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FORM 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
APRIL 2, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 No.)
44 FRANKLIN STREET 03061-2002
NASHUA, NEW HAMPSHIRE (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (603) 880-2323
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
AS OF MAY 1, 1999, THE COMPANY HAD 5,922,529 SHARES OF COMMON STOCK,
EXCLUDING 1,023,238 SHARES IN TREASURY, PAR VALUE $1 PER SHARE, OUTSTANDING.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 2, 1999 December 31,
ASSETS: (Unaudited) 1998
- ------- ------------- ------------
Cash and cash equivalents $ 27,728 $ 31,965
Restricted cash 5,000 5,000
Accounts receivable 19,702 18,232
Inventories
Materials and supplies 5,659 6,326
Work in process 3,219 2,503
Finished goods 5,528 5,847
-------- --------
14,406 14,676
Other current assets 13,695 13,474
-------- --------
Total current assets 80,531 83,347
-------- --------
Plant and equipment 73,009 73,057
Accumulated depreciation (34,470) (33,727)
-------- --------
38,539 39,330
-------- --------
Intangible assets 1,991 1,991
Accumulated amortization (1,524) (1,484)
-------- --------
467 507
-------- --------
Other assets 9,185 10,155
Net non-current assets of discontinued operations 756 756
-------- --------
Total assets $129,478 $134,095
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Current maturities of long-term debt $ 511 $ 511
Accounts payable 8,659 9,028
Accrued expenses 25,610 27,934
Income tax payable 180 --
-------- --------
Total current liabilities 34,960 37,473
-------- --------
Long-term debt 894 1,064
Other long-term liabilities 20,331 20,331
-------- --------
Total long-term liabilities 21,225 21,395
-------- --------
Common stock and additional capital 21,995 21,995
Retained earnings 64,289 64,071
Treasury stock, at cost (12,991) (10,839)
-------- --------
Total shareholders' equity 73,293 75,227
-------- --------
Commitments and contingencies -- --
-------- --------
Total liabilities and shareholders' equity $129,478 $134,095
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(In thousands, except per share data) THREE MONTHS ENDED
--------------------
April 2, April 3,
1999 1998
--------- --------
Net sales $42,649 $44,486
Cost of products sold 32,362 34,735
------- -------
Gross margin 10,287 9,751
Research, selling, distribution and
administrative expenses 10,093 10,492
Interest expense 204 113
Interest income (376) (8)
------- -------
Income (loss) from continuing operations before
income tax provision (benefit) 366 (846)
Income tax provision (benefit) 148 (356)
------- -------
Income (loss) from continuing operations 218 (490)
Loss from discontinued operation, net of taxes -- (301)
------- -------
Net income (loss) 218 (791)
Retained earnings, beginning of period 64,071 76,935
------- -------
Retained earnings, end of period 64,289 76,144
======= =======
Earnings per share:
Income (loss) from continuing operations $ .04 $ (0.08)
Income (loss) from discontinued operation -- (0.04)
------- -------
Net income (loss) per common share $ .04 $ (0.12)
======= =======
Average common shares 5,909 6,391
======= =======
Income (loss) per common share from continuing
operations assuming dilution $ .04 $ (0.08)
Income (loss) per common share from discontinued
operations assuming dilution $ -- $ (.04)
------- -------
Net income (loss) per common share assuming dilution $ .04 $ (0.12)
======= =======
Average common and potential common shares 5,926 6,391
======= =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
THREE MONTHS ENDED
-----------------------
April 2, April 3,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net income (loss) $ 218 $ (791)
Adjustments to reconcile net income (loss) to cash provided
by (used in) continuing operating activities:
Depreciation and amortization 1,444 1,737
Loss from discontinued operations -- 301
Net change in working capital and other assets (2,383) (2,947)
------- -------
Cash used in continuing operating activities (721) (1,700)
------- -------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (858) (2,007)
------- -------
Cash used in investing activities of continuing operations (858) (2,007)
------- -------
Cash flows from financing activities of continuing operations:
Proceeds from borrowings -- 2,100
Repayment of borrowings (170) (84)
Proceeds and tax benefits from shares issued under stock
option plans -- 292
Purchase of treasury stock (2,152) --
------- -------
Cash provided by (used in) financing activities of continuing
operations (2,322) 2,308
------- -------
Proceeds from the sale of discontinued operation 6,000
Cash provided by (used in) activities of discontinued operation (336) 251
Effect of exchange rate changes on cash -- 5
------- -------
Increase (decrease) in cash and cash equivalents (4,237) 4,857
Cash and cash equivalents at beginning of period 31,965 3,736
------- -------
Cash and cash equivalents at end of period $27,728 $ 8,593
======= =======
Interest paid $ 26 $ 102
======= =======
Income taxes paid $ 348 $ 51
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INDEBTEDNESS
On April 22, 1999, the Company entered into a new secured financing agreement
with Fleet Bank - NH, increasing the Company's revolving line of credit to $15
million from $8 million. This agreement with Fleet - NH replaces the Company's
existing credit facility, which was scheduled to expire April 30, 1999. The
agreement contains certain financial covenants with respect to consolidated
tangible net worth, capital expenditures and earnings before depreciation,
interest, income taxes, depreciation and amortization (EBITDA). Borrowings under
this facility are collateralized by a security interest in the Company's
receivables and inventory. Interest on amounts outstanding under the secured
line of credit is payable at the prime rate or at the Company's election, at
LIBOR plus a certain fixed percentage. The maturity of this financing agreement
is April 27, 2001. 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 greater than determined amounts, guarantees or sale of
certain assets.
RECLASSIFICATION
Certain amounts from the prior year have been reclassified to conform to the
current year presentation.
STOCK OPTIONS
At April 30, 1999, options for 553,170 shares of common stock were outstanding.
Stock options for an additional 24,253 shares may be awarded under the Company's
1996 Stock Incentive Plan. In addition, the Company's stockholders approved the
1999 Shareholder Value Plan at their annual meeting held on April 30, 1999.
Stock awards may be made under the 1999 Shareholder Value Plan for up to 600,000
shares of common stock (subject to adjustments for stock splits, stock dividends
or other changes in the Company's capitalization). No options or shares have
been awarded under this plan.
SHAREHOLDER'S EQUITY
On June 24, 1998, the Company's Board of Directors authorized the repurchase
from time to time in the open market of up to one million shares of its common
stock, subject to financial and market conditions, Securities and Exchange
Commission rules and regulations and financial covenant limitations with the
Company's lender. During the first quarter of 1999, Nashua repurchased 177,500
shares of the Company's common stock in open market transactions. In addition,
the Company repurchased 170,000 additional shares in open market transactions in
April bringing the total shares repurchased to 999,154 as of April 30, 1999.
SEGMENT AND RELATED INFORMATION
In the fourth quarter of 1998, the Company adopted Statement of Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information." The table below presents information about reported segments.
<TABLE>
<CAPTION>
(In thousands) Net Sales From Pretax Income (Loss) From
Continuing Operations Continuing Operations
------------------------------- --------------------------------
April 3, 1999 April 2, 1998 April 3, 1999 April 2, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Imaging Supplies $14,365 $16,695 $ (480) $ (784)
Specialty Coated and Label Products 28,192 27,760 1,921 1,665
Reconciling items:
Other 92 31 (42) (207)
Unallocated corporate expenses,
including interest - - (1,033) (1,520)
------- ------- -------- -------
Consolidated $42,649 $44,486 $ 366 $ (846)
</TABLE>
OTHER
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial
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position as of April 2, 1999, the results of operations for the three month
periods ended April 2, 1999 and April 3, 1998 and cash flows for the three month
periods ended April 2, 1999 and April 3, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales in the first quarter of 1999 were $42.6 million, compared with $44.5
million in the first quarter of 1998.
The Imaging Supplies Segment sales in the first quarter of 1999 were $14.4
million, compared with $16.7 million in the first quarter of 1998. The sales
decline was a result of lower volume in the toner and developer, cartridge and
paper product lines. The toner and developer sales decline was due to lower
order rates from large international customers and decreased selling prices on
two of the segment's high volume products. The cartridge and paper product sales
decline was a result of lower selling prices across all channels as well as
reduced volume in the dealer agent and international channels.
The Specialty Coated and Label Products Segment sales in the first quarter of
1999 were $28.2 million, compared with $27.8 million in the first quarter of
1998. The increased sales were a result of higher volume in the thermal paper
and label products, compared to the same period last year.
Gross margins improved to 24.1 percent of sales in the first quarter of 1999
from 21.9 percent of sales during the same period in 1998. The improvement in
gross margin was primarily a result of reduced manufacturing costs, increased
manufacturing efficiency and improved product mix in both the Imaging Supplies
Segment and the Specialty Coated and Label Products Segment.
Research, selling, distribution and administrative expenses in the first quarter
of 1999 decreased 4 percent, or $.4 million, compared to the same period of
1998. Research expense decreased 25 percent, or $.4 million, selling and
distribution expense decreased 4 percent, or $.2 million, and administrative
expenses increased 7 percent, or $.2 million.
Pretax loss in the Imaging Supplies Segment decreased $.3 million, or 38
percent, compared to the first quarter of 1998 as a result of improved gross
margins, reduced research, selling and distribution expenses. Research expense
declined due to reduced new product testing costs. Selling and distribution
expense declined as a result of lower sales impacting variable expenses.
Pretax profit in the Specialty Coated and Label Products Segment improved $.3
million as a result of improved gross margins, partially offset by higher
administrative expenses. The administrative expense increase in the first
quarter was a result of costs related to employee training and payroll, compared
to the first quarter of 1998.
Net income in the first quarter of 1999 was $.2 million ($.04 per share),
compared to a net loss of $.8 million ($.12 per share) in the first quarter of
1998. Net income from continuing operations in the first quarter of 1999 was $.2
million ($.04 per share), compared to a loss of $.5 million ($.08 per share) in
the first quarter of 1998. Pretax income from continuing operations in the first
quarter of 1999 was $.4 million, compared to a loss of $.8 million in the first
quarter of 1998, reflecting a $.5 million improvement in gross margin, a $.4
million reduction in operating expenses and a $.3 million increase in net
interest income derived from the investment of cash generated by the sale of the
Photofinishing Group.
Details of the charges related to continuing operations and the activity
recorded during the first quarter of 1999 follows.
<TABLE>
<CAPTION>
Balance Current Current Balance
(In thousands) Dec. 31, Period Period April 2,
1998 Provision Charges 1999
-------- --------- ------- --------
<S> <C> <C> <C> <C>
Provisions for severance related to workforce reductions $472 $ -- $329 $143
Other 149 -- 26 123
---- ---- ---- ----
Total $621 $ -- $355 $266
==== ==== ==== ====
</TABLE>
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All charges, excluding asset write-downs, are principally cash in nature and are
expected to be funded from operations.
The estimated annual effective income tax rate was 40.5 percent for the first
quarter of 1999 and is higher than the U.S. statutory rate principally due to
the impact of state income taxes.
YEAR 2000
The Year 2000 ("Y2K") issue is the result of computer programs being written
for, or microprocessors using, two digits (rather than four) to define the
applicable year. Company computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in system failures or miscalculations. The Company is currently
working to mitigate the Y2K issue and has established processes for assessing
the risks and associated costs.
The Company categorizes its Y2K efforts as follows: hardware, software, embedded
processors, vendors and customers. Progress in assessing and remediating
information technology systems (hardware and software) and non-information
technology systems (embedded processors) is being tracked in phases including
inventory, identification of non-compliant systems, risk assessment, project
plan development, remediation, testing and verification. The Company's Y2K
project team has completed the risk assessment phase for all major systems,
including hardware, software and embedded processors. Remediation efforts of
approximately two-thirds of the Company's major systems have been completed. The
Company expects that the internal remediation work and testing for all systems
critical to run the Company's businesses will be completed by July 1999. The
Company will use internal and external resources to remediate and test its
systems, and to develop contingency plans to mitigate risks associated with the
Y2K issue.
The Company has initiated communications with significant vendors and customers
to coordinate the Y2K issue and is in the process of determining the Company's
vulnerability if these companies fail to remediate their Y2K issues. The Company
is reviewing responses and expects to complete its analysis in the second
quarter. There can be no guarantee that the systems of other companies will be
timely remediated, or that other companies' failure to remediate Y2K issues
would not have a material adverse effect on the Company.
It is currently estimated that the aggregate cost of the Company's Y2K efforts
will be approximately $1.1 million, of which, approximately $.6 million has been
spent to date. These costs are being funded through operating cash flows and
include the costs of normal system upgrades and replacements for which the
timing was accelerated to address the Y2K issue. These amounts do not include
any costs associated with the implementation of contingency plans, which are in
the process of being developed; nor do they include internal Y2K program costs.
The Company does not separately track internal Y2K program costs. These costs
are principally the related payroll costs for the management information systems
group.
The Company has not yet developed a contingency plan for dealing with the
operational problems and costs (including loss of revenues) that would be
reasonably likely to result from failure by the Company and certain third
parties to achieve Y2K compliance on a timely basis. The Company currently plans
to complete its analysis of the problems and costs associated with the failure
to achieve Y2K compliance and to establish a contingency plan in the event of
such a failure by September 30, 1999.
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The Company presently believes that with remediation, testing and contingency
planning, Y2K risks can be mitigated. However, although the Company is not
currently aware of any material internal operational or financial Y2K related
issues, the Company cannot provide assurances that the computer systems,
products, services or other systems upon which the Company depends will be Y2K
ready on schedule, that the costs of its Y2K program will not become material or
that the Company's contingency plans will be adequate. The Company is currently
unable to evaluate accurately the magnitude, if any, of the Y2K related issues
arising from the Company's vendors and customers. If any such risks (either with
respect to the Company or its vendors or customers) materialize, the Company
could experience serious consequences to its business which could have material
adverse effects on the Company's financial condition, results of operations and
liquidity.
The foregoing assessment of the impact of the Y2K problem on the Company is
based on management's best estimates as of the date of this Form 10Q, which are
based on numerous assumptions as to future events. There can be no assurance
that these estimates will prove accurate, and actual results could differ
materially from those estimated if these assumptions prove inaccurate.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Working capital decreased $.3 million to $45.6 million from December 31, 1998.
Cash and cash equivalents declined $4.2 million, primarily as a result of
payment of certain year end accrued expenses in the amount of $2.3 million and
the repurchase of 177,500 shares of common stock in open market transactions
for $2.2 million pursuant to the Company's open market stock repurchase program
as detailed in the Shareholder's Equity section of the Notes to the Condensed
Consolidated Financial Statements. Other changes affecting working capital
included the $1.5 million increase in accounts receivable and the $.3 million
decline in accounts payable from December 31, 1998.
During April 1999, the Company entered into a new $15 million secured financing
agreement as detailed in the Indebtedness section of the Notes to the Condensed
Consolidated Financial Statements.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
MATTERS AFFECTING FUTURE RESULTS
This Form 10Q may contain forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. When used in this report,
the words "believe," "expects," "to be," "will" and similar expressions are
intended to identify such forward-looking statements. Any such forward-looking
statements and the Company's future results of operations and financial
condition are subject to risks and uncertainties which could cause actual
results to differ materially from those anticipated and from past results. Such
risks and uncertainties include, but are not limited to, fluctuations in
customer demand, intensity of competition from other vendors, timing and
acceptance of new product introductions, general economic and industry
conditions, delays or difficulties in programs designed to increase sales and
return the Company to profitability, risks associated with the failure by the
Company and certain third parties to achieve Year 2000 compliance on a timely
basis, and other risks detailed in the Company's filings with the
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Securities and Exchange Commission. The Company assumes no obligation to update
the information contained in this Form 10Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.01 Amended By-laws of the Company, effective as of April 13, 1999.
4.01 Amendment No. 3 to the Company's Rights Agreement, effective as
of April 30, 1999.
10.01 Amended 1996 Stock Incentive Plan of the Company, effective as
of April 13, 1999.
10.02 1999 Shareholder Rights Plan, effective as of April 30, 1999.
10.03 Loan Agreement between the Company and Fleet Bank - NH, dated as
of April 22, 1999.
10.04 Revolving credit promissory note between the Company and Fleet
Bank - NH, dated as of April 22, 1999.
10.05 Security Agreement between the Company and Fleet Bank - NH,
dated as of April 22, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASHUA CORPORATION
------------------------------------------
(Registrant)
Date: MAY 11, 1999 BY: /s/ John L. Patenaude
---------------------- --------------------------------------
John L. Patenaude
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly
authorized officer)
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Exhibit 3.01
BY-LAWS
OF
NASHUA CORPORATION
(a Delaware Corporation)
----------
ARTICLE I. OFFICES
SECTION 1. REGISTERED OFFICE IN DELAWARE. The registered office of
NASHUA CORPORATION (hereinafter called the "Corporation") in the State of
Delaware shall be in the City of Wilmington, County of New Castle, and the
registered agent in charge thereof shall be The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
SECTION 2. OTHER OFFICES. The Corporation may have such other office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or as shall
be necessary or appropriate for the conduct of the business of the Corporation.
ARTICLE II. MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETING. All meetings of the stockholders shall be
held at such place or places, within or without the State of Delaware, as may
from time to time be fixed by the Board of Directors, or as shall be specified
in the respective notices or waivers of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders shall be
held at 10:00 a.m. on the fourth Friday of April in each year or at such other
date and time as may be fixed by the Board of Directors for the purpose. At each
annual meeting the stockholders entitled to vote shall vote with respect to the
election of a Board of Directors and may transact any other proper business.
SECTION 3. SPECIAL MEETINGS. A special meeting of the stockholders, or
of any class thereof entitled to vote, for any purpose or purposes, may be
called at any time by the Chairman of the Board or the President or by order of
the Board of Directors.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly required
by law, written notice of each meeting of stockholders, whether annual or
special, stating the place, date and hour of the meeting shall be given not less
than ten days nor more than fifty days before the date on which the meeting is
to be held to each stockholder of record entitled to vote thereat by delivering
a notice thereof to him personally or by mailing such notice in a postage
<PAGE> 2
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prepaid envelope directed to him at his address as it appears on the stock
ledger of the Corporation. Every notice of a special meeting of the
stockholders, besides stating the place, date and hour of the meeting, shall
state briefly the purpose or purposes thereof. Notices of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy unless such attendance is for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened; and, if any stockholder shall, in person or by attorney thereunto
authorized, in writing or by telegraph, cable or wireless, waive notice of any
meeting of the stockholders, whether prior to or after such meeting, notice
thereof need not be given to him.
If a meeting is adjourned to another time or place and if an
announcement of the adjourned time and place is made at the meeting, it shall
not be necessary to give notice of the adjourned meeting unless the adjournment
is for more than thirty days or the Board of Directors, after adjournment, fixes
a new record date for the adjourned meeting.
SECTION 5. LIST OF STOCKHOLDERS. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of the stock ledger to
prepare and make, at least ten days before every meeting of the stockholders, a
complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in his name. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall be kept and produced at the time
and place of the meeting during the whole time thereof and subject to the
inspection of any stockholder who may be present. The original or duplicate
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine such list or the books of the Corporation or to vote in person or by
proxy at such meeting.
SECTION 6. QUORUM. At each meeting of the stockholders, the holders of
record of a majority of the issued and outstanding stock of the Corporation
entitled to vote at such meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business, except where otherwise
provided by law, the Certificate of Incorporation or these By-Laws. In the
absence of a quorum, any officer entitled to preside at, or act as Secretary of,
such meeting shall have the power to adjourn the meeting from time to time until
a quorum shall be constituted. At any such adjourned meeting at which a quorum
shall be present any business may be transacted which might have been transacted
at the meeting as originally called, but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 7. VOTING. Except as otherwise provided in the Certificate of
Incorporation, at every meeting of stockholders each holder of record of the
issued and outstanding stock of the Corporation entitled to vote at such meeting
shall be entitled to one vote in person or by proxy
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for each such share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless the proxy provides
for a longer period. Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes. Nothing in
this Section shall be construed as limiting the right of the Corporation to vote
its own stock held by it in a fiduciary capacity. At all meetings of the
stockholders, a quorum being present, all matters shall be decided by majority
vote of the shares of stock entitled to vote held by stockholders present in
person or by proxy, except as may be otherwise required by the Certificate of
Incorporation, these By-Laws or the laws of the State of Delaware. Unless
demanded by a stockholder of the Corporation present in person or by proxy at
any meeting of the stockholders and entitled to vote thereat or so directed by
the Chairman of the meeting or required by the laws of the State of Delaware,
the vote thereat on any question need not be by ballot.
