<PAGE> 1
FORM 10-Q
-------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OCTOBER 1, 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 03064
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 NOVEMBER 3, 1999, THE COMPANY HAD 5,891,949 SHARES OF COMMON STOCK,
EXCLUDING 1,023,818 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)
<TABLE>
<CAPTION>
October 1, 1999 December 31,
ASSETS: (Unaudited) 1998
- ------- --------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 20,800 $ 31,965
Restricted cash 5,000 5,000
Accounts receivable 21,896 18,232
Inventories
Materials and supplies 6,156 6,326
Work in process 3,513 2,503
Finished goods 6,191 5,847
-------- --------
15,860 14,676
Other current assets 16,592 13,474
-------- --------
Total current assets 80,148 83,347
-------- --------
Plant and equipment 75,590 73,057
Accumulated depreciation (36,773) (33,727)
-------- --------
38,817 39,330
-------- --------
Intangible assets 1,182 1,991
Accumulated amortization (800) (1,484)
-------- --------
382 507
-------- --------
Investment in unconsolidated affiliates 226 --
Other assets 9,621 10,155
Net non-current assets of discontinued operations 756 756
-------- --------
Total assets $129,950 $134,095
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Current maturities of long-term debt $ 511 $ 511
Accounts payable 11,009 9,028
Accrued expenses 25,253 27,934
-------- --------
Total current liabilities 36,773 37,473
-------- --------
Long-term debt 638 1,064
Other long-term liabilities 19,905 20,331
-------- --------
Total long-term liabilities 20,543 21,395
-------- --------
Common stock and additional capital 22,086 21,995
Retained earnings 65,455 64,071
Treasury stock, at cost (14,907) (10,839)
-------- --------
Total shareholders' equity 72,634 75,227
-------- --------
Commitments and contingencies -- --
-------- --------
Total liabilities and shareholders' equity $129,950 $134,095
======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
(In thousands, except per share data) Three Months Ended Nine Months Ended
------------------------ -------------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $43,668 $ 42,420 $128,890 $126,987
Cost of products sold 33,330 31,528 97,843 97,145
------- -------- -------- --------
Gross margin 10,338 10,892 31,047 29,842
Research, selling, distribution and
administrative expenses 9,169 9,785 28,958 30,729
Loss from equity investment 53 -- 53 --
Restructuring and unusual charges 138 15,000 138 15,000
Interest expense 197 24 614 246
Interest income (314) (524) (1,041) (1,201)
------- -------- -------- --------
Income (loss) from continuing operations before income
taxes (benefit) 1,095 (13,393) 2,325 (14,932)
Income taxes (benefit) 443 (5,326) 941 (5,899)
------- -------- -------- --------
Income (loss) from continuing operations 652 (8,067) 1,384 (9,033)
Loss from discontinued operation, net of taxes -- (2,261) -- (4,347)
Gain on disposal of discontinued operation, net of taxes -- -- -- 1,052
------- -------- -------- --------
Net income (loss) 652 (10,328) 1,384 (12,328)
Retained earnings, beginning of period 64,803 74,935 64,071 76,935
------- -------- -------- --------
Retained earnings, end of period 65,455 64,607 65,455 64,607
======= ======== ======== ========
Earnings per share:
Income (loss) from continuing operations $ 0.12 $ (1.27) $ 0.24 $ (1.41)
Loss from discontinued operation -- (0.35) -- (0.68)
Gain on disposal of discontinued operation -- -- -- .16
------- -------- -------- --------
Net income (loss) per common share $ 0.12 $ (1.62) $ 0.24 $ (1.93)
======= ======== ======== ========
Average common shares 5,633 6,374 5,744 6,404
======= ======== ======== ========
Income (loss) per common share from
continuing operations assuming dilution $ 0.12 $ (1.27) $ 0.24 $ (1.41)
Loss per common share from discontinued
operations assuming dilution -- (0.35) -- (0.68)
Gain on sale of discontinued operation
per common share assuming dilution -- -- -- 0.16
------- -------- -------- --------
Net income (loss) per common share assuming dilution $ 0.12 $ (1.62) $ 0.24 $ (1.93)
======= ======== ======== ========
Average common and potential common shares 5,635 6,374 5,754 6,404
======= ======== ======== ========
</TABLE>
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)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
Oct. 1, Oct. 2,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net income (loss) $ 1,384 $(12,328)
Adjustments to reconcile net income (loss) to cash provided by
(used in) continuing operating activities:
Depreciation and amortization 4,414 4,681
Gain on sale of discontinued operation -- (1,052)
Loss from discontinued operations -- 4,347
Loss from equity investment 53 --
Restructuring and unusual charges 138 --
One-time charge related to damages awarded in Ricoh Litigation -- 15,000
Net change in working capital and other assets (5,522) (14,766)
-------- --------
Cash used in continuing operating activities 467 (4,118)
