-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HYWGXnlk8oPy64yxupw/ioTSgUd/0uA/O2WBK5OLaxhsb5ct7ZeW8SAG42mIgSPV O5M4aHX3hGW3q3xRSMQ5Pw== 0000950135-01-001091.txt : 20010402 0000950135-01-001091.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950135-01-001091 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASHUA CORP CENTRAL INDEX KEY: 0000069680 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 020170100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-05492 FILM NUMBER: 1588048 BUSINESS ADDRESS: STREET 1: SECOND FL STREET 2: 11 TRAFALGAR SQ CITY: NASHUA STATE: NH ZIP: 03063 BUSINESS PHONE: 6038802323 MAIL ADDRESS: STREET 1: SECOND FL STREET 2: 11 TRAFALGAR SQ CITY: NASHUA STATE: NH ZIP: 03063 10-K405 1 b38195nce10-k405.txt NASHUA CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 2000 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 or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 11 TRAFALGAR SQUARE, SECOND FLOOR NASHUA, NEW HAMPSHIRE 03063 (Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (603) 880-2323 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - ----------------------------- ----------------------- Common Stock, par value $1.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- -----
Continued 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.(X) The aggregate market value of voting stock held by non-affiliates of the registrant as of March 26, 2001 was approximately $25,229,618. The number of shares outstanding of the registrant's Common Stock as of March 26, 2001 was 5,833,783 (excluding 1,023,818 shares held in treasury). DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive Proxy Statement for the Annual Meeting of Stockholders of the registrant to be held on May 8, 2001, are incorporated by reference into Part III of this Form 10-K. -2- 3 PART I ITEM 1. BUSINESS GENERAL Nashua Corporation ("Nashua") manufactures and markets a wide variety of specialty imaging products and services to industrial and commercial customers to meet various print application needs. Nashua was incorporated in Massachusetts in 1904 and changed its state of incorporation to Delaware in 1957. The Company has its principal executive offices at 11 Trafalgar Square, Nashua, New Hampshire 03063 (Telephone: (603) 880-2323) and its Internet address is www.nashua.com. References to the "Company" or to "Nashua" refer to Nashua Corporation and its consolidated subsidiaries, unless the context otherwise requires. On April 17, 2000, the Company completed the acquisition of all outstanding shares of stock of Rittenhouse Paper Company, an Illinois corporation ("Rittenhouse"), pursuant to a Stock Purchase Agreement, dated March 21, 2000, by and among the Company, Rittenhouse and the stockholders of Rittenhouse. Rittenhouse manufactures and markets a wide range of paper media, pressure-sensitive labels and imaging supplies. In paper media, Rittenhouse is primarily a converter of large rolls of paper into products such as cut/roll, bond paper, thermal, point-of-sale, ATM and wide format papers. In labels, it manufactures a wide assortment of pressure-sensitive labels and entertainment tickets for both commercial and consumer use. In imaging supplies, it manufactures and markets ribbons for use in imaging devices. Due to the continued decline in sales and profitability of the Company's remanufactured laser cartridge operation, the Company discontinued this product line in the first quarter of 2000. The Company recorded unusual charges totaling $1.0 million for the year primarily comprised of severance and other exit costs related to the discontinuance of this product line. The operations of the remanufactured laser cartridge product line are included in the Imaging Supplies segment. OPERATING SEGMENTS Beginning with the second quarter of 2000, the Company realigned operating segments for financial reporting purposes due to the acquisition of Rittenhouse. The Company now has three segments: (1) Imaging Supplies, (2) Specialty Paper Products and (3) Label Products. The Imaging Supplies segment includes remanufactured laser cartridge and toner and developer products and, effective in the first quarter of 2000, the Company transferred responsibility for the cut-sheet paper product line to the Specialty Paper Products segment. The Label Products segment, formerly included in the Specialty Coated and Label Products segment, includes pressure-sensitive laminated paper, entertainment tickets, stickers, retail shelf tags and pressure-sensitive thermosensitive label product lines. The Specialty Paper Products segment, which was also included in the Specialty Coated and Label Products segment, is now reported as a separate segment. The Specialty Paper Products segment's product scope includes thermal papers, bond papers, carbonless paper, specialty printed papers, such as ATM receipts and point-of-sale receipts, wide format papers, dry-gum papers, heat seal papers and ribbons. Historical segment data has been restated to reflect these changes. Consolidated net sales for 2000 from continuing operations were $253.1 million. Set forth below is a brief summary of each of our three operating segments, together with a description of their more significant products, competitors and operations. Additional financial information regarding our business segments is contained in the Note entitled "Information About Operations" in the Company's Consolidated Financial Statements included in Item 8 of Part II of this Form 10-K. Imaging Supplies Segment Nashua's Imaging Supplies segment manufactures and sells a variety of consumable products used in the process of producing hard copy images. Nashua's imaging supplies product line is comprised primarily of high quality, competitively priced toners and developers. -3- 4 Nashua markets its products worldwide under both the Nashua brand and major private labels. Products are sold through a variety of distribution channels. Sales of toner and developer to government agencies, machine service providers, and print-for-pay type customers are made through both direct and agent sales forces. Nashua also aligns itself with strategic partners who market toner and developer in complementary market segments. Nashua's major competitors for toners and developers include Xerox Corporation and Ricoh Corporation, each of which sells supplies for use in machines manufactured by it. The Company also competes with other smaller independent manufacturers of toner and developer products. This market segment is competitive, with more sophisticated toner formulas and shorter copier machine life cycles requiring timely product development and marketing. Strong OEM patent protection on formulations and dispense mechanisms requires Nashua to closely monitor new product development efforts in order to avoid patent infringement. The Imaging Supplies segment depends on outside suppliers for most of the raw materials used to produce its products. The segment purchases materials from several suppliers and believes that adequate quantities of supplies are available. There are no assurances that the Company's operating results would not be adversely affected, however, by future increases in raw materials prices. Specialty Paper Products Segment Nashua's Specialty Paper Products segment manufactures and sells: (1) thermal papers to printers and converters; (2) non-thermal papers; bond papers; specialty printed papers, such as ATM receipts and point-of-sale receipts; wide format papers; heat seal papers; Davac(R) dry-gum papers; carbonless papers; and ribbons primarily to merchants, resellers, converters and end-users, and (3) thermosensitive label products to fine paper merchants, converters and end-users. Thermal papers develop an image upon contact with either a heated stylus or a thermal print head. Thermal papers are used in point of sale printers, airline and package identification systems, gaming and ticketing systems, medical and industrial recording charts and for conversion to labels. Another application for these papers is for use in thermal facsimile machines. Competitors include major integrated companies such as Appleton Papers, Inc., Kanzaki Paper Mfg. Co., Ltd., Jujo Paper Co., Ltd. and Ricoh Corporation, as well as several other manufacturers in the United States, Japan and Europe. Davac(R) dry-gummed paper is a paper which is coated with a moisture-activated adhesive. Davac(R) dry-gummed paper is sold primarily to fine paper merchants and business forms manufacturers. It is ultimately converted into various types of labels and stamps. Major competitors in the dry-gummed label industry include Brown-Bridge Company, Ivex Corporation and Spinnaker. The segment's thermosensitive label papers are coated with an adhesive that is activated when heat is applied. These products are usually sold through fine paper merchants who, in turn, resell them to printers who convert the papers into labels for use primarily in the pharmaceutical industry. Thermosensitive label papers are also used in bakery and meat packaging applications. Wide format ink jet paper is a premium quality heavy weight paper untreated or treated with either resin or non resin coatings which is sold to merchants and resellers for use in graphic applications, signs, engineering drawings, posters and presentations. Major competitors in the wide format ink jet industry include Rexam PLC and Azon Corporation. Carbonless paper is a coated paper used in the production of multi-part business forms which produce multiple copies without carbon paper. The product is sold in sheet form through fine paper merchants and in roll form directly to the printing industry, where it is converted into multi-part business forms. Within the carbonless paper market, Nashua generally competes with large integrated manufacturers including Appleton Papers, Inc., The Mead Corporation and Imation Corporation. -4- 5 The Specialty Paper Products segment depends on outside suppliers for most of the raw materials used to produce carbonless and thermal papers, including paper to be converted and chemicals to be used in producing the various coatings which Nashua applies. The Company purchases materials from several suppliers and believes that adequate quantities of supplies are available. There are no assurances that the Company's operating results would not be adversely affected by future increases in the cost of raw materials or sourced products. Label Products Segment Nashua's Label Products segment manufactures and sells: (1) pressure-sensitive labels to merchants and end-users, (2) pressure-sensitive laminated papers to label converters and (3) entertainment tickets, stickers and retail shelf tags to merchants and end-users. Significant uses for pressure-sensitive labels include grocery scale marking, inventory control, automatic identification, and address labels. The Label Products segment is a major supplier of labels to the supermarket industry and of labels used in the distribution and manufacture of a wide variety of other products. The label industry is price-sensitive and competitive and includes competitors such as Moore Corporation Ltd., Hobart Corporation, NCR and UARCO, Inc. as well as numerous small regional converters. Pressure-sensitive laminated paper is sold to label converters and to end-user in-house converting departments primarily for the supermarket industry. Laminated paper is a combination of two papers and an adhesive. One paper is a carrier strip called a liner upon which is laminated a face sheet. A variety of adhesives bind the face sheet and the liner. Printing is done directly on the face sheet using impact printing devices, thermal activism or a variety of ink deposition techniques. Major competitors in the pressure-sensitive laminated paper industry include: Avery Dennison Corporation, Spinnaker Industries Inc., Green Bay Packaging, Inc., Ricoh Corporation and Kanzaki Paper Mfg. Co. The Label Products segment depends on outside suppliers for most of the raw material used to produce labels and label papers, including paper to be converted and chemicals to be used in producing the various coatings which Nashua applies. The Company purchases materials from several suppliers and believes that adequate quantities of supplies are available. There are no assurances that the Company's operating results would not be adversely affected by future increases in the cost of raw materials or sourced products. DEVELOPMENT OF NEW PRODUCTS The Company's success depends in part on its ability to continue developing and marketing new products. There can be no assurance that the Company will be able to develop and introduce new products in a timely manner or that such products, if developed, will achieve market acceptance. In addition, the Company's growth is dependent on its ability to penetrate new markets and sell through alternative channels of distribution. There can be no assurance that the markets being served by the Company will continue to grow; that existing and new products will meet the requirements of such markets; that the Company's products will achieve customer acceptance in such markets; that competitors will not force prices to an unacceptably low level or take market share from the Company; or that the Company can achieve or maintain profits in its markets. INTELLECTUAL PROPERTY The Company's ability to compete may be affected by its ability to protect its proprietary information, as well as its ability to design products outside the scope of its competitors' intellectual property rights. The Company holds a limited number of U.S. and foreign patents and there can be no assurance that its patents will provide meaningful protection, nor can there be any assurance that third parties will not assert infringement claims against the Company or its customers in the future. If a third party does assert an infringement claim, the Company may be required to expend significant resources to develop non-infringing alternatives or to obtain licenses in respect of the matters that are subject to the litigation. There can be no assurance that the Company would be successful in such development or that any such licenses would be available on commercially acceptable terms, if at all. In addition, such litigation could be lengthy or costly and could have an adverse material effect on the Company's financial condition or results of operations regardless of the outcome of such litigation. -5- 6 MANUFACTURING OPERATIONS The Company operates manufacturing facilities in Nashua, New Hampshire; Merrimack, New Hampshire; Omaha, Nebraska; Jefferson City, Tennessee; Morristown, Tennessee; Vernon, California; and Hewitt, Texas. All of these sites are unionized, except for the Tennessee and Texas locations. More information regarding the operating segments and principal products produced at each location can be found below in Item 2 of Part I of this Form 10-K. While we believe that labor wage rates and worker productivity at each of these manufacturing locations is competitive, there can be no assurance that future operating results will not be adversely affected by changes in labor wage rates or productivity. RESEARCH AND DEVELOPMENT Nashua's research and development efforts have been instrumental in the development of many of the products it markets. The research efforts of each of the Company's operating units are directed primarily toward developing new products and processes and improving product performance, often in collaboration with customers. The Company's research and development efforts support each operating unit's patent and product development work focusing primarily on new thermal coating applications in respect to the Specialty Paper Products segment and new toner and developer formulations and toner cartridge design in respect to the Imaging Supplies segment. Nashua's research and development expenditures were $4.2 million in 2000, $5.1 million in 1999 and $5.9 million in 1998. ENVIRONMENTAL MATTERS The Company is subject to various environmental laws and regulations. These include the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act and other state and local counterparts of these statutes. The Company believes that its operations have been and continue to be operating in compliance in all material respects with applicable environmental laws and regulations. Nevertheless, in the past and potentially in the future, the Company has and could receive notices of alleged environmental violations. Violation of these laws and regulations could result in substantial fines and penalties. The Company has endeavored to promptly remedy any such violations upon notification. For the past five years, the Company has spent approximately $1.0 million per year for compliance with pertinent environmental laws and regulations. In addition, for those sites which the Company has received notification of the need to remediate, the Company has assessed its liability and has established a reserve for estimated costs associated therewith. At December 31, 2000 the reserves for potential environmental liabilities were $1.6 million for continuing operations and $.3 million for discontinued operations. Liability of "potentially responsible parties" (PRP) under CERCLA and RCRA, however, is joint and several, and actual remediation expenses at sites where the Company is a PRP may exceed current estimates. The Company believes that, based on the facts currently known to the Company and the environmental reserve recorded, its remediation expense with respect to those sites and on-going costs of compliance are not likely to have a material adverse effect on its consolidated financial position or results of operations. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the executive officers of Nashua as of March 15, 2001:
NAME AGE POSITION - ---- --- -------- Andrew B. Albert 55 Chairman, President and Chief Executive Officer John M. Kucharski 65 Vice Chairman John L. Patenaude 51 Vice President-Finance, Chief Financial Officer and Treasurer John J. Ireland 49 Vice President/President, Specialty Paper Products Division Joseph R. Matson 53 Vice President, Corporate Controller Robert S. Amrein 46 Vice President, General Counsel and Secretary Donna J. DiGiovine 39 Vice President/President, Toner and Developer Products Division Thomas R. Pagel 44 Vice President/President, Label Products Division
-6- 7 Mr. Albert has been Chairman of the Board, President and Chief Executive Officer of Nashua since December 2000. He became President and Chief Operating Officer in April 2000 when Nashua closed its acquisition of Rittenhouse Paper Company. Prior to joining Nashua, he was Chairman and Chief Executive Officer of Rittenhouse Paper Company since 1983. Mr. Kucharski has served as Vice Chairman since December 2000. He has been a member of the Company's Board of Directors since 1988 and is the former Chairman and Chief Executive Officer of EG&G, Inc. (currently Perkin Elmer, Inc.). Mr. Patenaude has been the Vice President-Finance, Chief Financial Officer and Treasurer of Nashua since May 1998. From July 1996 to May 1998, he was Assistant Treasurer of the Company. Mr. Ireland has been a Vice President of Nashua since November 1995, President of the Specialty Paper Products Division since April 1998 and its General Manager since April 1994. Mr. Matson has been a Vice President of Nashua since May 1998 and its Corporate Controller since July 1988. Mr. Amrein has been Vice President, General Counsel and Secretary of Nashua since December 2000. Prior to joining Nashua he served as Chief Legal Counsel for M/A-Com, Inc. from 1997 to 2000 and as General Counsel and Corporate Secretary of Schneider Automation from 1988 to 1997. Ms. DiGiovine has been a Vice President of Nashua and President of the Toner and Developer Products Division since December 1999 and its General Manager since April 1999. She was Director of Marketing for the Imaging Supplies segment from September 1998 to April 1999 and its Manager of Consumer Product Marketing from July 1996 to September 1998. Mr. Pagel has been Vice President of Nashua and President of the Label Products Division since February 2001. He became President of Nashua's Tennessee Label operation in April 2000 when Nashua closed its acquisition of Rittenhouse Paper Company. Prior to joining Nashua, he was President and Chief Operating Officer of Rittenhouse Paper Company's Label Media Group. Executive officers are generally elected to their offices each year by the Board of Directors shortly after the Annual Meeting of Shareholders. EMPLOYEES Nashua and its subsidiaries had approximately 1,140 full-time employees at January 31, 2001. Approximately 476 employees of the Company are members of one of several unions, principally the Paper, Allied-Industrial, Chemical and Energy International Union. We believe our employee relations are good. There are three agreements with the Paper, Allied-Industrial, Chemical and Energy International Union covering approximately one-half of the Company's hourly employees. These agreements have initial durations of two to four years, which expire on March 31, 2002 and March 30, 2003, respectively. FOREIGN OPERATIONS The Company sold its Photofinishing segment on April 9, 1998, and as a result disposed of significant foreign operations as described more fully in the Note to the Company's Consolidated Financial Statements entitled "Business Changes" which is included in Item 8 of Part II of this Form 10-K. Accordingly, information regarding long-lived assets by geographic region relating to the Photofinishing segment is reported as discontinued operations in the Note to the Company's Financial Statements entitled "Information About Operations" which is included in Item 8 of Part II of this Form 10-K. FORWARD-LOOKING AND CAUTIONARY STATEMENTS Information provided by the Company in this Form 10-K may contain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. The Company may also make forward-looking statements in -7- 8 other reports filed with the Securities and Exchange Commission, in materials delivered to stockholders and in press releases. In addition, the Company's representatives may from time to time make oral forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that is not directly related to historical or current fact. Words such as "anticipates," "believes," "expects," "estimates," "intends," "plans," "projects," "can," "may" and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the Company's future capital needs, stock market conditions, price of the Company's stock, 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 improve profitability, the settlement of various tax issues, the possibility of a final award of material damages in the Cerion securities litigation and other risks detailed in this Form 10-K and the Company's other filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information contained in this Form 10-K or revise any forward-looking statement. ITEM 2. PROPERTIES Nashua's manufacturing facilities are located in the United States. Nashua considers its properties to be in good operating condition and suitable for the production of its products. Nashua relocated its corporate offices to a leased facility located in Nashua, NH during the second quarter of 2000. The lease for our corporate offices expires on May 30, 2005. Nashua relocated the administrative offices and certain manufacturing departments of the Imaging Supplies segment to a facility currently owned by the Company in Merrimack, NH. A portion of the manufacturing of the Imaging Supplies segment is still located at Front Street in Nashua, NH. The Company acquired several facilities as part of its acquisition of Rittenhouse in April 2000. The principal manufacturing facilities of the Company are listed by industry segment, location and principal products produced. Except as otherwise noted, each of these facilities is owned by the Company. PRINCIPAL PROPERTIES
TOTAL SQUARE NATURE OF LOCATION FOOTAGE PRODUCTS PRODUCED - -------- ------- ----------------- CORPORATE Nashua, New Hampshire (leased) 18,000 none (corporate offices) SPECIALTY PAPER PRODUCTS SEGMENT Merrimack, New Hampshire 475,000(1) coated paper products Jefferson City, Tennessee 145,000(2) converted paper products Morristown, Tennessee (leased) 35,000(2) converted paper products and warehousing Vernon, California (leased) 61,000(2) converted paper products Hewitt, Texas (leased) 20,000(2) converted paper products Park Ridge, Illinois (leased) 17,000(2) none (administrative offices) LABEL PRODUCTS SEGMENT Omaha, Nebraska 170,000 label products Jefferson City, Tennessee 60,000(2) label products IMAGING SUPPLIES SEGMENT Nashua, New Hampshire 209,000 dry toner and developer products Merrimack, New Hampshire 112,000 dry toner and developer products
(1) The Specialty Coated Products Division utilizes approximately 315,000 square feet and the remaining space is leased to third parties. (2) Former Rittenhouse facilities. -8- 9 ITEM 3. LEGAL PROCEEDINGS In August and September 1996, two individual plaintiffs initiated lawsuits in the Circuit Court of Cook County, Illinois against the Company, Cerion, certain directors and officers of Cerion, and the Company's underwriter, on behalf of classes consisting of all persons who purchased the common stock of Cerion between May 24, 1996 and July 9, 1996. These two complaints were consolidated. In March 1997, the same individual plaintiffs joined by a third plaintiff filed a Consolidated Amended Class Action Complaint (the "Consolidated Complaint"). The Consolidated Complaint alleged that, in connection with Cerion's initial public offering, the defendants issued materially false and misleading statements and omitted the disclosure of material facts regarding, in particular, certain significant customer relationships. In October 1997, the Circuit Court on motion by the defendants, dismissed the Consolidated Complaint. The plaintiffs filed a Second Amended Consolidated Complaint alleging substantially similar claims as the Consolidated Complaint seeking damages and injunctive relief. On May 6, 1998, the Circuit Court, on motion by the defendants, dismissed with prejudice the Second Amended Consolidated Complaint. The plaintiffs filed with the Appellate Court an appeal of the Circuit Court's ruling. On November 19, 1999, the Appellate Court reversed the Circuit Court's ruling dismissing the Second Amended Consolidated Complaint. The Appellate Court ruled that the Second Amended Consolidated Complaint stated a claim and remanded the case to the Circuit Court for further proceedings. On December 27, 1999, the Company filed a Petition for Leave to Appeal from the Appellate Court with the Supreme Court of Illinois. In that Petition, the Company asked the Supreme Court of Illinois to hear the Company's further appeal and determine whether the Circuit Court or the Appellate Court is correct. That Petition was denied and the case was remanded to the Circuit Court for trial. Discovery is in process. The Company believes that the lawsuit is without merit and will continue to defend itself in this matter. The Company is involved in certain environmental matters and has been designated by the Environmental Protection Agency ("EPA") as a potentially responsible party ("PRP") for certain hazardous waste sites. In addition, the Company has been notified by certain state environmental agencies that some of the Company sites not addressed by the EPA require remedial action. These sites are in various stages of investigation and remediation. Due to the unique physical characteristics of each site, the technology employed, the extended timeframes of each remediation, the interpretation of applicable laws and regulations and the financial viability of other potential participants, the ultimate cost to the Company of remediation for each site is difficult to estimate. At December 31, 2000, based on the facts currently known and the Company's prior experience with these matters, the Company has concluded that there is at least a reasonable possibility that site assessment, remediation and monitoring costs will be incurred by the Company with respect to those sites which can be reasonably estimated in the aggregate range of $1.4 million to $1.6 million for certain of the Company's continuing operations, and a range of $.1 million to $.4 million for certain of the Company's discontinued operations. These ranges are based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRPs are unable to bear their allocated share. At December 31, 2000, the Company's accrual balances were $1.6 million for continuing operations and $.3 million for discontinued operations, which represent, in management's view, the most likely amounts within the ranges stated above. Based on information currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the costs apportioned to them. Management believes that, based on its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites is not likely to have a material adverse effect on its consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCK- HOLDER MATTERS The Notes to the Company's Consolidated Financial Statements entitled "Shareholder's Equity", "Quarterly Operating Results" and "Common Stock Information," which are included in Item 8. of Part II of this Form 10-K include information on the market for the registrant's common stock and related stockholder matters. -9- 10 ITEM 6. SELECTED FINANCIAL DATA NASHUA CORPORATION AND SUBSIDIARIES FIVE YEAR FINANCIAL REVIEW
(In thousands, except per share data, number of employees and percentages) 2000 1999 1998 1997 1996 ------------------------------------ ---- ---- ---- ---- ---- Operations(1) Net sales $ 253,122 $ 170,844 $ 167,831 $ 173,202 $ 199,039 Gross margin percentage 20.1% 24.0% 24.3% 23.1% 20.6% Selling, distribution and administrative expenses as a percentage of sales 19.5% 20.3% 20.3% 22.3% 21.7% Income (loss) before interest and income taxes as a percentage of sales(2) 5.9% 2.1% (6.9)% (5.9)% (4.5)% Income (loss) before income taxes as a percentage of sales(2) 5.1% 1.7% (7.1)% (5.9)% (5.8)% Income (loss) as a percentage of sales(2) 2.1% (0.3)% (4.3)% (3.6)% (3.7)% Effective tax rate 58.3% 114.6% (39.5)% (39.9)% (36.4)% Income (loss) before income taxes(2) $ 12,914 $ 2,883 $ (11,950) $ (10,300) $ (11,464) Income (loss) after income taxes(2) $ 5,386 $ (420) $ (7,229) $ (6,190) $ (7,290) Income (loss) from discontinued operations, net of tax -- $ (4,001) $ (6,687) $ (2,632) $ 460 Gain on public stock offering, disposition of stock, and disposal of discontinued operation, net of taxes -- -- $ 1,052 -- $ 32,281 Extraordinary loss, net of taxes -- -- -- -- $ (1,257) Net income (loss) $ 5,386 $ (4,421) $ (12,864) $ (8,822) $ 24,194 Basic and diluted earnings (loss) per common share: Continuing operations(2) $ .95 $ (0.07) $ (1.15) $ (.97) $ (1.14) Discontinued operations -- $ (0.70) $ (1.06) $ (.41) $ .07 Gain on public stock offering, disposition of stock, and disposal of discontinued operation, net of taxes -- -- $ .17 -- $ 5.06 Extraordinary loss, net of taxes -- -- -- -- $ (.20) Net income (loss) $ .95 $ (0.77) $ (2.04) $ (1.38) $ 3.79 Financial Position(1) Working capital $ 22,531 $ 35,562 $ 45,874 $ 18,892 $ 21,173 Total assets $ 170,471 $ 130,445 $ 134,095 $ 146,762 $ 176,689 Long-term debt $ 35,905 $ 511 $ 1,064 $ 3,489 $ 2,044 Total debt $ 45,711 $ 1,022 $ 1,575 $ 4,000 $ 2,855 Total capital employed $ 118,048 $ 67,848 $ 76,802 $ 99,022 $ 104,772 Total debt as a percentage of capital employed 38.7% 1.5% 2.1% 4.0% 2.7% Shareholders' equity $ 72,337 $ 66,826 $ 75,227 $ 95,022 $ 101,917 Shareholders' equity per common share $ 12.79 $ 11.86 $ 12.59 $ 14.76 $ 15.90 Other Selected Data(1) Investment in plant and equipment $ 9,625 $ 7,855 $ 6,702 $ 4,418 $ 5,877 Depreciation and amortization $ 9,304 $ 6,381 $ 6,846 $ 7,554 $ 9,045 Dividends per common share $ .01 -- -- -- -- Return on average shareholders' equity 7.7% (6.2)% (15.1)% (9.0)% 27.4% Common stock price range: High $ 10.31 $ 15.44 $ 17.50 $ 14.75 $ 19.63 Low $ 3.56 $ 6.56 $ 11.56 $ 9.50 $ 9.13 Year-end closing price $ 4.44 $ 7.50 $ 13.31 $ 11.63 $ 12.00 Number of employees from continuing operations 1,140 729 725 768 874 Number of employees from discontinued operations -- -- -- 1,273 1,524 Average common shares outstanding 5,649 5,718 6,320 6,385 6,376