SECTION 8. BUSINESS. At any meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (a) by
or at the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the notice
provided for in this Section 8, who shall be entitled to vote at such meeting,
and who complies with the notice procedures set forth in this Section 8. For
business to be properly brought before a stockholder meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' prior disclosure of
the date of the meeting is first given or made (whether by public disclosure or
written notice to stockholders), notice by the stockholder to be timely must be
received no later than the close of business on the 10th day following the day
on which such disclosure of the date of the meeting was made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
Notwithstanding anything elsewhere in these By-Laws to the contrary, no business
shall be conducted at a stockholder meeting except in accordance with the
procedures set forth in this Section 8. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
these By-Laws, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Section 8, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section.
<PAGE> 4
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ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board of Directors.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of directors shall be
fixed from time to time by resolution of the Board of Directors, but shall not
be less than five nor more than fifteen. Directors need not be stockholders.
Each director shall hold office until the annual meeting of the stockholders
next following his election and until his successor shall have been elected and
shall qualify, or until his death, resignation or removal.
SECTION 3. QUORUM AND MANNER OF ACTING. Unless otherwise provided by
law, the presence of one-third of the total number of directors shall be
necessary to constitute a quorum for the transaction of business. In the absence
of a quorum, a majority of the directors present may adjourn the meeting from
time to time until a quorum shall be present. Notice of any adjourned meeting
need not be given. At all meetings of directors, a quorum being present, all
matters shall be decided by the affirmative vote of a majority of the directors
present, except as otherwise required by the laws of the State of Delaware.
SECTION 4. PLACE OF MEETINGS, ETC. The Board of Directors may hold its
meetings and keep the books and records of the Corporation, at such place or
places within or without the State of Delaware, as the Board may from time to
time determine.
SECTION 5. ANNUAL MEETING. As promptly as practicable after each annual
meeting of stockholders for the election of directors and at the place thereof,
the Board of Directors shall meet for the purpose of organization, the election
of officers and the transaction of other business. Notice of such meeting need
not be given. If such meeting is held at any other time or place, notice thereof
must be given or waived as hereinafter provided for special meetings of the
Board of Directors.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such time and place, within or without the State of Delaware, as
shall from time to time be determined by the Board of Directors. After there has
been such determination, and notice thereof has been once given to each member
of the Board of Directors, regular meetings may be held without further notice
being given.
SECTION 7. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
President, a Vice President, the Secretary or the Treasurer or by a majority of
the directors. Notice of each such meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least two days
before the date on which the meeting is to be held, or shall be sent to him at
such place by telegraph, cable, radio or wireless, or be delivered personally or
by telephone, not later than the day before the day on which such meeting is to
be held. Each such notice shall state the time and place of the meeting but need
not state the purposes thereof except as
<PAGE> 5
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provided in Article VIII hereof. In lieu of the notice to be given as set forth
above, a waiver thereof in writing, signed by the director or directors entitled
to said notice, whether prior to or after the meeting in question, shall be
deemed equivalent thereto for purposes of this Section 7. No notice to or waiver
by any director with respect to any special meeting shall be required if such
director shall be present at said meeting.
SECTION 8. RESIGNATION. Any director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board, the President or
the Secretary of the Corporation. The resignation of any director shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. When
one or more directors shall resign from the Board, effective at a future date, a
majority of the directors then in office including those who have so resigned
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective.
SECTION 9. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, unless
otherwise provided by the Certificate of Incorporation or the laws of the State
of Delaware.
SECTION 10. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more directors of the Corporation, which shall
have and may exercise such powers of the Board of Directors in the management of
the business and affairs of the Corporation (including the power to authorize
the seal of the Corporation to be affixed to all papers which may require it) as
the Board may provide in the respective resolutions appointing them, subject to
such restrictions as may be contained in the Certificate of Incorporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. The committees
shall keep regular minutes of their proceedings and report the same to the Board
when required. A majority of all the members of any such committee may fix its
rules of procedure, determine its action and fix the time and place, whether
within or without the State of Delaware, of its meetings and specify what notice
thereof, if any, shall be given, unless the Board of Directors shall otherwise
by resolution provide. In the absence or disqualification of any member of any
such committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board of
Directors shall have power to change the membership of any such committee at any
time, to fill vacancies therein and to discharge any such committee, either with
or without cause, at any time.
SECTION 11. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a
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meeting if a written consent thereto is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes or proceedings of the Board or committee.
SECTION 12. NOMINATIONS OF DIRECTORS. Subject to the rights of holders
of any class or series of stock having a preference over the common stock of the
Corporation as to dividends or upon liquidation, only persons who are nominated
in accordance with the procedures set forth in these By-Laws shall be eligible
to serve as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders (a) by or
at the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 12, who shall be entitled to vote for the election
of directors at the meeting, and who complies with the notice procedures set
forth in this Section 12. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' prior
disclosure of the date of the meeting is first given or made (whether by public
disclosure or written notice to stockholders), notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such disclosure of the date of the meeting was made.
Such stockholder's notice to the Secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
and (b) as to the stockholder giving the notice (i) the name and address, as
they appear on the Corporation's books, of such stockholder and (ii) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by such stockholder. At the request of the Board of Directors, any person
nominated by the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible to serve as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 12 or in accordance
with Section 9 in connection with filling a vacancy in the Board of Directors or
any newly created directorship resulting from any increase in the authorized
number of directors. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these By-Laws and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded. Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section.
<PAGE> 7
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ARTICLE IV. OFFICERS
SECTION 1. NUMBER. The principal officers of the Corporation shall be a
President, one or more Vice Presidents, a Treasurer, a Secretary and, at the
discretion of the Board of Directors, a Chairman of the Board and a Controller.
The Corporation may also have, at the discretion of the Board of Directors, such
other officers as may be appointed in accordance with the provisions of these
By-Laws. One person may hold the offices and perform the duties of any two or
more of said offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The principal officers of the
Corporation shall be chosen annually by the Board of Directors at the annual
meeting thereof. Each such officer shall hold office until his successor shall
have been duly chosen and shall qualify, or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3. SUBORDINATE OFFICERS. In addition to the principal officers
enumerated in Section 1 of this Article IV, the Corporation may have one or more
Assistant Treasurers, one or more Assistant Secretaries and such other officers,
agents and employees as the Board of Directors may deem necessary, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Chairman of the Board, the President, or the Board of Directors may from
time to time determine. The Board of Directors may delegate to any principal
officer the power to appoint and to remove any such subordinate officers, agents
or employees.
SECTION 4. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by resolution adopted by the Board of Directors.
SECTION 5. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Chairman of the Board or to the Board of Directors or to
the President or to the Secretary. Any such resignation shall take effect upon
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 6. VACANCIES. A vacancy in any office may be filled for the
unexpired portion of the term in the manner prescribed in these By-Laws for
election or appointment to such office for such term.
SECTION 7. CHAIRMAN OF THE BOARD. If there is a Chairman of the Board,
he shall preside at all meetings of stockholders and at all meetings of the
Board of Directors. Unless the Board of Directors shall otherwise specify, he
shall be the chief executive officer of the Corporation and as such shall have
general supervision of the affairs of the Corporation, subject to the control of
the Board of Directors. He shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
<PAGE> 8
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SECTION 8. PRESIDENT. In the absence of the Chairman of the Board or if
there is no Chairman of the Board, the President shall perform the duties and
exercise the powers given to the Chairman of the Board under these By-Laws. He
shall perform such other duties and have such other powers as the Chairman of
the Board or the Board of Directors may from time to time prescribe.
SECTION 9. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Chairman of the Board, the President or the Board of
Directors may from time to time prescribe.
SECTION 10. TREASURER. The Treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the Corporation and shall
deposit all such funds in the name of the Corporation in such banks or other
depositories as shall be selected by the Board of Directors. When requested by
the Board of Directors, he shall render a statement of the condition of the
finances of the Corporation at any meeting of the Board or at the annual meeting
of stockholders; shall receive, and give receipt for, moneys due and payable to
the Corporation from any source whatsoever; and in general, shall perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the Chairman of the Board, the President
or the Board of Directors. The Treasurer shall give such bond, if any, for the
faithful discharge of his duties as the Board of Directors may require.
SECTION 11. SECRETARY. The Secretary, if present, shall act as
secretary at all meetings of the Board of Directors and of the stockholders and
keep the minutes thereof in a book or books to be provided for that purpose;
shall see that all notices required to be given by the Corporation are duly
given and served; and in general, shall perform all the duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Chairman of the Board, the President or the Board of Directors.
SECTION 12. CONTROLLER. If there is a Controller, he shall have
immediate charge of the Accounting Department of the Corporation and shall keep
a record of all accounts and accounting matters of the Corporation and shall
prepare such statements and reports as may be required of him by the Chairman of
the Board, the President or the Board of Directors; and in general, shall
perform all the duties incident to the office of Controller and such other
duties as from time to time may be assigned to him by the Chairman of the Board,
the President or the Board of Directors.
<PAGE> 9
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ARTICLE V. SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR STOCK. Every stockholder of the Corporation
shall be entitled to a certificate or certificates, to be in such form as the
Board of Directors shall prescribe, certifying the number of shares of the
capital stock of the Corporation owned by him.
SECTION 2. STOCK CERTIFICATE SIGNATURE. The certificates for such stock
shall be signed by the Chairman of the Board or the President or any Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation and its seal shall be affixed thereto. If
such certificate is countersigned (1) by a transfer agent other than the
Corporation or its employee, or, (2) by a registrar other than the Corporation
or its employee, the signatures of such officers of the Corporation and its seal
may be facsimiles. In case any officer of the Corporation who has signed, or
whose facsimile signature has been placed upon, any such certificate shall have
ceased to be such officer before such certificate is issued, it may be issued by
the Corporation with the same effect as if he were such officer at the date of
issue.
SECTION 3. STOCK LEDGER. A record shall be kept by the Secretary or by
the transfer agent or by any other officer, employee or agent designated by the
Board of Directors of the name of the person, firm or corporation holding the
stock represented by such certificates, the number of shares represented by such
certificates, respectively, and the respective dates thereof, and in case of
cancellation, the respective dates of cancellation.
SECTION 4. CANCELLATION. Every certificate surrendered to the
Corporation for exchange or registration of transfer shall be cancelled, and no
new certificate or certificates shall be issued in exchange for any existing
certificates until such existing certificate shall have been so cancelled,
except in cases provided for in Section 7 of this Article V.
SECTION 5. REGISTRATIONS OF TRANSFERS OF STOCK. Registrations of
transfers of shares of the capital stock of the Corporation shall be made on the
books of the Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the Corporation or with a transfer clerk or a transfer agent
appointed as in Section 6 of this Article V provided, and on surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation; PROVIDED, HOWEVER, that whenever any transfer of shares shall
be made for collateral security, and not absolutely, it shall be so expressed in
the entry of the transfer if, when the certificates are presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
<PAGE> 10
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SECTION 6. REGULATIONS. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with the Certificate of
Incorporation or these By-Laws, concerning the issue, transfer and registration
of certificates for shares of the stock of the Corporation. It may appoint, or
authorize any principal officer or officers to appoint, one or more transfer
clerks or one or more transfer agents and one or more registrars, and may
require all certificates of stock to bear the signature or signatures of any of
them.
SECTION 7. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. As a
condition of the issue of a new certificate for shares of stock in the place of
any certificate theretofore issued and alleged to have been lost, stolen,
mutilated or destroyed, the Board of Directors, in its discretion, may require
the owner of any such certificate, or his legal representatives, to give the
Corporation a bond in such sum and in such form as it may direct to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss, theft, mutilation or destruction of any such certificate or the
issuance of such new certificate. Proper evidence of such loss, theft,
mutilation or destruction shall be procured for the Board of Directors, if
required. The Board of Directors, in its discretion, may authorize the issuance
of such new certificates without any bond when in its judgment it is proper to
do so.
SECTION 8. RECORD DATES. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix in advance a date as a
record date for any such determination of stockholders. Such record date shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
ARTICLE VI. INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, indemnify each person who is or was
a director, officer or employee of the Corporation from and against any and all
of the expenses, liabilities or other matters referred to in or covered by said
Section. The Corporation may, but shall not be obligated to, maintain insurance
at its expense, to protect itself and any such persons against any such expenses
or liabilities.
In addition to and without limiting the foregoing provisions of this
Article and except to the extent otherwise required by law, any person seeking
indemnification under or pursuant to this Article shall be deemed and presumed
to have met the applicable standard of conduct required for such indemnification
unless the contrary shall be established.
<PAGE> 11
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ARTICLE VII. MISCELLANEOUS PROVISIONS
SECTION 1. CORPORATE SEAL. The Board of Directors shall provide a
corporate seal, which shall be in the form of a circle and shall bear the name
of the Corporation and the words "Corporate Seal" and "Delaware". The Secretary
shall be the custodian of the seal. The Board of Directors may authorize a
duplicate seal to be kept and used by any other officer.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be as
specified by the Board of Directors.
SECTION 3. VOTING OF STOCKS OWNED BY THE CORPORATION. The Board of
Directors may authorize any person in behalf of the Corporation to attend, vote
and grant proxies to be used at any meeting of stockholders of any corporation
(except this Corporation) in which the Corporation may hold stock.
SECTION 4. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meeting declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Corporation.
ARTICLE VIII. AMENDMENTS
These By-Laws of the Corporation may be altered, amended or repealed by
the affirmative vote of a majority of the stock of the Corporation issued and
outstanding and entitled to vote in respect thereof and represented in person or
by proxy at any annual or special meeting of the stockholders or by the Board of
Directors at any regular or special meeting of the Board of Directors, provided
that notice of the proposed alteration, amendment or repeal, or an appropriate
summary thereof, is contained in the notice of such meeting of stockholders or
directors, as the case may be. By-Laws, whether made or altered by the
stockholders or by the Board of Directors, shall be subject to alteration or
repeal by the stockholders as provided in this Article.
4/99
<PAGE> 1
Exhibit 4.01
AMENDMENT NO. 3 TO RIGHTS AGREEMENT
This amendment, dated as of April 30, 1999, amends the Rights Agreement (the
"Rights Agreement"), dated as of July 19, 1996, between Nashua Corporation, a
Delaware corporation (the "Company"), and The First National Bank of Boston, a
national banking association (the "Rights Agent"). Terms defined in the Rights
Agreement and not otherwise defined herein are used herein as so defined.
WITNESSETH:
- -----------
WHEREAS, on July 19, 1996, the Board of Directors of the Company authorized the
issuance of Rights to purchase, on the terms and subject to the provisions of
the Rights Agreement, one one-hundredth of a share of the Company's Series B
Participating Preferred Stock;
WHEREAS, on July 19, 1996, the Board of Directors of the Company authorized and
declared a dividend distribution of one Right for every share of Common Stock of
the Company outstanding on the Record Date and authorized the issuance of one
Right (subject to certain adjustments) for each share of Common Stock of the
Company issued between the Record Date and the Distribution Date;
WHEREAS, on July 19, 1996, the Company and the Rights Agent entered into the
Rights Agreement to set forth the description and terms of the Rights; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors
now desire to amend certain provisions of the Rights Agreement.
NOW, THEREFORE, the Rights Agreement, as amended to date, is hereby further
amended as follows:
(1) Delete Section 23(c) in its entirety;
(2) Delete the proviso at the end of the second sentence of
Section 27; and
(3) Delete Section 31 in its entirety and substitute the
following:
"Section 31. SEVERABILITY.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated."
<PAGE> 2
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to the
Rights Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: NASHUA CORPORATION
By ____________________________ By _____________________________
Peter C. Anastos, Secretary Gerald G. Garbacz
Chairman, President and
Chief Executive Officer
Attest: THE FIRST NATIONAL BANK OF BOSTON
By ____________________________ By _____________________________
<PAGE> 1
Exhibit 10.01
AMENDED 1996 NASHUA CORPORATION STOCK INCENTIVE PLAN
1. NAME OF PLAN
The Plan shall be known as the 1996 Nashua Corporation Stock Incentive
Plan (the "Plan").
2. PURPOSE OF THE PLAN
The purpose of the Plan is to attract and retain key personnel for
positions of substantial responsibility and to provide additional
incentive to certain officers, key employees and directors of Nashua
Corporation or any Affiliated Corporation to promote the success of the
Company.
3. DEFINITIONS
As used herein, the following definitions shall apply:
(a) "AFFILIATED CORPORATIONS" shall include members of the controlled
group of corporations within the meaning of Section 424(e) and
424(f) of the Code.
(b) "AWARD" means a grant or award under Section 7, 8 or 10 of the
Plan.
(c) "COMPANY" and "CORPORATION" means Nashua Corporation.
(d) "BOARD" means the Board of Directors of the Company.
(e) "COMMON STOCK" means common stock, par value $1.00 per share, of
the Company.
(f) "CODE" means the Internal Revenue Code of 1986, as amended.
(g) "COMMITTEE" means the Executive Salary Committee of the Board, as
described in Section 5(a) hereof.
(h) "CONTINUOUS EMPLOYMENT" or "CONTINUOUS STATUS AS AN EMPLOYEE" means
the absence of any interruption or termination of employment with
the Company or with an Affiliated Corporation.
(i) "EFFECTIVE DATE" means the date specified in Section 11 hereof.
(j) "EMPLOYEE" means any person employed by the Company or an
Affiliated Corporation.
(k) "FAIR MARKET VALUE" means the closing price listed on the New York
Stock Exchange on the date an Option is granted.
(l) "INCENTIVE STOCK OPTION" means a stock option grant that is
intended to meet the requirements of Section 422 of the Code.
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(m) "NON-STATUTORY STOCK OPTION" means a stock option grant that is not
intended to be an Incentive Stock Option.
(n) "OPTION" means an Incentive Stock Option or a Non-Statutory Stock
Option granted pursuant to this Plan.
(o) "OPTIONED STOCK" means the Common Stock purchasable by an Employee
or Director of the Corporation pursuant to an Option.
(p) "OPTIONEE" means an Employee or Director of the Corporation who
receives an Option.
(q) "PERFORMANCE BASED RESTRICTED STOCK" means shares of Common Stock
contingently granted to an Employee under Section 8 of the Plan.
(r) "PLAN" means the 1996 Nashua Corporation Stock Incentive Plan.
(s) "SHARE" means one share of the Common Stock.
(t) "SUBSIDIARY" means a subsidiary of the Company as defined under
Section 424(f) of the Code.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 11(h), the aggregate number
of shares of Common Stock which may be issued pursuant to awards made
under the Plan shall not exceed 660,000 shares. Any Shares subject to an
Option which for any reason expires or is terminated unexercised as to
such Shares and any Shares reacquired by the Company pursuant to
forfeiture or a repurchase right hereunder may again be the subject of an
Award under the Plan. The Shares subject to Awards under this Plan may, in
whole or in part, be either authorized but unissued Shares or issued
Shares reacquired by the Company.
5. ADMINISTRATION OF THE PLAN
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by the
Executive Salary Committee of the Board of Directors of the Company.
Employees who are designated by the Committee shall be eligible to
receive Awards under the Plan. All persons designated as members of
the Committee shall be "disinterested persons" within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934.