-------- --------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (4,075) (4,418)
-------- --------
Cash used in investing activities of continuing operations (4,075) (4,418)
-------- --------
Cash flows from financing activities of continuing operations:
Repayment of borrowings (426) (2,340)
Proceeds and tax benefits from shares issued under stock
option plans 91 2,135
Purchase of treasury stock (4,068) (5,283)
-------- --------
Cash used in financing activities of continuing operations (4,403) (5,488)
-------- --------
Proceeds from the sale of discontinued operation -- 49,858
Cash used in activities of discontinued operation (3,154) (1,021)
Effect of exchange rate changes on cash -- 4
-------- --------
Increase (decrease) in cash and cash equivalents (11,165) 34,817
Cash and cash equivalents at beginning of period 31,965 3,736
-------- --------
Cash and cash equivalents at end of period $ 20,800 $ 38,553
======== ========
Interest paid $ 61 $ 189
======== ========
Income taxes paid $ 5,050 $ 6,441
======== ========
</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 replaced the Company's
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 interest, income taxes,
depreciation and amortization (EBITDA). Borrowings under this facility are
collateralized by a security interest in the Company's accounts 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 22, 2001.
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 without prior consent of the lenders.
RECLASSIFICATION
Certain amounts from the prior year have been reclassified to conform to the
current year presentation.
RESTRUCTURING AND UNUSUAL CHARGES
In the third quarter, the Company recorded a $.5 million pretax charge
associated with the Company's decision to cease manufacturing fax papers in the
Specialty Coated and Label Products Segment, which was partially offset by a
gain of $.4 million resulting from the completion of the partial sale of the
Company's Microsharp imaging technology. The Company decided to cease
manufacturing fax paper due to the loss of two significant fax paper customers
attributable to the acquisition of these customers by larger firms and a
consolidation of their fax purchases.
STOCK OPTIONS
At October 1, 1999, options for 496,835 shares of common stock were outstanding.
Stock options for an additional 72,753 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 half of 1999, Nashua repurchased 348,060
shares of the Company's
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common stock in open market transactions for $4.0 million. The total shares
repurchased under this program totaled 999,734.
SEGMENT AND RELATED INFORMATION
In the fourth quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information." The tables below present information about reported
segments.
<TABLE>
<CAPTION>
For the Quarter:
- ----------------
(In thousands) Net Sales From Pretax Income (Loss) From
Continuing Operations Continuing Operations
------------------------------ -------------------------------
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended
Oct. 1, 1999 Oct. 2, 1998 Oct. 1, 1999 Oct. 2, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Imaging Supplies $ 15,136 $ 15,032 $ 139 $ 7
Specialty Coated and Label Products 28,507 27,357 2,701 2,677
Reconciling items:
Other 25 31 1 (112)
Unallocated corporate expenses,
Including interest (1,608) (965)
Restructuring and unusual charges (138) (15,000)
-------- -------- ------ --------
Consolidated $ 43,668 $ 42,420 $1,095 $(13,393)
======== ======== ====== ========
<CAPTION>
For the Nine Months:
- --------------------
(In thousands) Net Sales From Pretax Income (Loss) From
Continuing Operations Continuing Operations
------------------------------ -------------------------------
Nine Months Nine Months Nine Months Nine Months
Ended Ended Ended Ended
Oct. 1, 1999 Oct. 2, 1998 Oct. 1, 1999 Oct. 2, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Imaging Supplies $ 43,650 $ 45,573 $ (407) $ (1,428)
Specialty Coated and Label Products 85,094 81,352 7,411 5,907
Reconciling items:
Other 146 62 (122) (565)
Unallocated corporate expenses,
Including interest (4,419) (3,846)
Restructuring and unusual charges (138) (15,000)
-------- -------- ------ --------
Consolidated $128,890 $126,987 $2,325 $(14,932)
======== ======== ====== ========
</TABLE>
Segment pretax income (loss) from continuing operations for the first two
quarters of 1999, included intercompany charges related to certain corporate
expenses that are not included in the primary performance measure used by
management in making decisions about allocating resources to each segment and in
assessing its respective performance. In accordance with Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information," the Company has adjusted its results for the nine months
ended October 1, 1999. The net impact to pretax income (loss) from continuing
operations of the Imaging Supplies and Specialty Coated and Label Products
Segments is $287,000 and $266,000, respectively.