(1) See "Business Changes" Note to Consolidated Financial Statements for a description of certain matters relevant to this data, including the acquisition of Rittenhouse Paper Company in April 2000. (2) Income (loss) is from continuing operations and includes restructuring and other unusual charges/(income) of $1.0 million and pension settlement income of $(18.6) million for 2000 (a combined 7.0% of sales), $(1.3) million for 1999 (.8% of sales), $13.8 million for 1998 (8.2% of sales), $4.3 million for 1997 (2.5% of sales), and $(1.7) million for 1996 (0.9% of sales). -10- 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CORPORATE MATTERS On April 17, 2000, the Company completed the acquisition of all outstanding shares of stock of Rittenhouse Paper Company, an Illinois corporation ("Rittenhouse"), pursuant to a Stock Purchase Agreement, dated March 21, 2000, by and among the Company, Rittenhouse and the stockholders of Rittenhouse. Rittenhouse manufactures and markets a wide range of paper media, pressure-sensitive labels and imaging supplies. In paper, Rittenhouse is primarily a converter of large rolls of paper into products such as cut/roll, bond paper, thermal, point-of-sale, ATM and wide format papers. In labels, it manufactures a wide assortment of pressure-sensitive and entertainment tickets for both commercial and consumer use. In imaging, it manufactures and markets ribbons for use in imaging devices. Due to the continued decline in sales and profitability of the Company's remanufactured laser cartridge operation, the Company discontinued this product line in the first quarter of 2000. The Company recorded unusual charges totaling $1.0 million for the year primarily comprised of severance and other exit costs related to the discontinuance of this product line. The operations of the remanufactured laser cartridge business are included in the Imaging Supplies segment. In the first quarter of 2000, the Company recorded a pretax gain of $18.6 million associated with the purchase of non-participating annuity contracts from Principal Life Insurance Company to settle the Company's pension benefit obligation with respect to the retired salaried and hourly employees covered under its pension plans and receiving pension benefits as of December 1, 1999. On April 9, 1998, the Company completed the sale of its Photofinishing segment. The Company received net proceeds of $49.9 million for the net assets of the Photofinishing segment and, after recording taxes of $7.9 million, recorded a gain of $1.1 million. The Company owns a 37.1 percent interest in the Cerion Technologies Liquidating Trust, a trust established pursuant to the liquidation of Cerion Technologies Inc. ("Cerion"), formerly a publicly held company. On September 15, 1998, Cerion announced its decision to cease operations and liquidate its assets. Accordingly, the Company no longer accounts for its investment in Cerion under the equity method of accounting and has accounted for its interest in Cerion based on its expected net realizable value on an after tax basis, since the third quarter of 1998. At December 31, 2000, 1999 and 1998, the Company valued its investment in Cerion at $.8 million. For the year ended December 31, 1998, the Company recognized a $4.5 million charge, net of $2.2 million in taxes, of which a portion related to Nashua's share of Cerion losses and the remainder related to the reduction in the Company's investment in Cerion to its net realizable value, net of taxes. Results of operations for Cerion and the Photofinishing segment are reported as discontinued operations for all periods presented in the accompanying consolidated financial statements. RESULTS OF CONTINUING OPERATIONS - 2000 COMPARED TO 1999 Net sales improved to $253.1 million, a 48.2 percent increase over 1999 due to the Rittenhouse acquisition. Excluding Rittenhouse, sales declined 9.6 percent to $154.4 million, primarily due to the discontinuance of the remanufactured laser cartridge product line and a decrease in toner sales within the Imaging Supplies segment. Gross margin decreased to 20.1 percent in 2000 from 24.0 percent in 1999. Excluding Rittenhouse, gross margin declined to 20.6 percent for 2000. The decline was primarily attributable to margin declines in the Label Products and Imaging Supplies segments. The Company recorded net income from continuing operations of $5.4 million in 2000, compared to a net loss from continuing operations of $.4 million in 1999. The 2000 results included pension settlement pretax income of $18.6 million and net restructuring and unusual charges of $1.0 million. The 1999 results included net restructuring and unusual pretax income of $1.3 million. The Company's pretax income, before restructuring and other unusual charges and pension settlement income, declined $6.3 million from income of $1.6 million in 1999 to a loss of $4.7 million in 2000. The $6.3 million decrease in 2000 resulted from an increase in profitability of $2.0 million in the operating -11- 12 segments offset by an increase of $8.3 million in Corporate expenses. The $2.0 million improvement in the operating segments resulted from increased profitability in the Specialty Paper Products segment of $4.9 million and in the Company's Projection System's business of $1.2 million, partially offset by profitability declines of $2.6 million in the Imaging Supplies segment and $1.5 million in the Label segment. The increase in the profitability of the Projection System's business was related to the sale of technology. The Company expects to realize $.5 million of pretax income from the sale of technology in 2001. The increase in Corporate expenses was driven primarily by the business acquisition, including increased net interest of $2.7 million, amortization of goodwill and deferred financing costs of $1.3 million, additional corporate overhead expenses of $1.7 million and integration costs of approximately $1.0 million. Corporate Administrative expenses were also impacted by an increase in proxy related costs. Corporate overhead expenses, integration costs and proxy solicitation fees are expected to decline in 2001. Restructuring and other unusual charges for 2000 of $1.0 million consisted primarily of $1.0 million of exit costs associated with the discontinuance of the laser cartridge product line, $.5 million from a 15 percent workforce reduction in the Imaging Supplies segment and $.5 million of workforce reductions resulting from acquisition synergies, partially offset by unusual income of $1.0 million resulting from the reversal of a loss accrual relating to the settlement of the Ricoh Company, Ltd., Ricoh Electronics, Inc., and Ricoh Corporation (collectively "Ricoh") patent infringement lawsuit against the Company. Details of the restructuring reserves related to continuing operations and activity recorded during 2000 were as follows:
Reserve Reserve Balance Current Current Balance Dec. 31, Year Year Dec. 31, (In thousands) 1999 Provision Utilization 2000 - -------------------------------------------------------------------------------------------------------------------------------- 2000 Activity: Provisions for severance related to workforce reductions $123 $1,445 $ (854) $714 Provisions for assets to be sold or discarded - 216 (216) - Other 86 184 (270) - --------------------------------------------------------- Total $209 $1,845 $(1,340) $714 ========================================================
The 2000 provision for workforce reductions included amounts payable to 122 employees. The restructuring activities provided for in the balance at December 31, 1999 were completed during 2000 and the amounts charged against the reserve did not change materially from the reserve balance of $.2 million. Selling and distribution expenses increased 27.5 percent from the prior year due to the acquisition of Rittenhouse. Excluding Rittenhouse, these expenses declined 16.1 percent resulting from sales declines in the Imaging Supplies segment. Administrative expenses increased 65.2 percent from the prior year primarily due to the acquisition of Rittenhouse. Research and development expenses decreased by 16.4 percent from the prior year primarily due to a reduction in spending in the Imaging Supplies segment and a reduction in Projection Systems development expenses. Interest expense increased $2.1 million from 1999 due to the impact of borrowings incurred to finance the Rittenhouse acquisition as described in the "Liquidity, Capital Resources and Financial Condition" section of this report. Interest income decreased by $.6 million due to the decreased cash balance resulting from the Rittenhouse acquisition. Management expects interest expense to increase in 2001 due to a full year of borrowings associated with the Rittenhouse acquisition and increased borrowings in December of 2000 related to the settlement of the Ricoh patent infringement lawsuit against the Company. Interest income is also expected to decline due to the decreased cash balance at December 31, 2000. The effective tax rate for continuing operations was a provision of 58.3 percent compared to a provision of 114.6 percent in 1999. The 2000 effective tax rate is higher than the U.S. federal statutory rate primarily due to non-deductible goodwill and the write-off of a tax asset associated with expired tax losses. -12- 13 Specialty Paper Products Segment Effective during the first quarter of 2000, responsibility for the cut-sheet paper product line was transferred from the Imaging Supplies segment to the Specialty Paper Products segment. Segment information for the prior period has been restated accordingly. The Specialty Paper Products segment reported a 109.4 percent increase in sales for 2000 as a result of the Rittenhouse acquisition. Excluding Rittenhouse and sales for the fax paper product line which was discontinued in the third quarter of 1999, sales increased 3.1 percent due to increased volume in the segment's thermal and carbonless product lines, which more than offset volume declines in its cut-sheet paper product line. Improved customer retention and new product introductions were the primary reasons for the sales improvement. Pretax profit increased $4.9 million to $7.5 million for 2000, as a result of the Rittenhouse acquisition. Excluding Rittenhouse pretax profit of $3.3 million, segment pretax profit improved 61.5 percent due to improvements in gross margin, resulting from lower manufacturing costs and higher volume in the segment's thermal product line. Label Products Segment The Label Products segment reported a 33.7 percent increase in sales over 1999 due to the Rittenhouse acquisition. Excluding Rittenhouse, sales for the Label Products segment were unchanged from the prior year. Increased volume in the roll stock and supermarket label product lines, offset decreased volume in the segment's EDP product lines. The segment's pretax income decreased 21.7 percent to $5.4 million compared to $6.9 million in 1999. Excluding Rittenhouse pretax profit of $2.1 million, segment pretax profit declined 52.2 percent from the prior year. This decline was primarily due to a decline in the segment's gross margin and a charge related to an environmental clean-up at the Company's Omaha, Nebraska facility. An unfavorable mix of products sold, increased raw material costs in its roll stock product line and decreased volume in its EDP product lines were the primary reasons for the segment's decline in gross margin. Imaging Supplies Segment The Imaging Supplies segment reported a 32.1 percent decrease in sales from 1999 primarily the result of exiting the remanufactured laser cartridge product line in the first quarter of 2000 and decreased sales of Xerox-compatible toners. Sales for the remanufactured laser cartridge product line were $2.5 million in 2000, a decrease of $7.4 million from the prior year. Sales for the toner and developer product line decreased $5.5 million or 18.0 percent on lower volume of Xerox-compatible toners, resulting primarily from the loss of a major customer. The segment's pretax loss for 2000 increased by $2.6 million to $4.2 million. The increased pretax loss was primarily due to a decline in the segment's gross margin resulting from lower sales volume and increased manufacturing costs associated with underutilized capacity in the toner and developer product line. The Company announced restructuring charges in the fourth quarter of 2000 and the first quarter of 2001 of $.5 million and $.2 million, respectively, relating primarily to workforce reductions. As a result of these workforce reductions and other cost cutting initiatives, management expects to reduce annual operating costs by approximately $2.5 million. RESULTS OF CONTINUING OPERATIONS - 1999 COMPARED TO 1998 Net sales from continuing operations for 1999 were $170.8 million, a 1.8 percent increase compared to 1998. This improvement in sales was primarily due to increased volume in the Specialty Paper Products and Label Products segments which more than offset volume shortfalls in the remanufactured laser cartridge product line of the Imaging Supplies segment. Gross margin decreased to 24.0 percent in 1999 from 24.3 percent in 1998 due primarily to lower average selling prices which more than offset the favorable effect of manufacturing cost reduction programs, improved manufacturing efficiency and improved product mix. The Company recorded a net loss from continuing operations of $.4 million in 1999, compared to a net loss from continuing operations of $7.2 million in 1998. The 1999 results included net restructuring and unusual income of $1.3 million. The 1998 results included net restructuring and unusual charges of $13.8 million. The Company's pretax -13- 14 operating results, before restructuring and other unusual charges, declined from income of $1.9 million in 1998 to income of $1.6 million in 1999 due to lower profitability in the Label Products segment of $.1 million and an increase in Corporate expenses of $1.2 million which more than offset improved profitability in the Imaging Supplies segment of $.7 million and a reduction in Projection Systems development expenses of $.4 million. The restructuring and other unusual income for 1999 of $1.3 million consisted primarily of $1.3 million in income from an insurance settlement related to environmental matters, a gain of $.4 million from the sale of a portion of the Company's Microsharp imaging technology and $.2 million of other miscellaneous gains offset by a provision of $.6 million resulting from the Company's decision to cease its manufacturing of fax papers. Details of the restructuring reserves related to continuing operations and activity recorded during 1999 were as follows:
Reserve Reserve Balance Current Current Balance Dec. 31, Year Year Dec. 31, (In thousands) 1998 Provision Utilization 1999 - -------------------------------------------------------------------------------------------------------------------------------- 1999 Activity: Provisions for severance related to workforce reductions $472 $142 $ (491) $123 Provisions for assets to be sold or discarded - 441 (441) - Other 149 32 (95) 86 -------------------------------------------------------- Total $621 $615 $(1,027) $209 ========================================================
The 1999 provision for workforce reductions included amounts payable to nine employees related to the discontinuance of the fax manufacturing line in the Specialty Paper Products segment. The restructuring activities provided for in the balance at December 31, 1998 were substantially completed in 1999 and the amounts charged against the reserve did not change materially from the reserve balance of $.6 million. Selling and distribution expenses decreased 3.6 percent from the prior year primarily due to the restructuring of the dealer-agent selling channel in the Imaging Supplies segment. Administrative expenses increased 11.6 percent from the prior year primarily due to increased costs related to corporate administration. Research and development expenses decreased by 14.9 percent from the prior year primarily due to a reduction in spending in the Imaging Supplies segment and a reduction in Projection Systems development expenses. Interest expense increased 97.1 percent from 1998 due to the accrual of interest expense related to the Ricoh litigation as described in the "Litigation and Other Matters" section of this report. Interest income decreased by 9.3 percent primarily due to the decreased cash balance resulting from the share repurchase program, which is described in the "Liquidity, Capital Resources and Financial Condition" section of this report. The effective tax rate for continuing operations was a provision of 114.6 percent compared to a benefit of 39.5 percent in 1998. The tax rate was greater than the U.S. federal statutory rate primarily due to charges of $2.1 million related to an increase of $.8 million to the tax valuation allowance for state net operating loss carryforwards and the provision of $1.3 million to provide a reserve for potential liabilities, based on recent developments arising in the fourth quarter of 1999 with respect to open federal and state tax audits. Specialty Paper Products Segment Effective during the first quarter of 2000, responsibility for the cut sheet paper product line was transferred from the Imaging Supplies segment to the Specialty Paper Products segment. Segment information for prior periods has been restated accordingly. The Specialty Paper Products segment reported a 5.4 percent increase in sales in 1999 compared to 1998 as a result of higher volume in its thermal paper and cut-sheet paper product lines. Improved customer retention and new customer initiatives were the primary reasons for the volume improvements. The segment -14- 15 had declining sales in the fax paper, heat seal and dry gum product lines in 1999. During the year, two of Nashua's significant fax customers were acquired by third parties. Nashua was unable to retain the related fax business after the acquisitions. In turn, during the third quarter of 1999, Nashua made the decision to cease manufacturing fax papers. The dry gum and heat seal sales declines were primarily due to lower volume. The segment's pretax income was unchanged from the prior year. Sales increases were offset by an unfavorable product mix. Label Products Segment The Label Products segment reported an 8.3 percent increase in sales in 1999 compared to 1998 as a result of higher volume in converted label products. Improved customer retention and new customer initiatives, primarily in the supermarket thermal product line, were the primary reasons for the sales improvement. The segment's pretax income decreased 1.4 percent compared to 1998, primarily due to the impact of an increase in the reserves for certain environmental exposures and the future collectibility of a large customer receivable. Imaging Supplies Segment The Imaging Supplies segment reported a 7.2 percent decrease in sales from 1998 to 1999 primarily due to a reduction in volume in the remanufactured laser cartridge product line and selling price reductions in the toner and developer product lines. The remanufactured laser cartridge sales decline was primarily volume driven due to the loss of two significant customers. Sales of remanufactured laser cartridges declined 13.7 percent in 1999 when compared to 1998 which contributed to a pretax loss for this product line of approximately $2.4 million in 1999 as compared to a pretax profit of $.4 million in 1998. As a result of the declining operating performance of the remanufactured laser cartridge business, on February 8, 2000, Nashua announced that it would discontinue the manufacture of this product line. The segment's pretax loss in 1999 improved 30.4 percent over 1998 primarily due to lower selling and administrative expenses related to the restructuring of the dealer-agent selling channel in the toner and developer product lines. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Excluding the changes in assets and liabilities resulting from the acquisition of Rittenhouse, cash used in operations totaled $1.1 million for the year ended December 31, 2000, a decrease of $13.0 million over cash flows provided by operations in 1999 of $11.9 million. This decline was primarily due to the settlement of the Ricoh patent infringement lawsuit against the Company during the fourth quarter of 2000. The Company paid $15.1 million of the $15.8 million settlement in December of 2000, of which $5.0 million was funded by restricted cash. The remaining $.7 million was paid in 2001. Operating cash flow generated from decreases in accounts receivable and inventory, partially offset by decreases in accounts payable, resulted primarily from the discontinuance of the remanufactured laser cartridge product line and a decrease in toner sales within the Imaging Supplies segment. Working capital decreased $13.0 million to $22.5 million at December 31, 2000. Cash and cash equivalents and restricted cash decreases and accounts payable and short-term debt increases, more than offset a decrease in accruals and increases in accounts receivable, inventory and taxes receivable. The combined decrease in cash and cash equivalents and restricted cash of $29.0 million was primarily due to the Rittenhouse acquisition and the settlement of the Ricoh patent infringement lawsuit against the Company. The decrease in accruals was also related to the settlement of the Ricoh patent infringement lawsuit. Taxes receivable includes $2.9 million relating to the Company's decision to forego a tax election and to treat the acquisition of Rittenhouse as a stock purchase versus an asset purchase for tax purposes, a $1.9 million U.K. tax refund received in February of 2001 and $5.9 million consisting primarily of tax refunds generated from the settlement of the Ricoh patent infringement lawsuit against the Company. Net cash used in investing activities consisted primarily of the acquisition of Rittenhouse, net of cash acquired, totaling $60.3 million and capital expenditures of $9.6 million, offset by $1.9 million in proceeds from the sale of certain real estate located in Nashua, N.H. The Company used $25.3 million, net of cash acquired of $1.5 million, during 2000 for the acquisition of Rittenhouse and related expenses, as detailed in the "Business Changes" Note to the Consolidated Financial Statements. The capital expenditures reflect purchases of machinery and equipment in all segments and building improvements in the Imaging Supplies segment. -15- 16 Net cash provided by financing activities of $44.6 million consisted primarily of $35.0 million in borrowings used to fund the Rittenhouse acquisition and borrowings used to finance the settlement of the Ricoh patent infringement lawsuit against the Company. During April 2000, the Company entered into a new financing agreement with Fleet Bank - NH and LaSalle Bank, NA as detailed in the "Indebtedness" Note to the Consolidated Financial Statements. The Loan Agreement requires the Company to maintain certain financial covenants such as Total Funded Debt to earnings before interest, income taxes, depreciation and amortization and a Fixed Charge Coverage Ratio. The Company was not in compliance with the above quarterly financial covenants and received a waiver from the Banks for the quarters ended September 29, 2000 and December 31, 2000. The Company and its lender established more favorable covenants for the Company for 2001 and made certain other changes to the financing agreement as described more fully in the "Indebtedness" Note to the Consolidated Financial Statements. The aggregate amounts of maturities on long-term debt for each of the next five years are as follows: 2001 - $9.8 million; 2002 - $28.2 million; 2003 - $3.1 million; 2004 - $3.1 million; and 2005 - $1.5 million. The Company expects to fund 2001 maturities using the proceeds from taxes receivable. Management believes that current cash and cash equivalents, cash flows from operations and amounts available under the Company's financing agreement are sufficient to fund its planned capital expenditures, working capital needs and other cash requirements for 2001. LITIGATION AND OTHER MATTERS In December 1999, the Internal Revenue Service ("IRS") completed an examination of the Company's corporate income tax returns for the years 1995 through 1997. On December 16, 1999, the IRS issued a Notice of Proposed Adjustment which assessed additional taxes of $5.2 million, excluding interest. The assessment represents a total of $14.0 million of adjustments to taxable income for the years under review. The proposed adjustments relate to the deductibility of restructuring and other reserves applicable to continuing and discontinued operations as well as the utilization of foreign net operating losses primarily associated with discontinued operations. The Company disagrees with the position taken by the IRS and filed a formal protest of the proposed adjustments on April 6, 2000. A hearing was held before the IRS Appeals Officer on March 14, 2001. In December 1998, the IRS completed an examination of the Company's corporate income tax returns for the years 1992 through 1994. On December 11, 1998, the IRS issued a Notice of Proposed Adjustment which assessed additional taxes of $4.6 million, excluding interest. The assessment represents a total of $18.2 million of adjustments to taxable income for the years under review. The proposed adjustments relate to the deductibility of restructuring and other reserves applicable to discontinued operations as well as certain losses deducted in connection with the divestiture of the Company's Computer Products Division. The Company disagrees with the positions taken by the IRS and filed a formal protest of the proposed adjustment on January 12, 1999. Formal hearings were held before the IRS Appeals Officer on November 16, 1999 and March 14, 2001. On March 31, 1998, the New Hampshire Department of Revenue ("DOR") issued a notice of deficiency in connection with an examination of the Company's corporate income tax returns for the years 1989 through 1992 in the amount of $4.4 million, including interest. The deficiency principally relates to the tax treatment of the sale of the Company's International Office Systems business in 1990. A petition for reconsideration was filed with an appeals officer on May 26, 1998 and a formal hearing was held before the DOR officers on August 31, 1999. On October 27, 2000, the State of New Hampshire issued a revised assessment of $1.8 million, including interest, in accordance with the New Hampshire Department of Revenue hearing officer's final order. The Company disagrees with the final order and on November 15, 2000 filed suit against the New Hampshire Department of Revenue Administration in the New Hampshire Superior Court. The Company believes that it will prevail in all material respects against the IRS' assertions related to the corporate income tax returns filed for years 1992 through 1994. In the fourth quarter of 1999, the Company recorded a charge of $1.3 million in continuing operations, which included $.8 million of interest, and a charge of $4.0 million in discontinued operations primarily to provide for potential liabilities for tax deficiencies that could arise from resolution of the IRS's examination of the corporate tax returns filed for years 1995 through 1997 and for resolution of New Hampshire DOR's examination of the corporate income tax returns for years 1989 through 1992. While management -16- 17 believes that it has provided adequately for its tax liabilities through December 31, 2000, including liabilities related to matters in dispute with taxing authorities, it can provide no assurances that the Company will prevail in its defense against adjustments proposed in these pending or future federal and state examinations. In addition, management can provide no assurances that the ultimate resolution of these open tax matters will not be in excess of current provisions. In August and September 1996, two individual plaintiffs initiated lawsuits in the Circuit Court of Cook County, Illinois against the Company, Cerion, certain directors and officers of Cerion, and the Company's underwriter, on behalf of classes consisting of all persons who purchased the common stock of Cerion between May 24, 1996 and July 9, 1996. These two complaints were consolidated. In March 1997, the same individual plaintiffs joined by a third plaintiff filed a Consolidated Amended Class Action Complaint (the "Consolidated Complaint"). The Consolidated Complaint alleged that, in connection with Cerion's initial public offering, the defendants issued materially false and misleading statements and omitted the disclosure of material facts regarding, in particular, certain significant customer relationships. In October 1997, the Circuit Court on motion by the defendants, dismissed the Consolidated Complaint. The plaintiffs filed a Second Amended Consolidated Complaint alleging substantially similar claims as the Consolidated Complaint seeking damages and injunctive relief. On May 6, 1998, the Circuit Court, on motion by the defendants, dismissed with prejudice the Second Amended Consolidated Complaint. The plaintiffs filed with the Appellate Court an appeal of the Circuit Court's ruling. On November 19, 1999, the Appellate Court reversed the Circuit Court's ruling dismissing the Second Amended Consolidated Complaint. The Appellate Court ruled that the Second Amended Consolidated Complaint stated a claim and remanded the case to the Circuit Court for further proceedings. On December 27, 1999, the Company filed a Petition for Leave to Appeal from the Appellate Court with the Supreme Court of Illinois. In that Petition, the Company asked the Supreme Court of Illinois to hear the Company's further appeal and determine whether the Circuit Court or the Appellate Court is correct. That Petition was denied and the case was remanded to the Circuit Court for trial. Discovery is in process. The Company believes that the lawsuit is without merit and will continue to defend itself in this matter. The Company is involved in certain environmental matters and has been designated by the Environmental Protection Agency ("EPA") as a potentially responsible party ("PRP") for certain hazardous waste sites. In addition, the Company has been notified by certain state environmental agencies that some of the Company sites not addressed by the EPA require remedial action. These sites are in various stages of investigation and remediation. Due to the unique physical characteristics of each site, the technology employed, the extended timeframes of each remediation, the interpretation of applicable laws and regulations and the financial viability of other potential participants, the ultimate cost to the Company of remediation for each site is difficult to estimate. At December 31, 2000, based on the facts currently known and the Company's prior experience with these matters, the Company has concluded that there is at least a reasonable possibility that site assessment, remediation and monitoring costs will be incurred by the Company with respect to those sites which can be reasonably estimated in the aggregate range of $1.4 million to $1.6 million for certain of the Company's continuing operations, and a range of $.1 million to $.4 million for certain of the Company's discontinued operations. These ranges are based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRPs are unable to bear their allocated share. At December 31, 2000, the Company's accrual balances were $1.6 million for continuing operations and $.3 million for discontinued operations, which represent, in management's view, the most likely amounts within the ranges stated above. Based on information currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the costs apportioned to them. Management believes that, based on its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites is not likely to have a material adverse effect on its consolidated financial position or results of operations. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires that all derivative instruments be recognized as either assets or liabilities on the balance sheet at their fair value. Changes in the fair value of derivatives (gains or losses) are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FAS 133" ("FAS 137"). FAS 137 changed the -17- 18 effective date of FAS 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. As a result, FAS 133 will be effective for the Company beginning on January 1, 2001. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company's results of operations or its financial position. ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to certain market risks from interest rate fluctuations relating to its Loan Agreement entered into with Fleet Bank-NH and LaSalle Bank, NA on April 14, 2000. Management has performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates applied to our debt. As of December 31, 2000, the analysis indicated that the hypothetical market movement would not have a material effect on the Company's consolidated financial position, results of operations or cash flows. Actual changes in interest rate and the related effects may differ materially from that analysis. -18- 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NASHUA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Net sales $ 253,122 $ 170,844 $ 167,831 Cost of products sold 202,357 129,872 127,089 --------------------------------------------- Gross margin 50,765 40,972 40,742 --------------------------------------------- Selling, distribution and administrative expenses 49,269 34,696 34,119 Research and development expense 4,224 5,051 5,938 Pension settlement income (18,606) -- -- Restructuring and other unusual charges (income) 966 (1,300) 13,825 Loss from equity investment 5 320 -- Interest expense 2,852 743 377 Interest income (859) (1,421) (1,567) --------------------------------------------- Income (loss) from continuing operations before income taxes 12,914 2,883 (11,950) Provision (benefit) for income taxes 7,528 3,303 (4,721) --------------------------------------------- Income (loss) from continuing operations 5,386 (420) (7,229) Loss from discontinued operations, net of taxes -- (4,001) (6,687) Gain on disposal of discontinued operation, net of taxes -- -- 1,052 --------------------------------------------- Net income (loss) 5,386 (4,421) (12,864) Retained earnings, beginning of period 59,650 64,071 76,935 Dividends (57) -- -- --------------------------------------------- Retained earnings, end of period $ 64,979 $ 59,650 $ 64,071 ============================================= Basic and diluted earnings per share: Income (loss) from continuing operations per common share $ .95 $ (.07) $ (1.15) Loss from discontinued operations per common share -- (.70) (1.06) Gain on disposal of discontinued operation -- -- .17 --------------------------------------------- Net income (loss) per common share $ .95 $ (.77) $ (2.04) =============================================