(b) POWERS OF THE COMMITTEE. The Committee is authorized (but only to the
extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) (i) to interpret the Plan, (ii) to
prescribe, amend and rescind rules and regulations relating to the
Plan, (iii) to determine the Employees to whom Awards shall be
granted under the Plan, the amount and terms of such Awards and the
time when Awards will be granted, and (iv) to make other
determinations necessary or advisable for the administration of the
Plan, and shall have and may exercise such other power and authority
as may be delegated to it by the Board from time to
<PAGE> 3
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time. A majority of the entire Committee shall constitute a quorum
and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the
Committee.
Officers of the Company are hereby authorized to assist the Committee
in the administration of the Plan and to execute instruments
evidencing Awards on behalf of the Company and to cause them to be
delivered to the Employees.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
6. ELIGIBILITY
Awards may be granted by the Committee only to those officers and key
Employees of the Company and of any Affiliated Corporation who are in
positions in which their decisions, actions and counsel significantly
impact upon the profitability of the Company. Directors who are not
otherwise Employees of the Company or an Affiliated Corporation shall be
eligible to receive Awards only under Section 10 hereof, and not under
other Sections. An Employee who has been granted an Award may, if
otherwise eligible, be granted an additional Award or Awards. In no event,
however, shall the aggregate number of Shares which may be issued under
the Plan to any one individual exceed 150,000, during the term of the Plan
subject to adjustment as provided in Section 11(h). For the purpose of
calculating such maximum number, an Option shall continue to be treated as
outstanding notwithstanding its cancellation or expiration.
7. STOCK OPTIONS
(a) GRANT. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine each Employee to whom
an Option shall be granted, the number of Shares to be covered by
each Option, the option price and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have
the authority to grant Incentive Stock Options or to grant
Non-Statutory Stock Options, or to grant both types of Options. The
terms and conditions of Awards of Incentive Stock Options shall be
subject to and comply with such rules as may be prescribed by Section
422 of the Code, as from time to time amended, and any regulations
implementing Section 422.
(b) OPTION PRICE. The price per Share at which each Option granted under
the Plan may be exercised shall not, as to any particular Option, be
less than 100% of the Fair Market Value of a Share at the time the
Option is granted.
The exercise price at which Options are granted under the Plan may
not be reset except for adjustments as provided in Section 11(h).
Options that lapse because of employee terminations or other reasons
may be replaced with new Awards.
(c) RESTRICTIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options
granted under this Plan shall be designated specifically as such and,
for so long as the Code shall so require, shall be subject to the
additional restriction that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are
<PAGE> 4
-4-
exercisable for the first time by an Optionee during any calendar
year shall not exceed $100,000. If an Incentive Stock Option which
exceeds the $100,000 limitation of this Section 7(c) is granted, the
portion of such Incentive Stock Option which is exercisable for
Shares in excess of the $100,000 limitation shall be treated as a
Non-Statutory Stock Option pursuant to Section 422(d) of the Code. In
the event that such Optionee is eligible to participate in any other
stock incentive plans of the Company, its parent, if any, or a
Subsidiary which are also intended to comply with the provisions of
Section 422 of the Code, such annual limitation shall apply to the
aggregate number of Shares for which options may be granted under all
such plans.
(d) EXERCISE OF OPTION. An Option shall be exercisable at such times and
under such conditions as shall be permissible under the terms of the
Plan and of the Option granted to an Optionee; however, in no event
may any Option granted hereunder be exercisable after expiration of
10 years and one day from the date of such grant. The Committee shall
have the power to permit in its discretion, the acceleration of the
exercise of an Option, or any portion thereof, under such
circumstances and upon such terms as it deems appropriate. An Option
may not be exercised for a fractional Share.
An Option may be exercised, subject to the provisions hereof relative
to its termination and limitations on its exercise, from time to time
only by (i) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (ii) payment to the
Company (contemporaneously with delivery of each such notice), either
in cash or, if permitted by the Committee, by the surrender and
delivery to the Company of Shares with a fair market value (based on
the New York Stock Exchange closing price on the date of payment)
equal to or less than the total Option price plus cash for any
difference of the amount of the Option price of the number of Shares
with respect to which the Option is then being exercised plus any
state and federal withholding tax required, as provided under Section
11(a) or by any other means (including without limitation, by
delivery of a promissory note of the Optionee payable on such terms
as are specified by the Committee) which the Committee determines are
consistent with the purpose of the Plan and with applicable laws and
regulations (including without limitation, the provisions of
Regulation T promulgated by the Federal Reserve Board). Each such
notice and payment shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Secretary of the
Company at the Company's executive offices.
(e) TERMINATION OF EMPLOYMENT. Each Option shall terminate and may no
longer be exercised if the Optionee ceases to perform services for
the Company or an Affiliated Corporation in accordance with the
following:
(i) If an Optionee ceases to be an employee of the Company or any
Subsidiary other than by reason of death, retirement or
disability, absent a determination by the Committee to the
contrary, any Options which were exercisable by the Optionee
on the date of termination of employment may be exercised any
time before their expiration date or within six months after
the date of termination, whichever is earlier, but only to
the extent that the Options were exercisable when employment
ceased. In the event an Optionee fails to exercise an
<PAGE> 5
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Incentive Stock Option within three months after the date of
termination, such Option will be treated as a Non-Statutory
Stock Option pursuant to Section 422 of the Code.
(ii) In the case of death or disability of the Optionee, Options
which were exercisable by the Optionee on the date of
employment termination may be exercised at any time before
their expiration date or within one year after the date of
termination, whichever is earlier.
(iii) If an Optionee's employment terminates because of retirement,
any Options which were exercisable by the Optionee on the
date of termination of employment may be exercised any time
before their expiration date or within three years after the
date of termination, whichever is earlier, but only to the
extent that the Options were exercisable when employment
ceased absent a determination by the Committee to the
contrary at the time any such Options were granted or prior
to their expiration date, as provided hereunder.
Notwithstanding the foregoing, in the event an Optionee fails
to exercise an Incentive Stock Option within three months
after the date of his or her retirement, such Option will be
treated as a Non-Statutory Stock Option.
8. PERFORMANCE BASED RESTRICTED STOCK
(a) All shares of Performance Based Restricted Stock granted hereunder
(including any shares received in respect of the Performance Based
Restricted Stock as a result of stock dividends, stock splits or any
other forms of recapitalization) shall be subject to the following
restrictions:
(1) No shares of Performance Based Restricted Stock or any
interest therein shall be transferred or disposed of either
voluntarily or involuntarily, directly or indirectly, by
sale, gift, pledge or otherwise, unless such shares of
Performance Based Restricted Stock shall have then been
released from such restrictions on transfer, and any
attempted transfer or disposition of shares of Performance
Based Restricted Stock while they are restricted shall be
null and void and of no effect.
(2) The restrictions imposed under Paragraph (a)(1) above upon
shares of Performance Based Restricted Stock shall terminate
within times determined by the Committee only upon the
attainment of performance conditions such as earnings, share
price or other targets set by the Committee at time of grant.
(b) If such performance conditions are not met by dates set by the
Committee at time of Award, all of the Performance Based Restricted
Stock subject to restrictions under said grant at such dates,
together with accumulated dividends thereon, shall be forfeited and
revert to the Company.
<PAGE> 6
-6-
(c) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom Shares of
Performance Based Restricted Stock shall be granted, the number of
Shares of Performance Based Restricted Stock to be granted to each
Employee, and the other terms and conditions of such Awards.
(d) Shares of Performance Based Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as
herein provided, during the restricted period. Certificates issued in
respect of shares of Performance Based Restricted Stock shall be
registered in the name of the Employee and deposited by such
Employee, together with a stock power endorsed in blank, with the
Company. At the expiration of the restricted period, the Company
shall deliver such certificates to the Employee or the Employee's
legal representative.
(e) Unless otherwise determined by the Committee at or after grant, if an
Employee's employment terminates for any reason, the Performance
Based Restricted Stock which is unvested or subject to restriction
shall thereupon be forfeited.
(f) Subject to adjustment as provided in Section 11(h), Awards of
Performance Based Restricted Stock may not exceed an aggregate of
150,000 shares under this Plan. Any shares reacquired by the Company
pursuant to a forfeiture of Performance Based Restricted Stock may
again be the subject of an Award of Performance Based Restricted
Stock under the Plan.
9. CHANGE IN CONTROL
The Committee may provide that certain or all Options granted under
Section 7 of the Plan shall become exercisable in full and that any time
limitation (but not performance condition) applicable to any Performance
Based Restricted Stock shall lapse, in the event of a Change in Control of
the Corporation (as hereinafter defined). Options granted under Section 10
shall become exercisable in full for the aggregate number of Shares
covered thereby in the event of 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
person (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 the Exchange Act) of 30% 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 (i) 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
<PAGE> 7
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subsidiaries or (ii) 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 June 14, 1996, 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 June 14, 1996 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
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
<PAGE> 8
-8-
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.
10. NON-EMPLOYEE DIRECTOR OPTIONS AND STOCK AWARDS
Notwithstanding any of the other provisions of the Plan to the contrary,
the provisions of this Section 10 shall only apply to a non-employee
member of the Board. The other provisions of the Plan shall apply to
grants of Options under this Section 10 to the extent not inconsistent
with the provisions of this Section.
(a) Each non-employee member of the Board shall receive Non-Statutory
Stock Options in accordance with the provisions of this Section 10.
(i) Recipients of Options under this Section 10 shall enter into
a stock option agreement with the Corporation, which
agreement shall set forth, among other things, the exercise
price of the Option, the term of the Option and provisions
regarding exercisability of the Option granted thereunder.
The Options shall be exercisable only by the recipient or the
recipient's estate.
(ii) On the Effective Date and the date after each succeeding
annual stockholders meeting of the Corporation each
non-employee member of the Board shall be granted a
Non-Statutory Stock Option to purchase 1,000 shares of Common
Stock subject to adjustment as provided in Section 11(h). The
Option Price per share of Common Stock purchasable under such
Options shall be equal to the Fair Market Value of the Common
Stock on the date of grant subject to adjustment as provided
in Section 11(h). Such Option shall remain exercisable by the
Optionee or the Optionee's estate until the earliest of 10
years and one day from the date of grant, or one year after
the last day of any directorship with the Corporation. Such
Options shall become exercisable on the day before the annual
stockholders meeting following the date of grant, providing
the recipient is then a director, by payment in full in cash
or in Shares of Common Stock having a fair market value
(based on the New York Stock Exchange closing price on the
date of payment) equal to the Option Price or in a
combination of cash and such Shares.
(b) Each non-employee member of the Board shall receive Shares in lieu of
annual cash compensation as follows:
On the Effective Date and the date after each succeeding annual
stockholders meeting of the Corporation each non-employee member of
the Board shall be granted a number of (unrestricted) Shares
determined by dividing the amount of
<PAGE> 9
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the annual cash retainer authorized for directors (currently $15,000)
by the closing price listed on the New York Stock Exchange on such
date without taking into account fractional shares.
Non-employee members of the Board who become members of the Board
between annual stockholders meetings shall be granted a number of
(unrestricted) Shares determined by dividing the amount of annual
cash retainer (as prorated for periods less than one year) by the
closing price listed on the New York Stock Exchange on such date
without taking into account fractional shares.
Additional annual cash compensation payable to a non-employee member
of the Board elected by the Board to additional offices such as
Chairman or Lead Director may be paid in cash on the date of his or
her election or reelection (the "Payment Date") to such office, or
any such member of the Board may elect (a "Share Election") to be
granted a number of (unrestricted) Shares determined by dividing the
amount of such additional annual cash compensation by the closing
price listed on the New York Stock Exchange on such date without
taking into account fractional shares. To receive Shares in lieu of
additional annual compensation, a non-employee member of the Board
must make a Share Election at least six months prior to the Payment
Date. Any reversal of a Share Election (the "Share Election
Reversal") will not be effective until a period of at least 6 months
from the date of such Share Election Reversal.
11. GENERAL PROVISIONS
(a) WITHHOLDING. Each participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes
required by law to be withheld in connection with Awards to such
participant no later than the date of the event creating the tax
liability. Participants may, to the extent then permitted under
applicable law, satisfy such tax obligations in whole or in part by
delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their fair market
value. The Company may, to the extent permitted by law, deduct any
such tax obligations from any payment of any kind otherwise due to a
participant.
(b) NONTRANSFERABILITY. Except as the Board may otherwise determine or
provide in an Award, Awards shall not be sold, assigned, transferred,
pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the
participant, shall be exercisable only by the participant. References
to a participant, to the extent relevant in the context, shall
include references to authorized transferees.
(c) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a participant the right to be retained in the employ of the
Company. Further, the Company expressly reserves the right at any
time to dismiss a participant without any liability under the Plan,
except as provided herein or in any agreement entered into with
respect to an Award.
<PAGE> 10
-10-
(d) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Optionee shall have any rights as a stockholder with
respect to any shares of Common Stock to be distributed under the
Plan until he or she has become the holder thereof. Notwithstanding
the foregoing, in connection with each grant of Performance Based
Restricted Stock hereunder, the applicable Award shall specify if and
to what extent the Optionee shall not be entitled to the rights of a
stockholder in respect of such Performance Based Restricted Stock.
(e) CONSTRUCTION OF THE PLAN. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined
solely in accordance with the laws of New Hampshire.
(f) EFFECTIVE DATE. Subject to the approval of the stockholders of the
Company within one year thereof, the Plan shall be effective on June
14, 1996. Although Options and Awards may be granted prior to such
stockholder approval, no Option or Award may be exercised until such
approval is obtained. No Options or Awards may be granted under the
Plan after June 13, 2006
(g) AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board of
Directors at any time may terminate, and at any time from time to
time, and in any respect, may amend or modify, the Plan provided:
(a) that no such termination or amendment shall adversely affect
or impair any then outstanding Option or Award without the
consent of the holder of such Option or Award;
(b) no such amendment shall be made to Section 10 more frequently
than once in any six-month period, unless an amendment is
required in order to comport with the requirements of the
Code or Rule 16(b)-3 of the Exchange Act; and
(c) that any such amendment which:
(i) increases the maximum number of Shares subject to this
Plan;
(ii) changes the class of persons eligible to participate
in this Plan; or
(iii) materially increases the benefits accruing to
executive officers and directors of the Company under
this Plan
shall be subject to approval by the shareholders of the
Company within one year from the effective date of such
amendment and shall be null and void if such approval is not
obtained.
(h) ADJUSTMENTS AND ASSUMPTIONS. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger,
<PAGE> 11
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consolidation, distribution of assets, or any other change in
the corporate structure or shares of the Company, the Committee shall
make such appropriate adjustments in the number and kind of shares
authorized by the Plan, in the number and kind of shares covered by
the Awards granted, and in the purchase price of outstanding Options.
In the event of any merger, consolidation or other reorganization in
which the Company is not the surviving or continuing corporation, all
Awards granted hereunder and outstanding on the date of such event
shall be assumed by the surviving or continuing corporation with
appropriate adjustment as to the number and kind of Shares and
purchase price of the Shares.
(i) PROVISION FOR FOREIGN PARTICIPANTS. The Committee may, without
amending the Plan, modify Awards or Options granted to participants
who are foreign nationals or employed outside the United States to
recognize differences in laws, rules, regulations or customs of such
foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
(j) IMPACT ON OTHER BENEFITS. The value of any Award (either on its grant
date, vesting date or exercise date) shall not be includable as
compensation or earnings for purposes of any other benefit plan of
the Company.
As Amended 4/13/99
<PAGE> 1
Exhibit 10.02
NASHUA CORPORATION
1999 SHAREHOLDER VALUE PLAN
---------------------------
1. PURPOSE
The purpose of this 1999 Shareholder Value Plan (the "Plan") of Nashua
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any of the
Company's present or future subsidiary corporations as defined in Section 424(f)
of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be
administered by the Board of Directors of the Company (the "Board"). The Board
shall have authority to grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. All decisions by the Board shall be
made in the Board's sole discretion and shall be final and binding on all
persons having or claiming any interest in the Plan or in any Award. No director
or person acting pursuant to the authority delegated by the Board shall be
liable for any action or determination relating to or under the Plan made in
good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board or any Committee as defined in Section 3(c) may
delegate to one or more executive officers of the Company the power to make
Awards and exercise such other powers under the Plan as the Board may determine,
provided that the Board shall fix the maximum number of shares subject to Awards
and the maximum number of shares for any one Participant to be made by such
executive officers.
(c) APPOINTMENT OF COMMITTEE. The Board shall appoint a committee
or subcommittee of the Board (a "Committee") consisting of not less than two
members, each member of which shall be an "outside director" within the meaning
of Section 162(m) of the Code and a "non-employee director" as defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act")
<PAGE> 2
and shall delegate its powers under the Plan to such Committee. All references
in the Plan to the "Board" shall mean the Board or a Committee of the Board or
the executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 8,
Awards may be made under the Plan for up to 600,000 shares of common stock,
$1.00 par value per share, of the Company (the "Common Stock"). If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 8,
the maximum number of shares of Common Stock with respect to which an Award may
be granted to any Participant under the Plan shall be 150,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
5. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option". Notwithstanding anything contained herein to the contrary, without the
prior approval of the Company's shareholders, no option issued hereunder shall
be repriced, replaced or regranted through cancellation, or by lowering the
option exercise price of a previously granted award.
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to
be an "incentive stock option" as defined in Section 422 of the Code (an
"Incentive Stock Option") shall only be granted to employees of the Company and
shall be subject to and shall be construed consistently with the requirements of
Section 422 of the Code. The Company shall have no liability to a Participant,
or any other party, if an Option (or any part thereof) which is intended to be
an Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price
at the time each Option is granted at not less than 100% of the fair market
value of the Common Stock, as determined by the Board, at the time the Option is
granted ("Fair Market Value"), and shall specify that option price in the
applicable option agreement.
2
<PAGE> 3
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify in the
applicable option agreement, provided, however, that no Option will be granted
for a term in excess of 10 years.
(e) EXERCISE OF OPTION. Options may be exercised by delivery to
the Company of a written notice of exercise signed by the proper person or by
any other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the
exercise of an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the
Company;
(2) except as the Board may, in its sole discretion,
otherwise provide in an option agreement, by (i)
delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver
promptly to the Company sufficient funds to pay the
exercise price or (ii) delivery by the Participant to
the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker
to deliver promptly to the Company cash or a check
sufficient to pay the exercise price;
(3) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as
determined by (or in a manner approved by) the Board
in good faith ("Fair Market Value"), provided (i)
such method of payment is then permitted under
applicable law and (ii) such Common Stock was owned
by the Participant at least six months prior to such
delivery;
(4) to the extent permitted by the Board, in its sole
discretion by (i) delivery of a promissory note of
the Participant to the Company on terms determined by
the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of
payment.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares at their issue price or other stated or
formula price (or to require forfeiture of such shares if issued at no cost)
from the recipient in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration
3
<PAGE> 4
of the applicable restriction periods, the Company (or such designee) shall
deliver the certificates no longer subject to such restrictions to the
Participant or if the Participant has died, to the beneficiary designated, in a
manner determined by the Board, by a Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) CHANGES IN CAPITALIZATION. In the event of any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed
liquidation or dissolution of the Company, the Board shall upon written notice
to the Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) ACQUISITION EVENTS
(1) DEFINITION. An "Acquisition Event" shall mean: (a)
any merger or consolidation of the Company with or
into another entity as a result of which the Common
Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any
exchange of shares of the Company for cash,
securities or other property pursuant to a statutory
share exchange transaction.