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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 position as of October 1,
1999, the results of operations for the three and nine month periods ended
October 1, 1999 and October 2, 1998, and cash flows for the nine month periods
ended October 1, 1999 and October 2, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS: FOR THE QUARTER:
Quarterly sales increased to $43.7 million, a 2.9 percent increase over third
quarter 1998 sales of $42.4 million due to improvements in both the Imaging
Supplies and Specialty Coated and Label Products Segments. Gross margin
decreased to 23.7 percent for the quarter compared to 25.7 percent for the third
quarter of 1998, primarily due to volume shortfalls impacting manufacturing
efficiencies in the laser printer cartridge product line in the Imaging Supplies
Segment. Research, selling, distribution and administrative expenses, as a
percent of sales, improved to 21.0 percent from 23.0 percent for the third
quarter of 1998, primarily due to the restructuring of selling channels in the
Imaging Supplies Segment. Net interest income decreased to $.1 million for the
third quarter compared to $.5 million a year ago, primarily a result of the
decreased cash balance due to the share repurchase program discussed further in
the Liquidity, Capital Resources and Financial Condition section of this report
and the accrual of interest expense related to the Ricoh litigation as described
in the Company's 10-K filing. Income before taxes for continuing operations, as
a percent of sales, was 2.5 percent compared to a loss of 31.6 percent last
year.
Net income in the third quarter of 1999 increased to $.7 million, $.12 per
share, compared to a net loss of $10.3 million, $1.62 per share, in the third
quarter of 1998 due to improvements in both the Imaging Supplies and Specialty
Coated and Label Products Segments. Net income in the third quarter of 1999
reflected an unusual charge of $.1 million due to the Company's decision to
discontinue manufacture of fax papers in the Specialty Coated and Label Products
Segment, which more than offset the gain resulting from the completion of the
sale of a portion of the Company's Microsharp imaging technology. Net income in
the third quarter of 1998 reflected an unusual charge of $15.0 million for
damages awarded by the U.S. District Court, District of New Hampshire in a
patent infringement lawsuit brought against the Company by Ricoh Corporation,
Ricoh Electronics, Inc. and Ricoh Company, Ltd. Net income, as a percent of
sales, was 1.5 percent for the third quarter of 1999, as compared to a net loss
of 24.4 percent for the same period last year. Net income from continuing
operations in the third quarter of 1999 totaled $.7 million, $.12 per share,
compared to a net loss from continuing operations of $8.1 million, $1.27 per
share, in the third quarter of 1998.
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<PAGE> 8
RESULTS OF OPERATIONS BY REPORTABLE OPERATING SEGMENT: FOR THE QUARTER:
IMAGING SUPPLIES SEGMENT:
The Imaging Supplies Segment reported a slight increase in sales for the third
quarter of 1999 as compared to the same period last year. The sales improvement
resulted from higher volume in the paper product lines, which more than offset
declines in both the toner and developer and the laser printer cartridge product
lines. Paper sales increased 18.1 percent compared to the third quarter of last
year as a result of higher volume driven by the market's reaction to an
anticipated rise in paper prices. Toner and developer sales declined 3.9 percent
from the same period last year as a result of volume shortfalls of older
products in the value added, dealer-agent and international channels partially
offset by higher volume from new product initiatives in the private label
channel. Laser printer cartridge sales declined 6.8 percent in the third quarter
of 1999 compared to the third quarter of 1998 due to volume shortfalls in the
dealer-agent and private label channels mostly due to the loss of two
significant customers, which more than offset volume improvements in the
international channel.
The Segment's pretax profit in the third quarter of 1999 improved $.1 million
compared to the third quarter of 1998. The pretax improvement over the third
quarter of 1998 was primarily a result of reduced selling and administrative
expenses in the toner and developer product line related to the restructuring of
the dealer-agent selling channel earlier this year and lower distribution
expense mostly due to lower volume in the toner and developer and laser printer
cartridge product lines.