The accompanying notes are an integral part of the consolidated financial statements. -19- 20 NASHUA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
December 31, - ------------------------------------------------------------------------------------------------------------ (In thousands, except share data) 2000 1999 - ------------------------------------------------------------------------------------------------------------ Assets Current assets Cash and cash equivalents $ 1,035 $ 25,056 Restricted cash -- 5,000 Accounts receivable 27,915 17,448 Inventories Raw materials 12,112 7,911 Work in process 3,658 3,788 Finished goods 8,956 6,194 --------- --------- 24,726 17,893 Taxes receivable 10,708 3,608 Other current assets 7,159 10,562 --------- --------- 71,543 79,567 --------- --------- Plant and equipment Land 978 804 Buildings and improvements 28,787 26,907 Machinery and equipment 57,249 44,804 Construction in progress 4,004 4,081 --------- --------- 91,018 76,596 Accumulated depreciation (36,465) (36,594) --------- --------- 54,553 40,002 Goodwill, net of amortization 30,490 -- Other assets 13,885 10,876 --------- --------- Total assets $ 170,471 $ 130,445 ========= ========= Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term debt $ 9,806 $ 511 Accounts payable 19,104 10,946 Accrued expenses 20,102 30,253 Income taxes payable -- 2,295 --------- --------- 49,012 44,005 --------- --------- Long-term debt 35,905 511 Other long-term liabilities 13,217 19,103 Commitments and contingencies (see "Commitments and Contingencies" Note) Shareholders' equity Preferred stock, par value $1.00: 2,000,000 shares authorized and unissued -- -- Common stock, par value $1.00: authorized 40,000,000 shares: Issued 7,011,601 shares in 2000 and 6,915,767 shares in 1999 7,012 6,916 Additional paid-in capital 15,268 15,182 Retained earnings 64,979 59,650 Treasury stock, at cost (14,922) (14,922) --------- --------- 72,337 66,826 --------- --------- Total liabilities and shareholders' equity $ 170,471 $ 130,445 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. -20- 21 NASHUA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------------------------------ (In thousands) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Cash Flows from Operating Activities of Continuing Operations Net income (loss) $ 5,386 $ (4,421) $(12,864) Adjustments to reconcile net income (loss) to cash provided by (used in) continuing operating activities: Depreciation and amortization 9,304 6,381 6,846 Deferred income taxes 14,326 2,357 (4,721) Stock issued for director compensation 105 90 89 Pension settlement income (18,606) -- -- Loss on sale/disposal of fixed assets 48 786 -- Loss from discontinued operations -- 4,001 6,687 Gain on disposal of discontinued operation -- -- (1,052) Equity in loss from unconsolidated joint ventures 5 320 -- Change in operating assets and liabilities, net of effects from acquisition and disposal of businesses: Restricted cash 5,000 -- (5,000) Accounts receivable 2,475 784 (3,317) Tax receivable (7,100) -- -- Inventories 8,683 (3,217) (39) Other assets and other current assets (2,105) 227 4,354 Accounts payable (2,696) 1,918 (3,567) Accrued expenses (13,464) 1,603 14,162 Income taxes payable (2,295) 2,295 -- Other long-term liabilities (169) (1,228) (449) ------------------------------------------- Cash provided by (used in) operating activities (1,103) 11,896 1,129 Cash Flows from Investing Activities of Continuing Operations Investment in plant and equipment (9,625) (7,855) (6,702) Investment in unconsolidated joint venture (201) (499) -- Proceeds from sale of plant and equipment 1,854 16 166 Business acquisition, net of cash acquired (60,341) -- -- ------------------------------------------- Cash used in investing activities (68,313) (8,338) (6,536) Cash Flows from Financing Activities of Continuing Operations Proceeds from borrowings 45,200 -- -- Repayment of borrowings (511) (553) (2,425) Dividends paid (57) -- -- Proceeds and tax benefits from shares issued under stock compensation plans -- -- 3,061 Purchase of treasury stock -- (4,083) (10,081) ------------------------------------------- Cash provided by (used in) financing activities 44,632 (4,636) (9,445) Proceeds from sale of discontinued operations -- -- 49,858 Cash provided by (used in) activities of discontinued operations 763 (5,831) (6,781) Effect of exchange rate changes on cash -- -- 4 ------------------------------------------- Increase (decrease) in cash and cash equivalents (24,021) (6,909) 28,229 Cash and cash equivalents at beginning of year 25,056 31,965 3,736 ------------------------------------------- Cash and cash equivalents at end of year $ 1,035 $ 25,056 $ 31,965 ========================================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 2,937 $ 1,055 $ 220 ========================================== Income tax payments, net of refunds $ 2,579 $ 1,486 $ 4,664 ==========================================
The accompanying notes are an integral part of the consolidated financial statements. -21- 22 NASHUA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of the Company: The Company manufactures and markets a wide variety of specialty imaging products and services to industrial and commercial customers to meet various print application needs. Segment and Related Information: Beginning with the second quarter of 2000, the Company realigned operating segments for financial reporting purposes due to the acquisition of Rittenhouse Paper Company as described in the "Business Changes" section of this report. The Company now has three reportable segments: (1) Imaging Supplies, (2) Specialty Paper Products, and (3) Label Products. The Imaging Supplies segment includes remanufactured laser cartridge and toner and developer products and, effective in the first quarter of 2000, the Company transferred responsibility for the cut-sheet paper product line to the Specialty Paper Products segment. The Label Products segment, formerly included in the Specialty Coated and Label Products segment, includes pressure sensitive laminated paper, entertainment tickets, stickers, retail shelf tags and thermosensitive label product lines. The Specialty Paper Products segment, which was also included in the Specialty Coated and Label Products segment, is now reported as a separate segment. The Specialty Paper Products segment's product scope includes thermal papers, bond papers, carbonless paper, specialty printed papers, such as ATM receipts and point-of-sale receipts, wide format papers, dry-gum papers, heat seal papers and ribbons. Historical segment data has been restated to reflect these changes. Basis of Consolidation: The accompanying consolidated financial statements include the accounts of Nashua Corporation and its wholly-owned subsidiaries ("the Company"). All significant intercompany transactions and balances have been eliminated. Revenue Recognition: Sales are recognized at the time the goods are shipped or when title passes. Environmental Expenditures: Environmental expenditures relating to ongoing operations are expensed when incurred unless the expenditures extend the life, increase the capacity or improve the safety or efficiency of the property, mitigate or prevent environmental contamination that has yet to occur and improve the property compared with its original condition, or are incurred for property held for sale. Expenditures relating to site assessment, remediation and monitoring are accrued and expensed when the costs are both probable and the amount can be reasonably estimated. Estimates are based on in-house or third-party studies considering current technologies, remediation alternatives and current environmental standards. In addition, if there are other participants and the liability is joint and several, the financial stability of the other participants is considered in determining the Company's accrual. Insurance and other recoveries relating to these expenditures are recorded separately once recovery has been made. Shipping Costs: The Company classifies third-party shipping costs as a component of selling, distribution and administrative expenses in its Consolidated Statement of Operations and Retained Earnings. Third-party shipping costs totaled $9.4 million, $5.6 million and $5.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. Amounts billed to customers for shipping costs are not significant. Research and Development: Research and development costs are expensed as incurred. Use of Estimates: The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. The more significant areas requiring the use of management estimates relate to tax contingency reserves, allowances for obsolete inventory and uncollectible receivables, environmental obligations, postretirement and other employee benefits, valuation allowances for deferred tax assets, future cash flows associated with assets, and useful lives for depreciation and amortization. Actual results could differ from those estimates. -22- 23 Cash Equivalents: The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. The Company held no cash equivalents at December 31, 2000. At December 31, 1999, the Company held cash equivalents of $22.9 million, consisting of various money market instruments carried at cost, which approximated market. Restricted Cash: Restricted cash at December 31, 1999 represented $5.0 million placed in escrow to secure a bond related to a patent infringement judgement against the Company. The Company settled the patent infringement lawsuit during the fourth quarter of 2000. Accounts Receivable: The consolidated balance is net of allowances for doubtful accounts of $1.0 million at December 31, 2000 and $1.3 million at December 31, 1999. Inventories: Inventories are carried at the lower of cost or market. Cost is determined by the first-in, first-out ("FIFO") method for approximately 73 percent and 51 percent of the inventories at December 31, 2000 and 1999, respectively, and by the last-in, first-out ("LIFO") method for the balance. If the FIFO method had been used to cost all inventories, the balances would have been approximately $1.9 million and $2.0 million higher at December 31, 2000 and 1999, respectively. Plant and Equipment: Plant and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred, while additions, renewals and betterments of plant and equipment are capitalized. Items which are fully depreciated, sold, retired or otherwise disposed of, together with the related accumulated depreciation, are removed from the accounts and, where applicable, the related gain or loss is recognized. For financial reporting purposes, depreciation is computed using the straight-line method over the following estimated useful lives of the assets: - -------------------------------------------------------------------------- Buildings and improvements 5 - 40 years Machinery and equipment 2 - 20 years
The Company reviews the value of its plant and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill: Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable net assets acquired. Goodwill is amortized on a straight-line basis over 20 years. Amortization of goodwill was $1.1 million for 2000. The carrying value of goodwill is evaluated periodically in relation to the estimated operating performance and undiscounted future cash flows of the underlying segments. Stock Compensation: The Company's employee stock option plans are accounted for in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company follows the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Income Taxes: Prepaid or deferred income taxes result principally from the use of different methods of depreciation and amortization for income tax and financial reporting purposes, the recognition of expenses for financial reporting purposes in years different from those in which the expenses are deductible for income tax purposes and the recognition of the tax benefit of net operating losses and other tax credits. Foreign Currency Translation: The functional currency of the Company's foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these subsidiaries have been translated using exchange rates prevailing at the appropriate balance sheet date and income statement items have been translated using average monthly exchange rates. Due to the size of the Company's foreign operations relative to the consolidated operations, the impact of the foreign currency translation on the Company's financial position, results of operations and cash flows is not significant. -23- 24 Financial Instruments: The Company enters into foreign currency forward contracts to manage foreign exchange exposure related to specific accounts receivable trade and accounts payable trade transactions with certain customers and vendors who require settlement in their local currency. The forward contracts are effective as hedges of these foreign currency denominated assets and liabilities. Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, trade receivables and financial instruments used in hedging activities. The Company places its temporary cash investments with high quality financial institutions and in high quality liquid investments. Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers comprise the Company's customer base, thus mitigating the trade credit risk. The Company performs ongoing credit evaluations of its customers' financial condition and maintains allowances for potential credit losses. The Company generally does not require collateral or other security to support customer receivables. The counterparties to the agreements relating to the Company's foreign exchange contracts consist of a number of high quality financial institutions. The Company does not believe that there is significant risk of nonperformance by these counterparties. Approximately 42 percent of the Company's employees are members of one of several unions, principally the Paper, Allied-Industrial, Chemical and Energy International Union. There are three agreements with the Paper, Allied-Industrial, Chemical and Energy International Union covering approximately one-half of the Company's hourly employees. These agreements have initial durations of two to four years, which expire on March 31, 2002 and March 31, 2003, respectively. Fair Value of Financial Instruments: The recorded amounts for cash and cash equivalents, other current assets, accounts receivable and accounts payable and other current liabilities approximate fair value due to the short-term nature of these financial instruments. The fair values of amounts outstanding under the Company's debt instruments approximates their book values in all material respects due to the variable nature of the interest rate provisions associated with such instruments. Earnings per Common and Common Equivalent Share: Earnings per common and common equivalent share are computed based on the total of the weighted average number of common shares and, when applicable, the weighted average number of common equivalent shares outstanding during the period presented. Impact of New Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires that all derivative instruments be recognized as either assets or liabilities on the balance sheet at their fair value. Changes in the fair value of derivatives (gains or losses) are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - - Deferral of the Effective Date of FAS 133" ("FAS 137"). FAS 137 changed the effective date of FAS 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. As a result, FAS 133 will be effective for the Company beginning on January 1, 2001. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company's results of operations or its financial position. Reclassification: Certain amounts from the prior year have been reclassified to conform to the present year presentation. BUSINESS CHANGES Business Acquisition On April 17, 2000, the Company completed the acquisition of all outstanding shares of stock of Rittenhouse Paper Company, an Illinois corporation ("Rittenhouse"), pursuant to a Stock Purchase Agreement, dated March 21, 2000, by -24- 25 and among the Company, Rittenhouse and the stockholders of Rittenhouse. Rittenhouse manufactures and markets a wide range of paper media, pressure-sensitive labels and imaging supplies. In paper, Rittenhouse is primarily a converter of large rolls of paper into products such as cut/roll, bond paper, thermal, point-of-sale, ATM and wide format papers. In labels, it manufactures a wide assortment of pressure-sensitive and entertainment tickets for both commercial and consumer use. In imaging, it manufactures and markets ribbons for use in imaging devices. Total consideration, including direct acquisition costs, paid by the Company was approximately $61.8 million. The Company funded $35.0 million of the purchase price from borrowings under a secured loan agreement and the remainder from its cash reserves. The acquisition of Rittenhouse was accounted for using the purchase method of accounting and the operations of Rittenhouse are included in the Consolidated Statement of Operations and Retained Earnings from the date of acquisition. Purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective fair values, with the excess of purchase consideration over the fair value of net assets of $31.6 million allocated to goodwill. Goodwill is being amortized on a straight-line basis over twenty years. The Company began formulating plans related to workforce reductions and plant closings prior to the purchase date. Liabilities assumed include restructuring charges of approximately $2.1 million related primarily to planned workforce reductions in the acquired business. The provision for planned workforce reductions included amounts for salary and benefit continuation for 67 employees, of which $.3 million was paid in 2000. Pro Forma Results of Continuing Operations: The following unaudited pro forma financial information presents the combined results of operations of the Company and Rittenhouse, including the amortization of goodwill and increased interest expense, as if the acquisition had occurred at January 1, 1999.
Year Ended ---------------------------- Dec. 31, Dec. 31, (In thousands, except per share information) 2000 1999 ---- ---- Pro forma revenues $ 286,702 $309,950 ============ ======== Pro forma net income $ 3,800 $ 83 ============ ======== Pro forma basic earnings per share $ .67 $ .01 ============ ======== Pro forma diluted earnings per share $ .67 $ .01 ============ ======== Shares used in pro forma share calculations: Average common shares 5,649 5,718 ============ ======== Average common and potential common shares 5,667 5,728 ============ ========
The pro forma results of operations are not necessarily indicative of the results that would have occurred had the merger occurred at January 1, 1999, and are not intended to be indicative of future results of operations. Restructuring and Other Unusual Charges Restructuring and other unusual charges for 2000 of $1.0 million consisted primarily of $1.0 million in exit costs associated with the discontinuance of the laser cartridge product line, $.5 million in connection with a 15 percent workforce reduction in the Imaging Supplies segment and $.5 million of workforce reductions resulting from acquisition synergies, partially offset by unusual income of $1.0 million resulting from the reversal of a loss accrual relating to the settlement of the Ricoh patent infringement lawsuit against the Company. The 2000 provision for workforce reductions included amounts payable to 122 employees. The restructuring activities provided for in the balance at December 31, 1999 were completed during 2000 and the amounts charged against the reserve did not change materially from the reserve balance of $.2 million. -25- 26 Details of the restructuring reserves related to continuing operations and activity recorded during 2000 were as follows:
Reserve Reserve Balance Current Current Balance Dec. 31, Year Year Dec. 31, (In thousands) 1999 Provision Utilization 2000 - --------------------------------------------------------------------------------------------------------------------------- 2000 Activity: Provisions for severance related to workforce reductions $123 $1,445 $(854) $714 Provisions for assets to be sold or discarded - 216 (216) - Other 86 184 (270) - ----------------------------------------------------------- Total $209 $1,845 $(1,340) $714 ===========================================================
The restructuring and other unusual income for 1999 of $1.3 million consisted primarily of $1.3 million in income from an insurance settlement related to environmental matters, a gain of $.4 million from the sale of a portion of the Company's Microsharp imaging technology and $.2 million of other miscellaneous gains, offset by a provision of $.6 million resulting from the Company's decision to cease its manufacturing of fax papers. The restructuring activities provided for in the balance at December 31, 1998 were substantially completed at December 31, 1999 and amounts charged against the reserve did not change materially from the reserve balance of $.6 million at December 31, 1998. The balance at December 31, 1999 for severance related to workforce reductions included amounts payable to nine employees related to the discontinuance of the fax manufacturing line in the Specialty Paper Products segment. Details of restructuring reserves related to continuing operations and the activity recorded during 1999 were as follows:
Reserve Reserve Balance Current Current Balance Dec. 31, Year Year Dec. 31, (In thousands) 1998 Provision Utilization 1999 - --------------------------------------------------------------------------------------------------------------------------------- 1999 Activity: Provisions for severance related to workforce reductions $472 $142 $ (491) $123 Provisions for assets to be sold or discarded - 441 (441) - Other 149 32 (95) 86 ------------------------------------------------------------ Total $621 $615 $(1,027) $209 ============================================================
The restructuring and other unusual charges for 1998 included an unusual charge of $15.0 million related to damages awarded to Ricoh Corporation in a patent infringement lawsuit, partially offset by unusual income of $1.2 million related to an insurance settlement for environmental matters. The balance at December 31, 1998 for severance related to workforce reductions consisted primarily of amounts payable to employees who had already left the Company during the 1997 restructuring. Discontinued Operations During the fourth quarter of 1999, the Company recorded charges of $4.0 million, net of taxes, related to discontinued operations as described more fully in the Note entitled "Income Taxes" of this report. The Company owns a 37.1 percent interest in the Cerion Technologies Liquidating Trust, a trust established pursuant to the liquidation of Cerion Technologies Inc. ("Cerion"), formerly a publicly held company. Cerion ceased operations during the fourth quarter of 1998 and is currently in the process of liquidation. Accordingly, the Company accounts for its investment in Cerion based on its expected net realizable value, net of taxes. On April 9, 1998, the Company completed the sale of its Photofinishing segment. The Company received net proceeds of $49.9 million for the net assets of the businesses and after recording taxes of $7.9 million, recorded a gain of $1.1 million. -26- 27 Operating results for the discontinued operations described above for 1999 and 1998 are summarized as follows:
(In millions) 1999 1998 - ------------------------------------------------------------------------------------------------ Net sales $ - $21.6 Loss before income taxes - (6.5) Provision (benefit) for income taxes 4.0 .2 --------------------------- Loss from discontinued operations $(4.0) $(6.7) ===========================
The net assets (liabilities) of the discontinued operations described above included in the December 31, 2000 and December 31, 1999 consolidated balance sheets are summarized as follows:
(In thousands) 2000 1999 - ------------------------------------------------------------------------------------------------- Assets $ 2,801 $ 3,865 Liabilities (3,301) (3,857) ---------------------------- Net assets and (liabilities) of discontinued operations $ (500) $ 8 ============================
INDEBTEDNESS In April 2000, Nashua, Rittenhouse Paper Company and Rittenhouse, L.L.C. (collectively, the "Company" as of April 17, 2000) entered into a Revolving Credit Agreement and a Term Loan Agreement (collectively the "Loan Agreement") with Fleet Bank - NH and LaSalle Bank, NA (the "Banks"). The Revolving Credit Agreement and the Term Loan Agreement were in the amounts of $35.0 million and $20.0 million at December 31, 2000, respectively. Borrowings under this facility are collateralized by a security interest in the Company's accounts receivable, inventory, certain machinery and equipment and real estate located in Merrimack, NH. This agreement with the Banks replaced Nashua's prior credit facility, which was scheduled to expire April 22, 2001. Borrowings of $25.2 million and $20.0 million were outstanding at December 31, 2000 under the Revolving Credit Agreement and the Term Loan Agreement, respectively. Interest on the loans outstanding, at the Company's option, is either at a rate per annum equal to the Base Rate (prime) or LIBOR plus applicable margin. The Revolver LIBOR margin was 2.0 percent and the Term LIBOR margin was 2.25 percent at December 31, 2000. The maturity of the Loan Agreement is June 30, 2005 with respect to the Term Loan and June 30, 2002 with respect to the Revolving Credit Loan. There were no borrowings outstanding at December 31, 1999 under the previous secured line of credit. Effective January 1, 2001, the Loan Agreement between the Company and the Banks was amended to reduce the Revolving Credit Agreement to $30.0 million from $35.0 million, revise the terms of the variable portion of the Company's interest rates, adjust the terms of the quarterly principal payments, decrease the limit on annual capital expenditures from $5.5 million to $3.5 million, revise certain quarterly financial covenants and increase the Banks' collateral in certain machinery and equipment by $5.0 million. Effective January 1, 2001, the applicable margin on the Base Rate (prime) and LIBOR were 1.5 percent and 3.5 percent, respectively, for the Term Loan and 1.0 percent and 3.0 percent, respectively, for the Revolving Credit Loan. The Loan Agreement requires the Company to maintain certain financial covenants such as Total Funded Debt to earnings before interest, income taxes, depreciation and amortization and a Fixed Charge Coverage Ratio. The Company was not in compliance with the above quarterly financial covenants and received a waiver from the Banks for the quarters ended September 29, 2000 and December 31, 2000. The Company and its lender established more favorable covenants for the Company for 2001. The Revolving Credit Agreement is subject to certain limitations such as, if the aggregate principal amount at any one time outstanding under the Revolving Credit Loan exceeds $15.0 million or the amount of certain eligible accounts receivable, as defined in the Loan Agreement, declines to $25.0 million or less, the maximum principal amount of the Revolving Credit Loan shall be the lesser of (a) $30.0 million effective January 1, 2001 or (b) the Borrowing Base, which is defined as the sum of 80 percent of the eligible accounts receivable, plus 50 percent of the eligible inventory, minus a reserve of $1.0 million as defined in the Loan Agreement. The Borrowing Base was $26.8 million at December 31, 2000. -27- 28 On December 26, 1996, the Company entered into a note agreement under which the Company borrowed $2.6 million. The note is being paid back in sixty equal monthly payments which began in January of 1997. The note bears interest at a rate per annum equal to 2.5 percent above the LIBOR rate. The note is collateralized by a security interest in certain equipment. At December 31, 2000 and 1999, borrowings of $.5 million and $1.0 million, respectively, were outstanding under this note agreement. The aggregate amounts of maturities on long-term debt for each of the next five years are as follows: 2001 - $9.8 million; 2002 - $28.2 million; 2003 - - $3.1 million; 2004 - $3.1 million; and 2005 - $1.5 million. At December 31, 2000, the weighted average annual interest rate on long-term debt was 8.9 percent. INCOME TAXES The domestic and foreign components of income (loss) from continuing operations before income taxes are as follows:
(In thousands) 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Domestic $12,413 $2,599 $(11,873) Foreign 501 284 (77) --------------------------------------- Consolidated pretax income (loss) $12,914 $2,883 $(11,950) =======================================
The provision (benefit) for income taxes relating to continuing operations consists of the following:
(In thousands) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- Current: United States $(6,233) $ 821 $ -- Foreign 291 99 -- State and local (856) 26 -- -------------------------------------- Total current (6,798) 946 -- Deferred: United States 12,632 1,426 (3,824) Foreign - - (18) State and local 1,694 931 (879) --------------------------------------- Total deferred 14,326 2,357 (4,721) --------------------------------------- Provision (benefit) for income taxes $ 7,528 $3,303 $(4,721) =======================================
Total net deferred tax assets (liabilities) are comprised of the following:
(In thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Depreciation $(2,822) $(2,137) Pension (3,360) - Other (301) (466) ------------------------ Gross deferred tax liabilities (6,483) (2,603) Restructuring 2,384 6,378 Pension and postretirement benefits 4,076 7,765 Loss carryforwards 3,204 4,285 Accrued expenses 1,248 1,656 Inventory reserve 724 399 Bad debt reserve 460 586 Other 2,821 2,499 ----------------------- Gross deferred tax asset 14,917 23,568 Deferred tax assets valuation allowance (1,885) (1,100) ----------------------- Net deferred tax assets $ 6,549 $19,865 =======================
-28- 29 Reconciliations between income tax provision (benefit) from continuing operations computed using the United States statutory income tax rate and the Company's effective tax rate are as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- United States federal statutory rate (benefit) 35.0% 35.0% (35.0)% State and local income taxes, net of federal tax benefit 4.2 4.8 (4.8) Change in valuation allowance 6.1 27.7 - Expired net operating loss 13.8 - - Non-deductible goodwill 3.4 - - Tax contingency reserve - 45.7 - Other, net (4.2) 1.4 .3 ---------------------------------------- Effective tax rate (benefit) 58.3% 114.6% (39.5)% ========================================