(2) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon
the occurrence of an Acquisition Event, or the
execution by the Company of any agreement with
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respect to an Acquisition Event, the Board shall
provide that all outstanding Options shall be
assumed, or equivalent options shall be substituted,
by the acquiring or succeeding corporation (or an
affiliate thereof). For purposes hereof, an Option
shall be considered to be assumed if, following
consummation of the Acquisition Event, the Option
confers the right to purchase, for each share of
Common Stock subject to the Option immediately prior
to the consummation of the Acquisition Event, the
consideration (whether cash, securities or other
property) received as a result of the Acquisition
Event by holders of Common Stock for each share of
Common Stock held immediately prior to the
consummation of the Acquisition Event (and if holders
were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided,
however, that if the consideration received as a
result of the Acquisition Event is not solely common
stock of the acquiring or succeeding corporation (or
an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the
exercise of Options to consist solely of common stock
of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to
the per share consideration received by holders of
outstanding shares of Common Stock as a result of the
Acquisition Event.
Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does
not agree to assume, or substitute for, such Options,
then the Board shall, upon written notice to the
Participants, provide that all then unexercised
Options will become exercisable in full as of a
specified time prior to the Acquisition Event and
will terminate immediately prior to the consummation
of such Acquisition Event, except to the extent
exercised by the Participants before the consummation
of such Acquisition Event; provided, however, that in
the event of an Acquisition Event under the terms of
which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), then the Board may
instead provide that all outstanding Options shall
terminate upon consummation of such Acquisition Event
and that each Participant shall receive, in exchange
therefor, a cash payment equal to the amount (if any)
by which (A) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such
outstanding Options (whether or not then
exercisable), exceeds (B) the aggregate exercise
price of such Options.
(3) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED
STOCK AWARDS. Upon the occurrence of an Acquisition
Event, the repurchase and other rights of the Company
under each outstanding Restricted Stock Award shall
inure to the benefit of the Company's successor and
shall apply to the cash, securities or other property
which the Common Stock was converted into or
exchanged for pursuant to such Acquisition Event in
the same manner and to the same extent as they
applied to the Common Stock subject to such
Restricted Stock Award.
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(4) CONSEQUENCES OF AN ACQUISITION EVENT ON OTHER AWARDS.
The Board shall specify the effect of an Acquisition
Event on any other Award granted under the Plan at
the time of the grant of such Award.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award shall be evidenced by a written
instrument in such form as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan,
each Award may be made alone or in addition or in relation to any other Award.
The terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on
an Award of the disability, death, retirement, authorized leave of absence or
other change in the employment or other status of a Participant and the extent
to which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or
make provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in connection with Awards to such Participant no later than
the date of the event creating the tax liability. Participants may, to the
extent then permitted under applicable law, satisfy such tax obligations in
whole or in part by delivery of shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair Market
Value. The Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate
any outstanding Award, including but not limited to, substituting therefor
another Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan until (i)
all conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the
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Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements
of any applicable laws, rules or regulations.
(h) ACCELERATION. The Board may at any time provide that any
Options shall become immediately exercisable in full or in part, that any
Restricted Stock Awards shall be free of restrictions in full or in part or that
any other Awards may become exercisable in full or in part or free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be.
10. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have
any claim or right to be granted an Award, and the grant of an Award shall not
be construed as giving a Participant the right to continued employment or any
other relationship with the Company. The Company expressly reserves the right at
any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan, except as expressly provided in
the applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become
effective on the date on which it is approved by the Company's stockholders. No
Awards shall be granted under the Plan after the completion of ten years from
the date the Plan was approved by the Company's stockholders, but Awards
previously granted may extend beyond that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time, provided that to the extent
required by Section 162(m) of the Code, no Award granted to a Participant
designated as subject to Section 162(m) by the Board after the date of such
amendment shall become exercisable, realizable or vested, as applicable to such
Award (to the extent that such amendment to the Plan was required to grant such
Award to a particular Participant), unless and until such amendment shall have
been approved by the Company's stockholders as required by Section 162(m)
(including the vote required under Section 162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
As Amended - 4/30/99
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Exhibit 10.03
LOAN AGREEMENT
LOAN AGREEMENT ( the "Agreement") dated as of this 22nd day of April,
1999 by and between NASHUA CORPORATION, a Delaware corporation with a principal
place of business of 44 Franklin Street, Nashua, New Hampshire 03061-2002 (the
"Borrower") and FLEET BANK-NH, a bank incorporated under the laws of the State
of New Hampshire with a principal place of business at 1155 Elm Street,
Manchester, New Hampshire 03101 (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower has requested and the Bank has agreed to make a
certain Fifteen Million Dollars ($15,000,000) Revolving Line of Credit Loan (the
"Line of Credit" or the "Loan") to the Borrower; and
WHEREAS, the parties wish to set forth in writing the terms and
conditions upon which the Bank will make the Loan to the Borrower;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties covenant, stipulate and
agree as follows:
ARTICLE I. THE LINE OF CREDIT. The Bank agrees to make, the Line of Credit
available to the Borrower subject to and upon the following terms and
conditions:
1.1 BORROWER. The Borrower under the Line of Credit shall be NASHUA
CORPORATION. The Borrower shall sign a promissory note (the "Line of Credit
Note" or the "Note") evidencing its obligation to pay and perform the Line of
Credit.
1.2 AMOUNT. Under the Line of Credit, the Bank agrees to loan the
Borrower an amount up to Fifteen Million Dollars ($15,000,000); PROVIDED,
HOWEVER, the availability under the Line of Credit for direct borrowings shall
be reduced by the aggregate amount of all outstanding foreign exchange
facilities and letters of credit issued by the Bank or any affiliate thereof for
the benefit or on behalf of the Borrower.
1.3 USE OF PROCEEDS. The proceeds of the Line of Credit shall be used
by the Borrower for general corporate purposes, including, but not limited to,
direct borrowings, letters of credit and foreign exchange facilities.
1.4 INTEREST RATE. Sums advanced under the Line of Credit shall bear
interest in accordance with the terms of Article II hereof.
1.5 REPAYMENT. Unless demand is sooner made due to an Event of
Default (as hereinafter defined) or the Line of Credit is renewed by the Bank,
the Line of Credit shall mature on April 22, 2001 (the "Maturity Date"). On or
before each anniversary date of this Agreement, the Bank shall review the Line
of Credit to determine whether it will renew the
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Line of Credit for an additional one (1) year period so that such annual renewal
will result in a "rolling" two (2) year Line of Credit. If the Bank, in its sole
discretion, elects not to renew the Line of Credit on or before each anniversary
date of this Agreement, then the Line of Credit shall mature on the date which
is one (1) year from the date of the anniversary date of this Agreement upon
which the Bank elected not to renew the Line of Credit, unless demand is sooner
made due to an Event of Default. Prior to maturity, the Borrower shall make
payments of interest only to the Bank on a monthly basis, in arrears, with the
first such payment being made on that date thirty (30) days from the date hereof
(or on such other date as the parties may agree upon in writing to provide for a
convenient payment date) with subsequent payments being made on the
corresponding day of each succeeding month. All payments required under this
Agreement, the Note or any other Loan Document shall be in lawful money of the
United States in immediately available funds. The due dates of all payments
required under the Agreement, the Note or any other Loan Document are subject to
adjustment in accordance with the Modified Following Business Day Convention.
Modified Following Business Day Convention means the convention for adjusting
any relevant date if it would otherwise fall on a day that is not a Business Day
to the date that will be the first following day that is a Business Day (unless
that day falls in the next calendar month, in which case that date will be the
first preceding day that is a Business Day). The term "Business Day" means, in
respect to any date that is specified in the Agreement or the Note to be subject
to adjustment in accordance with applicable Modified Following Business Day
Convention, a day on which commercial banks settle payments in (a) London, if
the payment obligation is calculated by reference to any LIBOR Rate (as
hereinafter defined) or (b) New York, if the payment obligation is calculated by
reference to the Prime Rate (as hereinafter defined).
1.6 SECURITY. Borrower's payment and performance of the Line of
Credit shall be secured by a perfected first priority security interest in all
of the Borrower's accounts receivable and inventory.
1.7 GUARANTY, SECURITY THEREFOR. The payment and performance of the
Line of Credit by the Borrower shall be unconditionally guaranteed by the
Guarantors (as defined in Section 4.22 hereof).
1.8 FEES AND EXPENSES. In connection with the Loan, the Borrower
agrees to pay the Bank the following fees:
(a) A Twenty Thousand Dollar ($20,000) closing fee payable at
closing;
(b) An unused facility fee equal to one quarter of one percent (1/4%)
per annum on the average daily principal amount of the unused portion of the
Line of Credit to be paid quarterly in arrears; and
(c) The letter of credit fees for any usage under the Line of Credit
for letters of credit shall be 1.25% per annum of the face amount of such letter
of credit.
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1.9 CROSS DEFAULT. The Borrower's obligations to the Bank with
respect to the Line of Credit shall be and hereby are cross defaulted with all
loans, letters of credit, foreign exchange facilities or other obligations, now
existing and hereafter arising, of the Borrower or any Guarantor, owed to the
Bank or any affiliate thereof, including the Line of Credit and the Master
Agreement (as hereinafter defined), as the same may be hereafter amended.
ARTICLE II. INTEREST RATE AND OTHER APPLICABLE LIBOR PROVISIONS
2.1 Subject to the terms of Section 2.2 hereof, the Borrower shall
have the option to elect that the sums advanced under the Line of Credit shall
bear interest at a variable per annum rate equal to the Prime Rate, (the
"Floating Rate Option"). The term "Prime Rate" means the variable per annum rate
of interest so designated from time to time by Fleet Bank-NH as its Prime Rate.
The Prime Rate is a reference rate and does not necessarily represent the lowest
or best rate being charged to any customer. Each time the Prime Rate changes,
the interest rate on such Loan shall change. Interest under the Floating Rate
Option and under the LIBOR Fixed Rate Option (as hereinafter defined) shall be
calculated and charged on the basis of actual days elapsed over a banking year
of three hundred sixty (360) days.
2.2 As a material inducement for the Borrower to enter into this
Agreement, the Borrower shall also have the option to elect (the "LIBOR Fixed
Rate Option") that the interest rate payable under the Line of Credit shall be
equal to the LIBOR Rate (as hereinafter defined) plus one and three quarters
percent (1 3/4%) per annum. If the Borrower maintains compensating balances in
its accounts with the Bank of at least Five Hundred Thousand Dollars ($500,000),
the LIBOR Fixed Rate Option shall automatically be reduced to equal the LIBOR
Rate plus one hundred sixty basis points (1.60%) per annum. The election of the
LIBOR Fixed Rate Option shall be fixed for one (1), two (2), three (3) or six
(6) month periods (the "LIBOR Rate Interest Period(s)") and shall be in the
minimum amount of One Hundred Thousand Dollars ($100,000) and, if greater, in
additional increments of Fifty Thousand Dollars ($50,000). In the absence of an
election by the Borrower to exercise the LIBOR Fixed Rate Option, the Line of
Credit shall bear interest at a rate equal to the Floating Rate Option and said
interest rate shall apply to the entire principal amount outstanding thereunder.
No LIBOR Rate Interest Period shall extend beyond the maturity of the Line of
Credit. Any LIBOR Interest Rate Period chosen by the Borrower will be so
structured such that the principal amount to be repaid at maturity hereunder
shall either bear interest at the Floating Rate Option or bear interest at a
LIBOR Fixed Rate Option having a LIBOR Rate Interest Period which terminates on
the day such principal repayment is to be made. Any LIBOR Rate Interest Period
which would otherwise end on a day which is not a Business Day shall be extended
to the next Business Day unless that day falls into the next calendar month, in
which case, that day will be the first preceding Business Day, or, provided that
the Bank shall have given reasonable notice to the Borrower, as otherwise
determined by the Bank in accordance with the then current foreign banking
practice. At the expiration of each LIBOR Rate Interest Period, any part of the
principal amount of the Line of Credit bearing interest based under LIBOR Fixed
Rate Option as to which no notice of renewal has been received as provided below
shall automatically be converted to the Floating Rate Option. The Bank shall
attempt to notify the Borrower of any such
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automatic conversion. If the Bank offers and the Borrower elects to do so, then
the Borrower and the Bank may exchange the LIBOR Fixed Rate Option (one (1)
month LIBOR only) pursuant to an interest rate swap contract (in the form of an
International Swap Dealer's Association Master Agreement and Confirmation
Agreement between the Borrower and Fleet National Bank ("FNB"), both of which
are referred to as the "Master Agreement") for a fixed rate of interest.
2.3 "LIBOR RATE" shall mean the per annum rate as determined by the
Bank (rounded upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in U.S. dollars, for
the applicable LIBOR Rate Interest Period, which appears on the Telerate page
3750 as of 11:00 a.m. London time on the day that is two (2) London Business
Days preceding the first day of such LIBOR Rate Interest Period; provided,
however, if the rate described above does not appear on the Telerate System on
any applicable interest determination date, the LIBOR Rate shall be the rate
(rounded upwards as described above, if necessary) for deposits in dollars for a
period substantially equal to LIBOR Rate Interest Period on the Reuters Page
"LIBO" (or such other page as may replace the LIBO Page on that service for the
purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day
that is two (2) London Business Days prior to the beginning of such interest
period.
If both the Telerate and Reuters system are unavailable, then the rate
for that date will be determined on the basis of the offered rates for deposits
in U.S. dollars for a period of time comparable to such LIBOR Rate Interest
Period which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Business
Days preceding the first day of such LIBOR Rate Interest Period as selected by
the Bank's calculation agent. The principal London office of each of the four
major London banks will be requested to provide a quotation of its U.S. dollar
deposit offered rate. If at least two such quotations are provided, the rate for
that date will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that date will be determined
on the basis of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to such LIBOR Rate Interest Period which
are offered by major banks in New York City at approximately 11:00 a.m. New York
City time, on the day that is two (2) London Business Days preceding the first
day of such LIBOR Rate Interest Period. If the Bank is unable to obtain any such
quotation as provided above, then it will be deemed that LIBOR Rate cannot be
determined and the Bank will have no obligation to make LIBOR Rate based loans.
If the Board of Governors of the Federal Reserve System shall impose a Reserve
Percentage with respect to LIBOR deposits of the Bank, then for any period
during which such Reserve Percentage shall apply, LIBOR Rate shall be equal to
the amount determined above divided by an amount equal to 1 minus the Reserve
Percentage. Reserve Percentage means the rate (expressed as a decimal) at which
the Bank is required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System against Eurodollar liabilities
outstanding.
2.4 Notwithstanding the foregoing, if as a result of any change in
any foreign or United States law or regulation (or change in the interpretation
thereof) it is determined by the
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Bank that it is unlawful to maintain a LIBOR Rate based loan, or if any central
bank or governmental authority (foreign or domestic) shall assert that it is
unlawful to maintain a LIBOR Rate based loan, then such LIBOR Rate based loan
shall terminate, be automatically converted to an advance under the Floating
Rate Option and the Borrower shall have no further right hereunder to elect the
LIBOR Fixed Rate Option. If for any reason a LIBOR Rate based loan is terminated
or prepaid by the Borrower prior to the end of the applicable LIBOR Rate
Interest Period for which the LIBOR Rate is to be in effect, then the Borrower
shall, upon demand by Bank, pay to Bank any amounts required to compensate Bank
for any additional losses, costs, or expenses which it may reasonably incur as a
result of such termination or prepayment, including, without limitation, any
losses, costs, or expenses incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by the Bank to fund or maintain such LIBOR
Rate based loan. If the Bank determines that by reason of circumstances
affecting the London interbank market, adequate and reasonable means do not
exist for determining the LIBOR Rate in the relevant amount and for the relevant
maturity are not available to the Bank in the London interbank market, with
respect to a proposed LIBOR Rate based loan, then the Bank shall give the
Borrower prompt notice of such determination. Until such notice has been
withdrawn, the Bank shall have no obligation to make LIBOR Rate based loans, or
maintain outstanding LIBOR Rate based loans.
2.5 If, due to any one or more of: (i) the introduction of any
applicable law or regulation or any change in the interpretation or application
by any authority charged with the interpretation or application thereof of any
law or regulation; or (ii) the compliance with any guideline or request from any
governmental central bank or other governmental authority (whether or not having
the force of law), there shall be an increase in the cost to the Bank of
agreeing to make or making, funding or maintaining LIBOR Rate based loans,
including, without limitation, changes which affect or would affect the amount
of capital or reserves required or expected to be maintained by the Bank, with
respect to all or any portion of the LIBOR Rate based loans, or any corporation
controlling the Bank, on account thereof, then the Borrower from time to time
shall, upon written demand by the Bank within ninety (90) days of an event which
gives rise to such increased costs, pay the Bank additional amounts sufficient
to indemnify the Bank against such increased cost as such increased costs relate
to the Borrower. A certificate as to the amount of the increased cost and the
reason therefor submitted to Borrower by the Bank in the absence of manifest
error, shall be conclusive and binding for all purposes.
2.6 In order for the Borrower to elect the LIBOR Fixed Rate Option,
the following conditions must be met:
(i) The Bank shall have received a written notice (the "LIBOR Fixed
Rate Request") from the Borrower at least two (2) London Business
Days prior to the first day of any LIBOR Rate Interest Period
requested, such notice to specify the first day and length of the
LIBOR Rate Interest Period (a "LIBOR Fixed Rate Period"), the
dollar amount of the LIBOR Portion and as to which Loan the LIBOR
Fixed Rate Request shall apply; and
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(ii) The Bank shall not have determined in good faith that it is
unable to determine the LIBOR Rate in respect of the requested
LIBOR Fixed Rate Period.
2.7 If, at any time (i) the interest rate on the Loan is a fixed
rate, and (ii) the Bank in its sole discretion should determine that current
market conditions can accommodate a prepayment request, then the Borrower shall
have the right at any time and from time to time to prepay such Loan in whole
(but not in part) and the Borrower shall pay to the Bank a yield maintenance fee
in an amount computed as follows: The current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond equivalent)
with a maturity date closest to the term chosen pursuant to the LIBOR Fixed Rate
Option as to which the prepayment is made, shall be subtracted from the "cost of
funds" component of the fixed rate in effect at the time of prepayment. If the
result is zero or a negative number, then there shall be no yield maintenance
fee. If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining in
the term chosen pursuant to the LIBOR Fixed Rate Option as to which the
prepayment is made. Said amount shall be reduced to present value calculated by
using the number of days remaining in the designated term and using the
above-referenced United States Treasury securities rate and the number of days
remaining in the term chosen pursuant to the LIBOR Fixed Rate Option as to which
the prepayment is made. The resulting amount shall be the yield maintenance fee
due to the Bank upon prepayment of the fixed rate loan. If the Bank elects to
declare the Loan to be immediately due and payable upon the occurrence of an
Event of Default, then any yield maintenance fee with respect to such Loan shall
become due and payable in the same manner as though the Borrower had exercised
such right of prepayment. If the interest rate under the Loan is swapped
pursuant to the Master Agreement, the Master Agreement sets forth additional
restrictions, limitations, and penalties associated with prepayment under said
Loan. In the event any prepayment is made by the Borrower, the amount thereof
will be applied first to delinquency charges, costs of collection and accrued
interest and thereafter to principal in the reverse order of maturity.
2.8 In the event that the Borrower fails to pay any amount that is
due and owing to FNB under and pursuant to the Master Agreement (after giving
effect to any applicable grace period), then upon demand by FNB, in its sole
discretion, the Bank shall pay such amount directly to FNB for the account of
the Borrower and the Borrower hereby authorizes and consents to such payment by
the Bank. The Borrower agrees that (i) FNB shall have no obligation to demand
the Bank to advance such funds on behalf of the Borrower, (ii) the making of
such a demand by FNB will not create any obligation to make such a demand in the
future, and (iii) at all times FNB may choose not to make such demand and
choose, instead to exercise its rights under the Master Agreement. It shall be
an additional obligation of the Borrower to reimburse the Bank for any amount
the Bank may pay on account of any amount that is due and owing by the Borrower
to FNB. Such additional obligation shall be due upon demand and shall bear
interest at a rate per annum equal to the default rate set forth in the Note
from, and including, the date of payment by the Bank to, but excluding, the date
the Borrower reimburses the Bank for such additional obligation. FNB is an
intended third-party beneficiary of the Bank's obligations under this Section.