SPECIALTY COATED AND LABEL PRODUCTS SEGMENT:
The Specialty Coated and Label Products Segment reported a 4.2 percent increase
in sales for the third quarter of 1999 compared to the same period last year due
to higher volume in the custom EDP and thermal paper product lines. The custom
EDP converted label sales improvement over the third quarter 1998 is primarily
due to more favorable average selling prices. Thermal paper sales, which are
used primarily for conversion into supermarket labels and ticket and tag
applications, improved over the third quarter 1998 due to customer retention,
new customer initiatives and new product offerings. The Specialty Coated
Products Division of this segment experienced sales declines across three of
five product lines including fax paper, dry gum and heat seal due to lower
volumes which were attributed to declining demand in mature markets. Fax paper
sales have been in decline since last year after two significant customers,
Quill and Viking, were acquired by Staples and Office Depot, respectively, and
decided to consolidate their purchases of fax paper from other suppliers. In
turn, Nashua made the decision to exit the fax paper manufacturing business. Dry
gum and heat seal products sales declined in the third quarter from the same
period last year due to lower volume in a highly competitive, price sensitive
market.
The Segment's pretax income increased slightly compared to the third quarter of
1998, primarily the result of higher volume, lower raw material costs, improved
manufacturing efficiency and a favorable mix of products sold.
RESULTS OF OPERATIONS: FOR NINE MONTHS YEAR-TO-DATE:
Sales for the first nine months of 1999 were up 1.5 percent to $128.9 million
compared to $127.0 million in the corresponding period of 1998 due to higher
sales in the Specialty Coated and Label Products Segment offset by a decline in
sales in the Imaging Supplies Segment. Gross Margin improved to 24.1 percent for
the first nine months from 23.5 percent for the same period last year. The
increase was due
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to manufacturing cost reduction programs, improved manufacturing efficiency,
reduced raw material prices, improved product mix and income related to the
Company's pension plans. Research, selling, distribution and administrative
expenses, as a percent of sales, improved to 22.5 percent from 24.2 percent for
the first nine months of 1998, primarily due to the reduction in commission
expenses attributable to restructuring the dealer-agent channel earlier this
year and income related to the Company's pension plans. Net interest income
decreased to $.4 million for the first nine months compared to $1.0 million a
year ago, primarily a result of the decreased cash balance due to the share
repurchase program completed in the second quarter this year, as well as higher
interest expense accrued in the first nine months of 1999 related to the Ricoh
litigation. Income before taxes for continuing operations, as a percent of
sales, was 1.8 percent compared to a loss of 7.1 percent a year ago.
Net income in the first nine months of 1999 was $1.4 million, $.24 per share,
compared to a net loss of $12.3 million, $1.93 per share, in the same period in
1998. Net income, as a percent of sales, was 1.1 percent for the first nine
months of 1999 and a net loss of 9.7 percent for the same period last year. Net
income from continuing operations in the first nine months of 1999 totaled $1.4
million, $.24 per share, compared to a net loss from continuing operations of
$9.0 million, $1.41 per share, in the first nine months of 1998. Net income in
the first nine months of 1999 included an unusual charge of $.1 million due to
the Company's decision to discontinue manufacture of fax papers in the Specialty
Coated and Label Products Segment which more than offset the gain resulting from
the completion of the sale of a portion of the Company's Microsharp imaging
technology. Net income in the first nine months of 1998 included an unusual
charge of $15.0 million for damages awarded by the U.S. District Court, District
of New Hampshire in a patent infringement lawsuit brought against the Company by
Ricoh Corporation.
RESULTS OF OPERATIONS BY REPORTABLE OPERATING SEGMENT: FOR NINE MONTHS YEAR-TO
DATE:
IMAGING SUPPLIES SEGMENT:
The Imaging Supplies Segment reported a 4.2 percent decrease in sales for the
first nine months of 1999 compared to the same period last year. The sales
decline was a result of a reduction in volume in the toner and developer and
laser printer cartridge product lines, as well as a reduction in selling price
in the toner and developer product line which more than offset volume
improvements in the paper product line. The toner and developer decline was due
to lower volume from international customers. The laser printer cartridge sales
decline was primarily due to the volume decline due to the loss of two
significant customers in the dealer-agent channel.
The Segment's pretax loss in the first nine months of 1999 improved 72 percent
over the same period in 1998. The pretax improvement over the first nine months
of 1998 resulted primarily from lower selling and administrative expenses
related to the restructuring of the dealer-agent selling channel in the toner
and developer product line which was completed earlier this year and income
related to the Company's pension plans.