At December 31, 2000, $5.6 million and $.9 million of net tax assets were included in "Other Current Assets" and "Other Assets," respectively. At December 31, 1999, $10.2 million and $9.7 million of net tax assets were included in "Other Current Assets" and "Other Assets," respectively. At December 31, 2000 and 1999, $5.5 million and $4.8 million of accrued taxes were included in "Accrued Expenses". At December 31, 2000, the Company had $3.2 million of state net operating loss carryforwards and $.5 million of alternative minimum tax credit carryforwards, which are available to offset future domestic taxable earnings. The net operating loss carryforward benefits expire as follows: $.2 million in 2001; and $3.0 million thereafter. The tax credit carryforwards expire after 2001. In the fourth quarter of 2000, management updated its assessment of the realizability of state net operating loss carryforwards taking into consideration current projections of future taxable income, recent product line divestitures and changes in the forecasted timing for deductibility of certain significant temporary differences. Based upon this assessment, management believes that it is more likely than not that $1.9 million of state net operating loss carryforwards will not be realized prior to their expiration. As a result, a $.8 million charge was recorded in the fourth quarter of 2000 to increase the valuation allowance for state net operating loss carryforwards to $1.9 million. In December 1999, the Internal Revenue Service ("IRS") completed an examination of the Company's corporate income tax returns for the years 1995 through 1997. On December 16, 1999, the IRS issued a Notice of Proposed Adjustment which assessed additional taxes of $5.2 million, excluding interest. The assessment represents a total of $14.0 million of adjustments to taxable income for the years under review. The proposed adjustments relate to the deductibility of restructuring and other reserves applicable to continuing and discontinued operations as well as the utilization of foreign net operating losses primarily associated with discontinued operations. The Company disagrees with the position taken by the IRS and filed a formal protest of the proposed adjustments on April 6, 2000. A hearing was held before the IRS Appeals Officer on March 14, 2001. In December 1998, the IRS completed an examination of the Company's corporate income tax returns for the years 1992 through 1994. On December 11, 1998, the IRS issued a Notice of Proposed Adjustment which assessed additional taxes of $4.6 million, excluding interest. The assessment represents a total of $18.2 million of adjustments to taxable income for the years under review. The proposed adjustments relate to the deductibility of restructuring and other reserves applicable to discontinued operations as well as certain losses deducted in connection with the divestiture of the Company's Computer Products Division. The Company disagrees with the position taken by the IRS and filed a formal protest of the proposed adjustment on January 12, 1999. Formal hearings were held before the IRS Appeals Officer on November 16, 1999 and March 14, 2001. On March 31, 1998, the New Hampshire Department of Revenue ("DOR") issued a notice of deficiency in connection with an examination of the Company's corporate income tax returns for the years 1989 through 1992 in the amount of $4.4 million, including interest. The deficiency principally relates to the tax treatment of the sale of the Company's International Office Systems business in 1990. A petition for reconsideration was filed with an appeals officer on May 26, 1998 and a formal hearing was held before the DOR officers on August 31, 1999. On October 27, 2000 the State of New Hampshire issued a revised assessment of $1.8 million, including interest, in accordance with the New Hampshire Department of Revenue hearing officer's final order. The Company disagrees with -29- 30 the final order and on November 15, 2000 filed suit against the New Hampshire Department of Revenue Administration in the New Hampshire Superior Court. The Company believes that it will prevail in all material respects against the IRS' assertions related to the corporate income tax returns filed for years 1992 through 1994. In the fourth quarter of 1999, the Company recorded a charge of $1.3 million in continuing operations, which included $.8 million of interest, and a charge of $4.0 million in discontinued operations primarily to provide for potential liabilities for tax deficiencies that could arise from resolution of the IRS' examination of the corporate tax returns filed for years 1995 through 1997 and for resolution of New Hampshire DOR's examination of the corporate income tax returns for years 1989 through 1992. While management believes that it has provided adequately for its tax liabilities through December 31, 2000, including liabilities related to matters in dispute with taxing authorities, it can provide no assurances that the Company will prevail in its defense against adjustments proposed in these pending or future federal and state examinations. In addition, management can provide no assurances that the ultimate resolution of these open tax matters will not be in excess of current provisions. SHAREHOLDERS' EQUITY On April 24, 2000, the Company's Board of Directors voted to redeem the stock purchase rights issued pursuant to its Shareholder Rights Plan. In redeeming the rights, a one-time payment of $0.01 per common share was distributed to shareholders of record on May 9, 2000. In 1999, the Board of Directors authorized the Company to repurchase up to 1,000,000 shares of its common stock. As of December 31, 2000, no shares had been purchased under this authorization. In 1998, the Board of Directors authorized the Company to repurchase up to an additional 1,000,000 shares of its common stock. As of December 31, 2000, the Company had purchased 999,754 shares under this authorization. The following summarizes the changes in selected shareholders' equity accounts for each of the three years in the period ended December 31, 2000:
Common Stock Add'l Treasury Stock ---------------------- Paid-In ---------------------- (In thousands, except share data) Shares Par Value Capital Shares Cost - ------------------------------------------------------------------------------------------------------------------------------ Balance, January 1, 1998 6,715,495 $ 6,716 $ 12,129 (24,064) $ (758) Stock issued for Director compensation 5,802 5 84 -- -- Stock options exercised and related tax benefit 236,600 237 2,828 -- -- Restricted stock issuances 105,000 105 1,568 -- -- Deferred compensation -- -- (1,673) -- -- Restricted stock forfeiture and conversion (124,500) (125) (1,518) -- -- Deferred compensation forfeiture -- -- 1,639 -- -- Purchase of treasury shares -- -- -- (651,674) (10,081) - ------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1998 6,938,397 $ 6,938 $ 15,057 (675,738) $ (10,839) Stock issued for Director compensation 8,370 9 81 -- -- Deferred compensation forfeiture -- -- 460 -- -- Restricted stock forfeiture (31,000) (31) (416) -- -- Purchase of treasury shares -- -- -- (348,080) (4,083) - ------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1999 6,915,767 $ 6,916 $ 15,182 (1,023,818) $ (14,922) Stock issued for Director compensation 16,834 17 92 -- -- Restricted stock issuances 189,000 189 1,398 -- -- Deferred compensation -- -- (1,282) -- -- Restricted stock forfeiture and conversion (110,000) (110) (1,223) -- -- Deferred compensation forfeiture -- -- 1,101 -- -- - ------------------------------------------------------------------------------------------------------------------------------ Balance, December 31,2000 7,011,601 $ 7,012 $ 15,268 (1,023,818) $ (14,922) ==============================================================================================================================
-30- 31 STOCK OPTION AND STOCK AWARD PLANS The Company has four stock compensation plans at December 31, 2000: the 1987 Stock Option Plan ("1987 Plan"), the 1993 Stock Incentive Plan ("1993 Plan"), the 1996 Stock Incentive Plan ("1996 Plan") and the 1999 Shareholder Value Plan ("1999 Plan"). Awards may no longer be granted under the 1987 Plan and the 1993 Plan. Awards under the 1996 Plan and the 1999 Plan are made at the discretion of the Leadership and Compensation Committee of the Board of Directors (the "Committee"). Under the 1987 Plan, nonqualified stock options have been awarded and are currently exercisable. Nonqualified stock options expire 10 years and one day from the date of grant. In the event of a change in control, certain option holders may, with respect to stock option agreements which so provide, have a limited right with respect to options under the plans to elect to surrender the options and receive cash or shares equal in value to the difference between the option price and the larger of either the highest reported price per share on the New York Stock Exchange during the sixty-day period before the change in control or, if the change in control is the result of certain defined transactions, the highest price per share paid in such defined transactions. Nonstatutory stock options and shares of performance based restricted stock have been awarded under the 1993 Plan, the 1996 Plan and the 1999 Plan. Of the 660,000 and 600,000 shares authorized by the Company's Board of Directors for the 1996 and 1999 Plans, respectively, 123,119 and 160,600 shares are available to be awarded as of December 31, 2000. Stock options awarded under the 1993 Plan are currently exercisable. Stock options under the 1996 Plan and the 1999 Plan generally become exercisable either (a) 50 percent on the first anniversary of grant and the remainder on the second anniversary of grant, (b) 100 percent at one year from the date of grant, or (c) otherwise as determined by the Committee. Certain options may become exercisable immediately in the event of a change in control as defined under these plans and option agreements. Nonstatutory stock options under the 1993 Plan and the 1996 Plan expire 10 years and one day from the date of grant, and incentive stock options expire 10 years from the date of grant. Nonstatutory and incentive stock options under the 1999 Plan expire 10 years from the date of grant. Performance based restricted stock awards under the 1993 Plan and the 1996 Plan have been granted to certain key executives and are earned only if the closing price of the Company's common stock meets specific target prices for certain defined periods of time or if significant performance based events are achieved. Restrictions on such shares lapse either (i) in equal amounts when the average closing price of the Company's common stock reaches $20 and $25 for a consecutive 10 trading day period; (ii) in equal amounts when the average closing price of the Company's common stock reaches $19 and $21 for a consecutive 10 trading day period; (iii) in equal amounts when the average closing price of the Company's common stock reaches $21 and $23 for a consecutive 10 trading day period; (iv) 100% upon the occurrence of certain significant performance based events; or (v) 33-1/3 percent per year on each of the three anniversary dates following the date of grant. Shares issued under the plans are initially recorded at their fair market value on the date of grant with a corresponding charge to additional paid-in capital representing the unearned portion of the award. Shares of performance based restricted stock are forfeited if the specified closing prices of the Company's common stock are not met within five years of grant, the executive leaves the Company or if the significant performance based events do not take place within the specified time period. -31- 32 A summary of the status of the Company's fixed stock option plans as of December 31, 2000, 1999 and 1998 and changes during the years ended on those dates is presented below:
2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price - ----------------------------------------------------------------------------------------------------------------------------------- Outstanding beginning of year 618,435 $ 11.94 547,370 $ 15.47 853,920 $ 14.75 Granted 206,200 7.06 275,500 7.50 64,500 15.60 Exercised -- -- -- -- (233,100) 12.37 Forfeited - non-vested (86,500) 7.10 (2,000) 9.88 (34,500) 11.63 Forfeited - exercisable (85,900) 16.21 (202,435) 15.47 (103,450) 17.83 Expired (2,500) 33.88 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Outstanding end of year 649,735 $ 10.39 618,435 $ 11.94 547,370 $ 15.47 Options exercisable at end of year 356,785 $ 13.01 344,935 $ 15.48 446,120 $ 15.83 Weighted average fair value of options granted during the year (exercise price equals market price) $ 2.91 $ 3.41 $ 6.60
The following table summarizes information about stock options outstanding at December 31, 2000:
Options Outstanding Options Exercisable ------------------------------------------------------ --------------------------------- Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Prices at 12/31/00 Contractual Life Exercise Price at 12/31/00 Exercise Price - ------------------------------------------------------------------------------------------------------------------------------- $ 4.38 55,000 10.0 years $ 4.38 -- N/A $ 6.25 - $ 6.63 145,000 9.1 years $ 6.60 67,500 $ 6.63 $ 8.06 - $11.63 199,200 9.0 years $ 8.83 38,750 $10.43 $12.13 - $19.75 228,800 6.3 years $ 14.03 228,800 $14.03 $22.63 - $34.63 21,735 2.6 years $ 26.79 21,735 $26.79 - ------------------------------------------------------------------------------------------------------------------------------- $ 4.38 - $34.63 649,735 7.9 years $ 10.39 356,785 $13.01
A summary of the status of the Company's restricted stock plans as of December 31, 2000, 1999 and 1998 and changes during the years ended on those dates is presented below:
2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------- Restricted stock outstanding at beginning of year 255,000 286,000 305,500 Granted 189,000 -- 105,000 Forfeited and converted (110,000) (31,000) (124,500) - -------------------------------------------------------------------------------------------------------------------- Restricted stock outstanding at end of year 334,000 255,000 286,000 Weighted average fair value per restricted share at grant date $ 8.46 $ -- $ 9.66 Weighted average share price at grant date $ 8.46 $ -- $ 15.93
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation." The Company continues to measure compensation cost using the intrinsic value based method of accounting prescribed by APB Opinion No. 25. If the Company had elected to recognize compensation cost based on the fair value of the options and restricted stock granted at grant date as prescribed by SFAS No. 123, net income (loss) and income (loss) per share would have decreased (increased) to the pro forma amounts indicated below:
(In thousands, except per share amounts) 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------- Net income (loss) - as reported $ 5,386 $ (4,421) $ (12,864) Net income (loss) - pro forma $ 4,981 $ (4,732) $ (14,266) Basic and diluted net loss per common share - as reported $ .95 $ (.77) $ (2.04) Basic and diluted net loss per common share - pro forma $ .88 $ (.83) $ (2.26)
-32- 33 The assumptions and methods used in estimating the fair value at the grant date of options and restricted shares granted are listed below:
Grant Year - ------------------------------------------------------------------------------ 2000 1999 1998 - ------------------------------------------------------------------------------ Volatility of Share Price: Options 31.0% 39.0% 37.0% Restricted stock N/A N/A 12.0% Dividend yield: Options -- -- -- Restricted stock -- -- -- Interest rate: Options 6.3% 6.2% 4.8% Restricted stock N/A N/A 4.8% Expected life of options 5.5 years 5.3 years 5.5 years Valuation methodology: Options Black-Scholes Option Pricing Model Restricted stock Binomial Pricing Model
Because the determination of the fair value of all options granted includes vesting periods over several years and additional option grants are expected to be made each year, the above pro forma disclosures are not representative of pro forma effects of reported net income for future periods. EARNINGS PER SHARE Reconciliation of the numerators and denominators used in earnings per share ("EPS") calculations are presented below:
Year Ended December 31, 2000 -------------------------------------------------- Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount - ----------------------------------------------------------------------------------------------------------------------------- Net income $5,386 - - --------------------------------------------------- Basic EPS Income available to common shareholders $5,386 5,649 $.95 Effect of dilutive securities Stock options - 18 - --------------------------------------------------- Diluted EPS Income available to common shareholders plus assumed conversions $5,386 5,667 $.95 ==================================================
Since the effect of stock options which have an exercise price below the average market price of the Company's stock of 9,900 shares in 1999, and 57,103 shares in 1998 would be antidilutive to loss per share computations, Basic EPS and Diluted EPS are identical for the years ended December 31, 1999 and 1998. The computations of EPS for 1999 and 1998 include weighted average shares (denominator) of 5,718,224 and 6,319,775, respectively. Performance based restricted stock of 334,000, 255,000 and 286,000 shares for the years ended December 31, 2000, 1999 and 1998, respectively, were not included in the above computations. Such shares may be issued in the future subject to the occurrence of certain events as described in the "Stock Option and Stock Award Plans" Note. COMMITMENTS AND CONTINGENCIES Rent expense for office equipment, facilities and vehicles was $1.0 million for each of the years ended December 31, 2000, 1999 and 1998. At December 31, 2000, the Company was committed, under non-cancelable operating leases, to minimum annual rentals as follows: 2001 - $.8 million; 2002 - $.6 million; 2003 - $.4 million; 2004 - $.3 million; 2005 - $.1 million. At December 31, 2000, the Company had a $.9 million obligation under standby letters of credit with Fleet Bank-NH. -33- 34 In August and September 1996, two individual plaintiffs initiated lawsuits in the Circuit Court of Cook County, Illinois against the Company, Cerion, certain directors and officers of Cerion, and the Company's underwriter, on behalf of classes consisting of all persons who purchased the common stock of Cerion between May 24, 1996 and July 9, 1996. These two complaints were consolidated. In March 1997, the same individual plaintiffs joined by a third plaintiff filed a Consolidated Amended Class Action Complaint (the "Consolidated Complaint"). The Consolidated Complaint alleged that, in connection with Cerion's initial public offering, the defendants issued materially false and misleading statements and omitted the disclosure of material facts regarding, in particular, certain significant customer relationships. In October 1997, the Circuit Court on motion by the defendants, dismissed the Consolidated Complaint. The plaintiffs filed a Second Amended Consolidated Complaint alleging substantially similar claims as the Consolidated Complaint seeking damages and injunctive relief. On May 6, 1998, the Circuit Court, on motion by the defendants, dismissed with prejudice the Second Amended Consolidated Complaint. The plaintiffs filed with the Appellate Court an appeal of the Circuit Court's ruling. On November 19, 1999, the Appellate Court reversed the Circuit Court's ruling dismissing the Second Amended Consolidated Complaint. The Appellate Court ruled that the Second Amended Consolidated Complaint stated a claim and remanded the case to the Circuit Court for further proceedings. On December 27, 1999, the Company filed a Petition for Leave to Appeal from the Appellate Court with the Supreme Court of Illinois. In that Petition, the Company asked the Supreme Court of Illinois to hear the Company's further appeal and determine whether the Circuit Court or the Appellate Court is correct. That Petition was denied and the case was remanded to the Circuit Court for trial. Discovery is in process. The Company believes that the lawsuit is without merit and will continue to defend itself in this matter. The Company is involved in certain environmental matters and has been designated by the Environmental Protection Agency ("EPA") as a potentially responsible party ("PRP") for certain hazardous waste sites. In addition, the Company has been notified by certain state environmental agencies that some of the Company sites not addressed by the EPA require remedial action. These sites are in various stages of investigation and remediation. Due to the unique physical characteristics of each site, the technology employed, the extended timeframes of each remediation, the interpretation of applicable laws and regulations and the financial viability of other potential participants, the ultimate cost to the Company of remediation for each site is difficult to estimate. At December 31, 2000, based on the facts currently known and the Company's prior experience with these matters, the Company has concluded that there is at least a reasonable possibility that site assessment, remediation and monitoring costs will be incurred by the Company with respect to those sites which can be reasonably estimated in the aggregate range of $1.4 million to $1.6 million for certain of the Company's continuing operations, and a range of $.1 million to $.4 million for certain of the Company's discontinued operations. This range is based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRPs are unable to bear their allocated share. At December 31, 2000, the Company's accrual balances were $1.6 million for continuing operations and $.3 million for discontinued operations which were included in "Accrued Expenses" and represent, in management's view, the most likely amounts within the ranges stated above. Based on information currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the costs apportioned to them. Management believes that, based on its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites is not likely to have a material adverse effect on its consolidated financial position or results of operations. POSTRETIREMENT BENEFITS Pension Plans: The Company and its subsidiaries have several pension plans which cover a portion of the Company's regular full-time employees. Benefits under these plans are generally based on years of service and the levels of compensation during those years. The Company's policy is to fund amounts deductible for income tax purposes. Assets of the plans are invested in common stocks, fixed-income securities and interest-bearing cash equivalent instruments. Retiree Health Care and Other Benefits: The Company also provides certain health care and other benefits to eligible retired employees and their spouses. Salaried participants generally become eligible for retiree health care benefits after reaching age 60 with ten years of service. Benefits, eligibility and cost-sharing provisions for hourly employees vary by location or bargaining unit. Generally, the medical plans are fully insured managed care plans. In 1993, the postretirement benefit plan was changed to share the cost of benefits with all retirees, resulting in an unrecognized benefit which is being amortized over the future service period of the active employees. -34- 35
Pension Benefits Postretirement Benefits (In thousands) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at beginning of year $ 121,421 $ 125,356 $ 6,133 $ 7,698 Service cost 1,600 1,614 74 57 Interest cost 3,729 8,512 481 417 Amendments 2,494 -- -- -- Settlement (75,621) -- -- -- Actuarial (gain)/loss 3,862 (5,510) 514 (1,437) Benefits paid (1,027) (8,551) (583) (602) ---------------------------------------------------------- Benefit obligation at end of year $ 56,458 $ 121,421 $ 6,619 $ 6,133 ========================================================== Change in plan assets Fair value of plan assets at beginning of year $ 138,061 $ 129,727 $ -- $ -- Actual return on plan assets (1,197) 16,602 -- -- Settlement (75,621) -- -- -- Employer contribution -- 25 -- -- Benefits paid (770) (8,293) -- -- ---------------------------------------------------------- Fair value of plan assets at end of year $ 60,473 $ 138,061 $ -- $ -- ========================================================== RECONCILIATION OF FUNDED STATUS Funded status $ 4,016 $ 16,640 $ (6,619) $ (6,133) Unrecognized net actuarial (gain)/loss (301) (28,739) (3,310) (4,055) Unrecognized prior service cost 5,567 3,157 (545) (600) Unrecognized net transition (asset)/obligation (80) 70 -- -- ---------------------------------------------------------- Net amount of asset (liability) recognized $ 9,202 $ (8,872) $ (10,474) $ (10,788) ========================================================== The amount recognized in the consolidated balance sheet consists of the following: Accrued benefit asset (liability) $ 9,202 $ (8,872) $ (10,474) $ (10,788) Additional minimum liability (25) (45) -- -- Intangible asset 25 45 -- -- ---------------------------------------------------------- Net amount of asset (liability) recognized $ 9,202 $ (8,872) $ (10,474) $ (10,788) ==========================================================
Pension Benefits Postretirement Benefits 2000 1999 1998 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- Weighted-average assumptions as of December 31 Discount rate 7.25% 7.75% 6.75% 7.25% 7.75% 6.75% Expected return on plan assets 9.70% 9.70% 9.70% N/A N/A N/A Average rate of compensation increase 4.00% 4.50% 5.00% N/A N/A N/A
Net periodic pension and postretirement benefit (income) costs from continuing operations for the plans, exclusive of enhanced early retirement and curtailment costs, includes the following components:
Pension Benefits Postretirement Benefits (In thousands) 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Components of net periodic benefit (income) cost Service cost $ 1,600 $ 1,614 $ 1,470 $ 75 $ 57 $ 54 Interest cost 3,729 8,512 8,288 481 417 532 Expected return on plan assets (5,624) (11,089) (10,712) -- -- -- Amortization of prior service cost 1,001 592 605 (56) (56) (56) Recognized net actuarial (gain) (76) -- (53) (232) (251) (136) Amortization of transition obligation 150 151 161 -- -- -- ------------------------------------------------------------------------- Net periodic benefit (income) cost $ 780 $ (220) $ (241) $ 268 $ 167 $ 394 =========================================================================
-35- 36 The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $2.8 million, $2.8 million, and $0, respectively, as of December 31, 2000 and $2.8 million, $2.7 million, and $0, respectively, as of December 31, 1999. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. The assumed health care cost trend rate was 10 percent for 2001 and ranges from 10 percent to 5 percent for future years. A one percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage (In thousands) Point Increase Point Decrease - ------------------------------------------------------------------------------------------------------- Effect on total of service and interest cost components $ 21 $ (19) Effect on accumulated postretirement benefit obligation $ 171 $ (153)
The Company recognized curtailment expenses of $.3 million relating to the sale of the photofinishing businesses in 1998. Approximately $2.8 million and $8.9 million of the accrued pension cost and $9.9 million and $10.2 million of the accrued postretirement benefits for 2000 and 1999, respectively, are included in "Other long-term liabilities" in the accompanying consolidated balance sheet. Pension assets of $12.0 million for 2000, are included in "Other assets" in the accompanying consolidated balance sheet. Additionally, approximately $.6 million of the accrued postretirement benefits for 2000 and 1999 are included in "Accrued expenses" in the accompanying consolidated balance sheet. The Company is in the process of liquidating a pension plan related primarily to the UK photofinishing business sold in 1998. At December 31, 2000, the projected benefit obligation and accumulated benefit obligation under the plan were $0 and the fair value of plan assets was $.9 million. In the first quarter, the Company recorded a pretax gain of $18.6 million associated with the purchase of non-participating annuity contracts from Principal Life Insurance Company to settle the Company's pension benefit obligation with respect to the retired salaried and hourly employees covered under its pension plans and receiving pension benefits as of December 1, 1999. INFORMATION ABOUT OPERATIONS Beginning with the second quarter of 2000, the Company realigned operating segments for financial reporting purposes due to the acquisition of Rittenhouse. The Company now has three reportable segments - (1) Imaging Supplies, (2) Specialty Paper Products, and (3) Label Products. The Imaging Supplies segment includes remanufactured laser cartridge and toner and developer products and, effective in the first quarter of 2000, the Company transferred responsibility for the cut-sheet paper product line to the Specialty Paper segment. The Label Products segment, formerly included in the Specialty Coated and Label Products segment, includes pressure sensitive laminated paper, entertainment tickets, stickers, retail shelf tags and thermosensitive label product lines. The Specialty Paper segment, which was also included in the Specialty Coated and Label Products segment, is now reported as a separate segment. The Specialty Paper segment's product scope includes thermal papers, bond papers, carbonless paper, specialty printed papers, such as ATM receipts and point-of-sale receipts, wide format papers, dry-gum papers, heat seal papers and ribbons. Historical segment data has been restated to reflect these changes. The Imaging Supplies segment produces and sells copier supplies (primarily toner and developer) to distributors, value-added resellers and end users. The Specialty Paper Products segment manufactures various converted paper products sold primarily to domestic converters and re-sellers, end users and private-label distributors. The Label Products segment manufactures pressure sensitive laminated paper, entertainment tickets, stickers, retail shelf tags and thermosensitive label product lines to merchants, converters and end-users. -36- 37 The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies" Note to the Consolidated Financial Statements. Segment data does not include restructuring and other unusual items, and does not allocate all corporate costs and assets to the divisions. The Company evaluates the performance of its segments and allocates resources to them based on pretax income before restructuring and other unusual items. The Specialty Paper Products segment is a major supplier of thermal roll stock to the Label Products segment. Eliminations represent sales between these business segments. Sales between segments and between geographic areas are generally priced at the lowest price offered to unaffiliated customers. The Company's reportable segments are strategic business units grouped by product class. They are managed separately because each business requires different technology and marketing strategies. The table below presents information about reported segments for the years ended December 31:
Net Sales From Pretax Income (Loss) From Continuing Operations Continuing Operations Identifiable Assets - ------------------------------------------------------------------------------------------------------------------------------------ (In millions) 2000 1999 1998 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ By Reportable Segment Imaging Supplies $ 27.9 $ 41.1 $ 44.3 $ (4.2) $ (1.6) $ (2.3) $ 16.3 $ 21.6 $ 21.2 Specialty Paper Products 138.8 66.3 62.9 7.5 2.6 2.6 54.5 19.8 21.7 Label Products 105.1 78.6 72.6 5.4 6.9 7.0 37.6 31.0 25.3 Reconciling Items: Eliminations (19.2) (15.4) (12.1) -- -- -- -- -- -- Other (1) .5 .2 .1 1.0 (.2) (.6) .7 .1 1.0 Corporate expenses and assets -- -- -- (14.4) (6.1) (4.9) 58.6 54.0 64.1 Pension settlement income -- -- -- 18.6 -- -- -- -- -- Restructuring and other unusual items -- -- -- (1.0) 1.3 (13.8) -- -- -- Discontinued operations -- -- -- -- -- -- 2.8 3.9 .8 - ------------------------------------------------------------------------------------------------------------------------------------ Consolidated $ 253.1 $ 170.8 $ 167.8 $ 12.9 $ 2.9 $ (12.0) $ 170.5 $ 130.4 $ 134.1 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Includes activity from operations which falls below the quantitative thresholds for a reportable segment. Capital expenditures and depreciation and amortization by reportable segment are set forth below for the years ended December 31:
Capital Expenditures Depreciation & Amortization - --------------------------------------------------------------------------------------------------------------- (In millions) 2000 1999 1998 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------- Imaging Supplies $ 3.1 $ 3.0 $ 1.1 $ 2.0 $ 1.9 $ 2.1 Specialty Paper Products 4.7 1.2 .9 2.7 1.9 2.2 Label Products 1.4 3.5 4.5 2.9 2.0 1.5 Reconciling Items: Other (1) -- -- -- -- .1 .2 Goodwill -- -- -- 1.1 -- -- Corporate .4 .2 .2 .6 .5 .8 - --------------------------------------------------------------------------------------------------------------- Consolidated $ 9.6 $ 7.9 $ 6.7 $ 9.3 $ 6.4 $ 6.8 - ---------------------------------------------------------------------------------------------------------------
(1) Includes activity from operations which falls below the quantitative thresholds for a reportable segment. -37- 38 The following is information by geographic area as of and for the years ended December 31:
Net Sales From Continuing Operations Long-Lived Assets (In millions) 2000 1999 1998 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------- By Geographic Area United States $ 251.8 $ 169.1 $ 166.9 $ 97.2 $ 40.4 $ 39.3 Europe 1.3 1.7 .9 -- -- .4 Reconciling Items: Discontinued Operations -- -- -- .8 .8 .8 Deferred tax assets -- -- -- .9 9.7 10.2 - ---------------------------------------------------------------------------------------------------------- Consolidated $ 253.1 $ 170.8 $ 167.8 $ 98.9 $ 50.9 $ 50.7 - ----------------------------------------------------------------------------------------------------------
Net sales from continuing operations by geographic area are based upon the geographic location from which the goods were shipped and not the customer location. QUARTERLY OPERATING RESULTS (UNAUDITED)
1st 2nd 3rd 4th (In millions, except per share data) Quarter Quarter Quarter Quarter Year - ---------------------------------------------------------------------------------------------------------------------------------- 2000(1) Net sales $44,010 $68,723 $73,310 $67,079 $253,122 Gross profit 8,922 15,373 14,031 12,439 50,765 Net income (loss)(2) 9,841 202 (1,035) (3,622) 5,386 Earnings (loss) per common share(2) 1.75 .04 (.18) (0.64) .95 Market price: High 10.31 9.00 10.13 8.25 10.31 Low 7.19 7.63 7.81 3.56 3.56 1999 Net sales $42,649 $42,573 $43,668 $41,954 $170,844 Gross profit 10,287 10,422 10,338 9,925 40,972 Income (loss) from continuing operations(3) 218 514 652 (1,804) (420) Loss from discontinued operations(4) -- -- -- (4,001) (4,001) Net income (loss)(3) (4) 218 514 652 (5,805) (4,421) Earnings (loss) per common share: Continuing operations(3) .04 .09 .12 (.32) (.07) Discontinued operations(4) -- -- -- (.71) (.70) Net income (loss)(3) (4) .04 .09 .12 (1.03) (.77) Market price: High 15.44 11.81 11.63 8.88 15.44 Low 11.50 9.63 8.88 6.56 6.56
(1) The Company acquired Rittenhouse on April 17, 2000, as described in the "Business Changes" Note. The operations of Rittenhouse have been included in the Company's quarterly operating results since the date of acquisition. -38- 39 (2) The first quarter includes a pretax gain of $18.6 million associated with the purchase of non-participating annuity contracts to settle the Company's pension benefit obligation with respect to the retired salaried and hourly employees covered under its pension plans and receiving pension benefits as of December 1, 1999. The first quarter also includes a pretax restructuring charge of $1.5 million related to the discontinuance of its remanufactured laser cartridge ("cartridge") product line. The third quarter includes unusual pretax income of $.1 million resulting from a reduction in the reserve established in the first quarter for the discontinued cartridge product line. The fourth quarter includes a tax adjustment of $2.5 million relating to the write-off of expired net loss carryforwards and for non-deductible goodwill resulting from the Company's decision in the fourth quarter to forego the treatment of the Rittenhouse acquisition as an asset purchase for tax purposes. The fourth quarter also includes net unusual pretax income of $.4 million consisting primarily of unusual income resulting from the reversal of a loss accrual relating to the settlement of a patent infringement lawsuit against the Company, partially offset by restructuring charges associated with workforce reductions at Corporate and in the Imaging Supplies segment. (3) The third quarter includes a net pretax restructuring charge of $.1 million, consisting of a restructuring charge associated with the Company's decision to cease manufacturing fax papers, partially offset by a gain resulting from the completion of the partial sale of the Company's Microsharp imaging technology. The fourth quarter includes unusual pretax income of $1.4 million resulting from an insurance settlement related to environmental matters. The fourth quarter also includes a tax charge of $2.1 million related to an increase in the Company's tax valuation allowance for state net operating loss carryforwards and the provision of a reserve for potential liabilities associated with open tax audits primarily related to an IRS notice received in the fourth quarter of 1999. (4) Represents a tax charge related to the provision of a reserve for potential liabilities associated with open tax audits. COMMON STOCK INFORMATION (UNAUDITED) The Company's stock is traded on the New York Stock Exchange under the trading symbol "NSH." At December 31, 2000, there were 1,200 record holders of the Company's common stock. RELATED PARTIES Rent expense incurred on property and equipment leases with various entities owned by a director and executive officer of the Company, and his affiliates, was $.3 million in 2000. There were no material related party transactions in 1999 and 1998. -39- 40 SCHEDULE II NASHUA CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (In Thousands)
Balance at Previous Balance at Description End of Year Additions Deductions End of Year - ----------- ----------- --------- ---------- ----------- DECEMBER 31, 2000: Allowance for doubtful accounts $ 1,327 $ 1,478(a) $(1,770)(b) $ 1,035 Valuation allowance on state net operating loss carryforwards 1,100 785 -- 1,885 DECEMBER 31, 1999: Allowance for doubtful accounts $ 866 $ 647(c) $ (186)(d) $ 1,327 Valuation allowance on state net operating loss carryforwards 300 800 -- 1,100 DECEMBER 31, 1998: Allowance for doubtful accounts $ 1,193 $ 176(c) $ (503)(d) $ 866 Valuation allowance on state net operating loss carryforwards 328 -- (28) 300
(a) Includes the impact of the Rittenhouse acquisition and amounts charged to costs and expenses. (b) Includes the impact of the Rittenhouse acquisition and accounts deemed uncollectible. (c) Includes amounts charged to costs and expenses. (d) Includes accounts deemed uncollectible. -40- 41 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NASHUA CORPORATION: We have audited the accompanying consolidated balance sheet of Nashua Corporation as of December 31, 2000, and the related consolidated statements of operations and retained earnings and of cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. The financial statements and schedule of the Company as of December 31, 1999 and 1998, were audited by other auditors whose report dated February 18, 2000, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nashua Corporation as of December 31, 2000, and the consolidated results of operations and retained earnings and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. ERNST & YOUNG LLP Manchester, New Hampshire February 26, 2001 -41- 42 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NASHUA CORPORATION: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and retained earnings and of cash flows present fairly, in all material respects, the financial position of Nashua Corporation and its subsidiaries at December 31, 1999, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 18, 2000 -42- 43 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NASHUA CORPORATION: Our audits of the consolidated financial statements referred to in our report dated February 18, 2000, appearing in this Annual Report Form 10-K also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Boston, Massachusetts February 18, 2000 -43- 44 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On March 15, 2000, the Company filed a report on Form 8-K with respect to a change in the Company's independent auditors. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS The information required by this Item with respect to directors will be included in the Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 8, 2001, and is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item with respect to executive officers is contained in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item will be included in the Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 8, 2001, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item with respect to directors will be included in the Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 8, 2001, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item with respect to directors will be included in the Company's definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 8, 2001, and is incorporated herein by reference. -44- 45 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are included in Item 8 of Part II of this Form 10-K: (1) Financial statements: Consolidated statements of operations and retained earnings for each of the three years ended December 31, 2000, 1999 and 1998 Consolidated balance sheets at December 31, 2000 and December 31, 1999 Consolidated statements of cash flows for each of the three years ended December 31, 2000, 1999 and 1998 Notes to consolidated financial statements Report of independent auditors (2) Financial statement schedule: Report of independent auditors on financial statement schedule Schedule II - Valuation and qualifying accounts for each of the three years ended December 31, 2000, 1999 and 1998 The financial statement schedule should be read in conjunction with the financial statements included in Item 8 of Part II of this Form 10-K. All other schedules have been omitted as they are not applicable, not required, or the information is included in the consolidated financial statements or notes thereto. (3) Exhibits: 3.01 Certificate of Incorporation, as amended. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference. 3.02* By-laws, as amended. 4.01 Revolving Credit and Term Loan Agreement entered into as of April 14, 2000 by and among the Company, Rittenhouse, L.L.C., Rittenhouse Paper Company, Fleet Bank-NH and LaSalle Bank, NA Exhibit to the Company's Form 8-K dated April 14, 2000 and incorporated herein by reference. 4.02 Amendment to the Revolving Credit and Term Loan Agreement as of October 23, 2000 by and among the Company, Rittenhouse, L.L.C., Rittenhouse Paper Company, Fleet National Bank and LaSalle Bank, NA Exhibit to the Company's Form 10-Q for the quarterly period ended September 29, 2000 and incorporated herein by reference. 4.03* Amendment to the Revolving Credit and Term Loan Agreement dated February 28, 2001 by and among the Company, Rittenhouse, L.L.C., Rittenhouse Paper Company, Fleet National Bank and LaSalle Bank, NA. +10.01 1987 Stock Option Plan. Exhibit to the Company's Proxy Statement dated March 24, 1987 and incorporated herein by reference. +10.02 Amendments to the 1987 Stock Option Plan effective as of April 28, 1989. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989 and incorporated herein by reference. +10.03 Amended 1996 Stock Incentive Plan effective April 13, 1999. Exhibit to the Company's Form 10-Q for the quarterly period ended April 2, 1999 and incorporated herein by reference. +10.04 1999 Shareholder Value Plan effective April 30, 1999. Exhibit to the Company's Form 10-Q for the quarterly period ended April 2, 1999 and incorporated herein by reference.
-45- 46 +10.05 Employment Agreement dated as of April 14, 2000 between the Company and Andrew B. Albert. Exhibit to the Company's Form 8-K dated April 18, 2000 and incorporated herein by reference. +10.06 Change of Control and Severance Agreement dated as of June 24, 1998 between the Company and John L. Patenaude. Exhibit to the Company's Form 10-Q for the quarterly period ended July 3, 1998 and incorporated herein by reference. +10.07 Change of Control and Severance Agreement dated as of June 24, 1998 between the Company and Joseph R. Matson. Exhibit to the Company's Form 10-Q for the quarterly period ended July 3, 1998 and incorporated herein by reference. +10.08* Change of Control and Severance Agreement dated as of December 15, 2000 between the Company and Robert S. Amrein. +10.09 Change of Control and Severance Agreement dated as of July 19, 1999 between the Company and John J. Ireland. Exhibit to the Company's Form 10-Q for the quarterly period ended October 1, 1999 and incorporated herein by reference. +10.10 Change of Control and Severance Agreement dated as of February 25, 2000 between the Company and Donna J. DiGiovine. Exhibit to the Company's Form 10-K for the year ended December 31, 1999 and incorporated herein by reference. +10.11 Management Incentive Plan dated as of March 1999. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference. +10.12* Form of Indemnification Agreement between the Company and its directors and executive officers. +10.13* Deferred Compensation Agreement dated as of December 23, 1996 between Rittenhouse Paper Company and Thomas R. Pagel. 10.14* Lease for corporate offices dated December 19, 1994. 11.01* Statement regarding Computation of Earnings Per Share and Common Equivalent Share. 21.01* Subsidiaries of the Registrant. 23.01* Consent of Ernst & Young LLP. 23.02* Consent of PricewaterhouseCoopers LLP. 24.01* Powers of Attorney.
* - Filed herewith. + - Identifies exhibits constituting management contracts or compensatory plans or other arrangements required to be filed as an exhibit to this Annual Report on Form 10-K. (4) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the three months ended December 31, 2000. -46- 47 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NASHUA CORPORATION Date: March 28, 2001 By /s/ John L. Patenaude -------------- -------------------------------- John L. Patenaude Vice President-Finance and Chief Financial Officer
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 following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/Andrew B. Albert Chairman, President and March 28, 2001 - --------------------------- Chief Executive Officer Andrew B. Albert (principal executive officer) /s/John L. Patenaude Vice President-Finance and March 28, 2001 - --------------------------- Chief Financial Officer John L. Patenaude (principal financial officer) /s/Joseph R. Matson Vice President, Corporate Controller March 28, 2001 - --------------------------- and Chief Accounting Officer Joseph R. Matson (principal accounting officer) * Director - --------------------------- Sheldon A. Buckler * Director - --------------------------- Avrum Gray * Director - --------------------------- Charles S. Hoppin * Director - --------------------------- John M. Kucharski * Director - --------------------------- David C. Miller, Jr. * Director - --------------------------- George R. Mrkonic, Jr. * Director - --------------------------- Peter J. Murphy * Director - --------------------------- James F. Orr III *By /s/ John L. Patenaude March 28, 2001 - ------------------------- John L. Patenaude Attorney-In-Fact
-47- EX-3.02 2 b38195ncex3-02.txt NASHUA BY LAWS AS AMENDED 1 EXHIBIT 3.02 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 2 -2- 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 for each such share of stock entitled to vote held by such stockholder, but no proxy shall be 3 -3- 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 provided, however, that, in the election of directors, if some but not all of the total number of directors to be elected receive a majority vote of the shares of stock entitled to vote held by stockholders present in person or by proxy, then the remaining number of directors to be elected, up to the total number of directors to be elected, shall be elected by a plurality of the votes of the shares of stock entitled to vote held by stockholders present in person or by proxy. 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 4 -4- 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. 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. 5 -5- 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 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 6 -6- 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 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 7 -7- 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. 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. 8 -8- 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. 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. 9 -9- 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. 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 10 -10- 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. 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. 11 -11- 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. 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. 3/2000 EX-4.03 3 b38195ncex4-03.txt AMMENDMENT TO THE REVOLVING CREDIT 1 EXHIBIT 4.03 Amendment to the Revolving Credit and Term Loan Agreement (Fleet Letterhead) February 28, 2001 Nashua Corporation 11 Trafalgar Square 2nd Floor Nashua, NH 03063 Rittenhouse Paper Company 250 South Northwest Highway Parkridge, IL 60068 Rittenhouse, L.L.C. 250 South Northwest Highway Parkridge, IL 60068 RE: FINANCIAL COVENANTS VIOLATION WAIVER Ladies and Gentlemen: Reference is hereby made to that certain Revolving Credit and Term Loan Agreement dated April 14, 2000 as amended by letter agreement dated October 23, 2000 (the "Credit Agreement") by and among Nashua Corporation ("Nashua"), Rittenhouse, L.L.C. ("Rittenhouse"), Rittenhouse Paper Company ("RPC") (Nashua, Rittenhouse and RPC are referred to individually as a "Borrower" and collectively as the "Borrowers") and Fleet National Bank (successor by merger to Fleet Bank-NH) ("Fleet"), as a Lender and as an Agent for itself and the other Lender, LaSalle Bank National Association ("LaSalle") and other lenders from time to time as a party thereto (collectively, the "Lenders"). Capitalized terms used herein which are not otherwise defined, shall have the meaning given to such terms in the Credit Agreement. The purpose of this correspondence is to set forth the terms and conditions of the Lenders' agreement to waive the Borrowers' violations of the Total Funded Debt to EBITDA Ratio and the Fixed Charge Coverage Ratio as set forth in Sections 8(b) and 8(c) in the Credit Agreement for the fourth quarter ending December 31, 2000. In consideration of the Lenders agreeing to waive the foregoing Total Funded Debt to EBITDA Ratio and the Fixed Charge Coverage Ratio violations for said fourth quarter, the Borrowers agree to pay a waiver fee in the amount of $169,500 upon execution of this Letter Agreement. Also, in consideration of said waivers, the Borrowers and the Lenders agree to amend the Credit Agreement and other Loan Documents as follows: 1. Section 2.1(a) of the Credit Agreement is hereby amended by deleting the phrase "Thirty Five Million Dollars ($35,000,000)" appearing three times in the first paragraph thereof and replacing said phrase with "Thirty Million Dollars ($30,000,000)". 2. Section 2.1(a) of the Credit Agreement is hereby further amended by deleting the amounts appearing in a portion of the grid under Revolving Loan Commitment for Fleet, LaSalle and Total and replacing them as follows: LENDER REVOLVING LOAN COMMITMENT Fleet $16,363,635 LaSalle $13,636,365 ----------- TOTAL $30,000,000 =========== 2 February 28, 2001 Page 2 The balance of the grid appearing in said Section 2.1(a) of the Credit Agreement shall remain unchanged. 3. Section 2.2(d) of the Credit Agreement is hereby amended by deleting the phrase "1.25%" and replacing said phrase with "2.25%". 4. Section 2.6 of the Credit Agreement is hereby generally amended to reflect that the applicable margins shall no longer be based upon Nashua's net income and that the pricing grid set forth in said Section is hereby deleted in its entirety and replaced with the following which shall be effective commencing January 1, 2001:
REVOLVER BASE TERM BASE REVOLVER LIBOR TERM LIBOR RATE MARGIN RATE MARGIN MARGIN MARGIN 1% 1-1/2% 3% 3-1/2%
5. Section 2.6(e) of the Credit Agreement is hereby amended by (a) deleting the phrase "$1,176,471 (being one seventeenth of the initial face amount of the Term Loan)" and replacing said phrase with: "$765,000"; and (b) adding the following at the end of said section: "In addition to the above mentioned quarterly principal payments, the Borrowers shall pay to the Agent for the pro rata benefit of the Lenders principal reduction payments in the amount of $2,900,000 on or before the earlier of June 30, 2001 or that date five days after the Borrowers receive their federal tax refund, and $4,100,000 on or before the earlier of September 30, 2001 or that date five days after the Borrowers receive their federal tax refund." 6. Pursuant to Section 6.10 of the Credit Agreement, the Lenders hereby consent to Andrew Albert serving as Chairman and Chief Executive Officer of Nashua. 7. Section 7.7 of the Credit Agreement is hereby amended by deleting the phrase "commencing January 1, 2001, in excess of $5,500,000 in the aggregate in any one fiscal year thereafter" appearing in the first sentence thereof and replacing said phrase with "commencing January 1, 2001, in excess of $3,500,000 in the aggregate in any one fiscal year thereafter". 8. Section 8 of the Credit Agreement is hereby amended by deleting it in its entirety and replacing it with the following: "ss.8. FINANCIAL COVENANTS. Each Borrower covenants and agrees that, so long as any Loan or Note is outstanding or the Lenders have any Available Revolving Commitment, the Borrowers shall maintain or achieve the following financial covenants subject to paragraph (a) hereof: (a) COVENANT CALCULATIONS. The covenants calculations in ss. 8(b) and ss. 8(c) below shall be based upon the Borrowers' consolidated financial statements. Such covenant compliance shall be tested quarterly as of the end of each fiscal quarter. For purposes of determining covenant compliance for ss. 8(b), EBITDA will be annualized and the covenant shall be calculated quarterly as of the end of each fiscal quarter on a going forward basis ramping to a trailing four quarter basis. For purposes of determining covenant compliance for ss. 8(c), said covenant shall be calculated quarterly as of the end of each fiscal quarter on a cumulative going forward basis ramping to a trailing four quarter basis. (b) TOTAL FUNDED DEBT/EBITDA. Tested as set forth in ss. 8(a), the ratio of the Borrowers' Total Funded Debt to EBITDA shall not exceed the following maximum levels for the period indicated: 3 February 28, 2001 Page 3
PERIOD MAXIMUM (EBITDA ANNUALIZED) LEVEL First Quarter 2001 5.0 to 1.0 First and Second Quarter 2001 4.5 to 1.0 First through Third Quarter 2001 3.5 to 1.0 Trailing Four Quarters at all times thereafter 3.0 to 1.0
"Total Funded Debt" means the aggregate amount of all interest bearing obligations of the Borrowers. "EBITDA" is the sum of the Borrowers' GAAP net income (minus extraordinary income) plus Interest Expense, taxes, depreciation and amortization. During the first quarter of 2001 only, unusual and restructuring charges up to $300,000 will be excluded from the calculation of this covenant. (c) FIXED CHARGE COVERAGE RATIO. Tested as set forth in ss. 8(a), the Borrowers shall maintain a Fixed Charge Coverage Ratio of at least 1.1 to 1.0. The Fixed Charge Coverage Ratio means the ratio of (I) the sum of the Borrowers' EBITDA minus the sum of unfinanced Capital Expenditures, dividends and cash taxes to (ii) the sum of Interest Expense and current maturities of long term debt paid during the measured period excluding payment from tax refunds enumerated in revised Section 2.6(e)." 9. On or before that date three (3) months from the date hereof, the Borrowers shall provide and grant the Lenders a first priority security interest in additional Collateral in the form of additional machinery and equipment of Nashua or Rittenhouse with an orderly liquidation value of at least Five Million Dollars ($5,000,000). The Borrowers agree to execute and deliver any and all documents that the Agent requests to carry out the foregoing, including, without limitation, an amendment to the Loan Documents, additional financing statements, an opinion of counsel (including Delaware counsel) and a detailed listing of said machinery and equipment, all of which must be in form and substance acceptable to the Lenders. 10. The Borrowers hereby grant to and confirm unto the Agent, as collateral agent for the Lenders, a security interest in or mortgage upon the Collateral described in the Security Documents to secure the Obligations, as they may be amended, modified, extended, restated or renewed from time to time, and the terms and conditions of said Security Documents are hereby ratified and confirmed. 11. The Notes shall be amended pursuant to Amendments to Revolving Credit Note and Amendments to Term Note in the forms attached hereto as Exhibit A. This Letter Agreement shall constitute an amendment to the terms and conditions of the Loan Documents as well as the Credit Agreement. All references to the Loan Documents, shall hereinafter refer to such documents as amended. The provisions of the Loan Documents, as modified herein, shall remain in full force and effect in accordance with their terms and are hereby ratified and confirmed. The Borrowers shall execute and deliver such additional documents and do such other acts as the Lenders may reasonably require to implement the intent of this Letter Agreement fully. The Borrowers shall pay all costs and expenses, including but not limited to, attorneys' fees, incurred by the Lenders in connection with this Letter Agreement. To the extent not otherwise paid from the Revolving Credit Loan, the Agent, at its option, but without any obligation to do so, may advance funds to pay any such costs and expenses that are the obligations of the Borrowers, and all such funds advanced shall bear interest at the highest rate provided in any Notes. This Letter Agreement may be executed in several counterparts by the Borrowers and the Lenders, each of which shall be deemed an original but all of which together shall constitute one and the same Agreement. 4 February 28, 2001 Page 4 If the foregoing is acceptable, please sign below to indicate your consent and agreement to the above. Very truly yours, FLEET NATIONAL BANK (successor by merger To FLEET BANK-NH), As Agent /s/ Diane A. Anderson By: /s/ John A. Hopper - -------------------------------- -------------------------------- Witness John A. Hopper, Its Duly Authorized Senior Vice President Agreed and consented to: NASHUA CORPORATION /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness /s/ John L. Patenaude , Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- RITTENHOUSE PAPER COMPANY /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness /s/ John L. Patenaude , Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- RITTENHOUSE, L.L.C. /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness /s/John L. Patenaude , Its Duly -------------------------------- Authorized V.P. Finance & CFO ----------------------
STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 15 day of March, 2001, by John A. Hopper, the duly authorized Senior Vice President, of FLEET NATIONAL BANK (successor by merger to Fleet Bank-NH), a national bank organized under the laws of the United States, on behalf of the same. /s/ Diane A. Brodeur ------------------------------------- Notary Public My Commission Expires: May 12, 2004 Notary Seal 5 February 28, 2001 Page 5 STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28TH day of February 2001, by John Patenaude, the duly authorized VP Finance & CFO of NASHUA CORPORATION, a Delaware corporation, on behalf of the same. /s/ Linda J. Madden ------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28TH day of February 2001, by John Patenaude, the duly authorized VP Finance & CFO of RITTENHOUSE PAPER COMPANY, an Illinois corporation, on behalf of the same. /s/ Linda J. Madden ------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28TH day of February 2001, by John Patenaude, the duly authorized VP Finance & CFO of RITTENHOUSE, L.L.C., a Illinois limited liability company, on behalf of the same. /s/ Linda J. Madden ------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal 6 February 28, 2001 Page 6 LENDER COUNTERPART SIGNATURE PAGE TO LETTER AGREEMENT AMONG NASHUA CORPORATION, RITTENHOUSE PAPER COMPANY AND RITTENHOUSE, L.L.C., AS BORROWERS AND FLEET NATIONAL BANK, AS AGENT Agreed and Consented to: LASALLE BANK NATIONAL ASSOCIATION, As Lender By: /s/ Brian Sullivan - -------------------------------- ------------------------------------------ Witness Brian Sullivan , Its Duly -------------------------------- Authorized Assistant Vice President -------------------------------- STATE OF ILLINOIS COUNTY OF COOK The foregoing instrument was acknowledged before me this 14 day of March, 2001, by Brian L. Sullivan, the duly authorized Asst. Vice President, of LaSalle Bank National Association, a national banking association, on behalf of the same. /s/ Effie Dale Scott --------------------------------------------- Notary Public My Commission Expires: March 24, 2003 Notary Seal 7 February 28, 2001 Page 7 LENDER COUNTERPART SIGNATURE PAGE TO LETTER AGREEMENT AMONG NASHUA CORPORATION, RITTENHOUSE PAPER COMPANY AND RITTENHOUSE, L.L.C., AS BORROWERS AND FLEET NATIONAL BANK, AS AGENT Agreed and Consented to: FLEET NATIONAL BANK (successor by merger To FLEET BANK-NH), as Lender /s/ Diane A. Brodeur By: /s/ John A. Hopper - -------------------------------- ---------------------------------------- Witness John A. Hopper, Its Duly Authorized Senior Vice President STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 15 day of March, 2001, by John A. Hopper, the duly authorized Senior Vice President, of FLEET NATIONAL BANK (successor by merger to Fleet Bank-NH), a national bank organized under the laws of the United States, on behalf of the same. /s/ Diane A. Brodeur ---------------------------------------- Notary Public My Commission Expires: May 12, 2004 Notary Seal 8 EXHIBIT 4.03 (continued) AMENDMENT TO TERM NOTE THIS AMENDMENT (the "Amendment"), is made as of the 28th day of February, 2001, by and among LASALLE BANK, NATIONAL ASSOCIATION, a national banking association with a principal place of business at 135 LaSalle Street, Chicago, IL 60603 (the "Lender") and NASHUA CORPORATION, a Delaware corporation with its principal place of business at 11 Trafalgar Square, Nashua, New Hampshire 03063, RITTENHOUSE PAPER COMPANY, an Illinois corporation with a principal place of business at 250 South Northwest Highway, Parkridge, Illinois 60068 and RITTENHOUSE, L.L.C., an Illinois limited liability company with a principal place of business at 250 South Northwest Highway, Parkridge, Illinois 60068 (collectively, the "Borrower"). W I T N E S S E T H: WHEREAS, the Borrower, the Lender, Fleet National Bank, as agent, and certain other Lenders entered into a Revolving Credit and Term Loan Agreement dated April 14, 2000, as amended (the "Credit Agreement"), providing for loans from the Lender to the Borrower and have executed certain documentation in connection therewith (the "Loan Documents"); WHEREAS, the Lender and the Borrower have agreed to amend certain provisions of the Term Note dated April 14, 2000 made payable by the Borrower to the Lender (the "Term Note"), issued pursuant to the Credit Agreement as more fully set forth below. In consideration of One Dollar ($1.00) and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Lender and the Borrower hereby agree as follows: 1. AMENDMENT TO TERM NOTE. The terms of the Term Note are hereby amended by adding the following sentence to the first paragraph thereof immediately after the phrase "in seventeen (17) equal consecutive quarterly payments as provided in the Credit Agreement": "In addition to the foregoing quarterly principal payments, the Borrower promises to make two principal reduction payments as more fully set forth in Section 2.6(c) of the Credit Agreement". 2. COLLATERAL, ETC. The Loan Documents and the Collateral, as such term is defined in the Credit Agreement, shall continue to secure the payment of the Term Note, as hereby modified. 3. CONTINUING EFFECT. Except as modified herein, the provisions of the Term Note remain in full force and effect in accordance with their terms, which are hereby ratified and confirmed. All references to the Term Note in the Loan Documents shall be deemed to refer to the Term Note, as amended. 