without merit, has substantial
defenses and intends to vigorously defend against these allegations.
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
26
<PAGE> 19
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, 1997, 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 $1.3 million
to $1.5 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 PRPs are unable to bear their allocated share. At
December 31, 1997, 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 the Company's 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.
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 common stocks,
fixed-income securities and interest-bearing cash equivalent instruments.
Net periodic pension cost from continuing operations for the plans, exclusive
of enhanced early retirement and curtailment pension costs, includes the
following components:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 1,669 $ 2,360 $ 2,005
Interest cost on projected benefit obligation 8,219 7,997 7,927
Actual return on plan assets (15,619) (14,691) (22,000)
Net amortization and deferral 6,462 6,350 14,541
-------- -------- --------
Net periodic pension cost $ 731 $ 2,016 $ 2,473
======== ======== ========
</TABLE>
In 1996, the Company recognized a curtailment expense of $.3 million relating to
the Tape Products Division sale.
The following sets forth the funded status of the plans and the amounts
recognized in the Company's consolidated balance sheet at December 31, 1997:
<TABLE>
<CAPTION>
Accumulated Benefit Obligation
----------------------------------------
(In thousands) Less Than Assets Exceeds Assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 111,630 $ 2,798
--------- -------
Accumulated benefit obligation $ 111,868 $ 2,802
--------- -------
Projected benefit obligation $ 113,742 $ 2,929
--------- -------
Market value of plan assets $ 125,011 $ --
--------- -------
Plan assets in excess of (less than) projected benefit obligation $ 11,269 $(2,929)
Unrecognized transition obligation 484 44
Unrecognized prior service costs 3,977 501
Unrecognized net gain (22,862) (83)
Additional liability -- (335)
--------- -------
Accrued pension cost $ (7,132) $(2,802)
========= =======
</TABLE>
27
<PAGE> 20
The following sets forth the funded status of the plans and the amounts
recognized in the Company's consolidated balance sheet at December 31, 1996:
<TABLE>
<CAPTION>
Accumulated Benefit Obligation
-----------------------------------------
(In thousands) Less Than Assets Exceeds Assets
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 113,000 $ 2,682
--------- -------
Accumulated benefit obligation $ 113,460 $ 2,682
--------- -------
Projected benefit obligation $ 115,990 $ 2,695
--------- -------
Market value of plan assets $ 126,687 $ --
--------- -------
Plan assets in excess of (less than) projected benefit obligation $ 10,697 $(2,695)
Unrecognized transition (asset) obligation (249) 55
Unrecognized prior service costs 4,342 600
Unrecognized net gain (20,811) (338)
Additional liability -- (304)
--------- -------
Accrued pension cost $ (6,021) $(2,682)
========= =======
</TABLE>
Approximately $9.9 million and $10.3 million of the accrued pension cost for
1997 and 1996, respectively, are included in "Other Long-Term Liabilities" in
the accompanying consolidated balance sheet.
The significant actuarial assumptions used for the plans' valuations were:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Average discount rate 7.25% 7.1%
Expected long-term rate of return on plan assets 9.70% 8.9%
Rate of increase in future compensation levels 5.00% 4.6%
</TABLE>
Retiree Health Care and Other Benefits: The Company provides certain health care
and other benefits to eligible retired employees and their 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 are fully insured managed care plans. 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.
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:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 7,045 $ 6,505
Fully eligible active plan participants 309 1,039
Other active participants 1,173 675
-------- --------
Market value of plan assets -- --
Accumulated postretirement benefit obligation
in excess of plan assets (8,527) (8,219)
Unrecognized prior service benefit (758) (818)
Unrecognized net gain (2,285) (2,762)
-------- --------
Accrued postretirement benefit cost $(11,570) $(11,799)
======== ========
</TABLE>
Approximately $10.8 million and $11.1 million of accrued postretirement benefits
for 1997 and 1996, respectively, are included in "Other Long-Term Liabilities"
in the accompanying consolidated balance sheet.