It is expressly agreed by the parties hereto that
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the terms of this Section shall apply to any and all Master Agreements entered
into by the Borrower with respect to any Loan.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTORS. To
induce the Bank to enter into this Agreement and to make the Loan, the Borrower
and the Guarantors warrant and represent to the Bank that:
3.1 LEGAL EXISTENCE. The Borrower is a corporation duly organized and
validly existing under the laws of the State of Delaware with the power to own
its property and to carry on its business as it is now being conducted. In
addition, the Borrower is duly qualified to do business and is in good standing
in New Hampshire and in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
3.2 AUTHORITY OF BORROWER. The Borrower has full power and authority
to enter into this Agreement and to borrow hereunder, to execute and deliver
this Agreement, and any other documents the purpose of which is to evidence or
secure the Loan (the foregoing, including, without limitation, this Agreement,
being hereinafter sometimes collectively referred to as the "Loan Documents" and
the security described therein sometimes hereinafter collectively referred to as
the "Collateral") and to incur the obligations provided for herein and in the
Loan Documents, all of which have been duly authorized by all proper and
necessary corporate or other action. Any consent or approval of stockholders, or
of any agency or of any public authority, or of any other party required as a
condition to the legal validity of this Agreement or the Loan Documents has been
obtained.
3.3 AUTHORITY OF GUARANTORS. Each Guarantor has full power and
authority to enter into, to execute and deliver all of the Loan Documents and to
incur the obligations provided for herein and in the Loan Documents, all of
which have been duly authorized by all proper and necessary action. Any consent
or approval of any agency or of any public authority, or any other party
required as a condition to the legal validity of this Agreement or the Loan
Documents has been obtained.
3.4 BINDING AGREEMENT. This Agreement and the Loan Documents
constitute the valid and legally binding obligations of the Borrower and each of
the Guarantors enforceable in accordance with their terms; PROVIDED, that the
enforceability of any provisions in the Loan Documents, or of any rights granted
to the Bank pursuant thereto may be subject to and affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and that the right of the Bank to specifically
enforce any provisions of the Loan Documents is subject to general principles of
equity.
3.5 LITIGATION. Except as disclosed on Schedule 3.5 attached hereto,
there are no suits pending or, to the knowledge of the Borrower or the
Guarantors, threatened, against or affecting the Borrower or any of the
Guarantors or any of the Borrower's or the Guarantors' assets which, if
adversely determined, would have a material adverse effect on the condition,
financial or otherwise, or business of the Borrower or any of the Guarantors and
which have not been disclosed in writing to the Bank. There are no proceedings
by or before any governmental commission, board, bureau or other administrative
agency pending, or, to the knowledge of the Borrower or any of the Guarantors,
threatened against the Borrower or any of the Guarantors, which, if adversely
determined, would have a material adverse effect on the condition, financial or
otherwise, or business of the Borrower or any of the Guarantors and which have
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not been disclosed in writing to the Bank. Notwithstanding the above, there are
certain suits pending or threatened which are listed on Schedule 3.5 and which
have been disclosed by Borrower or the Guarantors to Bank ("Disclosed Suits").
3.6 CONFLICTING AGREEMENTS. There is no charter provision or bylaw of
the Borrower, and no provision(s) of any existing mortgage, indenture, contract
or agreement binding on the Borrower or any of the Guarantors or affecting any
of the Borrower's or Guarantors' property, which would conflict with, be in
contravention hereof, have a material adverse effect upon, or in any way prevent
the execution, delivery, or performance of the terms of this Agreement or the
Loan Documents.
3.7 FINANCIAL CONDITION. The annual financial statements heretofore
delivered to the Bank by Borrower and the Guarantors have been prepared in
accordance with generally accepted accounting principles, consistently applied,
are complete and correct, and fairly present the financial condition and results
of the Borrower and the Guarantors. There are no material liabilities, direct or
indirect, fixed or contingent, of the Borrower or the Guarantors which are not
reflected therein or in the notes thereto which would be required to be
disclosed therein in accordance with Generally Accepted Accounting Principles
("GAAP") and there has been no material adverse change in the financial
condition or operations of the Borrower since the date of such financial
statements. Except as set forth on Schedule 3.7, to the best of Borrower's
knowledge, the Borrower's and the Guarantors' assets are free of encumbrances of
any nature.
3.8 TAXES. The Borrower and the Guarantors have filed all federal,
state and local tax returns required to be filed by the Borrower and the
Guarantors and have paid or have made adequate provision for the payment of all
taxes shown by such returns to be due and payable on or before the due dates
thereof except such that are being contested in good faith. Except as set forth
on Schedule 3.8, there are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction and the Guarantors and the
officers of the Borrower know of no basis for any such claim.
3.9 LICENSES, FRANCHISES, ETC. The Borrower possesses all material
permits, approvals, licenses, franchises, patents, trademarks, service marks,
trademark and service mark rights, trade names, trade name rights and copyrights
necessary to conduct its business substantially as now conducted, and as
proposed to be conducted, in each case subject to no mortgage, pledge, lien,
lease, encumbrance, charge, security interest, title retention agreement or
option which is not permitted by this Agreement to exist, and, without any known
conflict with any such rights or assets of others.
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3.10 NO PURCHASE OF MARGIN STOCK. No part of the proceeds received by
the Borrower from the Loan will be used directly or indirectly for the purpose
of purchasing or carrying, or for payment in full or in part of indebtedness
which was incurred for the purposes of purchasing or carrying any margin stock,
as such term is used and defined in Regulation U of the Board of Governors of
the Federal Reserve System.
3.11 SOLVENCY. The present fair saleable value of the Borrower's
assets is greater than the amount required to pay its total liabilities, the
amount of Borrower's capital is adequate in view of the type of business in
which it is engaged and the Borrower is able to pay its debts as they mature.
3.12 NOT A SUCCESSOR. Except as set forth on Schedule 3.12, the
Borrower has not, within the six year (6) period immediately preceding the date
of this Agreement, changed its name, been the surviving corporation of a merger
or consolidation, or acquired all or substantially all of the assets of any
person, corporation, partnership or entity.
3.13 BROKERAGE. There are no claims against the Borrower or any of the
Guarantors for brokerage commissions, finder's fees or similar compensation
arising out of or due to any act of the Borrower or any of the Guarantors in
connection with the transactions contemplated by this Agreement; and the
Borrower or any of the Guarantors will defend, indemnify and hold the Bank
harmless against any liability or expenses arising out of any such claim.
3.14 EMPLOYEE BENEFIT PLANS. The Borrower has not incurred any
material accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), has not incurred
any material liability to the Pension Benefit Guaranty Corporation established
under ERISA (or any successor thereto) in connection with any profit sharing,
group insurance, bonus, deferred compensation, percentage compensation, stock
option, severance pay, insurance, pension or retirement plan or other oral or
written agreement or commitment relating to employment or fringe benefits or
perquisites for employees, officers or directors of the Borrower (an "Employee
Benefit Plan"), and no Employee Benefit Plan which is subject to ERISA had, as
of its latest valuation date, accrued benefits (whether or not vested) the
present value of which exceeded the value of the assets of such Employee Benefit
Plan, based upon actuarial assumptions utilized for such Plan.
3.15 SUBSIDIARIES. The Borrower does not have any subsidiaries other
than those identified on Schedule 3.15 hereof (the "Subsidiaries"). The
Subsidiaries listed on Schedule 3.15 under the column "Material Subsidiaries" on
said Schedule 3.15 constitute any Subsidiaries which alone account for five
percent (5%) or more of the Borrower's consolidated total assets or account for
five percent (5%) or more of the Borrower's consolidated total revenue for
continuing operations for the immediately preceding fiscal year.
3.16 OWNERSHIP AND LIENS. The Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in the
financial statements referred to in Section 3.7 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties
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and assets owned by the Borrower and none of its leasehold interests is subject
to any lien, except such as are provided on Schedule 3.7 attached hereto or may
be permitted pursuant to Section 5.6 of this Agreement.
3.17 STATUTORY COMPLIANCE. The Borrower is in compliance, in all
material respects, with all statutes, regulations, ordinances, directives, and
orders of every federal, state, municipal or other governmental authority which
has or claims jurisdiction over them, any of its assets, or any person in any
capacity under which it would be responsible for the conduct of such person
where the failure to so comply would have no material adverse effect on the
Borrower.
3.18 YEAR 2000 REPRESENTATION. The Borrower has (i) initiated a review
and assessment of all areas within the business and operations of the Borrower
and each of its Subsidiaries that could be adversely affected by the "YEAR 2000
PROBLEM" (that is, the risk that computer applications used by it or any of its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to an any date after December 31, 1999),
(ii) developed a plan and time line for addressing the Year 2000 Problem on a
timely basis and (iii) to date, implemented such plan in accordance with such
timetable. The Borrower reasonably believes that all of its computer
applications that are material to the business or operations of the Borrower or
any of its Subsidiaries will on a timely basis be able to perform properly
date-sensitive functions for all dates before and from and after January 1,
2000, except to the extent that a failure to do so could not reasonable be
expected to have a material adverse effect on the Borrower or its Subsidiaries.
3.19 FULL DISCLOSURE. None of the information with respect to the
Borrower and any of the Guarantors which has been prepared and furnished by the
Borrower and any of the Guarantors to the Bank in connection with the
transactions contemplated hereby is false or misleading with respect to any
material fact, or omits to state any material fact necessary in order to make
the statements therein not misleading.
ARTICLE IV. AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTORS. Until payment
in full of the indebtedness now existing or hereafter incurred under this
Agreement and the performance of all its obligations hereunder, the Borrower and
the Guarantors agree that, unless the Bank shall otherwise consent in writing,
the Borrower and/or the Guarantors (as applicable) shall:
4.1 PROMPT PAYMENT. Pay promptly when due all amounts due and owing
to the Bank under this Agreement.
4.2 USE OF PROCEEDS. Use the proceeds of the Loan only for the
purposes set forth herein and will furnish the Bank such evidence as it may
reasonably require with respect to such use.
4.3 FINANCIAL STATEMENTS. (a) The Borrower shall furnish the Bank
within forty-five (45) days after the end of each quarter during Borrower's
fiscal year internally prepared quarterly (including year to date) financial
statements of the Borrower and its affiliates,
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including a balance sheet and a profit and loss statement. All such statements
shall be prepared in the format previously approved by the Bank.
(b) The Borrower shall furnish the Bank within one hundred twenty
(120) days after the close of each fiscal year (i) a statement of stockholders'
equity and a statement of changes in financial position of the Borrower for such
fiscal year; (ii) an income statement of the Borrower for such fiscal year; and
(iii) balance sheets of the Borrower as of the end of such fiscal year. All such
annual statements shall be prepared in accordance with generally accepted
accounting principles consistently applied, and shall present fairly the
financial position and result of operations of Borrower. The annual financial
statements of Borrower shall be prepared on an audited basis, by an independent
certified public accountant selected by Borrower and reasonably acceptable to
the Bank. Such financial statements shall be accompanied by an opinion of the
auditor which (i) shall not disclaim the auditor's obligation to address the
Year 2000 Risk as it relates to the Borrower's liabilities or contingent
liabilities and (ii) shall not be qualified due to the Borrower's possible
failure to take all appropriate steps to successfully address the Year 2000
Risk. The Bank shall have the right, from time to time, to discuss the affairs
of Borrower directly with Borrower's accountant after reasonable notice to
Borrower and opportunity of Borrower to be represented at any such discussions.
(c) Promptly deliver to the Bank upon receipt thereof, copies of any
reports submitted to Borrower by Borrower's accountants in connection with any
examination of the financial statements of Borrower made by such accountants.
(d) On an annual basis prior to Borrower's fiscal year end, furnish
the Borrower's business plan and budget for the upcoming fiscal year which
include a projected profit and loss statement, balance sheet, cash flow
projections and a capital budget.
(e) Furnish the Bank with a fully executed compliance certificate
substantially in the form of covenant compliance certificate attached hereto as
Schedule 4.3(e), within forty-five (45) days after the end of each fiscal
quarter (the "Covenant Compliance Certificate").
(f) Furnish the Bank with such other financial information or reports
(such as agings and inventory) as the Bank may reasonably request.
4.4 MAINTENANCE OF EXISTENCE. Take all necessary action to maintain
the Borrower's existence, including the filing of required reports and tax
returns with the Secretary of State of the State of New Hampshire and with the
appropriate authorities in any other state where required.
4.5 MAINTENANCE OF PROPERTY, PLANT, EQUIPMENT AND COLLATERAL.
Maintain the Borrower's property, plant and equipment, including the Collateral,
in good working order, subject only to reasonable wear and tear and make all
necessary repairs thereto and replacements therefor so that operations may be
properly conducted in accordance with prudent business management.
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4.6 MAINTENANCE OF INSURANCE. Maintain insurance on the Borrower's
property (including real estate, machinery, equipment and inventory) and other
related insurance reasonably satisfactory to the Bank with such insurance
companies as are reasonably satisfactory to the Bank. Such insurance shall be
payable to the Bank as its interest may appear. All policies of insurance shall
provide for not less than thirty (30) days' written notice of cancellation to
the Bank. Upon the request of the Bank, the Borrower shall escrow payments on
account of its insurance premiums with the Bank.
4.7 INSPECTION BY THE BANK. Upon prior reasonable notice (other than
in emergencies when no notice shall be required), permit any person designated
by the Bank to inspect any of its properties, including its books, records, and
accounts during regular business hours (and including the making of copies
thereof and extracts therefrom).
4.8 PROMPT PAYMENT OF TAXES. Accrue the Borrower's and the
Guarantors' tax liability in accordance with GAAP and pay or discharge (or cause
to be paid or discharged) as they become due all taxes, assessments, and
government charges upon its property, operations, income and products (as well
as all claims for labor, materials or supplies), which, if unpaid might become a
lien upon any of its property; PROVIDED, that the Borrower and/or the Guarantors
(as applicable) shall, prior to payment thereof, have the right to contest such
taxes, assessments and charges in good faith by appropriate proceedings so long
as the Bank's interests are protected by the Borrower having established
adequate reserves therefor.
4.9 NOTIFICATION OF DEFAULT UNDER THIS AND OTHER LOAN OR FINANCING
ARRANGEMENTS. Promptly notify the Bank in writing of the occurrence of any Event
of Default under this Agreement (or any occurrence that would, with the passage
of time, constitute an Event of Default) or any other loan or financing
arrangement.
4.10 NOTIFICATION OF LITIGATION. Promptly notify the Bank in writing
of any litigation that has been instituted or is pending or threatened against
the Borrower involving aggregate amounts in excess of Five Hundred Thousand
Dollars ($500,000) or more or the outcome of which might have a material adverse
effect on the Borrower's or any of the Guarantors' continued operations or
condition, financial or otherwise.
4.11 NOTIFICATION OF GOVERNMENTAL ACTION. Promptly notify the Bank in
writing of any material governmental investigation or proceeding that has been
instituted or is pending or threatened and the outcome thereof, including
without limitation, material matters relating to the federal or state tax
returns of the Borrower, compliance with the Occupational Safety and Health Act,
or proceedings by the Treasury Department, Labor Department, or Pension Benefit
Guaranty Corporation with respect to matters affecting employee welfare, benefit
or retirement programs.
4.12 NOTIFICATION OF MATERIAL ADVERSE CHANGE. Promptly notify the Bank
in writing of (a) any material adverse changes in the business prospects or
financial condition of the Borrower or any of the Guarantors; and (b) any
accounting rule change that would have a material adverse effect on the business
or financial condition of the Borrower.
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4.13 PRESERVATION OF THE COLLATERAL. Take all reasonably necessary
steps to keep the Collateral current and not obsolete and free of unpermitted
liens and give the Bank access to and permit it to inspect the same during all
business hours and other reasonable times.
4.14 MAINTENANCE OF RECORDS. Keep adequate records and books of
account, in which appropriate entries will be made in a manner reasonably
acceptable to the Bank and consistently applied, reflecting all financial
transactions of the Borrower required to be stated therein.
4.15 COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS. Comply in all
material respects with all applicable material laws, rules, regulations, and
orders; PROVIDED, HOWEVER, that Borrower shall be entitled to contest the same
in good faith so long as such action does not have an adverse effect upon the
Bank's rights hereunder or the security furnished therefor. Without limiting in
any manner the scope or generality of the foregoing, each of the Borrower and
the Guarantors agrees to comply in all material respects with all federal, state
and other laws and regulations regarding the generation, treatment, storage,
disposal or transportation of hazardous waste or materials, as defined under
applicable federal and state law; and agrees to defend, indemnify and hold the
Bank harmless from and against any and all liabilities, costs and expenses
(including reasonable attorneys' fees) attributable to or in any way connected
with the failure to comply with such laws and regulations.
4.16 COMPOSITION OF MANAGEMENT. Maintain current role and management
responsibilities of senior management of the Borrower listed on Schedule 4.16;
PROVIDED, HOWEVER, the failure of any of the aforesaid individuals to continue
their current role or responsibilities shall not constitute a default hereunder
if such individual is replaced, within a period of six (6) months, with another
individual of comparable skill and experience.
4.17 ACCOUNTS AND DEPOSITS. Maintain the Borrower's primary operating
and deposit accounts with the Bank. The Borrower hereby authorizes the Bank to
charge such accounts directly for payments of principal, interest and fees due
under the Loan Documents. The Borrower shall also compensate the Bank for
certain services to be provided to the Borrower by the Bank through the payment
of the Bank's standard service charges, such services to include monthly
checking account activity, cash management services and electronic funds
transfers.
4.18 APPRAISALS. The Bank shall have the right to appraise all of
Borrower's assets at reasonable times and upon reasonable notice and at
reasonable frequency at the expense of the Borrower.
4.19 SUBORDINATION OF SUMS PAYABLE. All of the Borrower's obligations,
if any, to any of the Guarantors, shareholders, officers or directors of the
Borrower for borrowed money shall be subordinated to the Borrower's performance
of its obligations to the Bank with respect to the Loan.
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4.20 MAINTENANCE OF SELECTED FINANCIAL RATIOS AND MEASURES. Maintain
or achieve the following financial ratios or measures determined or computed in
accordance with GAAP with respect to the Borrower:
(a) MINIMUM EBITDA: The Borrower's earnings before interest, taxes,
depreciation and amortization expenses on a consolidated basis shall be at least
$1,000,000 per quarter as of the end of each fiscal quarter and at least
$7,500,000 per fiscal year as of the end of each fiscal year.
(b) MINIMUM TANGIBLE NET WORTH. At all times, the Borrower's
stockholders equity (as reflected on the Borrower's balance sheet delivered
pursuant to Section 4.3 hereof) minus general intangibles included as assets on
such balance sheet shall not be less than $65,000,000.
(c) MAXIMUM CAPITAL EXPENDITURES. Tested as of the end of each fiscal
quarter, the Borrower's annual capital expenditures shall not exceed $13,500,000
for fiscal year 1999. The maximum capital expenditure limitation for each fiscal
year thereafter will be determined by the Bank, but shall not be less than
$13,500,000 in any one fiscal year.
(d) MAXIMUM OTHER INDEBTEDNESS. Except as permitted pursuant to
Section 5.4 hereof, the Borrower's indebtedness (not to include Accounts Payable
and Accrued Expenses as defined by GAAP) to parties other than the Bank shall
not exceed $5,000,000 in the aggregate at any one time.
4.21 SPECIAL COVENANTS RELATING TO INVENTORY AND ACCOUNTS. (a) At such
intervals as the Bank may reasonably request in writing, the Borrower shall
notify the Bank of all Collateral which has come into existence or changes in
Collateral since the date of the last such notification and shall provide the
Bank with schedules of the Collateral (which notification and schedules shall be
in such forms as the Bank may specify).