SPECIALTY COATED AND LABEL PRODUCTS SEGMENT:
The Specialty Coated and Label Products Segment reported a 4.6 percent increase
in sales for the first nine months of 1999 compared to the same period last
year. The increased sales were a result of higher volume in the thermal paper
and converted label products, compared to the same period last year. Customer
retention and new customer initiatives, primarily in the supermarket thermal
product line, were the primary drivers of the first nine months sales
improvement. The Specialty Coated Products Division of this segment had
declining sales in the fax paper, heat seal and dry gum product lines in the
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<PAGE> 10
first nine months of 1999 compared to the same period in 1998. Fax paper sales
have been in decline since last year after two significant customers, Quill and
Viking, were acquired by Staples and Office Depot, respectively, and decided to
consolidate their purchases of fax paper from other suppliers. In turn, Nashua
made the decision to exit the fax paper manufacturing business. Dry gum and heat
seal sales decline is primarily due to lower volume mostly due to technological
changes in the marketplace.
The Segment's pretax income increased 25.5 percent compared to the first nine
months of 1998, primarily a result of higher sales volume and an improvement in
the Segment's gross margin. Lower manufacturing costs, improved manufacturing
efficiency, a favorable mix of products sold and income related to the Company's
pension plans were the primary reasons for the improvement.
RESTRUCTURING AND UNUSUAL CHARGES
The current period provision for restructuring and unusual charges included $.5
million associated with the Company's decision to cease manufacturing fax papers
in the Specialty Coated and Label Products Segment.
Details of the charges related to continuing operations and the activity
recorded during the first nine months of 1999 follows.
<TABLE>
<CAPTION>
Balance Current Current Balance
(In thousands) July 2, Period Period Oct. 1,
1999 Provision Charges 1999
------- --------- ------- -------
<S> <C> <C> <C> <C>
Provisions for severance related to workforce reductions $246 $156 $208 $194
Provisions for assets to be sold or discarded -- 266 -- 266
Other 120 130 34 216
---- ---- ---- ----
Total $366 $552 $242 $676
==== ==== ==== ====
</TABLE>
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
nine months 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. 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 has established
processes for assessing the risks and associated costs of the Y2K issue.
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 contingency planning.
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<PAGE> 11
All aspects related to assessing, remediating and testing mission critical
systems have been completed and are Y2K compliant. Mission critical systems are
systems necessary to take customer orders, manufacture and ship product, collect
accounts receivable and report financial information.
The Company is in communication with and has conducted several analyses with
significant vendors and customers to ensure their Y2K compliance. In addition,
the Company continues to evaluate its vulnerability if these companies fail to
remediate their Y2K issues. The Company is in the process of assessing supply
chain risk and building safety stock where feasible by ordering raw materials
and seeking alternative sources in the event of non-compliance. 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 estimated that the aggregate cost of the Company's Y2K efforts will be
approximately $1.1 million, of which, substantially all 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 have been developed and 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 developed contingency plans 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. These plans will continue to be updated throughout
the remainder of 1999. Activity outlined in the plans will increase in
mid-December to take the recommended precaution prior to January 1, 2000.
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. In addition, the Company
believes the analyses conducted to ensure Y2K compliance of vendors and
customers will lessen the Y2K risk, however, there is no guarantee this will
completely eliminate the potential for disruption. 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 $2.5 million to $43.4 million from December 31, 1998.
Cash and cash equivalents declined $11.2 million, primarily as a result of
payment of certain year end accrued expenses in the amount of $2.3 million,
payment of Advanced Corporation Tax to the U.K. in the amount of $2.6 million,
payment of certain state taxes in the amount of $2.3 million, and the repurchase
of 348,060
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<PAGE> 12
shares of common stock in open market transactions for $4.0 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 a $3.7
million increase in accounts receivable, a $1.2 million increase in inventories,
primarily in the Specialty Coated and Label Segment, and a $2.0 million increase
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
ANNUAL MEETING OF STOCKHOLDERS
The Company's Annual Stockholders' Meeting will be held on April 25, 2000 at the
Crowne Plaza, 2 Somerset Parkway, Nashua, NH, at 10:00 a.m.
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 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
10.01 Change of Control and Severance Agreement dated July 19, 1999 between
Nashua Corporation and John J. Ireland.