Net periodic postretirement benefit cost of continuing operations, exclusive
of enhanced early retirement costs, included the following components:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 59 $ 81 $ 85
Interest cost on accumulated postretirement benefit obligation 606 620 768
Amortization of prior service benefit (177) (370) (724)
----- ----- -----
Net periodic postretirement benefit cost $ 488 $ 331 $ 129
===== ===== =====
</TABLE>
28
<PAGE> 21
For measurement purposes, a 5.5 percent annual rate of increase in the cost of
medical benefits was assumed for the various plans in 1997. 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, 1997 would have
increased by 1 percent. The effect of this assumed change on the aggregate of
service and interest cost for 1997 would have been an increase of 3.5 percent.
INFORMATION ABOUT OPERATIONS
The Company conducts business in two segments: Commercial Products Group and
Cerion. The Commercial Products Group produces and sells facsimile and thermal
papers, pressure-sensitive labels, specialty papers, and copier and laser
printer supplies primarily to domestic converters and resellers, original
equipment manufacturers, end users and private label distributors. Cerion
manufactures precision metallic parts primarily for the domestic computer
industry. As previously discussed in the Business Changes note, the Company and
Cerion completed an initial public offering of common stock in May 1996. As a
result of the public offering, the Company's ownership of Cerion was reduced to
37.1 percent, and accordingly, the Company now uses the equity method of
accounting for its investment in Cerion common stock. Net sales, operating
income and identifiable assets of the Company's two business segments and the
geographic areas in which they operate are set forth below:
<TABLE>
<CAPTION>
Net Sales From Income (Loss) From
Continuing Operations Continuing Operations Identifiable Assets
----------------------------- --------------------------------- ----------------------------
(In millions) 1997 1996 1995 1997(a) 1996(b) 1995(c) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
By Business
Commercial Products $ 173.2 $ 199.0 $ 245.5 $ (.6) $ 1.7 $ (20.4) $ 67.2 $ 77.5 $ 84.3
Cerion Technologies -- 19.3 27.5 .3 44.4 6.0 -- 7.2 12.4
Corporate expenses and assets -- -- -- (9.7) (13.2) (14.6) 38.3 16.3 37.1
Discontinued operations -- -- -- -- -- -- 41.3 75.7 97.6
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated $ 173.2 $ 218.3 $ 273.0 $ (10.0) $ 32.9 $ (29.0) $ 146.8 $ 176.7 $ 231.4
- -----------------------------------------------------------------------------------------------------------------------------------
By Geographic Area
United States $ 172.4 $ 217.8 $ 272.7 $ 1.3 $ 46.9 $ (13.8) $ 66.9 $ 84.4 $ 96.7
Europe .8 .5 .3 (1.6) (.8) (.6) .8 .8 .8
Corporate expenses and assets -- -- -- (9.7) (13.2) (14.6) 37.8 15.8 36.3
Discontinued operations -- -- -- -- -- -- 41.3 75.7 97.6
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated $ 173.2 $ 218.3 $ 273.0 $ (10.0) $ 32.9 $ (29.0) $ 146.8 $ 176.7 $ 231.4
- -----------------------------------------------------------------------------------------------------------------------------------
</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 $2.8 million and $1.5
million for Commercial Products Group and Corporate, respectively.
(b)Includes restructuring and other unusual income (charges) of $3.1 million
and $(1.4) million for Commercial Products Group and Corporate, respectively.
Also includes gains of $32 million from the sale of Cerion stock and $7.3
million from the Company's interest in shares sold by Cerion.
(c)Includes restructuring and other unusual charges of $14.3 million and $1.9
million for Commercial Products Group and Corporate, respectively.