(b) The Borrower shall accord the Bank and the Bank's representatives
with access from time to time (including periodic audits performed at the Bank's
reasonable discretion) as the Bank and such representatives may reasonably
require to all properties owned by or over which the Borrower has control, for
the purposes of auditing the Borrower's books and records. The Borrower shall
pay the Bank such fees and expenses as it customarily charges in connection with
such audits which are incurred in connection with not more than one (1) audit
per year, during the term of this Agreement. The Bank and the Bank's
representatives, shall have the right, and the Borrower will permit the Bank and
such representatives from time to time as the Bank and such representatives may
reasonably request, to examine, inspect, copy and make extracts from any and all
of the Collateral, and any and all of the Borrower's books, records,
electronically stored data, papers and files, and to verify the Collateral or
any portion thereof (such verification, including, without limitation, through
contact with account debtors).
(c) The Borrower may grant such allowances or other adjustments to
the Borrower's account debtors as the Borrower may reasonably deem to be in
accord with sound business practice; provided, however, the authority granted
the Borrower pursuant to this
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paragraph may be limited or terminated by the Bank upon the occurrence of an
Event of Default which has not been remedied within any applicable cure period.
(d) At such intervals as the Bank may reasonably request, the
Borrower shall promptly furnish the Bank with detailed reports in such form as
the Bank may prescribe of all allowances, adjustments, returns, and
repossessions concerning the Borrower's accounts and accounts receivable and its
inventory, and of any downgrading in the quality of any of the inventory or
event affecting the marketability of the inventory, and of all inventory
detained from, refused entry into, or required to be removed from the United
States by the appropriate governmental authorities.
(e) Upon the occurrence of an Event of Default which has not been
remedied within any applicable cure period, the Bank shall have the right to
notify any of the Borrower's account or contract debtors, either in the name of
the Bank or the Borrower, to make payments directly to the Bank, and to advise
any person of the Bank's security interest in and to any of the Collateral, and
to collect all amounts due on account of the Collateral. Upon the occurrence of
an Event of Default which has not been remedied within any applicable cure
period and upon request by the Bank, the Borrower agrees to provide written
notification to any or all of the Borrower's account or contract debtors
regarding the Bank's security interest in the receivables Collateral and will
request that such account or contract debtors forward payment thereof to the
Bank. The within obligations on the part of the Borrower directly, being unique,
shall be specifically enforceable by the Bank.
(f) Upon the occurrence of an Event of Default which has not been
remedied within any applicable cure period, the Borrower hereby irrevocably
constitutes and appoints the Bank as the Borrower's true and lawful attorney,
with full power of substitution, to convert the Collateral into cash at the sole
risk, cost and expense of the Borrower. The rights and powers granted the Bank
by the within appointment include, but are not limited to, the right and power
to compromise, settle, or execute releases with any of the Borrower's account
debtors, and to prosecute, defend, compromise, or release any action relating to
the Collateral; to receive, open, and dispose of all mail addressed to the
Borrower and to take therefrom any remittances on or proceeds of any Collateral
in which the Bank has a security interest; to notify Post Office authorities to
change the address to which the Borrower's mail is to be sent as the Bank shall
designate; to endorse the name of the Borrower in favor of the Bank upon all
checks, drafts, money orders, notes, acceptances, or other instruments of the
same or different nature; to sign and endorse the name of the Borrower on, and
to receive as a secured party, any of the Collateral, invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents to title of a same or different nature
relating to the Collateral; to sign the name of the Borrower on any notice to
the Borrower's account debtors for verification of the receivables Collateral;
and to sign and file or record on behalf of the Borrower any financing or other
statement in order to perfect or protect the Bank's security interest. The Bank
shall not be obligated to do any of the acts or to exercise any of the powers
authorized herein, but if the Bank elects to do any such act or to exercise any
such power, it shall not be accountable for more than it actually receives as a
result of such exercise of power, and shall not be responsible to the Borrower
except for the Bank's gross negligence or willful misconduct. All powers
conferred upon the Bank by this Agreement,
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being coupled with an interest, shall be irrevocable until the within Agreement
is terminated as provided herein.
4.22 MATERIAL SUBSIDIARY GUARANTORS. The Borrower shall immediately
notify the Bank of the addition of any new Subsidiaries and whether such
Subsidiary is a Material Subsidiary (as defined in Section 3.15 hereof). Upon
the Bank's request, the Borrower shall cause such Material Subsidiary to execute
a guaranty of the Borrower's obligations hereunder and a Subordination Agreement
(if applicable) each in the form attached hereto, and to deliver all such
financial statements, information and reports as the Bank may reasonably
request. Such Material Subsidiary or Material Subsidiaries, as the case may be,
are on occasion referred to herein individually as a "Guarantor" or collectively
as the "Guarantors".
4.23 LINE OF CREDIT BALANCE. Maintain a Debit Balance, as defined in
the Line of Credit Note, of not more than the maximum principal sum provided for
in such note or under this Agreement at any time.
ARTICLE V. NEGATIVE COVENANTS OF BORROWER AND GUARANTORS. Until payment in
full of the indebtedness now existing or hereafter incurred under this Agreement
and the performance of all obligations hereunder, the Borrower and the
Guarantors (as applicable) will not, without the express prior written consent
of the Bank, engage in the following:
5.1 NATURE AND SCOPE OF BUSINESS. The Borrower shall not enter into
any type of business other than that in which it is presently engaged, or
otherwise significantly change the scope or nature of its business.
5.2 MERGER, CONSOLIDATION OR ACQUISITIONS. The Borrower shall not be
a party to any merger, consolidation or any other reorganization, or acquire by
purchase, lease or otherwise all or substantially all of the assets or capital
stock of any person, partnership, corporation or entity.
5.3 SALE OR DISPOSITION OF ASSETS. The Borrower shall not sell,
lease, transfer or otherwise dispose of all or, a substantial portion of the
Borrower's assets and properties, except in the ordinary course of business.
5.4 ADDITIONAL INDEBTEDNESS. The Borrower shall not incur
indebtedness for borrowed money (or lease expense or issue or sell any of its
bonds, debentures, notes or similar obligations) except:
(a) Borrowings under this Agreement;
(b) Other obligations to the Bank;
(c) Borrowings used to prepay in full borrowing under this Agreement;
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(d) Accounts Payable and Accrued Expenses (as defined by GAAP).
(e) Borrowings disclosed to the Bank in the financial statements
previously delivered to the Bank described in Section 3.7.
(f) Borrowing from parties other than the Bank provided the same do
not exceed an aggregate of $5,000,000 at any time ("Permitted Other
Indebtedness").
5.5 GUARANTIES, ENDORSEMENT AND CONTINGENT LIABILITIES. Except as set
forth in Schedule 5.5 and except for guarantees, endorsements or liabilities for
the obligations of others which do not exceed $250,000 in the aggregate at any
one time, the Borrower and the Guarantors shall not guarantee, endorse or
otherwise become absolutely or contingently liable for the obligations of any
other person, partnership, corporation or other entity.
5.6 LIENS AND MORTGAGES. The Borrower shall not incur, create, assume
or suffer to exist any mortgage, pledge, lien, charge or other encumbrance of
any nature whatsoever on any of their respective assets, now or hereafter owned,
other than (a) the security interests, liens or mortgages, granted to the Bank
pursuant to the Loan Documents; (b) deposits under Workmen's Compensation,
Unemployment Insurance and Social Security laws; (c) liens imposed by law, such
as carriers, warehousemen's or mechanic's liens and other liens incurred in good
faith in the ordinary course of business; (d) liens evidencing the Permitted
Other Indebtedness as defined in Section 5.4(f) above; (e) those presently
existing liens and encumbrances permitted under the Borrower's Security
Agreement of even date (the "Security Agreement"); or (f) deposits or pledges
securing the performance of bids, tenders, contracts, leases, surety and appeal
bonds and other obligations of like nature make in the ordinary course of
business.
5.7 LOAN AND ADVANCES. Except for intercompany loans which do not
exceed $1,000,000 in the aggregate at any one time, the Borrower shall not make
any loans or advances to any individual, firm or corporation, including, without
limitation, any parent, affiliate, subsidiaries, shareholders, directors,
officers and employees; PROVIDED, HOWEVER, that the Borrower may make advances
to its employees, including its officers, with respect to reasonable expenses
incurred by such employees, which expenses are reimbursable by the Borrower and
directly related to the conduct of the Borrower's business.
5.8 DIVIDENDS AND DISTRIBUTIONS. The Borrower shall not declare or
pay dividends, or make any other payment or distribution on account of its
capital stock if there is a violation of or after such distribution or dividend
there would be a violation of any of the financial covenants set forth in
Section 4.20 hereof.
5.9 CONVERSION; CAPITAL STRUCTURE; ACQUISITION OF STOCK. The Borrower
and the Guarantors shall not alter, amend or convert the Borrower's form of
organization or capital structure. Furthermore, the Borrower shall not purchase,
obligate itself to purchase, redeem or otherwise acquire for value any of its
outstanding capital stock or any other of its equity securities if there is a
violation of or after such action there would be a violation of any of the
financial covenants set forth in Section 4.20 hereof.
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<PAGE> 18
ARTICLE VI. CONDITIONS PRECEDENT TO MAKING OF LOAN
6.1 CONDITIONS PRECEDENT TO INITIAL DISBURSEMENT.
(a) The obligation of the Bank to make the Loan and make
disbursements of the proceeds of the same to the Borrower is subject to the
satisfaction by the Borrower or its representatives of the following conditions
precedent:
(i) The Borrower's and the Guarantors' warranties and representations
as contained herein shall be accurate and complete, in all
material respects, as of the date of Closing. (ii) The Borrower
and the Guarantors shall not be in default under any of the
covenants contained herein as of the date of Closing.
(iii) The Borrower and the Guarantors shall have executed and delivered
all of the Loan Documents as described herein. Without limiting
the foregoing, the Borrower shall have delivered to the Bank all
of those items identified as Borrower's and the Guarantors'
Documents" on the Closing Agenda attached hereto as Schedule
6.1(a)(iii) and made a part hereof, all of which must be
reasonably acceptable, in form and substance, to the Bank.
(b) Without limiting in any manner the scope or generality of the
foregoing, certain of said items are more particularly described as follows:
(i) All of the Borrower's obligations, if any, to the Guarantors
shall have been subordinated to the Borrower's performance of its
obligations to the Bank with respect to the Loan.
(ii) The Bank shall have received:
(A) acknowledgment copies of proper financing statements (Form
UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the opinion of the
Bank, desirable to perfect the security interests created
under the Loan Documents; and
(B) certified copies of Requests for Information or Copies (Form
UCC-11) listing the financing statements referred to in
paragraph (i) above and all other effective financing
statements which name the Borrower (under its present name
and any previous names) as debtor and which are filed in the
jurisdictions referred to in said paragraph (A), together
with copies of such other financing statements (none of
which shall cover the Collateral purported to be covered by
the Security Agreement).
(iii) The Borrower shall pay the costs and fees of the Bank
hereinbefore described herein.
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<PAGE> 19
(iv) The Borrower shall deliver a Covenant Compliance Certificate in
accordance with Section 4.3(e) hereof.
(v) Counsel to the Borrower and the Guarantors shall deliver an
opinion to the Bank to the effect that (A) the Borrower is a
business corporation duly organized and validly existing under
the laws of the State of Delaware and is duly qualified to do
business in New Hampshire and all jurisdictions in which the
nature of its business or assets make such qualification
necessary; (B) that the Loan Documents constitute binding
obligations of the Borrower or the Guarantors enforceable in
accordance with their terms; (C) that the Borrower's and the
Guarantors' entrance into the obligations evidenced by the Loan
Documents does not constitute a breach of the articles of
incorporation or bylaws of the Borrower or, to the knowledge of
such counsel, any other arrangements or agreements by which
Borrower or any of the Guarantors is bound and that the
Borrower's and the Guarantors' entrance into and performance of
the Borrower's loan obligations will not require any further
approvals or consents; (D) that there is neither pending nor, to
the knowledge of such counsel, threatened any litigation,
administrative proceedings or investigations that would have a
material adverse effect on the Borrower or any of the Guarantors
or the Borrower's or any of the Guarantors' condition, financial
or otherwise; (E) that the security interests granted to the Bank
in connection with the Loan constitute a valid perfected security
interest in the collateral described therein; and (F) addressing
such other matters as deemed appropriate by the Bank.
(c) Borrower shall furnish the Bank with such other documents,
opinions, certificates, evidence and other matters as may be requested by the
Bank at or prior to Closing.
6.2 SUBSEQUENT BORROWING. The obligation of the Bank to make each
Loan to be made by it hereunder (including the initial Loan) is subject to the
following conditions precedent:
(a) At the time of each Loan (as evidenced by a certificate executed
on behalf of the Borrower if the Bank shall so require):
(i) The Borrower shall have complied and shall then be in compliance
in all material respects with all the terms, covenants and
conditions of this Agreement which are binding on it;
(ii) There shall exist no Event of Default or no event (including an
event caused by such Loan) which would be an Event of Default but
for the requirement that notice be given or time elapse or both;
(iii) The representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the date
of such Loan; and
19
<PAGE> 20
(iv) There shall have been no material adverse change in the
Borrower's financial condition as evidenced by the financial
information submitted to the Bank pursuant to this Agreement.
(b) All of the Loan Documents shall remain in full force and effect
and the validity of any Loan Document shall not have been contested.
6.3 DISBURSEMENT OF THE LOAN. The Bank shall credit the proceeds of
the Loan to the deposit accounts of the Borrower with the Bank for the benefit
of the Borrower or as otherwise directed in writing by the Borrower, including
payments to third parties through electronic funds transfers. Advances under the
Line of Credit shall (1) be made in accordance with the disbursement procedures
set forth in the Line of Credit Note; (2) shall not cause the Debit Balance, as
defined in the Line of Credit Note, to exceed Fifteen Million Dollars
($15,000,000); PROVIDED, HOWEVER, the availability under the Line of Credit for
direct borrowings shall be reduced by the aggregate amount of all outstanding
foreign exchange facilities and letters of credit issued by the Bank or any
affiliate thereof for the benefit or on behalf of the Borrower; and (3) shall be
for a purpose defined in Article I herein.
ARTICLE VII. EVENTS OF DEFAULT; ACCELERATION; REMEDIES
7.1 The occurrence of any one or more of the following events shall
constitute an event of default (an "Event of Default") after the expiration of
applicable notice and cure periods, if any, under this Agreement:
(a) If any statement, representation or warranty made by the Borrower
or any of the Guarantors herein or in the Loan Documents shall prove to have
been false or misleading when made, or subsequently becomes false or misleading,
in any materially adverse respect.
(b) Default by the Borrower in payment after three (3) days of its
due date of any principal or interest called for under its payment obligations
with respect to the Loan.
(c) Default by the Borrower or any of the Guarantors, in any material
respect, in the performance or observance of any of the other provisions, terms,
conditions, warranties or covenants of the Loan Documents.
(d) The dissolution, termination of existence, death, merger or
consolidation of the Borrower or any of the Guarantors or a sale of the
Borrower's or any of the Guarantors business or the assets of the Borrower or
any of the Guarantors out of the ordinary course of business.
(e) The Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee or liquidator of it or any of its property, (ii) admit in
writing its inability to pay its debts as they mature, (iii) make a general
assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or
insolvent, (v) file a voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed
20
<PAGE> 21
against it in any proceeding under any such law or (vi) offer or enter into any
composition, extension or arrangement seeking relief or extension of its debts.
(f) Proceedings shall be commenced or an order, judgment or decree
shall be entered, without the application, approval or consent of the Borrower,
in or by any court of competent jurisdiction, relating to the bankruptcy,
dissolution, liquidation, reorganization or the appointment of a receiver,
trustee or liquidator of the Borrower, of all or a substantial part of its
assets, and such proceedings, order, judgment or decree shall continue
undischarged or unstayed for a period of sixty (60) days.
(g) A final and unappealable judgment for the payment of money, not
covered by insurance, in excess of Two Hundred Fifty Thousand Dollars ($250,000)
shall be rendered against the Borrower and the same shall remain undischarged
for a period of thirty (30) days, during which period execution shall not be
effectively stayed.
(h) The Collateral is materially injured or destroyed by fire or
otherwise which casualty is not insured.
(i) Any attachment or mechanic's, laborer's, materialman's
architect's, artisan's or similar statutory liens or any notice thereof shall be
filed against any Collateral and shall not be discharged within thirty (30) days
of such filing.
(j) The Line of Credit is hereby cross-defaulted as more fully set
forth in Section 1.19 hereof, to the end that a default under one loan or
obligation shall constitute a default under all of such loans and obligations.
7.2 Upon the occurrence of any Event of Default (which, in the case
of an Event or Default listed in Section 9.1(a) or 9.1(c) above remains
unremedied for a period of ten (10) days after the earlier of the date of notice
thereof to the Borrower by the Bank or the date the Borrower becomes aware of
such default), the Bank's commitment to make further loans under this Agreement
or any other agreement with the Borrower will immediately cease and terminate
and, at the election of the Bank, all of the obligations of the Borrower to the
Bank under this Agreement will immediately become due and payable without
further demand, notice or protest, all of which are hereby expressly waived.
Thereafter, the Bank may proceed to protect and enforce its rights, at law, in
equity, or otherwise, against the Borrower, and any other endorser or guarantor
of the Borrower's obligations, either jointly or severally, and may proceed to
liquidate and realize upon any of its security in accordance with the rights of
a secured party under the Uniform Commercial Code, or any Loan Document, any
agreement between the Borrower and the Bank relating to the Loan, or any other
agreement between any guarantor or endorser of the Borrower's obligations to the
Bank hereunder.
21
<PAGE> 22
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1 ENTIRE AGREEMENT; WAIVERS. This Agreement and the Loan Documents
together constitute the entire agreement between the Borrower and the Bank and
no covenant, term, condition or other provision thereof nor any default in
connection therewith may be waived except by an instrument in writing signed by
the Bank and the Borrower and delivered to the Borrower. The Bank's failure to
exercise or enforce any of its rights, powers or privileges under this Agreement
or the Loan Documents shall not operate as a waiver thereof. In the event of any
conflict between the terms, covenants, conditions and restrictions contained in
the Loan Documents, the term, covenant, condition or restriction which confers
the greatest benefit upon the Bank shall control. The determination as to which
term, covenant, condition or restriction is more beneficial shall be made by the
Bank in its sole discretion.
8.2 REMEDIES CUMULATIVE. All remedies provided under this Agreement
and the Loan Documents or afforded by law shall be cumulative and available to
the Bank until all of the Borrower's obligations to the Bank have been paid in
full.
8.3 SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein and in certificates delivered in
connection herewith shall be deemed to have been relied on by the Bank,
notwithstanding any investigation made by the Bank or in its behalf, and shall
survive the execution and delivery of this Agreement and the Loan Documents
until payment in full of the Loan. All such covenants, agreements,
representations and warranties shall be joint and several obligations of the
Borrower and bind and inure to the benefit of the Borrower's and the Bank's
successors and assigns, whether so expressed or not.
8.4 GOVERNING LAW; JURISDICTION. This Agreement and the Loan
Documents shall be construed and their provisions interpreted under and in
accordance with the laws of the State of New Hampshire. The Borrower and the
Guarantors, to the extent they may legally do so, hereby consent to the
jurisdiction of the courts of the State of New Hampshire and the United States
District Court for the State of New Hampshire, as well as to the jurisdiction of
all courts from which an appeal may be taken from such courts for the purpose of
any suit, action or other proceeding arising out of any of their obligations
hereunder or with respect to the transactions contemplated hereby, and expressly
waive any and all objections they may have to venue in any such courts. THE
BORROWER AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS
AGREEMENT AND MAKE THE LOAN.