27.01 Financial Data Schedule for the period ending October 1, 1999.
(b) Reports on Form 8-K
None
-12-
<PAGE> 13
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: November 10, 1999 By: /s/ John L. Patenaude
----------------- -----------------------------------------------
John L. Patenaude
Vice President-Finance and
Chief Financial Officer
(principal financial and duly authorized officer)
-13-
<PAGE> 1
CHANGE OF CONTROL AND SEVERANCE AGREEMENT
-----------------------------------------
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and JOHN J. IRELAND (the "Executive"), dated as of the 19th day of
July, 1999.
RECITALS:
WHEREAS, the Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company or other reasons of uncertainty;
WHEREAS, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and business concerns and
to encourage the Executive's full attention and dedication to the Company; and
WHEREAS, in order to accomplish these objectives, the Board believes it is in
the best interests of the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall be the first date during the "Change of
Control Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is
terminated or the Executive ceases to be an officer of the Company
prior to the date on which a Change of Control occurs, and it is
reasonably demonstrated that such termination of employment (1) was at
the request of a third party who has taken steps reasonably calculated
to effect the Change of Control or (2) otherwise arose in connection
with or anticipation of the Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period commencing on the date
hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as the "Renewal Date"),
the Change of Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days
prior to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so extended.
<PAGE> 2
-2-
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control"
shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of l934, as amended (the "Exchange Act"))
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) (a "Person") of 30% or more of either (i) the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Company Voting
Securities"), PROVIDED, HOWEVER, that any acquisition by (x) the
Company or any of its subsidiaries, or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
subsidiaries or (y) any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Company Voting Securities, as the case may be, shall not constitute a
Change of Control; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election or nomination
for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the Outstanding
Company Common Stock and Company Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from Business Combination in
substantially the same proportion as their ownership immediately prior
to such Business Combination of the Outstanding Company Common Stock
and Company Voting Securities, as the case may be; or
(d) (i) a complete liquidation or dissolution of the Company or of (ii)
sale or other disposition of all or substantially all of the assets of
the Company other than to a
<PAGE> 3
-3-
corporation with respect to which, following such sale or disposition,
more than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is
then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of
the Outstanding Company Common Stock and Company Voting Securities, as
the case may be, immediately prior to such sale or disposition.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the
third anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 90-day period immediately preceding the Effective
Date and (B) the Executive's services shall be performed at
the location where the Executive was employed immediately
preceding the Effective Date or any office or location less
than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to
the Company.
<PAGE> 4
-4-
(b) COMPENSATION.
(i) BASE SALARY. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable to the
Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed at
least annually and shall be increased at any time and from
time to time as shall be substantially consistent with
increases in base salary awarded in the ordinary course of
business to other peer executives of the Company and its
affiliated companies. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the
term "affiliated companies" includes any company controlled
by, controlling or under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year beginning or ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average bonus paid or
payable, including by reason of deferral, to the Executive by
the Company and its affiliated companies in respect of the
three fiscal years immediately preceding the fiscal year in
which the Effective Date occurs (annualized for any fiscal
year during the Employment Period consisting of less than
twelve full months or with respect to which the Executive has
been employed by the Company for less than twelve full months)
(the "Recent Annual Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Annual Bonus
is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Annual
Base Salary and Annual Bonus payable as hereinabove provided,
the Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive,
savings and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than (x) the most favorable
of those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or (y) if more
favorable to the Executive, those provided at any time after
the Effective Date to other peer executives of the Company and
its affiliated companies.
<PAGE> 5
-5-
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and
programs) to the extent generally applicable to other peer
executives of the Company and its affiliated companies, but in
no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable,
in the aggregate, than (x) the most favorable of such plans,
practices, policies and programs in effect for the Executive
at any time during the 90-day period immediately preceding the
Effective Date or (y) if more favorable to the Executive,
those provided at any time after the Effective Date generally
to other peer executives of the Company and its affiliated
companies.
(v) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company
and its affiliated companies in effect for the Executive at
any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size
and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Executive
by the Company and its affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(viii) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect at any time
during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
incentives of the
<PAGE> 6
-6-
Company and its affiliated companies.
5. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 15(b) of this
Agreement of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by
the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" means the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or Executive's legal representative (such agreement as
to acceptability not to be withheld unreasonably).
(b) CAUSE. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause"
means (i) an action taken by the Executive involving willful and
wanton malfeasance involving specifically a wholly wrongful and
unlawful act, or (ii) the Executive being convicted of a felony.
(c) GOOD REASON. The Executive's employment may be terminated during the
Employment Period by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which results in
a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section
4(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
<PAGE> 7
-7-
(v) any failure by the Company to comply with and satisfy Section
14(c) of this Agreement.