Capital expenditures and depreciation and amortization by business segment are
set forth below:
<TABLE>
<CAPTION>
Capital Expenditures Depreciation and Amortization
------------------------------ ------------------------------
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Products Group $4.4 $5.9 $ 9.0 $7.6 $9.0 $ 9.8
Cerion Technologies - 3.1 2.1 - .8 .8
---- ---- ------ ---- ---- ------
Consolidated $4.4 $9.0 $11.1 $7.6 $9.8 $10.6
---- ---- ------ ---- ---- ------
</TABLE>
29
<PAGE> 22
QUARTERLY OPERATING RESULTS AND COMMON STOCK INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
(In millions, except per share data) Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Net sales $ 44.4 $ 43.2 $ 42.6 $ 43.0 $ 173.2
Gross profit 10.2 10.3 9.6 9.9 40.0
Loss from continuing operations(1),
net of income taxes (.8) (2.9) (1.1) (1.2) (6.0)
Income (loss) from discontinued operations (.6) .9 (2.0) (1.2) (2.8)
Net loss(1) (1.4) (2.0) (3.1) (2.4) (8.8)
Earnings (loss) per common share:
Continuing operations(1) (.13) (.45) (.17) (.19) (.94)
Discontinued operations (.09) .15 (.31) (.19) (.44)
Net loss(1) (.22) (.30) (.48) (.38) (1.38)
Market price:
High 13 12 5/8 12 7/16 14 3/4 14 3/4
Low 11 7/8 10 1/2 9 1/2 11 1/4 9 1/2
1996
Net sales $ 64.5 $ 60.6 $ 45.3 $ 47.9 $ 218.3
Gross profit 12.9 13.9 9.8 11.8 48.4
Income (loss) from continuing operations(2) (1.3) 24.1 (3.7) .5 19.6
Income (loss) from discontinued operations (.7) (5.1) 4.3 (1.0) (2.5)
Gain on disposal of discontinued operation -- 8.4 -- -- 8.4
Income (loss) before extraordinary loss (2.0) 27.5 .5 (.5) 25.5
Extraordinary loss on extinguishment of debt -- (1.3) -- -- (1.3)
Net income (loss)(2) (2.0) 26.2 .5 (.5) 24.2
Earnings (loss) per common share:
Continuing operations(2)(3) (.21) 3.79 (.59) .08 3.07
Discontinued operations (.11) (.81) .67 (.15) (.40)
Gain on disposal of discontinued operation -- 1.32 -- -- 1.32
Income (loss) before extraordinary loss (.32) 4.30 .08 (.07) 3.99
Extraordinary loss on extinguishment of debt -- (.20) -- -- (.20)
Net income (loss)(2)(3) (.32) 4.10 .08 (.07) 3.79
Market price:
High 14 3/4 19 5/8 15 16 1/8 19 5/8
Low 9 1/8 12 3/8 12 5/8 11 7/8 9 1/8
</TABLE>
(1)The second quarter includes restructuring and unusual charges of $2.8
million. The third quarter loss includes a pretax charge of $.9 million
related to the sale of excess real estate. The fourth quarter includes
restructuring and unusual charges of $.6 million.
(2)The second quarter included gains of $32 million from the sale of Cerion
stock, and $7.3 million from the Company's interest in the shares sold by
Cerion. The fourth quarter includes restructuring and other unusual charges
of $.2 million.
(3)For the second and fourth quarters of 1996 and the year ended December 31,
1996, income from continuing operations per common share assuming dilution
was $3.78, $.08 and $3.06, respectively. For the second and third quarters of
1996 and the year ended December 31, 1996, net income per common share
assuming dilution was $4.09, $.07 and $3.78, respectively.
The Company's stock is traded on the New York Stock Exchange. At December 31,
1997, there were 1,358 record holders of the Company's common stock.
30
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NASHUA CORPORATION:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Nashua
Corporation and its subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, 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.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
February 4, 1998, except as to the Business Changes Note which is as of March
10, 1998.