4. COUNTERPARTS. This Amendment may be executed in several counterparts by the Borrower and the Lender, each of which shall be deemed an original but all of which together shall constitute one and the same Agreement. 9 Page 2 Executed as of the date first above written. NASHUA CORPORATION /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------ Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO --------------------- RITTENHOUSE PAPER COMPANY /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO --------------------- RITTENHOUSE, L.L.C. /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- 10 Page 3 Agreed and consented to: LASALLE BANK, NATIONAL ASSOCIATION By: /s/ Brian Sullivan - -------------------------------- ------------------------------------------ Witness Brian Sullivan, Its Duly -------------- Authorized Assistant Vice President --------------------------- STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of NASHUA CORPORATION, a Delaware corporation, on behalf of the same. /s/ Linda J. Madden --------------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of RITTENHOUSE PAPER COMPANY, an Illinois corporation, on behalf of the same. /s/ Linda J. Madden --------------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal 11 Page 4 STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of RITTENHOUSE, L.L.C., an Illinois limited liability company, on behalf of the same. /s/ Linda J. Madden --------------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF ILLINOIS COUNTY OF COOK The foregoing instrument was acknowledged before me this 14 day of March, 2001, by Brian L. Sullivan, the duly authorized Asst. Vice President, of LaSalle Bank National Association, a national banking association, on behalf of the same. /s/ Effie Dale Scott --------------------------------------------- Notary Public My Commission Expires: March 24, 2003 Notary Seal 12 EXHIBIT 4.03 (continued) AMENDMENT TO TERM NOTE THIS AMENDMENT (the "Amendment"), is made as of the 28th day of February, 2001, by and among FLEET NATIONAL BANK (successor by merger to Fleet Bank-NH), a national bank organized under the laws of the United States with a principal place of business at 1155 Elm Street, Manchester, New Hampshire 03101 (the "Lender") and NASHUA CORPORATION, a Delaware corporation with its principal place of business at 11 Trafalgar Square, Nashua, New Hampshire 03063, RITTENHOUSE PAPER COMPANY, an Illinois corporation with a principal place of business at 250 South Northwest Highway, Parkridge, Illinois 60068 and RITTENHOUSE, L.L.C., an Illinois limited liability company with a principal place of business at 250 South Northwest Highway, Parkridge, Illinois 60068 (collectively, the "Borrower"). W I T N E S S E T H: WHEREAS, the Borrower, the Lender, Fleet National Bank, as agent, and certain other Lenders entered into a Revolving Credit and Term Loan Agreement dated April 14, 2000, as amended (the "Credit Agreement"), providing for loans from the Lender to the Borrower and have executed certain documentation in connection therewith (the "Loan Documents"); WHEREAS, the Lender and the Borrower have agreed to amend certain provisions of the Term Note dated April 14, 2000 made payable by the Borrower to the Lender (the "Term Note"), issued pursuant to the Credit Agreement as more fully set forth below. In consideration of One Dollar ($1.00) and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Lender and the Borrower hereby agree as follows: 1. AMENDMENT TO TERM NOTE. The terms of the Term Note are hereby amended by adding the following sentence to the first paragraph thereof immediately after the phrase "in seventeen (17) equal consecutive quarterly payments as provided in the Credit Agreement": "In addition to the foregoing quarterly principal payments, the Borrower promises to make two principal reduction payments as more fully set forth in Section 2.6(c) of the Credit Agreement". 2. COLLATERAL, ETC. The Loan Documents and the Collateral, as such term is defined in the Credit Agreement, shall continue to secure the payment of the Term Note, as hereby modified. 3. CONTINUING EFFECT. Except as modified herein, the provisions of the Term Note remain in full force and effect in accordance with their terms, which are hereby ratified and confirmed. All references to the Term Note in the Loan Documents shall be deemed to refer to the Term Note, as amended. 4. COUNTERPARTS. This Amendment may be executed in several counterparts by the Borrower and the Lender, each of which shall be deemed an original but all of which together shall constitute one and the same Agreement. 13 Page 2 Executed as of the date first above written. NASHUA CORPORATION /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- RITTENHOUSE PAPER COMPANY /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- RITTENHOUSE, L.L.C. /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- 14 Page 3 Agreed and consented to: FLEET NATIONAL BANK /s/ Diane A. Brodeur By: /s/ John A. Hopper - ------------------------------- ------------------------------------- Witness John A. Hopper, Its Duly Authorized Senior Vice President STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of NASHUA CORPORATION, a Delaware corporation, on behalf of the same. /s/ Linda J. Madden ---------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of RITTENHOUSE PAPER COMPANY, an Illinois corporation, on behalf of the same. /s/ Linda J. Madden ---------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal 15 Page 4 STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of RITTENHOUSE, L.L.C., an Illinois limited liability company, on behalf of the same. /s/ Linda J. Madden ---------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 15 day of March, 2001, by John A. Hopper, the duly authorized Senior Vice President, of FLEET NATIONAL BANK (successor by merger to Fleet Bank-NH), a national bank organized under the laws of the United States, on behalf of the same. /s/ Diane A. Brodeur ---------------------------------------- Notary Public My Commission Expires: May 12, 2004 Notary Seal 16 EXHIBIT 4.03 (continued) AMENDMENT TO REVOLVING CREDIT NOTE THIS AMENDMENT (the "Amendment"), is made as of the 28th day of February, 2001, by and among LASALLE BANK, NATIONAL ASSOCIATION, a national banking association with a principal place of business at 135 LaSalle Street, Chicago, IL 60603 (the "Lender") and NASHUA CORPORATION, a Delaware corporation with its principal place of business at 11 Trafalgar Square, Nashua, New Hampshire 03063, RITTENHOUSE PAPER COMPANY, an Illinois corporation with a principal place of business at 250 South Northwest Highway, Parkridge, Illinois 60068 and RITTENHOUSE, L.L.C., an Illinois limited liability company with a principal place of business at 250 South Northwest Highway, Parkridge, Illinois 60068 (collectively, the "Borrower"). W I T N E S S E T H: WHEREAS, the Borrower, the Lender, Fleet National Bank, as agent, and certain other Lenders entered into a Revolving Credit and Term Loan Agreement dated April 14, 2000, as amended (the "Credit Agreement"), providing for loans from the Lender to the Borrower and have executed certain documentation in connection therewith (the "Loan Documents"); WHEREAS, the Lender and the Borrower have agreed to amend certain provisions of the Revolving Credit Note dated April 14, 2000 made payable by the Borrower to the Lender (the "Revolving Credit Note"), issued pursuant to the Credit Agreement as more fully set forth below. In consideration of One Dollar ($1.00) and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Lender and the Borrower hereby agree as follows: 1. AMENDMENT TO REVOLVING CREDIT NOTE. The terms of the Revolving Credit Note are hereby amended as follows: (a) The amount of "$15,909,090" in the upper left hand corner of page 1 of the Revolving Credit Note is hereby deleted and replaced with "$13,636,365". (b) The amount "$15,909,090" appearing in the twelfth line of the first paragraph of page 1 of the Revolving Credit Note is hereby deleted and replaced with "$13,636,365". (c) The amount "Fifteen Million Nine Hundred Nine Thousand Ninety Dollars ($15,909,090)" appearing in the first and second lines of the last paragraph of the Revolving Credit Note is hereby deleted and replaced with "Sixteen Million Three Hundred Sixty Three Thousand Six Hundred Thirty Five Dollars ($16,363,635)". 2. COLLATERAL, ETC. The Loan Documents and the Collateral, as such term is defined in the Credit Agreement, shall continue to secure the payment of the Revolving Credit Note, as hereby modified. 3. CONTINUING EFFECT. Except as modified herein, the provisions of the Revolving Credit Note remain in full force and effect in accordance with their terms, which are hereby ratified and confirmed. All references to the Revolving Credit Note in the Loan Documents shall be deemed to refer to the Revolving Credit Note, as amended. 4. COUNTERPARTS. This Amendment may be executed in several counterparts by the Borrower and the Lender, each of which shall be deemed an original but all of which together shall constitute one and the same Agreement. 17 Page 2 Executed as of the date first above written. NASHUA CORPORATION /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- RITTENHOUSE PAPER COMPANY /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- --------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- RITTENHOUSE, L.L.C. /s/ John W. Marchant By: /s/ John L. Patenaude - -------------------------------- ------------------------------------- Witness John L. Patenaude, Its Duly -------------------------------- Authorized V.P. Finance & CFO ---------------------- 18 Page 3 Agreed and consented to: LASALLE BANK, NATIONAL ASSOCIATION By: /s/ Brian Sullivan - -------------------------------- ------------------------------------------ Witness Brian Sullivan, Its Duly -------------- Authorized Assistant Vice President --------------------------- STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of NASHUA CORPORATION, a Delaware corporation, on behalf of the same. /s/ Linda J. Madden --------------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of RITTENHOUSE PAPER COMPANY, an Illinois corporation, on behalf of the same. /s/ Linda J. Madden --------------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal 19 Page 4 STATE OF NEW HAMPSHIRE COUNTY OF HILLSBOROUGH The foregoing instrument was acknowledged before me this 28th day of February, 2001, by John Patenaude, the duly authorized Vice President Finance and CFO of RITTENHOUSE, L.L.C., an Illinois limited liability company, on behalf of the same. /s/ Linda J. Madden --------------------------------------------- Notary Public My Commission Expires: April 29, 2003 Notary Seal STATE OF ILLINOIS COUNTY OF COOK The foregoing instrument was acknowledged before me this 14 day of March, 2001, by Brian L. Sullivan, the duly authorized Asst. Vice President, of LaSalle Bank National Association, a national banking association, on behalf of the same. /s/ Effie Dale Scott --------------------------------------------- Notary Public My Commission Expires: March 24, 2003 Notary Seal EX-10.08 4 b38195ncex10-08.txt CHANGE OF CONTROL AND SEVERANCE AGREEMENT 12/15/00 1 EXHIBIT 10.08 CHANGE OF CONTROL AND SEVERANCE AGREEMENT AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the "Company") and ROBERT S. AMREIN (the "Executive"), dated as of the 15th day of December, 2000. 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. 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 more than 50% 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 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. (b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the Executive shall receive 4 -4- 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. (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, 5 -5- 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 Company and its affiliated companies. 5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon the 6 -6- 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 (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. 7 -7- (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 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 8 -8- days of the Date of Termination. In addition, the Executive's estate or designated beneficiaries shall be entitled to receive the Executive's Annual Base Salary for 12 months; PROVIDED, HOWEVER, that such payments of Annual Base Salary shall be reduced by any survivor benefits paid to the Executive's estate or designated beneficiary under the Retirement Plan. Anything in this Agreement to the contrary notwithstanding, the Executive's estate and family shall be entitled to receive benefits at least equal to the most favorable benefits provided generally by the Company and any of its affiliated companies to the estates and surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect generally with respect to other peer executives and their estates and families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death generally with respect to other peer executives of the Company and its affiliated companies and their families. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations. All Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. In addition, the Executive shall be entitled to receive the Executive's Annual Base Salary for the balance of the Employment Period; PROVIDED, HOWEVER, that such payments of Annual Base Salary shall be reduced by any benefits paid to the Executive under the Retirement Plan by reason of Disability. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. If the Executive terminates employment during the Employment Period other than for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. (d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability, or 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: 9 -9- A. all Accrued Obligations; and B. the sum of (i) Annual Base Salary and (ii) the Highest Annual Bonus; and C. a lump-sum retirement benefit equal to the difference between (a) the actuarial equivalent of the benefit under the Nashua Corporation Retirement Plan for Salaried Employees (the "Retirement Plan") and any supplemental and/or excess retirement plan providing benefits for the Executive (the "SERP") which the Executive would receive if the Executive's employment continued at the compensation level provided for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for the remainder of the Employment Period, assuming for this purpose that all accrued benefits are fully vested, and (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP; for purposes of determining the amount payable pursuant to this Section 6(d)(i)C the accrual formulas and actuarial assumptions utilized shall be no less favorable than those in effect with respect to the Retirement Plan and the SERP during the 90-day period immediately prior to the Effective Date. 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. 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. 10 -10- 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 any and all 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) and 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 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. The Release shall also contain, at a minimum, the following language: The Executive acknowledges that he has been given twenty-one (21) days to consider the terms of this Release and that the Company advised him to consult with an attorney of his own choosing prior to signing this Release. The Executive may revoke this Release for a period of seven (7) days after the execution of the Release and the Release shall not be effective or enforceable until the expiration of this seven (7) day revocation period. At the same time, the Company shall execute and deliver a Release to the Executive as follows: The Company hereby fully, forever, irrevocably and unconditionally releases, remises and discharges the Executive from any and all claims which it ever had or now has against the Executive, other than for intentional harmful acts. 11 -11- 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 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. 12 -12- (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: Robert S. Amrein 12 Queensway Circle Nashua, NH 03062 IF TO THE COMPANY: Nashua Corporation 11 Trafalgar Square, 2nd Floor Nashua, NH 03063 Attention: Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof or the failure to assert any right the Executive may have hereunder, including, without limitation, the right to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver of such provision or right or any other provision or right thereof. (f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. The Executive and the Company acknowledge that 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 ----------------------------------- ---------------------------------- Chief Executive Officer Name: Robert S. Amrein EX-10.12 5 b38195ncex10-12.txt FORM OF INDEMNIFICATION AGREEMENT 1 EXHIBIT 10.12 INDEMNIFICATION AGREEMENT This Agreement is made as of the ____ day of ________ 20__, by and between NASHUA CORPORATION, a Delaware corporation (the "Corporation"), and _____________ ("Indemnitee"), a director or officer of the Corporation. WHEREAS, it is essential to the Corporation to retain and attract as directors and officers the most capable persons available, and WHEREAS, the substantial increase in corporate litigation subjects directors and officers to expensive litigation risks at the same time that the availability of directors' and officers' liability insurance has been severely limited, and WHEREAS, it is now and has always been the express policy of the Corporation to indemnify its directors and officers so as to provide them with the maximum possible protection permitted by law, and WHEREAS, Indemnitee does not regard the protection available under the Corporation's Certificate of Incorporation and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as a director or officer without adequate protection, and WHEREAS, the Corporation desires Indemnitee to serve, or continue to serve, as a director or officer of the Corporation. NOW THEREFORE, the Corporation and Indemnitee do hereby agree as follows: 1. AGREEMENT TO SERVE. Indemnitee agrees to serve or continue to serve as a director or officer of the Corporation for so long as Indemnitee is duly elected or appointed or until such time as Indemnitee tenders Indemnitee's resignation in writing. 2. DEFINITIONS. As used in this Agreement: (a) The term "Proceeding" shall include any threatened, pending or completed action, suit, arbitration, alternative dispute resolution proceeding, administrative hearing or other proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, and any appeal therefrom. (b) The term "Corporate Status" shall mean the status of a person who is or was a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, trustee, member, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise. (c) The term "Expenses" shall include, without limitation, attorneys' fees, retainers, court costs, transcript costs, fees and expenses of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and other disbursements or expenses of the types customarily incurred in connection with investigations, judicial or administrative 2 proceedings or appeals, but shall not include the amount of judgments, fines or penalties against Indemnitee or amounts paid in settlement in connection with such matters. (d) References to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Agreement. 3. INDEMNIFICATION IN THIRD-PARTY PROCEEDINGS. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 3 if Indemnitee was or is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Corporation to procure a judgment in its favor) by reason of the Indemnitee's Corporate Status or by reason of any action alleged to have been taken or omitted in connection therewith, against all Expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal Proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal Proceeding, had reasonable cause to believe that his conduct was unlawful. 4. INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 4 if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the Indemnitee's Corporate Status or by reason of any action alleged to have been taken or omitted in connection therewith, against all Expenses and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding, if he acted in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Paragraph 4 in respect of any claim, issue, or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as the Court of Chancery or such other court shall deem proper. 5. EXCEPTIONS TO RIGHT OF INDEMNIFICATION. Notwithstanding anything to the contrary in this Agreement, except as set forth in Paragraph 10, the Corporation shall not indemnify the Indemnitee in connection with a Proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. Notwithstanding anything to the contrary in this Agreement, the Corporation shall not indemnify the Indemnitee to the extent the Indemnitee is reimbursed from the proceeds of -2- 3 insurance, and in the event the Corporation makes any indemnification payments to the Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of insurance, the Indemnitee shall promptly refund such indemnification payments to the Corporation to the extent of such insurance reimbursement. 6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any Proceeding or any claim, issue or matter therein is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or NOLO CONTENDERE by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto. 7. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any Proceeding for which indemnity will or could be sought by him and provide the Corporation with a copy of any summons, citation, subpoena, complaint, indictment, information or other document relating to such Proceeding with which he is served. With respect to any Proceeding of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Paragraph 7. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Agreement. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. The Corporation shall not be required to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without its written consent. The Corporation shall not settle any Proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Corporation nor the Indemnitee will unreasonably withhold their consent to any proposed settlement. 8. ADVANCEMENT OF EXPENSES. Subject to the provisions of Paragraph 9 below, in the event that the Corporation does not assume the defense pursuant to Paragraph 7 of this Agreement of any Proceeding to which the Indemnitee was or is a party or is threatened to be made a party by reason of his Corporate Status or by reason of any action alleged to have been taken or omitted in connection therewith and of which the Corporation receives notice under this Agreement, any Expenses incurred by the Indemnitee or on his behalf in defending such Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding; PROVIDED, HOWEVER, that the payment of such -3- 4 Expenses incurred by the Indemnitee or on his behalf in advance of the final disposition of such Proceeding shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Agreement. Such undertaking shall be accepted without reference to the financial ability of the Indemnitee to make repayment. 9. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or advancement of Expenses pursuant to Paragraphs 3, 4, 6 or 8 of this Agreement, Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification or advancement of Expenses. Any such indemnification or advancement of Expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Paragraphs 3, 4 or 8 the Corporation determines within such 60-day period that such Indemnitee did not meet the applicable standard of conduct set forth in Paragraph 3 or 4, as the case may be. Such determination, and any determination that advanced Expenses must be repaid to the Corporation, shall be made in each instance (a) by a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the Proceeding ("disinterested directors"), whether or not a quorum, (b) by a committee of disinterested directors designated by a majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by applicable law, be regular legal counsel to the Corporation) in a written opinion to the Board, or (d) by the stockholders. 10. REMEDIES. The right to indemnification or advancement of Expenses as provided by this Agreement shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Paragraph 9. Unless otherwise required by law, the burden of proving that indemnification is not appropriate shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Paragraph 9 that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. Indemnitee's expenses (of the type described in the definition of "Expenses" in Paragraph 2(c)) reasonably incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such Proceeding shall also be indemnified by the Corporation. 11. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Expenses, judgments, fines, penalties or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any Proceeding but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such Expenses, judgments, fines, penalties or amounts paid in settlement to which Indemnitee is entitled. 12. SUBROGATION. In the event of any payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights. -4- 5 13. TERM OF AGREEMENT. This Agreement shall continue until and terminate upon the later of (a) six years after the date that Indemnitee shall have ceased to serve as a director or officer of the Corporation or, at the request of the Corporation, as a director, officer, partner, trustee, member, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise or (b) the final termination of all Proceedings pending on the date set forth in clause (a) in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Paragraph 10 of this Agreement relating thereto. 14. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and advancement of Expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under the Certificate of Incorporation, the By-Laws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of Delaware, any other law (common or statutory), or otherwise, both as to action in his official capacity and as to action in another capacity while holding office for the Corporation. Nothing contained in this Agreement shall be deemed to prohibit the Corporation from purchasing and maintaining insurance, at its expense, to protect itself or the Indemnitee against any expense, liability or loss incurred by it or him in any such capacity, or arising out of his status as such, whether or not the Indemnitee would be indemnified against such expense, liability or loss under this Agreement; provided that the Corporation shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. 15. NO SPECIAL RIGHTS. Nothing herein shall confer upon Indemnitee any right to continue to serve as an officer or director of the Corporation for any period of time or at any particular rate of compensation. 16. SAVINGS CLAUSE. If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments, fines, penalties and amounts paid in settlement with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the fullest extent permitted by applicable law. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute the original. 18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of the estate, heirs, executors, administrators and personal representatives of Indemnitee. 19. HEADINGS. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 20. MODIFICATION AND WAIVER. This Agreement may be amended from time to time to reflect changes in Delaware law or for other reasons. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof nor shall any such waiver constitute a continuing waiver. -5- 6 21. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been given (i) when delivered by hand or (ii) if mailed by certified or registered mail with postage prepaid, on the third day after the date on which it is so mailed: -6- 7 (a) if to the Indemnitee, to: ------------------- ------------------- ------------------- (b) if to the Corporation, to: Nashua Corporation 11 Trafalgar Square, 2nd Floor Nashua, New Hampshire 03063 Attention: Chief Executive Officer or to such other address as may have been furnished to Indemnitee by the Corporation or to the Corporation by Indemnitee, as the case may be. 22. APPLICABLE LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. 23. ENFORCEMENT. The Corporation expressly confirms and agrees that it has entered into this Agreement in order to induce Indemnitee to continue to serve as a director or officer of the Corporation, and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity. 24. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supercedes all prior agreements, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. For avoidance of doubt, the parties confirm that the foregoing does not apply to or limit the Indemnitee's rights under Delaware law or the Corporation's Certificate of Incorporation or By-Laws. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. ATTEST: NASHUA CORPORATION By: By: ----------------------------- ------------------------------- Name: Name: Title: Title: INDEMNITEE ---------------------------------- Name: -7- EX-10.13 6 b38195ncex10-13.txt DEFFERED COMPENSATION AGREEMENT 1 EXHIBIT 10.13 Deferred Compensation Agreement for Thomas R. Pagel Rittenhouse Paper Company (the "Company") hereby agrees to pay Thomas R. Pagel ("Pagel") as deferred compensation on August 31, 2005, $230,000 and any unpaid income credits in his deferred compensation account. The deferred compensation account shall be credited with income quarterly on each March 31, June 30, September 30 and December 31 in each year commencing December 31, 1996 at a per annum rate of interest equal to the Applicable Rate (as defined below) which interest credit shall be paid out quarterly on each such date. The "Applicable Rate" shall mean on any date as to which income credits are to be calculated the per annum rate applicable to borrowings from the principal revolving credit facility of the Company on such day, or if no such facility shall then exist, the principal revolving credit facility of any successor to substantially all of the assets of the Company (a "Successor") on such day, or if no such facility shall then exist, the prime lending rate announced by Harris Trust & Savings Bank is applicable on such day. Interest shall be computed on the basis of the number of days actually elapsed and a 365- or 366-day year, as applicable. The Company may, from time to time, at its discretion, accelerate the date of payment of all or any portion of this deferred compensation in its sole exclusive discretion. The obligations of the Company and/or any Successor to make any payment hereunder shall be subordinate and junior to all principal and interest on any Indebtedness (as defined below) of the Company and/or any Successor. Upon the maturity of any Indebtedness of the Company and/or any Successor by lapse of time, acceleration or otherwise, then all principal of and interest on all such matured Indebtedness shall first be paid in full before any payment on account of the obligations of the Company hereunder is made by the Company and/or any Successor hereunder. In the event of insolvency, bankruptcy, liquidation, reorganization or other similar proceedings, or any receivership proceedings in connection therewith, relative to the Company and/or any Successor, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up the Company and/or any Successor, whether or not involving insolvency or bankruptcy proceedings, then all principal of and interest on all Indebtedness of the Company and/or any Successor shall have been paid in full before any payment on account of the Company's obligations hereunder. Furthermore, Pagel irrevocably agrees to such additional terms of subordination as requested by any lender (or other party providing non-equity financing) to the Company and/or any Successor, any of their respective affiliates or any holder of 10% or more of the then outstanding shares and/or interests of the Company and/or any Successor. For the purposes hereof, "Indebtedness" of an entity shall mean the principal of (and premiums, if any) and unpaid interest on: (i) indebtedness of such entity which is for money borrowed from others; (ii) indebtedness guaranteed, directly or indirectly, in any manner by such entity, or in effect guaranteed, directly or indirectly, by such entity through an agreement, contingent or otherwise, to supply funds to or in any manner invest in the debtor or to purchase indebtedness, or to purchase property or services primarily for the purpose of enabling the debtor to make payment of the indebtedness or of assuring the owner of the indebtedness against loss; (iii) all indebtedness secured by any mortgage, lien, pledge, charge or other encumbrance upon property owned by such corporation, even if such entity has not in any manner become liable for the payment of such indebtedness; (iv) all obligations of such entity created or arising under any conditional sale, lease or other title agreement with respect to property acquired by such entity even though the rights and remedies of the seller, lessor or lender under such agreement or lease in the event of default are limited to repossession or sale of such property to the extent that such obligations are required to be capitalized for financial accounting purposes in accordance with generally accepted accounting principles, consistently applied; and 2 (v) renewals, extensions and refunding of any such indebtedness. Pagel's rights under this Deferred Compensation Agreement shall not be transferable voluntarily or involuntarily and shall not be subject to pledge or any claim of its creditors. Any purported transfer of this interest shall be void. This Deferred Compensation Agreement shall not be construed as conferring any rights to continued employment. Employer's rights with respect to the continuation or termination of Pagel's employment shall be unchanged by this Deferred Compensation Agreement. Agreed to this 23rd day of December, 1996. Rittenhouse Paper Company By: /s/ Simon Blattner ----------------------------------- Its: Vice President /s/ Thomas R. Pagel ----------------------------------- Thomas R. Pagel EX-10.14 7 b38195ncex10-14.txt LEASE FOR THE CORPORATE OFFICE 12/23/1996 1 EXHIBIT 10.14 LEASE FOR CORPORATE OFFICES DATE OF LEASE EXECUTION: DECEMBER 19, 1994 (To be Completed by Landlord) ARTICLE I REFERENCE DATA 1.1 SUBJECTS REFERRED TO: Each reference in this Lease to any of the following subjects shall be construed to incorporate the data stated for that subject in this Section 1.1: LANDLORD: SUN LIFE ASSURANCE COMPANY OF CANADA (US) MANAGING AGENT: SPAULDING AND SLYE SERVICES LIMITED PARTNERSHIP LANDLORD'S & MANAGING AGENT'S ADDRESS: c/o Spaulding and Slye Services Limited partnership 25 Burlington Mall Road Burlington, MA 01803 Attention: Treasurer LANDLORD'S REPRESENTATIVE: ANNE E. CANNIFF TENANT: NASHUA CORPORATION TENANT'S ADDRESS (For Notice and Billing): 11 TRAFALGAR SQUARE, NASHUA, NH 03061 TENANT REPRESENTATIVE: COUNSEL, NASHUA CORPORATION/cc WALTER REMEIS BUILDING ADDRESS: 11 TRAFALGAR SQUARE, NASHUA, NEW HAMPSHIRE RENTABLE FLOOR AREA OF TENANT'S SPACE: 17,102 Square Feet (r.s.f.) approximately TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 32,923 Square Feet (r.s.f.) approx. TENANT'S DESIGN COMPLETION DATA: 21 DAYS AFTER LEASE EXECUTION SCHEDULED TERM COMMENCEMENT DATE: MAY 15, 1995 TERM EXPIRATION DATE: MAY 30, 2005 APPROXIMATE TERM: TEN (10) YEARS ANNUAL BASE RENT: $13.00* Per Rentable Square Foot (p.r.s.f.) ANNUAL ESTIMATED OPERATING COSTS: ** ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE (included in Annual Rent):N/A ANNUAL RENT: $222,326 (Subject to an Annual Adjustment as provided in Article IV, as adjusted per Exhibit B, Rider to Lease), computed as follows: ANNUAL RENT: $13.00 Annual Base Rent (p.r.s.f.) + **$ Annual Estimated Operating Costs (p.r.s.f) + $N/A Annual Estimated Electrical Costs to Tenant's Space (p.r.s.f) + N/A Other (p.r.s.f.) = $13.00 Total Rate (p.r.s.f) X 17,102 rentable square feet = $222,326 Annual Rent ($18,527.17 per month, subject to Adjustment per Exhibit B, Item 1.) FIRST FISCAL YEAR FOR TENANT'S PAYING OPERATING COST ESCALATION: YEAR ENDING: 12/31/96 SECURITY DEPOSIT: N/A GUARANTOR: N/A TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD: ALL CONSTRUCTION COSTS (IF ANY) ABOVE THE $342,040 TENANT ALLOWANCE AMOUNT. 