8.5 ASSURANCE OF EXECUTION AND DELIVERY OF ADDITIONAL INSTRUMENTS.
The Borrower agrees to execute and deliver, or to cause to be executed and
delivered, to the Bank all such further instruments, and to do or cause to be
done all such further acts and things, as the Bank
22
<PAGE> 23
may reasonably request or as may be necessary or desirable to effect further the
purposes of this Agreement and the Loan Documents. Upon receipt of an affidavit
of an officer of the Bank as to the loss, theft, destruction or mutilation of
the Note or any other security document which is not of public record, and, in
the case of any such loss, theft, destruction or mutilation, upon surrender and
cancellation of such Note or other security document, Borrower will issue, in
lieu thereof, a replacement Note or other security document in the same
principal amount thereof and otherwise of like tenor.
8.6 WAIVERS AND ASSENTS BY THE BORROWER AND THE GUARANTORS. With the
exception of specific notices provided in the Loan Documents (if any), the
Borrower and any guarantor or endorser of the Borrower's obligations to the Bank
hereunder hereby waive, to the fullest extent permitted by law, demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description with respect both to
the Loan Documents and Collateral. The Borrower and the Guarantors assent to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Bank may deem
advisable. Any demand upon or notice to the Borrower that the Bank may be
required or may elect to give shall be mailed by registered or certified mail,
return receipt requested, postage prepaid and shall be effective on the date of
the first attempted delivery thereof by the U.S. Postal Service, as shown on the
registered or certified mail return receipt for such notice addressed to the
Borrower at their address as set forth at the beginning of the Agreement.
8.7 NO DUTY OF THE BANK WITH RESPECT TO THE COLLATERAL. The Bank
shall have no duty as to the collection or protection of Collateral security
furnished to it hereunder or any income thereon, nor as to the preservation of
rights against prior parties, nor as to the preservation of any rights
pertaining thereto, beyond the safe custody thereof.
8.8 ELECTION OF THE BANK. The Bank may exercise its rights with
respect to the Collateral without resorting or regard to other collateral or
sources of reimbursement for the liabilities.
23
<PAGE> 24
8.9 ASSIGNMENT BY THE BANK. The Bank may assign its rights and
obligations under the Loan Documents with the prior consent of the Borrower
which consent shall not be unreasonably withheld. If at any time, by permitted
assignment , the Bank transfers its rights in the Borrower's obligations
hereunder and its rights in the security therefor, in whole or in part, such
transfer shall carry with it the powers and rights of the Bank under this
Agreement and the Collateral so transferred and the transferee shall become
vested with such powers and rights whether or not they are specifically referred
to in the instrument evidencing the transfer. If, and to the extent that the
Bank retains such rights and Collateral, the Bank shall continue to have the
rights and powers herein set forth with respect thereto. This Agreement shall be
binding upon and inure to the benefit of the Bank, the Borrower, and their
successors, permitted assigns, heirs and personal representatives; provided,
however, the rights and obligations of the Borrower hereunder are not
assignable, delegable or transferable without the consent of the Bank. All of
the rights of the Bank hereunder shall inure to the benefit of any participating
bank or banks and its or their successors and assigns.
The Bank shall have the unrestricted right at any time and from time to
time, and without the consent of or notice to Borrower or any Guarantor, to
grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in the Bank's obligation to lend
hereunder and/or any or all of the Loan held by the Bank hereunder. In the event
of any such grant by the Bank of a participating interest to a Participant,
whether or not upon notice to the Borrower, the Bank shall remain responsible
for the performance of its obligations hereunder and the Borrower shall continue
to deal solely and directly with the Bank in connection with the Bank's rights
and obligations hereunder. The Bank may furnish any information concerning the
Borrower in its possession from time to time to prospective assignees and
Participants, provided that the Bank shall require any such prospective assignee
or Participant to agree in writing to maintain the confidentiality of such
information.
8.10 EXPENSES; PROCEEDS OF COLLATERAL. The Borrower covenants and
agrees that it shall pay to the Bank, on demand, any and all reasonable
out-of-pocket expenses, including reasonable attorneys' fees incurred or paid by
the Bank in protecting and enforcing its rights under this Agreement, the costs
of preparation of this Agreement and its supporting documents including all
filing and appraisal fees. Without limiting the foregoing, the Bank shall have
the right to recover its out-of-pocket costs in connection with the
administration of the Loan, and to recover its reasonable out-of-pocket costs
and/or collect fees in connection with requests for consents and waivers of
compliance with covenants, or other material changes in the Loan. After
deducting all of said reasonable expenses and the reasonable expenses of
retaking, holding, preparing for sale, selling and the like, the residue of any
proceeds of collections of sale of the Collateral shall be applied to the
payment of principal of or interest on the Loan in such order or preference as
the Bank may determine, and any excess shall be returned to the Borrower
(subject to the provisions of Section 9-504 of the Uniform Commercial Code) and
the Borrower shall remain liable for any deficiency.
8.11 THE BANK'S RIGHT OF SETOFF. Borrower and any Guarantor hereby
grant to the Bank, a lien, security interest and right of setoff as security for
all liabilities and obligations to the Bank, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of
24
<PAGE> 25
the Bank or any entity under the control of Fleet Financial Group, Inc., or in
transit to any of them. Upon an Event of Default or upon notice of issue of any
legal process by which process any of the Borrower's or Guarantor's assets in
the possession or control of the Bank or any entity under the control of Fleet
Financial Group, Inc., may be trusteed, attached or levied upon, the Bank may
without demand or notice set off the same or any part thereof and apply the same
to any liability or obligation of the Borrower and any Guarantor even though
unmatured and regardless of the adequacy of any other collateral securing the
loan. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
IN WITNESS WHEREOF, the BANK and the BORROWER have executed this Agreement by
their duly authorized officers.
FLEET BANK-NH
______________________________ By:__________________________________
Witness Amy LeBlanc Hackett, Its Duly
Authorized Vice President
NASHUA CORPORATION
______________________________ By:__________________________________
Witness John L. Patenaude, Its Duly
Authorized Vice President-Finance, Chief
Financial Officer and Treasurer
25
<PAGE> 26
SCHEDULE 3.5
Litigation
[To Be Completed By Borrower]
2
<PAGE> 27
SCHEDULE 3.7
Liens
[To Be Completed By Borrower]
3
<PAGE> 28
SCHEDULE 3.8
Taxes
[To Be Completed By Borrower]
4
<PAGE> 29
SCHEDULE 3.12
Successor
[To Be Completed By Borrower]
5
<PAGE> 30
SCHEDULE 3.15
Subsidiaries
[To Be Completed By Borrower]
I. MATERIAL SUBSIDIARIES (Those Subsidiaries which alone account for five
percent (5%) or more of the Borrower's consolidated total assets or
five percent (5%) or more of the Borrower's consolidated total
revenue):
II. OTHER SUBSIDIARIES:
6
<PAGE> 31
SCHEDULE 4.16
Senior Management
NAME TITLE
[To Be Completed By Borrower]
7
<PAGE> 32
SCHEDULE 4.3(e)
Covenant Compliance Certificate
Fleet Bank-NH
1155 Elm Street
Manchester, NH 03101
Attention: Amy LeBlanc Hackett, Vice President
Dear Ms. LeBlanc Hackett:
Pursuant to the provisions of a certain Loan Agreement dated as of
April 22, 1999 with respect to a line of credit loan in the amount of
$15,000,000 (collectively, the "Loan Agreement") by and between Nashua
Corporation (the "Borrower") and Fleet Bank-NH (the "Bank"), the undersigned
hereby certifies as follows:
1. That the financial statements (the "Financial Statements") of the
Borrower and/or Guarantors delivered to the Bank with this Certificate fairly
present the financial condition of the Borrower in all material respects for the
periods covered therein as of the date hereof.
2. That the undersigned is a duly elected, qualified and acting
__________ of the Borrower and as such officer is authorized to make and deliver
this Covenant Compliance Certificate.
3. That during the period set forth in the Financial Statements, the
Borrower was in compliance with all financial covenants of the Loan Agreement.
As of __________, 199__, the Minimum EBITDA (as defined in the Loan Agreement)
is $__________. As of _______________, 199__, the Minimum Tangible Net Worth (as
defined in the Loan Agreement) is $____________. As of ___________, 199__, the
amount of the Maximum Capital Expenditures (as defined in the Loan Agreement)
incurred during the current fiscal year to date is $__________. As of
__________, 199_, the amount of the Maximum Other Indebtedness (as defined in
the Loan Agreement) is $_________________.
4. The representations and warranties contained in the Loan
Agreement and the representations and warranties of the Borrower and the
Guarantors contained in each of the other Loan Documents are to the best of the
Borrower's knowledge, true, correct and complete in every material respect on
and as of the date hereof with the same force in effect as though made on and as
of the date hereof. All covenants contained in the Loan Agreement have been and
continue to be met in all material respects.
5. To the best of the Borrower's knowledge, no event has occurred or
is continuing which constitutes a default or an Event of Default.
Terms defined in the Loan Agreement which is not otherwise expressly defined
herein are used herein with the meaning so defined in the Loan Agreement.
8
<PAGE> 33
IN WITNESS WHEREOF, the undersigned has executed this Covenant
Compliance Certificate on this _____ day of ___________, 1999.
NASHUA CORPORATION
_________________________ By:_________________________________
Witness John L. Patenaude, Its Duly
Authorized Vice President-Finance,
Chief Financial Officer and Treasurer
9
<PAGE> 34
SCHEDULE 5.5
Guaranties, Endorsements and Contingent Liabilities
[To Be Completed By Borrower]
10
<PAGE> 35
SCHEDULE 6.1(a)(iii)
Closing Agenda
11
<PAGE> 1
Exhibit 10.04
REVOLVING CREDIT PROMISSORY NOTE
$15,000,000 April 22, 1999
Manchester, New Hampshire
FOR VALUE RECEIVED, NASHUA CORPORATION, a Delaware corporation with its
principal place of business at 44 Franklin Street, Nashua, New Hampshire
03061-2002 (the "Borrower"), promises to pay, to the order of FLEET BANK-NH, a
bank incorporated under the laws of the State of New Hampshire with an office at
1155 Elm Street, Manchester, New Hampshire 03101 (the "Bank") (the Bank and any
subsequent transferee of this Note, whether taking by negotiation or otherwise,
are sometimes referred to herein as the "Holder") at such place of business or
such other place as may be designated hereafter by the holder hereof, the
principal sum of Fifteen Million Dollars ($15,000,000) (or so much thereof as
may be advanced or readvanced by the Bank to the Borrower from time to time
hereafter, such amounts defined as the "Debit Balance" below), together with
interest as provided for below, in lawful money of the United States of America
at the times provided for in the Loan Agreement, as defined below.
This Note is being executed and delivered in accordance with the terms
of a certain Loan Agreement of even date between the Borrower and the Bank (the
"Loan Agreement") and the documents defined therein as the "Loan Documents". The
payment and performance of the obligations contained in the Loan Agreement and
the Loan Documents are secured by the collateral granted to the Bank therein and
the security granted to the Bank therein (the "Collateral").
Until such time as this Note becomes due and payable, interest shall be
payable monthly in arrears commencing on that date thirty (30) days from the
date hereof (or on such other date as may be agreed upon by the Borrower and the
Bank to provide for a convenient payment date) and continuing on the
corresponding day of each succeeding month thereafter. All payments shall be in
lawful money of the United States in immediately available funds.
The maximum principal amount outstanding under this Note shall be
limited to Fifteen Million Dollars ($15,000,000). Pursuant to the Loan
Agreement, there shall be due and payable from the Borrower to the Bank, and the
Borrower shall immediately pay to the Bank, without demand, any amount by which
the Debit Balance exceeds Fifteen Million Dollars ($15,000,000).
Interest shall be calculated and charged daily on the basis of a three
hundred sixty (360) day banking year and the actual number of days elapsed on
the unpaid principal balance outstanding from time to time. The Borrower shall
have the option to elect (i) that sums advanced under this Note shall bear
interest at a variable per annum rate equal to the Prime Rate (as defined in the
Loan Agreement) (the "Floating Rate Option") or (ii) that the interest rate
payable under this Note, for periods of one (1), two (2), three (3) or six (6)
months (the "LIBOR Rate Interest Period(s)"), in the minimum amount set forth in
the Loan Agreement, shall be equal to the LIBOR Rate (as defined in the Loan
Agreement) plus one and three quarters
<PAGE> 2
percent (1 3/4%) per annum (the "LIBOR Fixed Rate Option"). If the Borrower
maintains compensating balances in its accounts with the Bank of at least Five
Hundred Thousand Dollars ($500,000), the LIBOR Fixed Rate Option shall
automatically be reduced to equal the LIBOR Rate plus one hundred sixty (1.60%)
basis points per annum. In the absence of an election of the LIBOR Fixed Rate
Option, this Note shall bear interest at a rate equal to the Floating Rate
Option and said interest rate shall apply to the entire principal amount
outstanding thereunder or such amount thereof as to which no election has been
made. If the Bank offers and the Borrower elects to do so, then the Borrower and
the Bank may exchange the LIBOR Fixed Rate Option (one (1) month LIBOR Rate
only) pursuant to an interest rate swap contract (in the form of an
International Swap Dealer's Association Master Agreement and Confirmation
Agreement between the Borrower and Fleet National Bank ("FNB"), both of which
are referred to as the "Master Agreement") for a fixed rate of interest.
The Borrower may prepay any amounts outstanding under this Note, which
bear interest at the Floating Rate Option, in whole or in part, at any time
without the payment of any penalty, premium or charge of any nature whatsoever.
The Borrower may prepay amounts outstanding under this Note, which bear interest
at the LIBOR Fixed Rate Option only in accordance with the terms and conditions
of the Loan Agreement. If the interest rate hereunder is swapped pursuant to the
Master Agreement, the Master Agreement sets forth additional restrictions,
limitations and penalties associated with prepayment under this Note. In the
event that any such prepayment shall be made by the Borrower, the amount thereof
shall be applied first to delinquency charges, costs of collection, and accrued
interest, and thereafter to principal. Notwithstanding anything herein to the
contrary, in the event that the interest rate hereunder, as aforesaid, violates
any applicable usury or similar statute, the interest rate shall then
automatically be deemed to be the highest rate of interest then permitted.
The Borrower agrees that the Bank may make loan advances to the
Borrower upon verbal authority (which, if the Bank so requires, shall be
followed by written confirmation) of any officer executing this Note on behalf
of the Borrower or any other officer of the Borrower who is authorized in
writing to borrow money from the Bank and may deliver such advances by direct
deposit to any deposit account of the Borrower with the Bank or otherwise as so
authorized in the Loan Agreement. Notwithstanding anything to the contrary
herein, the Bank may require written notice of requests for loan advances as may
be provided in the Loan Agreement. All such advances shall represent binding
obligations of the Borrower.
The Borrower's "Debit Balance" shall mean the debit balance in an
account on the books of the Bank, maintained in the form of a ledger card,
computer records or otherwise in accordance with the Bank's customary practice
and appropriate accounting procedures wherein there shall be recorded the
principal amount of all advances made by the Bank to the Borrower, all principal
payments made by the Borrower to the Bank hereunder, and all other appropriate
debits and credits (the "Loan Account"). The Bank shall render to the Borrower a
statement of account with respect to the Loan Account on a monthly basis. Such
statement shall indicate the Borrower's then current Debit Balance and any
interest amounts due and payable from the Borrower to Bank. Such statement may
be based on estimates of the
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<PAGE> 3
principal amount outstanding and the interest rate for the applicable payment
period. Any required adjustments between such estimates and actual amounts shall
be reflected in subsequent statements.
The Borrower acknowledges that this Note is to evidence the Borrower's
obligation to pay the Debit Balance, plus interest, as determined from time to
time and that it shall continue to do so despite the occurrence of intervals
when no Debit Balance exists because the Borrower has paid the previously
existing Debit Balance in full.
At the option of the Bank, this Note shall become immediately due and
payable in full, without further demand or notice, on the earlier of (i) the
Maturity Date (unless renewed, in which case, the Maturity Date as extended), or
(ii) the occurrence of an Event of Default under the Loan Agreement or any of
the Loan Documents after applicable notice and cure periods (if any).
The Holder may impose upon the Borrower a delinquency charge of five
percent (5%) of the amount of interest and principal not paid on or before the
tenth (10th) day after such installment is due. The entire principal balance
hereof, together with accrued interest, shall after the earlier of an Event of
Default or after maturity, whether by demand, acceleration or otherwise, bear
interest at the contract rate of this Note plus an additional two percent (2%)
per annum. The Borrower agrees to pay on demand all reasonable out-of-pocket
costs of collection hereof, including reasonable attorneys' fees, whether or not
any foreclosure or other action is instituted by the Holder in its discretion.
No delay or omission on the part of the Holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be construed
as a waiver thereof or of any other right, privilege or remedy. No waiver of any
right, privilege or remedy or any amendment to this Note shall be effective
unless made in writing and signed by the Holder. Under no circumstances shall an
effective waiver of any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion. The acceptance by the Holder
hereof of any payment after any default hereunder shall not operate to extend
the time of payment of any amount then remaining unpaid hereunder or constitute
a waiver of any rights of the Holder hereof under this Note.
All agreements between the Borrower and the Bank are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Bank for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Note shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of Borrower and the
Bank in the execution, delivery and acceptance of this Note to contract in
strict compliance with the laws of the State of New Hampshire from time to time
in effect. If,
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<PAGE> 4
under or from any circumstances whatsoever, fulfillment of any provision hereof
or of any of the Loan Documents at the time of performance of such provision
shall be due, shall involve transcending the limit of such validity prescribed
by applicable law, then the obligation to be fulfilled shall automatically be
reduced to the limits of such validity, and if under or from circumstances
whatsoever the Bank should ever receive as interest an amount which would exceed
the highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of the principal balance evidenced hereby and not to
the payment of interest. This provision shall control every other provision of
all agreements between the Borrower and the Bank.
All rights and remedies of the Holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently,
and the Holder shall have, in addition to all other rights and remedies, the
rights and remedies of a secured party under the Uniform Commercial Code of New
Hampshire. Except as otherwise provided by law, the Holder shall have no duty as
to the collection or protection of the Collateral or of any income thereon, or
as to the preservation of any rights pertaining thereto beyond the safe custody
thereof. Surrender of this Note upon payment or otherwise, shall not affect the
right of the Holder to retain the Collateral as security for the payment and
performance of any other liability of the Borrower to the holder.
THE BORROWER AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ACCEPT THIS NOTE AND MAKE THE LOAN.
Except as otherwise specifically provided for herein or in the Loan
Agreement, the Borrower waives, to the fullest extent permitted by law,
presentment, notice, protest and all other demands and notices and assent (1) to
any extension of the time of payment or any other indulgence, (2) to any
substitution, exchange or release of Collateral, and (3) to the release of any
other person primarily or secondarily liable for the obligations evidenced
hereby.
The Bank may at any time pledge all or any portion of its rights under
the loan documents including any portion of the promissory note to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement thereof shall
release the Bank from its obligations under any of the Loan Documents.
This Note and the provisions hereof shall be binding upon the Borrower
and the Borrower's heirs, administrators, executors, successors, legal
representatives and assigns and
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<PAGE> 5
shall inure to the benefit of the Holder, the Holder's heirs, administrators,
executors, successors, legal representatives and assigns.
This Note may not be amended, changed or modified in any respect except
by a written document which has been executed by each party. This Note and all
rights and obligations hereunder, including matters of construction, validity
and performance, shall be governed by the laws of the State of New Hampshire.
IN WITNESS WHEREOF, the Borrower, acting by and through its duly
authorized officer, has executed this Promissory Note on this 22nd day of April,
1999.