For purposes of this Agreement, any good faith determination of Good
Reason made by the Executive shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
15(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the
extent applicable sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than fifteen days after the giving of such notice).
In the case of a termination of the Executive's employment for Cause,
a Notice of Termination shall include a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the
entire membership of the Board at a meeting of the Board called and
held for the purpose (after reasonable notice to the Executive and
reasonable opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board prior to such vote),
finding that in the good faith opinion of the Board the Executive was
guilty of conduct constituting Cause. No purported termination of the
Executive's employment for Cause shall be effective without a Notice
of Termination. The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive
hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means the date of receipt
of the Notice of Termination or any later date specified therein, as
the case may be; provided, however, that (i) if the Executive's
employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (ii) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than the following
obligations: (i) payment of the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii)
payment of the product of (x) the greater of (A) the Annual Bonus paid
or payable, including by reason of deferral, (and annualized for any
fiscal year consisting of less than twelve full months or for which
the Executive has been employed for less than twelve full months) for
the most recently completed fiscal year during the Employment Period,
if any, and (B) the Recent Annual Bonus (such greater amount hereafter
referred to as the "Highest Annual
<PAGE> 8
-8-
Bonus") and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (iii) payment of any compensation
previously deferred by the Executive (together with any accrued
interest thereon) and not yet paid by the Company and any accrued
vacation pay not yet paid by the Company (the amounts described in
paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued
Obligations"). All Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. In addition, the
Executive's estate or designated beneficiaries shall be entitled to
receive the Executive's Annual Base Salary for the balance of the
Employment Period; PROVIDED, HOWEVER, that such payments of Annual
Base Salary shall be reduced by any survivor benefits paid to the
Executive's estate or designated beneficiary under the Retirement
Plan. Anything in this Agreement to the contrary notwithstanding, the
Executive's estate and family shall be entitled to receive benefits at
least equal to the most favorable benefits provided generally by the
Company and any of its affiliated companies to the estates and
surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect generally
with respect to other peer executives and their estates and families
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(b) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations. All Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination. In addition, the Executive shall be entitled
to receive the Executive's Annual Base Salary for the balance of the
Employment Period; PROVIDED, HOWEVER, that such payments of Annual
Base Salary shall be reduced by any benefits paid to the Executive
under the Retirement Plan by reason of Disability. Anything in this
Agreement to the contrary notwithstanding, the Executive shall be
entitled after the Disability Effective Date to receive disability and
other benefits at least equal to the most favorable of those generally
provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their
families at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally with
respect to other peer executives of the Company and its affiliated
companies and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive Annual Base Salary through
the Date of Termination plus the amount of any compensation previously
deferred by the Executive, in each case to the extent theretofore
unpaid. If the Executive terminates employment during the Employment
Period other than for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations
<PAGE> 9
-9-
shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall
terminate employment during the Employment Period for Good Reason, the
Company shall pay to the Executive in a lump sum in cash within 60
days after the Date of Termination, and subject to receiving an
executed irrevocable Release as described in Section 11, the aggregate
of the following amounts:
A. all Accrued Obligations; and
B. the product of (x) three and (y) the sum of (i) Annual Base
Salary and (ii) the Highest Annual Bonus; and
C. a lump-sum retirement benefit equal to the difference between
(a) the actuarial equivalent of the benefit under the Nashua
Corporation Retirement Plan for Salaried Employees (the
"Retirement Plan") and any supplemental and/or excess
retirement plan providing benefits for the Executive (the
"SERP") which the Executive would receive if the Executive's
employment continued at the compensation level provided for in
Sections 4(b)(i) and 4(b)(ii) of this Agreement for the
remainder of the Employment Period, assuming for this purpose
that all accrued benefits are fully vested, and (b) the
actuarial equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and the SERP;
for purposes of determining the amount payable pursuant to
this Section 6(d)(i)C the accrual formulas and actuarial
assumptions utilized shall be no less favorable than those in
effect with respect to the Retirement Plan and the SERP during
the 90-day period immediately prior to the Effective Date.
In addition, for the remainder of the Employment Period (if the
termination took place during the Employment Period under this Section
6), the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies applicable generally to other peer
executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families. For purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed
until the end of the Employment Period and to have retired on the last
day of such period.