2 TENANT ALLOWANCE: $342,040 ($20.00PRSF) ARCHITECTURAL SERVICES: Landlord will reimburse Tenant up to $38,000 for Architectural Services. PERMITTED USES: GENERAL OFFICE USE PUBLIC LIABILITY INSURANCE: BODILY INJURY: $2,000,000 PROPERTY DAMAGE: $1,000,000 * ANNUAL BASE RENT EQUALS $13.00 P.R.S.F. WHICH INCLUDES THE ANNUAL OPERATING COSTS IN THE BASE YEAR PER EXHIBIT B, ITEM 2. ** SEE EXHIBIT B, RIDER TO LEASE, ITEM 2. - -------------------------------------------------------------------------------- 1.2 EXHIBITS The Exhibits listed below in this section are incorporated in this Lease by reference and are to be construed as part of this Lease: Exhibit A - Plan showing Tenant's Space. Exhibit B - Riders (if applicable). Exhibit C - Specifications of Leasehold Improvements and Tenant Layout (if applicable). Exhibit D - Landlord's Services. Exhibit E - Rules and Regulations. 2 3 1.3 TABLE OF CONTENTS PAGE ARTICLE II PREMISES AND TERM 5 2.1 PREMISES 5 2.2 TERM 5 ARTICLE III CONSTRUCTION 5 3.1 INITIAL CONSTRUCTION 5 3.2 PREPARATION OF PREMISES FOR OCCUPANCY 6 3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION 7 3.4 REPRESENTATIVES 7 ARTICLE IV RENT 7 4.1 RENT 7 4.2 OPERATING COSTS: ESCALATION 7 4.3 ESTIMATED ESCALATION PAYMENTS 9 4.4 CHANGE OF FISCAL YEAR 9 4.5 PAYMENTS 9 ARTICLE V LANDLORD'S COVENANTS 10 5.1 LANDLORD'S COVENANTS DURING THE TERM 10 5.1.1 Building Services 10 5.1.2 Additional Building Services 10 5.1.3 Repairs 10 5.1.4 Quiet Enjoyment 10 5.1.5 Insurance 10 5.1.6 Landlord's Indemnification Obligation 10 5.2 INTERRUPTIONS 10 ARTICLE VI TENANT'S COVENANTS 11 6.1 TENANT'S COVENANTS DURING THE TERM 11 6.1.1 Tenant's Payments 11 6.1.2 Repairs and Yielding Up 11 6.1.3 Occupancy and Use 11 6.1.4 Rules and Regulations 12 6.1.5 Safety Appliances 12 6.1.6 Assignment and Subletting 12 6.1.7 Indemnity 12 6.1.7 Tenant's Indemnification Obligation 12 6.1.8 Tenant's Liability Insurance 13 6.1.9 Tenant's Worker's Compensation Insurance 13 6.1.10 Landlord's Right of Entry 13 6.1.11 Loading 13 6.1.12 Landlord's Costs 13 6.1.13 Tenant's Property 13 6.1.14 Labor or Materialmen's Liens 13 6.1.15 Changes or Additions 14 6.1.16 Holdover 14 ARTICLE VII CASUALTY AND TAKING 14 7.1 CASUALTY AND TAKING 14 7.2 RESERVATION OF AWARD 14 3 4 ARTICLE VIII RIGHTS OF MORTGAGEE 15 8.1 PRIORITY OF LEASE 15 8.2 MORTGAGEE PROTECTION CLAUSE 15 ARTICLE IX DEFAULT 15 9.1 EVENTS OF DEFAULT 15 9.2 TENANT'S OBLIGATIONS AFTER TERMINATION 16 ARTICLE X MISCELLANEOUS 16 10.1 NOTICE OF LEASE 16 10.2 [Section Omitted] 10.3 NOTICES FROM ONE PARTY TO THE OTHER 17 10.4 BIND AND INURE 17 10.5 NO SURRENDER 17 10.6 NO WAIVER, ETC. 17 10.7 NO ACCORD AND SATISFACTION 17 10.8 CUMULATIVE REMEDIES 17 10.9 LANDLORD'S RIGHT TO CURE 18 10.10 ESTOPPEL CERTIFICATE 18 10.11 WAIVER OF SUBROGATION 18 10.12 ACTS OF GOD 18 10.13 BROKERAGE 18 10.14 SUBMISSION NOT AN OFFER 18 10.15 APPLICABLE LAW AND CONSTRUCTION 18 ARTICLE XI [Article Omitted] ARTICLE XII APPROVALS 19 4 5 ARTICLE II PREMISES AND TERM 2.1 PREMISES. Subject to and with the benefit of the provisions of this Lease, Landlord hereby leases to Tenant, and Tenant leases from Landlord, Tenant's Space in the Building, excluding exterior faces of exterior walls, the common facilities area and building service fixtures and equipment serving exclusively or in common other parts of the Building. Tenant's Space, with such exclusions, is hereinafter referred to as the "Premises". Tenant shall have, as appurtenant to the Premises, the right to use in common with others entitled thereto: (a) the common facilities included in the Building or on the Lot, including 55 parking spaces included in the parking facility, and in the location from time to time designated by Landlord, and (b) the building service fixtures and equipment serving the Premises. Landlord reserves the right from time to time at reasonable times, on reasonable notice, and without unreasonable interference with Tenant's use, (a) to install, repair, replace, use, maintain and relocate for service to the Premises and to other parts of the Building or either, building service fixtures and equipment wherever located in the Building and (b) to alter or relocate any common facilities, it being understood that if any parking spaces are provided, the same may be relocated on or off the Lot from time to time by Landlord, provided that in all events substitutions are substantially equivalent. 2.2 TERM. To have and to hold for a period (the "Term") commencing on the earliest of (a) if Landlord is not obligated to perform construction work, on the Scheduled term Commencement Date, or (b) if Landlord is obligated to perform construction work pursuant to Exhibit C, on the date on which the Premises are deemed ready for occupancy as provided in Section 3.2, and (c) in all events, the date on which Tenant occupies all or any part of the Premises for its normal business operations (whichever of said dates is appropriate being hereafter referred to as the "Commencement Date"), and continuing until the Term Expiration Date, unless sooner terminated as provided in Section 3.2 or 7.1 or in Article IX. Landlord and Tenant will execute, upon request of either, a certificate acknowledging the Commencement Date of this Lease once such commencement date has occurred. ARTICLE III CONSTRUCTION 3.1 INITIAL CONSTRUCTION. On or before Tenant's Design Completion Date, if such date is indicated in Section 1.1, Tenant shall provide to Landlord for approval complete sets of construction drawings and specifications (the "Complete Plans") prepared at Tenant's expense by Fuller Associates, including but not limited to: a. Dimensioned Partition Plans b. Dimensioned Electrical and Telephone Outlet Plans c. Reflected Ceiling Plans d. Door and Hardware Schedules e. Room Finish Schedules including wall, carpet and floor tile colors f. Electrical, mechanical and structural engineering plans g. All necessary construction details and specifications for work not specified in Exhibit C. Landlord shall approve or disapprove the Complete Plans within five business days of receipt, provided that any disapproval shall be accompanied by a detailed explanation of such disapproval. Landlord shall reimburse Tenant for architectural services expenses incurred by Tenant within fifteen days of Tenant's submission to Landlord of an invoice for same, provided that such reimbursement shall not exceed $38,000.00 and the Lease has been fully executed. 5 6 All of Tenant's construction, installation of furnishings, and later changes or additions shall be coordinated with any work being performed by Landlord in such manner as to maintain harmonious labor relations and not to damage the Building or Lot or unreasonably interfere with Building operations. Except for installation of furnishings and the installation of telephone outlets which must be performed by a local telephone company at Tenant's direction and expense, all work described in the Complete Plans (the "Leasehold Improvements") shall be performed by Landlord's general contractor, to be selected pursuant to Exhibit B. Tenant shall pay to Landlord as additional rent a sum equal to all construction costs incurred by Landlord on account of the Leasehold Improvements (excluding, however, the Tenant Allowance of $342,040, but including in the costs so incurred the cost to Landlord of Landlord's Contractor's overhead and profit equal to 15% of the costs of work not covered by the Tenant Allowance), hereinafter called "Tenant Improvement Reimbursement to Landlord" or "TIR". Tenant shall pay to Landlord fifty percent (50%) of the TIR prior to Landlord's commencement of construction of the Leasehold Improvements, and thereafter as construction of the Leasehold Improvements progresses, on submission by Landlord to Tenant of a statement on or about the first day of each month showing construction and design costs incurred for agreed upon Leasehold Improvements. Such statements shall be accompanied by a certificate of Landlord's Contractor and subcontractors that all payments then due to laborers, materialmen and subcontractors have been made, less the aggregate amount of prior monthly progress payments made by Tenant. On the earlier of occupancy or the Commencement Date, Tenant shall pay to Landlord a sum equal to the unpaid balance of TIR. In addition to paying TIR as above provided, Tenant shall pay an amount equal to all costs incurred by Landlord as a result of any change orders signed by Tenant and Landlord affecting the Complete Plans, including the cost to Landlord of Landlord's Contractor's overhead and profit equal to 15% of those costs exclusive of overhead and profit. Amounts due and payable on account of such change orders shall be included in the monthly statements relating to TIR provided for above, and Tenant shall pay therefore in accordance with each such statement within thirty (30) days, and in all events by the Commencement Date. Landlord will not approve any construction, alterations, or additions requiring unusual expense to readapt the Premises to normal office use on lease termination or increasing the cost of construction, insurance or taxes on the Building or of Landlord's services called for by Section 5.1 unless Tenant first gives assurances acceptable to Landlord that such readaptation will be made prior to such termination without expense to Landlord and makes provisions acceptable to Landlord for payment of such increased cost. Landlord will also disapprove any alterations or additions requested by Tenant which will unreasonably delay completion of the Premises or the Building. All mechanical, structural, partition, finishes, and hardware changes and additions shall be part of the Building except such items as by writing at the time of approval the parties agree either shall be removed by Tenant on termination of this Lease, or shall be removed or left at Tenant's election. Landlord has given preliminary approval to Tenant's Leasehold Improvements in accordance with the Preliminary Furniture Layout dated November 8, 1994, as prepared by Fuller Associates, subject to final approval of the Complete Plans. 3.2 PREPARATION OF PREMISES FOR OCCUPANCY. If Landlord is obligated to perform construction work pursuant to Exhibit C, Landlord agrees to use reasonable efforts to have the Premises ready for occupancy on or before the Scheduled Term Commencement Date, which shall, however, be extended for a period equal to that of any delays due to governmental regulations, unusual scarcity of or inability to obtain labor or materials, labor difficulties, casualty or other causes beyond Landlord's reasonable control. The Premises shall be deemed ready for occupancy on the date on which the Leasehold Improvements, as specified in Exhibit C and in the Complete Plans, are ready for occupancy as certified by Landlord with the exception of minor items which can be fully completed without material interference with Tenant and other items which because of the season or weather or the nature of the item are not practicable to do at the time, provided that none of said items is necessary to make the Premises tenantable for the Permitted Uses; provided, however, that if Landlord is unable to complete construction due to delay in Tenant's compliance with the provisions of Section 3.1 of this Lease, then the Premises shall be deemed ready for occupancy no later than the Scheduled Term Commencement Date. 6 7 Landlord shall permit Tenant upon prior written notice 24 hour per day access for installing equipment and furnishings in the Premises prior to the Term if it can be done without material interference with completion of the Building or remaining portions of the Leasehold Improvements. In the event of Tenant's failure by more than fourteen (14) days to comply with the provisions of Section 3.1 to submit information or to deliver construction drawings and specifications which meet Landlord's approval, Landlord may, at Landlord's option, exercisable by notice to Tenant, either (a) terminate this Lease on the date specified in said notice to Tenant, and upon such termination Landlord shall have all the rights provided in Article IX of this Lease in the event of Tenant's default or (b) assess Tenant liquidated damages in an amount equal to the Annual Rent divided by 365 for each day such failure continues, which damages shall be paid to Landlord on the Commencement Date. Notwithstanding the foregoing provisions, if the Premises are not deemed ready for occupancy within 120 days after the Scheduled Term Commencement Date for whatever reason, other than Tenant's default, Tenant may elect to cancel this Lease at any time thereafter while the Premises are not deemed ready for occupancy by giving notice to Landlord of such cancellation which shall be effective when given, and Landlord shall immediately refund all TIR paid it being understood that said election and payment shall be Tenant's sole remedy at law or in equity for Landlord's failure to have the Premises ready for occupancy. 3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION. All construction work required or permitted by this Lease, whether by Landlord or by Tenant, shall be done in a good and workmanlike manner and in compliance with all applicable laws and all lawful ordinances, regulations and orders of governmental authority and insurers of the Building. Either party may inspect the work of the other at reasonable times and promptly shall give notice of observed defects. Landlord's obligations under Section 3.1 shall be deemed to have been performed when Tenant commences to occupy any portion of the Premises for the Permitted Uses except for items which are incomplete or do not conform with the requirements of Section 3.1 and as to which Tenant shall in either case have given written notice to Landlord prior to such commencement and items which are not reasonably capable of discovery through normal observation of the Premises, provided Tenant notifies Landlord of said discrepancies within six (6) months of occupancy. If Tenant shall not have commenced to occupy the Premises for the Permitted Uses within 30 days after they are deemed ready for occupancy as provided in Section 3.2, a certificate of completion by the Landlord shall be conclusive evidence that Landlord has performed all such obligations except for items stated in such certificate to be incomplete or not in conformity with such requirements. 3.4 REPRESENTATIVES. Each party authorizes the other to rely in connection with their respective rights and obligations under this Article III upon approval and other actions on the party's behalf by Landlord's Representative in the case of Landlord or Tenant's Representative in the case of Tenant or by any person designated in substitution or addition by notice to the party relying. ARTICLE IV RENT 4.1 RENT. Tenant agrees to pay rent to Landlord without any offset or reduction whatever (except as made in accordance with the express provisions of this lease), equal to 1/12th of the Annual Rent in equal installments in advance on the first day of each calendar month included in the Term; and for any portion of a calendar month at the beginning or end of the Term, at the proportionate rate payable for such portion, in advance. 4.2 OPERATING COSTS: ESCALATION. Tenant's proportionate share of the Annual Estimated Operating Costs shall be determined by multiplying Annual Estimated Operating Costs by a fraction, the numerator of which is the Rentable Floor Area of Tenant's Space, and the denominator of which is the Total Rentable Floor Area of the Building. 7 8 With respect to the First Fiscal Year for Tenant's Paying Operating Cost Escalation, or fraction thereof, and any fiscal year or fraction thereof thereafter, Tenant shall pay to Landlord, as additional rent, Operating Cost Escalation (as defined below), if any, on or before the thirtieth (30th) day following receipt by Tenant of Landlord's Statement (as defined below). As soon as practicable after the end of each Fiscal Year ending during the Term and after Lease termination, Landlord shall render a statement ("Landlord's Statement") in reasonable detail and according to generally accepted accounting practices certified by Landlord and showing for the preceding Fiscal Year or fraction thereof, as the case may be, Landlord's Operating Costs, excluding the cost of correcting defects in the original construction of the Building; Salaries of officers and executives of the Landlord not connected with the operation of the Building; The initial cost of tools and equipment used in the operation of the Property; Depreciation and amortization except as permitted below; Costs relating to Tenant's alterations; Interest on indebtedness and ground rent payable under ground leases; Advertising costs, brokerage commissions and legal costs in connection with the negotiation or enforcement of other leases; Costs for which the Landlord, by the terms of this Lease or any other lease, makes a separate charge and the cost of providing free rent, fit-up costs and other concessions to other tenants; Capital expenditures not intended to reduce Operating costs; Management fees payable to affiliates of Landlord which are not consistent with fees for similar services payable to independent third party managers by owners of similar buildings in the Nashua area; BUT INCLUDING, without limitation: real estate taxes on the Building and Lot; installments and interest on assessments for public betterments or public improvements which shall be amortized; expenses of any proceedings for abatement of taxes and assessments (provided Tenant benefits proportionately from any abatement resulting from such proceedings) with respect to any fiscal year or fraction of a fiscal year; premiums for insurance; fees payable to third parties for annual financial audits of Landlord's Operating Costs; compensation and all fringe benefits, worker's compensation insurance premiums and payroll taxes paid by Landlord to, for or with respect to all persons engaged in the operating, maintaining, or cleaning of the Common Areas of the Building and Lot; all utility charges not billed directly to tenants by Landlord or the utility; payments to independent contractors under service contracts for cleaning of the Common Areas, operating, managing, maintaining and repairing the Building and Lot (which payments may be to affiliates of Landlord provided the same are at reasonable rates consistent with the type of occupancy and the services rendered) rent paid by the managing agent or imputed cost equal to the loss of rent by Landlord for making available to the managing agent space for a Building office on the ground floor or above; if the Building shares common areas or facilities with another building or buildings, the Buildings' pro rata share (as reasonably determined by Landlord) of the cost of cleaning, operating, managing (including the cost of the management office for such buildings and facilities), maintaining and repairing such common areas and facilities; and all other reasonable and necessary expenses paid in connection with the cleaning, operating, managing, maintaining and repairing of the Building and Lot, or either, and properly chargeable against income, it being agreed that if the improvement for which Tenant is charged an escalation is a new or replacement capital item for the purpose of reducing Landlord's Operating Costs, the cost thereof as reasonably amortized by Landlord, with interest at the average prime commercial rate in effect from time to time at the three largest national banks in Boston, Massachusetts on the unamortized amount, shall be included in Landlord's Operating Costs. Landlord's Statement shall also show the average number of square feet of the Building which were occupied for the preceding fiscal year or fraction thereof. "Operating Cost Escalation" shall be equal to the difference, if any, between Landlord's Operating Costs during the Base Year (calendar year 1995) and the Landlord's Operating Costs in subsequent years, multiplied by a percentage reflecting the ratio which the square footage of the Premises bears to the square footage of the building. Tenant shall have the right at its expense and upon 30 days prior written notice to audit the Landlord's calculations of Operating Cost Escalation. Tenant shall perform such Audit at Landlord's or Managing Agent's Offices during normal business hours. If the management fee is reduced by reason of a tenant's default in the payment of Annual Rent or additional rent, Landlord shall reduce the Annual Estimated Operating Costs by the amount of such reduction in the 8 9 management fee. In case of special services which are not rendered to all areas on a comparable basis, the proportion allocable to the Premises shall be the same proportion which the Rentable Floor Area of Tenant's Space bears to the total rentable floor area to which such service is so rendered (such latter area to be determined in the same manner as the Total Rentable Floor Area of the Building). The term "real estate taxes" as used above shall mean all taxes of every kind and nature assessed by any government authority on the Lot, the Building and improvements, or both, which the Landlord shall become obligated to pay because of or in connection with the ownership, leasing and operation of the Lot, the Building and improvements, or both, subject to the following: There shall be excluded from such taxes all income taxes, excess profits taxes, excise taxes, franchise taxes, and estate, succession, inheritance and transfer taxes, provided, however, that if at any time during the Term the present system of ad valorem taxation of real property shall be changed so that in lieu of the whole or any part of the ad valorem tax on real property, there shall be assessed on Landlord a capital levy or other tax on the gross rents received with respect to the Lot, Building, and improvements, or both, or a federal, state, county, municipal or other local income, franchise, excise or similar tax, assessment, levy or charge (distinct from any now in effect) measured by or based, in whole or in part, upon any such gross rents, then any and all of such taxes, assessments, levies or charges, to the extent so measured or based, shall be deemed to be included within the term "real estate taxes". Notwithstanding any other provision of this Section 4.2, if the Term expires or is terminated as of a date other than the last day of a fiscal year, then for such fraction of a fiscal year at the end of the Term, Tenant's last payment to Landlord under this Section 4.2 shall be made on the basis of Landlord's best estimate of the items otherwise includable in Landlord's Statement and shall be made on or before the later of (a) 10 days after Landlord delivers such estimate to Tenant or (b) the last day of the Term, with an appropriate payment or refund to be made upon submission of Landlord's Statement. Tenant shall not be required to reimburse Landlord for Operating Costs and Real Estate Taxes except to the extent that they exceed the Operating Cost Base and the Real Estate Tax Base, respectively, as defined in Exhibit B. 4.3 ESTIMATED ESCALATION PAYMENTS. If, with respect to any fiscal year or fraction thereof during the Term, Landlord estimates that Tenant shall be obligated to pay Operating Cost Escalation, then Tenant shall pay, as additional rent, on the first day of each month of such fiscal year and each ensuing fiscal year thereafter, Estimated Monthly Escalation Payments equal to 1/12th of the estimated Operating Cost Escalation for the respective fiscal year, with an appropriate additional payment or refund to be made within 30 days after Landlord's Statement is delivered to Tenant. Landlord may adjust such Estimated Monthly Escalation Payment from time to time and at any time during a fiscal year, and Tenant shall pay, as additional rent, on the first day of each month following receipt of Landlord's notice thereof, the adjusted Estimated Monthly Escalation Payment. 4.4 CHANGE OF FISCAL YEAR. Landlord shall have the right from time to time to change the periods of accounting under Section 4.2 to any annual period other than a fiscal year, and upon any such change all items referred to in this Section 4.4 shall be appropriately apportioned. In all Landlord's Statements rendered under this Section 4.4, amounts for periods partially within and partially without the accounting periods shall be appropriately apportioned, and any items which are not determinable at the time of a Landlord's Statement shall be included therein on the basis of Landlord's estimate, and with respect thereto Landlord shall render promptly after determination a supplemental Landlord's Statement, and appropriate adjustment shall be made according thereto. All Landlord's Statements shall be prepared on an accrual basis of accounting. 4.5 PAYMENTS. All payments of Annual Rent and additional rent shall be made to Managing Agent, or to such other person as Landlord may from time to time designate in writing. If any installment of Annual Rent or additional rent or on 9 10 account of leasehold improvements is paid more than 5 days after the due date thereof, at Landlord's election, it shall bear interest at a rate equal to the average prime commercial rate from time to time established by the three largest national banks in Boston, Massachusetts plus 4% per annum from such due date, which interest shall be immediately due and payable as further additional rent. ARTICLE V LANDLORD'S COVENANTS 5.1 LANDLORD'S COVENANTS DURING THE TERM. Landlord covenants during the Term: 5.1.1 Building Services - To furnish, through Landlord's employees or independent contractors, the services listed in Exhibit D; 5.1.2 Additional Building Services - To furnish, through Landlord's employees or independent contractors, reasonable additional Building operation services upon reasonable advance request of Tenant at equitable rates from time to time established by Landlord to be paid by Tenant; 5.1.3 Repairs - Except as otherwise provided in Article VII, to make such repairs to the roof, exterior walls, floor slabs, common areas, electrical, plumbing, HVAC Systems, parking lots, access roads, landscaping and site improvements, other structural components and common facilities of the Building as may be necessary to keep them in first-class operating condition; and 5.1.4 Quiet Enjoyment - That Landlord has the right to make this Lease and that Tenant on paying the rent and performing its obligations hereunder, shall peacefully and quietly have, hold and enjoy the Premises throughout the Term without any manner of hindrance or molestation from Landlord or anyone claiming under Landlord, subject however to all the terms and provisions hereof. 5.1.5 Insurance - Landlord shall maintain insurance on the Building sufficient to permit its restoration in the event of a casualty loss. 5.1.6 Landlord's Indemnification Obligation - Landlord hereby indemnifies and holds Tenant harmless from and against any and all claims, demands, liabilities and expenses, including reasonable attorney's fees, arising from the negligence or wrongful act of Landlord or its agents, employees or contractors or from any material breach by Landlord of this Lease, provided that Landlord's obligations under this subparagraph shall not be effective to the extent such claims, demands, liabilities or expenses (I) arise out of or relate to the negligence or wrongful act of Tenant, its agents, employees or contractors or the material breach of this Lease by Tenant; or (II) relate to losses typically covered by casualty insurance. In the event any action or proceeding shall be brought against Tenant by reason of any such indemnified claim, Landlord shall defend the same at Landlord's expense by counsel reasonably satisfactory to Tenant; Tenant expressly agrees that Landlord's insurance counsel shall be satisfactory, Landlord may participate in any such action or proceeding through counsel employed at its own expense. 