NASHUA CORPORATION
______________________________ By:__________________________________
Witness John L. Patenaude, Its Duly
Authorized Vice President-Finance, Chief
Financial Officer and Treasurer
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<PAGE> 1
Exhibit 10.05
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of this 22nd day of April, 1999, by and
between NASHUA CORPORATION, a Delaware corporation with a principal place of
business at 44 Franklin Street, Nashua, New Hampshire 03061-2002 (the "Debtor"),
and FLEET BANK-NH, a bank incorporated under the laws of the State of New
Hampshire with a principal place of business at 1155 Elm Street, Manchester, New
Hampshire 03101 (the "Secured Party").
W I T N E S S E T H :
WHEREAS, incident to a Loan Agreement of even date by and between the
Debtor and the Secured Party (the "Loan Agreement"), the Secured Party may make
loans and financial accommodations to the Debtor (collectively, the "Loan"), all
as set forth in the Loan Agreement; and
WHEREAS, the obligations of the Secured Party to make the Loan to the
Debtor are subject to the condition, among others, that the Debtor shall execute
and deliver this Agreement and grant the security interests hereinafter
described;
NOW, THEREFORE, in consideration of the willingness of the Secured
Party to make the Loan to the Debtor and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. SECURITY INTEREST. As security for the Secured Obligations
described in Section 2 hereof, the Debtor hereby grants to the Secured Party a
security interest in and lien on all of the property described below
(hereinafter referred to collectively as the "Collateral"):
(a) All inventory wherever located (including in transit), including,
but not limited to, goods, merchandise and other personal property, held for
sale or lease or furnished or to be furnished under a contract of service, or
constituting raw materials, work in process, or materials used or consumed in
the Debtor's business, or consigned to others or held by others for return to
the Debtor, whether now owned or subsequently acquired or manufactured and
wherever located;
(b) All accounts, accounts receivable, demand deposits, "cash
collateral" (as defined in 11 U.S.C. Section 363(a)), contracts, contract
rights, notes, bills, drafts, chattel paper, acceptances, instruments, tax
refunds, insurance proceeds, and all other debts, obligations, and liabilities
in whatever form, owing to the Debtor from any person or entity, rights of the
Debtor, earned or to be earned, under contracts to sell goods or render
services, all of which now belong, have belonged, or will belong to the Debtor
for goods sold by it or for services rendered by it, together with all
guaranties and securities therefor, all right, title and interest of the Debtor
in the merchandise giving rise thereto, including the right of stoppage in
transit, and all goods subsequently acquired by the Debtor by way of
substitution, replacement, return, repossession or otherwise;
<PAGE> 2
(c) Any and all products and proceeds of any or all of the foregoing,
including, without limitation, cash, cash equivalents, tax refunds and the
proceeds of insurance policies providing coverage against the loss or
destruction of or damage to any of the Collateral;
(d) All of the Debtor's after-acquired property of the kinds and
types described in paragraphs (a)-(c) herein; and
(e) All records and data relating to any of the property described
above, whether in the form of a writing, photograph, microfile, microfiche, or
electronic media, together with all of the Debtor's right, title and interest in
and to all computer software required to utilize, create, maintain and process
any of such records or data or electronic media.
The purpose of this Security Agreement is to make the Secured Party a
secured party and provide it with a continuing first priority interest under the
Uniform Commercial Code of the State of New Hampshire in property of the Debtor,
as more particularly described above.
2. SECURED OBLIGATIONS. The security interest granted herein shall
secure the following (the "Secured Obligations"):
(a) The Debtor's payment and performance of a certain loan and other
extensions of credit (including without limitation foreign exchange facilities
and letters of credit issued by the Secured Party or any affiliate thereof on
behalf or for the benefit of the Debtor) in the aggregate amount of Fifteen
Million Dollars ($15,000,000) to the Debtor by the Secured Party pursuant to the
Loan Agreement and the obligation of the Debtor pursuant to the Master Agreement
(as defined in the Loan Agreement).
(b) The payment of all other sums with interest and charges thereon
advanced in accordance herewith to protect the validity, security and priority
of this Security Agreement;
(c) The Debtor's payment or other performance of its obligations
under the Loan Agreement, notes evidencing the Loan (the "Note"), the Master
Agreement, this Security Agreement and any and all other loan documents and
instruments described in and contemplated thereby (collectively, the "Loan
Documents") as the same may be amended, modified, extended, renewed, replaced or
restated.
The Debtor agrees that the Collateral granted to the Secured Party
pursuant to this Security Agreement shall, in addition to securing any Loan,
advance or indebtedness which may be made contemporaneously with the execution
of the Loan Agreement, also secure all future advances, loans, liabilities, and
extensions of credit of every nature made by the Secured Party and indebtedness
of the Debtor to the Secured Party pursuant to the Loan Agreement.
3. WARRANTIES AND REPRESENTATIONS OF THE DEBTOR. The Debtor warrants
and represents to the Secured Party as follows (which shall survive the
execution and delivery of this Agreement and shall be continuing warranties and
representations as long as any Secured Obligations remain outstanding):
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<PAGE> 3
(a) Each representation or warranty made in the Loan Documents
relating to the Debtor, the Collateral or the security furnished hereunder is
true, accurate and complete in all material respects.
(b) The Debtor conducts business only under and through the business
and trade names and entities set forth in the introductory paragraph of this
Security Agreement and as set forth on Exhibit A hereto.
(c) No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or other person is required either
(a) for the grant by the Debtor of the security interests granted hereby or for
the execution, delivery or performance of this Security Agreement by the Debtor
or (b) for the perfection of or the exercise by the Secured Party of their
respective rights and remedies hereunder, except the filing of financing
statements.
(d) The Debtor has not performed any acts which might prevent the
Secured Party from enforcing any of the terms and conditions of this Security
Agreement or which would limit any of them in any such enforcement except for
existing liens and encumbrances disclosed in Exhibit C.
(e) The address shown at the beginning of this Agreement is the
principal place of business of the Debtor and all of the Debtor's additional
places of business, if any, and the locations of all the Collateral, are listed
in Exhibit B attached hereto. The Debtor will not change its principal or any
other place of business, or the location of any Collateral, without at least
thirty (30) days' prior written notice to the Secured Party.
(f) The Collateral is and, if acquired hereafter, will be, lawfully
owned by the Debtor, free and clear of all other liens, encumbrances and
security interests, except as may be disclosed to the Secured Party on Exhibit C
hereto and as permitted by the Loan Agreement, and the Debtor will warrant and
defend title to the same against the claims and demands of all persons.
4. AFFIRMATIVE COVENANTS OF THE DEBTOR. (a) The Debtor shall
promptly notify and provide the Secured Party with a complete description of the
opening of any new places of business, the closing of any existing places of
business, the conduct of business under any names or through any entities other
than those set forth herein, the relocation of any of the Collateral to any new
place of business, which would affect the financing statements filed by the
Secured Party. The Debtor will furnish to the Secured Party from time to time
such statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral, as such Secured Party
may reasonably request, all in reasonable detail.
(b) The Debtor shall continuously take all steps that are necessary
or prudent to protect the security interests of the Secured Party in the
Collateral.
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<PAGE> 4
(c) The Debtor shall defend the Collateral against the claims and
demands of all persons.
(d) The Debtor shall deliver and pledge to the Secured Party,
endorsed or accompanied by instruments of assignment or transfer satisfactory to
the Secured Party, any instruments, documents and chattel paper which the
Secured Party may specify.
(e) The Debtor shall keep and maintain the Collateral in good
condition and repair and adequately insured (as provided in the Loan Documents)
and permit the Secured Party and its agents to inspect the Collateral at any
reasonable time. The Debtor shall be permitted to make normal replacement of its
fixed assets.
(f) The Debtor shall comply, in all material respects, with all
governmental regulations applicable to the Collateral or any part thereof or to
the operation of the Debtor's business; provided, however, that the Debtor may
contest any governmental regulation in any reasonable manner which shall not, in
the reasonable opinion of the Secured Party, adversely affect the Secured
Party's rights or the priority of its security interest in the Collateral.
(g) The Debtor shall pay promptly when due, all taxes, assessments
and governmental charges or levies imposed upon the Collateral or in respect of
its income or profits therefrom, as well as all claims of any kind, except that
no such charge need be paid if (i) the validity thereof is being contested in
good faith by appropriate proceedings, (ii) such proceedings do not involve any
danger of the sale, forfeiture or loss of any of the Collateral or any interest
therein; and (iii) such charge is adequately reserved against in accordance with
the generally accepted accounting principles.
(h) The Debtor shall advise the Secured Party promptly, in reasonable
detail, (i) of any lien, security interest, encumbrance or claim made or
asserted against any of the Collateral that is not permitted by this Agreement,
(ii) of any material change, substantial loss or depreciation in the composition
of the Collateral, and (iii) of the occurrence of any other material adverse
effect on the aggregate value, enforceability or collectability of the
Collateral or on the security interests created hereunder.
(i) The Debtor shall give, execute, deliver and file or record in the
proper governmental offices, any instrument, paper or document, including but
not limited to, one or more financing statements under the Uniform Commercial
Code, satisfactory to the Secured Party, or take any action, which the Secured
Party may deem necessary or desirable in order to create, preserve, perfect,
extend, continue, modify, terminate or otherwise effect any security interest
granted pursuant hereto, or to enable the Secured Party to exercise or enforce
any of its rights hereunder, including without limitation, upon the occurrence
of an Event of a Default, the establishment of one or more lockbox accounts with
the Secured Party or others who are, and in a manner which is, satisfactory to
the Secured Party.
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<PAGE> 5
(j) The Debtor shall keep, and stamp or otherwise mark, any of its
documents, instruments and chattel paper and its books relating to any of the
Collateral in such manner as the Secured Party may reasonably require.
(k) The Debtor shall pay, or reimburse the Secured Party, in the
amount of all expenses (including reasonable fees and expenses of attorneys,
experts and agents) incurred in any way in connection with the exercise, defense
or assertion of any of its rights or interests hereunder, the enforcement of any
provisions hereof or the management, preservation, use, operation, maintenance,
collection, possession, disposition or enforcement of any of the Collateral (all
such expenses shall be treated as Secured Obligations hereunder).
(l) Upon any failure of the Debtor to comply with its obligations
above, the Secured Party may, at its option, and without affecting any of its
other rights or remedies herein or as a secured party under the Uniform
Commercial Code, procure the insurance protection it deems necessary and/or
cause repairs or modifications to be made to the Collateral, the cost of either
or both of which shall be a lien against the Collateral added to the amount of
the indebtedness secured hereby and payable on demand with interest at a per
annum rate computed on the same basis as the Secured Obligations.
(m) The Debtor hereby assigns to the Secured Party any and all moneys
which may become due and payable under any policy insuring the Collateral,
including return of unearned premiums, and directs any such insurance company to
make payment directly to the Secured Party, and authorizes the Secured Party to
apply such moneys in payment on account of the indebtedness secured hereby,
whether or not due, or, at the sole option of the Secured Party, toward
replacement of the Collateral, and to remit any surplus to the Debtor.
5. NEGATIVE COVENANTS OF THE DEBTOR. Except as otherwise provided in
the Loan Agreement, without the prior written consent of the Secured Party, the
Debtor shall not:
(a) Transfer, sell or assign any of the Collateral except for the
sale of inventory in the ordinary course of business.
(b) Allow or permit any other security interest or lien to attach to
any of the Collateral, except those liens listed on Exhibit C.
(c) File, or authorize or permit to be filed, in any jurisdiction any
financing statement relating to any of the Collateral unless the Secured Party
is named as sole secured party, except those interests already filed and listed
on Exhibit C and those permitted by the Loan Agreement.
(d) Permit any of the Collateral to be levied upon under any legal
process.
(e) Permit anything to be done that may materially impair the value
of any of the Collateral or the security therein intended to be afforded hereby.
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<PAGE> 6
6. EVENTS OF DEFAULT. The Debtor shall be in default under this
Security Agreement upon the occurrence of an event of default under any Loan
Document, including the Loan Agreement (herein called "Events of Default").
7. RIGHTS OF SECURED PARTY ON DEFAULT. Upon the occurrence of any
Event of Default, the Secured Party may declare all of the Secured Obligations
to be immediately due and payable and shall then have the remedies of a secured
party under the Uniform Commercial Code or under any other applicable law,
including, without limitation, the right to take possession of the Collateral,
and in addition thereto, the right to enter upon any premises on which the
Collateral or any part thereof may be situated and remove the same therefrom.
The Secured Party may require the Debtor to make the Collateral (to the extent
the same is moveable) available to the Secured Party at a place to be designated
by the Secured Party which is reasonably convenient to all parties. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Secured Party will give the
Debtor at least ten (10) days' prior written notice by registered or certified
mail at the address of the Debtor set forth above (or at such other address or
addresses as the Debtor shall specify in writing to the Secured Party) of the
time and place of any public sale thereof or of the place and time after which
any private sale or any other intended disposition thereof is to be made. Any
such notice shall be deemed to meet any requirement hereunder or under any
applicable law (including the Uniform Commercial Code) that reasonable
notification be given of the time and place of such sale or other disposition.
After deducting all reasonable costs and expenses of collection, storage,
custody, sale or other disposition and delivery (including reasonable legal
costs and attorneys' fees) and all other charges against the Collateral, the
residue of the proceeds of any such sale or disposition shall be applied to the
payment of the Secured Obligations in such order of priority as the Secured
Party shall determine or held in escrow to apply to any contingent obligations
of the Debtor to the Bank, as required, and any surplus shall be returned to the
Debtor. In the event the proceeds of any sale, lease or other disposition of the
Collateral hereunder are insufficient to pay all of the Secured Obligations in
full, the Debtor will be liable for the deficiency, together with interest
thereon, at the maximum rate provided in the Note and the reasonable cost and
expenses of collection of such deficiency, including (to the extent permitted by
law), without limitation, reasonable attorneys' fees, expenses and
disbursements.
8. RIGHTS OF THE SECURED PARTY TO USE AND OPERATE COLLATERAL, ETC.
Upon the occurrence of any Event of Default, but subject to the provisions of
the Uniform Commercial Code or other applicable law, the Secured Party shall
have the right and power to take possession of all or any part of the
Collateral, and to exclude the Debtor and all persons claiming under the Debtor
wholly or partly therefrom, and thereafter to hold, store, and/or use, operate,
manage and control the same. Without limiting the generality of the foregoing,
the Secured Party shall, have the right to apply for and have a receiver
appointed by a court of competent jurisdiction in any action taken by the
Secured Party to enforce its rights and remedies hereunder in order to manage,
protect and preserve the Collateral and continue the operation of the business
of the Debtor and to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership including
the
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<PAGE> 7
compensation of the receiver and to the payment of the Secured Obligations as
aforesaid until a sale or other disposition of such Collateral shall be finally
made and consummated.
9. COLLECTION OF ACCOUNTS RECEIVABLE, ETC. Upon the occurrence of
any Event of Default, the Secured Party may notify or may require the Debtor to
notify account debtors obligated on any or all of the Debtor's accounts
receivable, whether now existing or hereafter arising, to make payment directly
to the Secured Party, and may take possession of all proceeds of any accounts in
the Debtor's possession, and may take any other steps which the Secured Party
deem necessary or advisable to collect any or all accounts receivable or other
Collateral or proceeds thereof.
10. WAIVER, ETC. The Debtor hereby waives presentment, demand,
notice, protest and, except as is otherwise provided herein, all other demands
and notices in connection with this Security Agreement or the enforcement of the
Secured Party's rights hereunder or in connection with any Secured Obligations
or any Collateral; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to the Debtor or to any
account debtor in respect of any account receivable, or substitution, release or
surrender of any Collateral, the addition or release of persons primarily or
secondarily liable on any Secured Obligation or on any account receivable or
other Collateral, the acceptance of partial payments on any Secured Obligation
or on any account receivable or other Collateral and/or the settlement or
compromise thereof. No delay or omission on the part of the Secured Party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder. Any waiver of any such right on any one occasion shall
not be construed as a bar to or waiver of any such right on any such future
occasion.
THE BORROWER AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK
TO ACCEPT THIS AGREEMENT AND MAKE THE LOAN.
11. TERMINATION; ASSIGNMENTS, ETC. This Agreement and the security
interest in the Collateral created hereby shall be terminated when all of the
Secured Obligations have been (a) fully and finally paid and performed and (b)
delivery of a final discharge in writing by the Bank (this Agreement and such
security interest shall continue in full force and effect notwithstanding any
temporary payment of the Secured Obligations under a revolving credit
instrument). In the event of a sale or assignment by the Secured Party of all or
any of the Secured Obligations held by it to the extent permitted by the Loan
Agreement, the Secured Party may assign or transfer its rights and interests
under this Security Agreement in whole or in part to the purchaser or purchasers
of such Secured Obligations, whereupon such purchaser or purchasers shall become
vested with all of the powers and rights of the Secured Party
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<PAGE> 8
hereunder, and the Secured Party shall thereafter be forever released and fully
discharged from any liability or responsibility hereunder, with respect to the
rights and interests so assigned.
12. NOTICES. Except as otherwise provided herein, notice to the
Debtor or to the Secured Party shall be deemed to have been sufficiently given
or served for all purposes hereof if mailed, certified or registered mail,
return receipt requested, postage prepaid to the parties at the addresses set
forth above in this Security Agreement or at such other address as the party to
whom such notice is directed may have designated in writing to the other parties
hereto.
13. MISCELLANEOUS. (a) The powers conferred on the Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for monies actually
received by it hereunder, the Secured Party shall not have any duty as to any
Collateral or as to the taking of any necessary steps to preserve any right of
it or of the Debtor against other parties pertaining to any Collateral.
(b) No provision hereof shall be amended except by a writing signed
by the Secured Party and the Debtor.
(c) Any provision of this Security Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
(d) This Security Agreement shall be binding upon and shall inure to
the benefit of the permitted assigns and successors of the Secured Party and the
Debtor.
(e) No delay, failure to enforce, or single or partial exercise on
the part of the Secured Party in connection with any of its rights hereunder
shall constitute an estoppel or waiver thereof, or preclude other or further
exercises or enforcement thereof and no waiver of any default hereunder shall be
a waiver of any subsequent default.
(f) This Security Agreement shall be governed as to its validity,
interpretation and effect in accordance with the laws of the State of New
Hampshire.
IN WITNESS WHEREOF, acting by and through its duly authorized agent the
parties hereto have executed this Security Agreement on the day and year first
hereinbefore stated.
NASHUA CORPORATION
_____________________________ By:__________________________________
Witness John L. Patenaude, Its Duly
Authorized Vice President-Finance, Chief
Financial Officer and Treasurer
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<PAGE> 9
FLEET BANK-NH
______________________________ By:__________________________________
Witness Amy LeBlanc Hackett, Its Duly
Authorized Vice President
9
<PAGE> 10
EXHIBIT A
Business and Trade Names
[To Be Completed By Borrower]
10
<PAGE> 11
EXHIBIT B
Location(s) of the Collateral
[To Be Completed By Borrower]
11
<PAGE> 12
EXHIBIT C
Other Liens, Etc.
[To Be Completed By Borrower]
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-02-1999
<EXCHANGE-RATE> 1
<CASH> 32,728
<SECURITIES> 0
<RECEIVABLES> 19,702
<ALLOWANCES> 0
<INVENTORY> 14,406
<CURRENT-ASSETS> 80,531
<PP&E> 73,009
<DEPRECIATION> (34,470)
<TOTAL-ASSETS> 129,478
<CURRENT-LIABILITIES> 34,960
<BONDS> 0
0
0
<COMMON> 6,938
<OTHER-SE> 66,355
<TOTAL-LIABILITY-AND-EQUITY> 129,478
<SALES> 42,649
<TOTAL-REVENUES> 42,649
<CGS> 32,362
<TOTAL-COSTS> 42,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204
<INCOME-PRETAX> 366
<INCOME-TAX> 148
<INCOME-CONTINUING> 218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