31
<PAGE> 24
<TABLE>
<CAPTION>
Officers
<S> <C> <C>
Gerald G. Garbacz Joseph R. Matson Commercial Products Group
Chairman, President and Corporate Controller
Chief Executive Officer Joseph I. Gonzalez-Rivas
Vice President, General Manager
William J. Manning
Paul Buffum Assistant Treasurer John J. Ireland
Vice President, General Vice President, General Manager
Counsel and Secretary John L. Patenaude
Assistant Treasurer
Gene P. Pache
Daniel M. Junius Vice President, General Manager
Vice President-Finance, Peter C. Anastos
Chief Financial Officer Associate General Counsel
and Treasurer
Daniel F. Lyman
Bruce T. Wright Associate General Counsel
Vice President
Human Resources Suzanne L. Ansara
Assistant Secretary
Michael D. Jeans
Vice President
Group President
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS
<S> <C> <C>
Sheldon A. Buckler John M. Kucharski James F. Orr III
Chairman Chairman and Chairman, President and
Commonwealth Energy System Chief Executive Officer Chief Executive Officer
EG&G, Inc. UNUM Corporation
Gerald G. Garbacz (Technical and Scientific (Insurance)
Chairman, President and Products and Services)
Chief Executive Officer
Nashua Corporation David C. Miller, Jr. Peter J. Murphy
President and Chief President and Chief
Charles S. Hoppin Executive Officer Executive Officer
Partner ParEx Inc. Parlex Corporation
Davis Polk & Wardwell (Investment Company) (Electrical Components)
(Law Firm)
</TABLE>
<TABLE>
<CAPTION>
COMMITTEES
<S> <C> <C>
Audit/Finance and Leadership and
Investment Committee Compensation Committee Governance Committee
John M. Kucharski, Chairman James F. Orr III, Chairman Sheldon A. Buckler, Chairman
Sheldon A. Buckler John M. Kucharski Charles S. Hoppin
Charles S. Hoppin David C. Miller, Jr. David C. Miller, Jr.
Peter J. Murphy Peter J. Murphy James F. Orr III
</TABLE>
32
<PAGE> 1
EXHIBIT 21.01
-------------
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:
Jurisdiction of
Domestic Incorporation
- -------- ---------------
Nashua Belmont Limited(2) Delaware
Nashua International, Inc.(1) Delaware
Nashua Commercial Products Corporation(1) Delaware
Nashua Photo European Investments, Inc.(2) Delaware
Nashua Photo Inc.(1) Delaware
Nashua Photo International Investments, Inc.(2) Delaware
Nashua P.R., Inc.(1) Delaware
Nippon Nashua Incorporated(1) Delaware
Promolink Corporation(1) Delaware
Jurisdiction of
Foreign Incorporation
- ------- ---------------
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
Postal Film Services (Country-Wide) Limited(4) England
- ----------
All of the above listed subsidiaries are included in Nashua's consolidated
financial statements.
(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 Nashua Photo Limited (England)
-17-
<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, No. 33-72438
and No. 333-06025) of Nashua Corporation of our report dated February 4, 1998,
except as to the Business Changes Note which is as of March 10, 1998, appearing
in 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 in
this Form 10-K.
Price Waterhouse LLP
Boston, Massachusetts
March 24, 1998
-18-
<PAGE> 1
EXHIBIT 24.01
-------------
Commission File No. 1-5492-1
POWER OF ATTORNEY
-----------------
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.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Sheldon A. Buckler Director March 20, 1998
- ------------------------ --------------
Sheldon A. Buckler
/s/ Charles S. Hoppin Director March 25, 1998
- ------------------------- --------------
Charles S. Hoppin
/s/ John M. Kucharski Director March 20, 1998
- ------------------------ --------------
John M. Kucharski
/s/ David C. Miller, Jr. Director March 20, 1998
- ------------------------ --------------
David C. Miller, Jr.
/s/ Peter J. Murphy Director March 20, 1998
- ------------------------ --------------
Peter J. Murphy
/s/ James F. Orr III Director March 25, 1998
- ------------------------- --------------
James F. Orr III
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS, THE CONSOLIDATED
BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-K
FILING.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,736
<SECURITIES> 0
<RECEIVABLES> 16,108
<ALLOWANCES> 1,193
<INVENTORY> 14,637
<CURRENT-ASSETS> 45,770
<PP&E> 81,020
<DEPRECIATION> 40,605
<TOTAL-ASSETS> 146,762
<CURRENT-LIABILITIES> 26,878
<BONDS> 0
0
0
<COMMON> 6,716
<OTHER-SE> 88,306
<TOTAL-LIABILITY-AND-EQUITY> 146,762
<SALES> 173,202
<TOTAL-REVENUES> 173,202
<CGS> 133,175
<TOTAL-COSTS> 46,306
<OTHER-EXPENSES> 4,254
<LOSS-PROVISION> 79
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> (9,994)
<INCOME-TAX> (3,988)
<INCOME-CONTINUING> (6,006)
<DISCONTINUED> (2,816)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,822)
<EPS-PRIMARY> (1.38)
<EPS-DILUTED> (1.38)
</TABLE>