Notwithstanding the foregoing, if a Change of Control shall have
occurred before the Date of Termination, the aggregate amount of
"parachute payments", as defined in Section 280G of the Internal
Revenue Code of 1986, as amended from time to time (the
<PAGE> 10
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"Code") payable to the Executive pursuant to all arrangements with the
Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the
"cut back amount"); provided, however, that if Executive would be
better off by at least $25,000 on an after-tax basis by receiving the
full amount of the parachute payments as opposed to the cut back
amount (notwithstanding a 20% excise tax) the Executive shall receive
the full amount of the parachute payments.
7. SEVERANCE BENEFITS. Notwithstanding anything contained in this Agreement to
the contrary, if, before or after the Employment Period, the Executive's
employment is terminated by the Company for reason other than misconduct,
the Company shall pay to the Executive one year's salary continuation and
continue medical and dental benefits during such continuation period.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any other agreements with the Company or any
of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program except as explicitly modified by
this Agreement.
9. FULL SETTLEMENT. The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement. The
Company agrees to pay, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof, plus
in each case interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Internal Revenue Code of l986, as amended (the
"Code").
10. OTHER AGREEMENTS. The parties agree that this Agreement supersedes and
replaces the Change of Control and Severance Agreement between the parties
dated as of the 24th day of June, 1998 and any and all other agreements,
policies, understandings or letters (including but not limited to
employment agreements, severance agreements and job abolishment policies)
between the parties related to the subject matter hereof.
11. RELEASE. Prior to receipt of the payment described in Sections 6(d) or 7,
the Executive shall execute and deliver a Release to the Company as
follows:
The Executive hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Company, its officers, directors,
stockholders, corporate affiliates, agents and employees from any and
all claims, charges, complaints, demands, actions, causes of action,
suits, rights, debts, sums of money, costs, accounts, reckonings,
covenants, contracts, agreements, promises, doings, omissions,
damages, executions, obligations, liabilities and expenses (including
attorneys' fees and costs), of every kind
<PAGE> 11
-11-
and nature which he ever had or now has against the Company, its
officers, directors, stockholders, corporate affiliates, agents and
employees, including, but not limited to, all claims arising out of
his employment, all employment discrimination claims under Title VII
of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the
Americans With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New
Hampshire Law Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1
ET SEQ. and similar state antidiscrimination laws, damages arising out
of all employment discrimination claims, wrongful discharge claims or
other common law claims and damages, provided, however, that nothing
herein shall release the Company from Executive's Stock Option
Agreements or Restricted Stock Agreements. The Release shall also
contain, at a minimum, the following language:
The Executive acknowledges that he has been given twenty-one
(21) days to consider the terms of this Release and that the
Company advised him to consult with an attorney of his own
choosing prior to signing this Release. The Executive may
revoke this Release for a period of seven (7) days after the
execution of the Release and the Release shall not be
effective or enforceable until the expiration of this seven
(7) day revocation period.
At the same time, the Company shall execute and deliver a Release to the
Executive as follows:
The Company hereby fully, forever, irrevocably and unconditionally
releases, remises and discharges the Executive from any and all claims
which it ever had or now has against the Executive, other than for
intentional harmful acts.
12. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained
by the Executive during the Executive's employment by the Company or any of
its affiliated companies and which shall not be or become public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior
written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions
of this Section 12 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
13. ARBITRATION. Any controversy or claim arising out of this Agreement shall
be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment
upon any award rendered by the arbitrator may be entered in any court of
law having jurisdiction thereof. Arbitration shall take place in Nashua,
New Hampshire at a mutually convenient location.
14. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable
<PAGE> 12
-12-
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
15. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
IF TO THE EXECUTIVE:
John J. Ireland
27 Pine Street
Exeter, NH 03833
IF TO THE COMPANY:
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03064
Attention: President
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may
have hereunder, including, without limitation, the right to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v), shall not
be deemed to be a waiver of such provision or right or any other
provision or right thereof.
<PAGE> 13
-13-
(f) This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof. The Executive
and the Company acknowledge that the employment of the Executive by
the Company is "at will" and, prior to the Effective Date, both the
Executive's employment and this Agreement may be terminated by either
the Company or the Executive at any time. In the event that this
Agreement is terminated by the Company prior to the Effective Date and
the Executive remains employed by the Company, the Executive would be
entitled to the same severance benefits as set forth in Section 7 of
this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
NASHUA CORPORATION EXECUTIVE
By _____________________________________ __________________________________
President and Chief Executive Officer Name: John J. Ireland
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-02-1999
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<COMMON> 6,947
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<SALES> 43,668
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