5.2 INTERRUPTIONS. Landlord shall not be liable to Tenant for any compensation or reduction of rent by reason of inconvenience or annoyance or for loss of business arising from power losses or shortages or from the necessity of Landlord's entering the Premises for any of the purposes in this Lease authorized, or for repairing the Premises or any portion of the Building or Lot, so long as Landlord makes diligent efforts to remedy any such interruptions. In case Landlord is prevented or delayed from making any repairs, alterations or improvements, or furnishing any service or performing any other covenant or duty to be performed on Landlord's part, by reason of any cause reasonably beyond Landlord's control, Landlord shall not be liable to Tenant therefore, nor except as expressly otherwise provided in Article VII, shall Tenant be entitled to any abatement or reduction of rent by reason thereof, nor shall 10 11 the same give rise to a claim in tenant's favor that such failure constitutes actual or constructive, total or partial, eviction from the Premises. Landlord shall use reasonable efforts in case of power losses or shortages to restore the services required to be provided under this Lease. However, Landlord agrees to use its best efforts to diligently remedy the situation and minimize the disruption to Tenant's business. Landlord reserves the right to stop any service or utility system when necessary by reason of accident or emergency or until necessary repairs have been completed. Except in case of emergency repairs, Landlord will give Tenant reasonable advance notice of any contemplated stoppage and will use reasonable efforts to avoid unnecessary inconvenience to Tenant by reason thereof. Landlord also reserves the right to institute such policies, programs and measures as may be necessary, required or expedient for the conservation or preservation of energy or energy services or as may be necessary or required to comply with applicable codes, rules, regulations or standards. ARTICLE VI TENANT'S COVENANTS 6.1 TENANT'S COVENANTS DURING THE TERM. Tenant covenants during the term and such further time as Tenant occupies any part of the Premises: 6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and additional rent, (b) all taxes which may be imposed on Tenant's personal property in the Premises (including, without limitation, Tenant's fixtures and equipment) regardless to whomever assessed, (c) all charges by public utilities for telephone and other utility services (including service inspections therefor) rendered to the Premises not otherwise required hereunder to be furnished by Landlord without charge and not consumed in connection with any services required to be furnished by Landlord without charge and not consumed in connection with any services required to be furnished by Landlord without charge, and (d) as additional rent, all charges to Landlord for services rendered pursuant to Section 5.1.2 hereof; 6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article VII and Section 5.1.3, to keep the Premises in good order, repair and condition, reasonable wear only excepted; and at the expiration or termination of this Lease peaceably to yield up the Premises and all changes and additions therein in such order, repair and condition, first removing all goods and effect of Tenant and any items, the removal of which is required by agreement or specified herein to be removed at Tenant's election and which Tenant elects to remove, and repairing all damage caused by such removal and restoring the Premises and leaving them clean and neat; 6.1.3 Occupancy and Use - Continuously from the Commencement Date, to use and occupy the Premises only for the Permitted Uses; not to insure or deface the Premises, Building, or Lot; and to permit in the Premises any use thereof which is improper, offensive, contrary to law or ordinances, or liable to create a nuisance or to validate or increase the premiums for any insurance on the Building or its contents or liable to render necessary any alteration or addition to the Building; not to dump, flush, or in any way introduce any hazardous substances or any other toxic substances into the septic, sewage or other waste disposal system serving the Premises, not to generate, store or dispose of hazardous substances in or on the Premises or dispose of hazardous substances from the Premises to any other location without the prior written consent of Landlord and then only in compliance with the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss.6901 et seq., and all other applicable laws, ordinances and regulations; to notify Landlord of any incident which would require the filing of a notice under applicable federal, state, or local law; not to store or dispose of hazardous substances on the Premises without first submitting to Landlord a list of all hazardous substances and all permits required therefor and thereafter providing to Landlord on an annual basis Tenant's certification that all such permits have been renewed with copies of such renewed permits; and to comply with the orders and regulations of all governmental authorities with respect to zoning, building, fire, health, and other codes, regulations, ordinances or laws applicable to the Premises. "Hazardous substances" as used in this paragraph shall mean "hazardous substances" as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 11 12 42 U.S.C. ss.9601 and regulations adopted pursuant to said Act. To the best of Landlord's knowledge, a special permit was obtained to allow the Premises to be used for office use. 6.1.4 Rules and Regulations - To comply with the Rules and Regulations set forth in Exhibit E and all other reasonable Rules and Regulations hereafter made by Landlord, of which Tenant has been given written notice, for the care and use of the Building and Lot and their facilities and approaches, it being understood that Landlord shall not be liable to Tenant for the failure of other tenants of the Building to conform to such Rules and Regulations; so long as such rules and regulations are enforced on a uniform and non-discriminating basis. 6.1.5 Safety Appliances - To keep the Premises equipped with all safety appliances required by law or ordinance or any other regulation of any public authority because of any use made by Tenant (as opposed to matters which apply to the Building as a whole) and to procure all licenses and permits so required because of such use and, if requested by Landlord, to do any work so required because of such use, it being understood that the foregoing provisions shall not be construed to broaden in any way Tenant's Permitted Uses; 6.1.6 Assignment and Subletting - Except to a subsidiary or affiliate, not without the prior written consent of Landlord to assign this Lease, to make any sublease, or to permit occupancy of the Premises or any part thereof by any other other than Tenant or American Express voluntarily or by operation of law (it being understood that in no event shall Landlord consent to any such assignment, sublease or occupancy if the same is on terms more favorable to the successor occupant than to the then occupant); as additional rent, to reimburse Landlord promptly for reasonable legal and other expenses incurred by Landlord in connection with any request by Tenant for consent to assignment or subletting; no assignment or subletting shall affect the continuing primary liability of Tenant (which, following assignment, shall be joint and several with the assignee); no consent to any of the foregoing in a specific instance shall operate as a waiver in any subsequent instances. Landlord's consent to any proposed assignment or subletting is required both as to the terms and conditions thereof, and as to the credit worthiness of the proposed assignee or subtenant and the consistency of the proposed assignee's or subtenant's business with other uses and tenants in the Building. Landlord's consent to assignment or subletting by Tenant shall not be unreasonably withheld, provided that Tenant is not then in default under this Lease it being understood if Landlord is marketing comparable space in the Building or in the building located at Trafalgar Square ("the Buildings") for lease, Tenant may not enter into any assignment or sublease or occupancy agreement with a third party the terms of which require payments of Annual Rent and Additional Rent less than the Annual Rent rate then being quoted by Landlord for comparable space in the Buildings for lease. Tenant, upon Landlord's prior written consent, may enter into any assignment or sublease or occupancy agreement with a third party the terms of which shall require payments of Annual Rent and Additional Rent to be no less than seventy-five (75%) of the Annual Rent rate Landlord would lease comparable space in the Buildings. In the event that any assignee or subtenant pays to Tenant any amounts in excess of the Annual Rent and additional rent then payable hereunder, or pro rata portion therefor on a square footage basis for any portion of the Premises, Tenant shall promptly pay said excess to Landlord as and when received by Tenant. If Tenant requests Landlord's consent to assign this Lease or sublet more than 25% of the Premises other than a subsidiary or wholly-owned entity of Tenant, Landlord shall have the option, exercisable by written notice to Tenant given within 10 days after receipt of such request, to terminate this Lease with respect to the space to be assigned or sublet as of a date specified in such notice which shall not be less than 30 or more than 60 days after the date of such notice. The foregoing provisions shall not apply to any space which the Tenant, before attempting to sublease, offers to the Landlord in return for cancellation of this Lease with respect to that space, except that any payments by subtenants in excess of the Annual Rent and additional rent shall be paid to Landlord as set forth above. 6.1.7 Tenant's Indemnification Obligation - Tenant hereby indemnifies and holds Landlord harmless from and against all claims, demands, liabilities and expenses, including reasonable attorney's fees, arising from the negligence or wrongful act of Tenant or its agents, employees or contractors or from any material breach by Tenant of this Lease, provided that Tenant's obligations under this subparagraph shall not be effective to the extent such claims, demands, liabilities or expenses (i) arise out of or relate to the negligence or wrongful act of Landlord, its agents, employees or contractors or the material breach of this Lease by Landlord; or (ii) relate to 12 13 losses typically covered by casualty insurance. In the event any action or proceeding shall be brought against Landlord by reason of any such indemnified claim, Tenant shall defend the same as Tenant's expense by counsel reasonably satisfactory to Landlord; Landlord expressly agrees that Tenant's insurance counsel shall be satisfactory. Tenant may participate in any such action or proceeding through counsel employed as its own expense. 6.1.8 Tenant's Liability Insurance - To maintain public liability insurance on the Premises indemnifying Landlord and Tenant against all claims and demands for injury to or death of any person or damage to or loss of property, on the Premises or connected with the use, condition or occupancy of any thereof unless caused by the negligence of Landlord or its servants or agents, any act, fault or omission, or other misconduct of Tenant or its agents, contractors, licensees, sublessees or invites, in amounts which shall, at the beginning of the Term, be at least equal to the limits set forth in Section 1.1, and from time to time during the Term, shall be for such higher limits, if any, as are customarily carried in the area in which the Premises are located on property similar to the Premises and used for similar purposes, and shall be written on the "Occurrence Basis," and to furnish Landlord with certificates thereof; 6.1.9 Tenant's Liability Insurance - To keep all of Tenant's employees working in the Premises covered by worker's compensation insurance in statutory amounts and to furnish Landlord with certificates thereof; 6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's agents entry: to examine the Premises at reasonable times and, if Landlord shall so elect, to make repairs or replacements; to remove, at Tenant's expense, any changes, additions, signs, curtains, blinds, shades, awnings, aerials, flagpoles, or the like not consented to in writing; and to show the Premises to prospective tenants during the 12 months preceding expiration of the Term and to prospective purchasers and mortgagees at all reasonable times; 6.1.11 Loading - Not to place Tenant's Property, as defined in Section 6.1.13, upon the Premises so as to exceed a rate of 50 pounds of live load per square foot and not to move any safe, vault or other heavy equipment in, about or out of the Premises except in such manner and at such times as Landlord shall in each instance approve; Tenant's business machines and mechanical equipment which cause vibration or noise that may be transmitted to the Building structure or to any other leased space in the Building shall be placed and maintained by Tenant in settings of cork, rubber, spring, or other types of vibration eliminators sufficient to eliminate such vibration or noise; 6.1.12 Landlord's Costs - In case Landlord shall be made party to any litigation commenced by or against Tenant or by or against any parties in possession of the Premises or any part thereof claiming under Tenant, to pay, as additional rent, all costs including, without implied limitation, reasonable counsel fees incurred except in connection with a suit by Tenant or a party claiming under Tenant to enforce the provisions of this Lease by or imposed upon Landlord in connection with such litigation, and, as additional rent, also to pay all such costs and fees incurred by Landlord in connection with the successful enforcement by Landlord of any obligations of Tenant under this Lease; 6.1.13 Tenant's Property - All the furnishings, fixtures, equipment, effects and property of every kind, nature and description of Tenant and of all persons claiming by, through or under Tenant which, during the continuance of this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft, or from any other cause, no part of said loss or damage is to be charged to or be borne by Landlord unless due to the negligence of Landlord; 6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire cost of any work done on the Premises by Tenant, its agents, employees, or independent contractors; not to cause or permit any liens for labor 13 14 or materials performed or furnished in connection therewith to attach to the Premises; and immediately to discharge any such liens which may so attach; 6.1.15 Changes or Additions - Not to make any changes or additions to the Premises without Landlord's prior written consent which approval will not be unreasonably withheld, provided that Tenant shall reimburse Landlord for all reasonable costs incurred by Landlord in reviewing Tenant's proposed changes or additions, and provided further that, in order to protect the functional integrity of the Building, all such changes and additions shall be performed by contractors approved by Landlord, which approval shall not be unreasonably withheld; 6.1.16 Holdover - To pay to Landlord the greater of twice (a) the then fair market rent or (b) the total of the Rent and additional rent then applicable for each month or portion thereof Tenant shall retain possession of the Premises or any other thereof after the termination of this Lease, whether by lapse of time or otherwise, and also to pay all damages sustained by Landlord of the right of re-entry provided in this Lease. ARTICLE VII CASUALTY AND TAKING 7.1 CASUALTY AND TAKING. In case during the Term all or any substantial part of the Premises are damaged materially by fire or any other cause, or by action of the public authority in consequence thereof or are taken by eminent domain or Landlord receives compensable damage by reason of anything lawfully done in pursuance of public authority resulting in the loss of use of a substantial portion of the premises, this Lease shall terminate at Landlord's election, which may be made, notwithstanding Landlord's entire interest may have been divested, by notice to Tenant within 30 days after the occurrence of the event giving rise to the election to terminate, which notice shall specify the effective date of termination which shall not be less than 30 nor more than 60 days after the date of notice of such termination. If in any such case the Premises are rendered unfit for use and occupation and the Lease is not terminated, Landlord shall notify Tenant within thirty days after the occurrence of such event whether or not Landlord will restore the Premises. If no such notice is given, or if Landlord states that it does not intend to restore the Premises, Tenant may thereafter terminate this Lease by notice to Landlord. If within such thirty days period Landlord gives notice that it will restore Landlord shall use due diligence (but in no event greater than 120 days) to put the Premises, or, in case of a taking, what may remain thereof (excluding any items installed or paid for by Tenant which Tenant may be required or permitted to remove) into proper condition for use and occupation to the extent permitted by the net award of insurance or damages available to Landlord, and a just proportion of the Annual Rent and additional rent according to the nature and extent of the injury shall be abated until the Premises or such remainder shall have been put by Landlord in such condition; and in case of a taking which permanently reduces the area of the Premises, a just proportion of the Annual Rent and additional rent shall be abated for the remainder of the Term and an appropriate adjustment shall be made to the Annual Estimated Operating Expenses. If such restoration is not completed within 180 days of the date of the occurrence of such event, the Tenant may terminate this Lease by notice to Landlord. 7.2 RESERVATION OF AWARD. Landlord reserves to itself any and all rights to receive awards made for damages to the Premises, Building or Lot and the leasehold hereby created, or any one or more of them, accruing by reason of exercise of eminent domain or by reason of anything lawfully done in pursuance of public authority. Tenant hereby releases and assigns to Landlord all Tenant's rights to such awards, and covenants to deliver such further assignments and assurances thereof as Landlord may from time to time request. It is agreed and understood, however, that Landlord does not reserve to itself, and Tenant does not assign to Landlord, any damages payable for (i) movable trade fixtures installed by the Tenant or anybody claiming under Tenant, at its own expense or (ii) relocation expenses recoverable by Tenant from such authority in a separate action. 14 15 ARTICLE VIII RIGHTS OF MORTGAGEE 8.1 PRIORITY OF LEASE. This lease is and shall continue to be subject and subordinate to any presently existing mortgage or deed of trust of record covering the Lot or Building or both (the "mortgaged premises"). The holder of any such presently existing mortgage or deed of trust shall have the election to subordinate the same to the rights and interests of Tenant under this Lease exercisable by filing with the appropriate recording office a notice of such election, whereupon the Tenant's rights and interests hereunder shall have priority over such mortgage or deed of trust. Nothing contained herein shall be deemed to permit Landlord's holder or any third party to diminish the Tenant's right to quiet enjoyment pursuant to this Lease. 8.2 MORTGAGEE PROTECTION CLAUSE. Tenant agrees to give any Mortgagees and/or Trust/Deed Holders by Registered Mail, a copy of any Notice of Default served upon the Landlord, provided that prior to such notice Tenant has been notified, in writing, (by way of a Notice of Assignment of Rents and Leases, or otherwise) of the address of Such Mortgagees and/or Trust Deed Holders. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for the Lease; then the Mortgagees and/or Trust Deed Holders shall have sixty (60) days within which to cure such default or if such default cannot be cured within that time, then such additional time not to exceed 60 days, as may be necessary if within such original sixty (60) days, any Mortgagee and/or Trust Deed Holder has commenced and is diligently pursuing the remedies necessary to cure such default, (including but not limited to commencement or foreclosure proceedings, if necessary to effect such cure) in which event this Lease shall not be terminated while such remedies are being so diligently pursued. ARTICLE IX DEFAULT 9.1 EVENTS OF DEFAULT. If any default by Tenant continues after written notice, in case of Annual Rent, additional rent, Tenant Improvement Reimbursement or any other monetary obligation to Landlord for more than 10 days, or in any other case for more than 30 days and such additional time, if any, as is reasonably necessary to cure the default if the default is of such a nature that it cannot reasonably be cured in 30 days and Tenant diligently endeavors to cure such default; or if Tenant becomes insolvent, fails to pay its debts as they fall due, files a petition under any chapter of the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may be amended (or any similar petition under any insolvency law of any jurisdiction), or if such petition is filed against Tenant; or if Tenant proposes any dissolution, or liquidation with creditors, makes an assignment or trust mortgage for benefit of creditors, or if a receiver, trustee, custodian or similar agent is appointed or takes possession with respect to any property of Tenant which is not discharged within 30 days; or if the leasehold hereby created is taken on execution or other process of law in any action against Tenant; then, and in any such case, Landlord and the agents and servants of Landlord may, in addition to and not in derogation of any remedies for any preceding breach of covenant, immediately or at any time thereafter while such default continues and without further notice, at Landlord's election, do any one or more of the following: (1) give Tenant written notice stating that the Lease is terminated, effective upon the giving of such notice or upon a date stated in such notice, as Landlord may elect, in which event the Lease shall be irrevocably extinguished and terminated as stated in such notice without any further action, or (2) with or without process of law, in a lawful manner, enter and repossess the Premises as of Landlord's former estate, and expel the Tenant and those claiming through or under Tenant, and remove its and their effects, without being guilty of trespass, in which event the Lease shall be irrevocably extinguished and terminated at the time of such entry, or (3) pursue any other rights or remedies permitted by law. Any such termination of the Lease shall be without prejudice to any remedies which might otherwise be used for arrears of rent or prior breach of covenant, and in the event of such termination Tenant shall remain liable under this Lease as hereinafter provided. Tenant hereby waives all statutory rights of redemption, if any to the extent such rights may be lawfully waived, and Landlord, without notice to Tenant, may store Tenant's effects and those of any 15 16 person claiming through or under Tenant at the expense and risk of Tenant and, if Landlord so elects; may after reasonable written notice to Tenant sell such effects at public auction or private sale and apply the net proceeds to the payment of all sums due to Landlord from tenant, if any, and pay over the balance, if any, to Tenant. 9.2 TENANT'S OBLIGATIONS AFTER TERMINATION. In the event that this Lease is terminated under any of the provisions contained in Section 9.1 or shall be otherwise terminated for breach of any obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as compensation, the excess of the present value of total rent reserved for the residue of the Term over the rental value of the Premises for said residue of the Term. In calculating the rent reserved, there shall be included, in addition to the annual Rent and all additional rent, the value of all other consideration agreed to be paid or performed by Tenant for said residue. Tenant further covenants as an additional and cumulative obligation after any such ending to pay punctually to Landlord all the sums and perform all of the obligations which Tenant covenants in this Lease to pay and to perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated. In calculating the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall be credited with any amount paid to Landlord as compensation as provided in the first sentence of this Section 9.2 and also with the net proceeds of any rents obtained by Landlord by reletting the Premises, after deducting all Landlord's expenses in connection with such reletting, including, without implied limitation, all repossession costs, brokerage commissions, fees for legal services and expenses of preparing the Premises for such reletting, it being agreed by Tenant that Landlord may (i) relet the Premises or any part or parts thereof for a term or terms which may at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term and may grant such concessions and free rent as Landlord in its sole judgment considers advisable or necessary to relet the same and (ii) make such alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable or necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet or to collect rent under reletting shall operate or be construed to release or reduce Tenant's liability as aforesaid. So long as at least 12 months of the Term remain unexpired at the time of such termination, in lieu of any other damages or indemnity and in lieu of full recovery by Landlord of all sums payable under all the foregoing provisions of this Section 9.2, Landlord may by written notice to Tenant, at any time after this Lease is terminated under any of the provisions contained in Section 9.1, or is otherwise terminated for breach of any obligation of tenant and before such full recovery, elect to recover, and Tenant shall thereupon pay, as liquidated damages, an amount equal to the aggregate of the Annual Rent and additional rent accrued under Article IV in the 12 months ended next prior to such termination plus the amount of Annual Rent and additional rent of any kind accrued and unpaid at the time of termination and less the amount of any recovery by Landlord under the foregoing provisions of this Section 9.2 up to the time of payment of such liquidated damages. Nothing contained in this Lease shall, however, limit or prejudice the right of Landlord to prove and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, to less than the amount of the loss or damages referred to above. ARTICLE X MISCELLANEOUS 10.1 NOTICE OF LEASE. Upon request of either party, both parties shall execute and deliver, after the Term begins, a short form of this Lease in form appropriate for recording or registration, and if this Lease is terminated before the Term expires, an instrument in such form acknowledging the date of termination. 10.2 SECTION OMITTED. 16 17 10.3 NOTICES FROM ONE PARTY TO THE OTHER. All notices required or permitted hereunder shall be in writing and addressed, if to the Tenant, at Tenant's Address or such other address as Tenant shall have the last designated by notice in writing to Landlord and, if to Landlord, at Landlord's Address or such other address as Landlord shall have last designated by notice in writing to the Tenant. Any notice shall have been deemed duly given if mailed to such address postage prepaid, registered or certified mail, return receipt requested, when deposited with the U.S. Postal Service, or if delivered to such address by hand, when so delivered. 10.4 BIND AND INURE. The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Landlord named herein and each successive owner of the Premises shall be liable only for the obligations accruing during the period of its ownership. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Premises but not upon other assets of Landlord. No individual partner, trustee, stockholder, officer, director, employee or beneficiary of Landlord shall be personally liable under this Lease and Tenant shall look solely to Landlord's interest in the Premises in pursuit of its remedies upon an event of default hereunder, and the general assets of the individual partners, trustees, stockholders, officers, employees or beneficiaries of Landlord shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant. The foregoing does not limit the indemnity obligation of the Landlord pursuant to Section 5.1.6. 10.5 NO SURRENDER. The delivery of keys to any employee of Landlord or to Landlord's agent or any employee thereof shall not operate as a termination of this Lease or a surrender of the Premises. 10.6 NO WAIVER, ETC. The failure of Landlord or of Tenant to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Lease or, with respect to such failure of Landlord, any of the Rules and Regulations referred to in Section 6.1.4, whether heretofore or hereafter adopted by Landlord, shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation, nor shall the failure of Landlord to enforce any of said Rules and Regulations against any other tenant in the Building be deemed a waiver of any such Rules or Regulations. The receipt of Landlord of Annual Rent or additional rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach by Landlord, unless such waiver be in writing and signed by Landlord. No consent or waiver, express or implied, by Landlord or Tenant to or of any breach of any agreement or duty shall be construed as waiver or consent to or of any other breach of the same or any other agreement or duty. 10.7 NO ACCORD AND SATISFACTION. No acceptance by Landlord of a lesser sum than the Annual Rent and additional rent then due shall be deemed to be other than on account of the earliest installment of such rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed as accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy in this Lease provided. 10.8 CUMULATIVE REMEDIES. The specific remedies to which Landlord may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which it may be lawfully entitled in case of any breach or threatened breach by Tenant of any provisions of this Lease. In addition to the other remedies provided in this Lease, Landlord shall be entitled to the restraint by injunction of the violation or attempted or threatened violation of any of the covenants, conditions or provisions of this Lease or to a decree compelling specific performance of any such covenants, conditions or provisions. 17 18 10.9 LANDLORD'S RIGHT TO CURE. If Tenant shall at any time default in the performance of any obligation under this Lease, Landlord shall have the right, but shall not be obligated, to enter upon the Premises at reasonable times upon reasonable notice and to perform such obligation, notwithstanding the fact that no specific provisions for such substituted performance by Landlord is made in this Lease with respect to such default. In performing such obligation, Landlord may make any payment of money or perform any other act. All sums so paid by Landlord (together with interest at the rate of 4% per annum in excess of the then average prime commercial rate of interest being charged by the three largest national banks in Boston, Massachusetts) and all necessary incidental costs and expenses in connection with the performance of any such act by Landlord, shall be deemed to be additional rent under this Lease and shall be payable to Landlord immediately on demand. Landlord may exercise the foregoing rights without waiving any of its rights or releasing Tenant from any of its obligations under this Lease 10.10 ESTOPPEL CERTIFICATE. Tenant agrees, from time to time, upon not less than 15 days' prior written request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect; that Tenant has no defenses, offsets or counterclaims against its obligations to pay the Annual Rent and additional rent and to perform its other covenants under this Lease; that there are no uncured defaults of Landlord or Tenant under this Lease (or, if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications, and, if there are any defenses, offsets, counterclaims, or defaults, setting them forth in reasonable detail); and the dates to which the Annual Rent, additional rent and other charges have been paid. Any such statement delivered pursuant to this Section 10.10 shall be in a form reasonably acceptable to and may be relied upon by an prospective purchaser or mortgagee of the premises which include the Premises or any prospective assignee of any such mortgagee. 10.11 WAIVER OF SUBROGATION. Any insurance carried by either party with respect to the Premises and property therein or occurrences thereon shall include a clause or endorsement denying to the insurer rights of subrogation against the other party to the extent rights have been waived by the insured prior to occurrences of injury or loss. Each party, notwithstanding any provisions of this Lease to the contrary, hereby waives any rights of recovery against the other for injury or loss due to hazards covered by insurance containing such clause or endorsement to the extent of the indemnification received thereunder. 10.12 ACTS OF GOD. In any case where either party hereto is required to do any act, delays caused by or resulting from Acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations, unusually severe weather, or other causes beyond such party's reasonable control shall not be counted in determining the time during which work shall be completed, whether such time be designated by a fixed date, a fixed time or a "reasonable time," and such time shall be deemed to be extended by the period of such delay, however, in no case will such delay exceed a period of one (1) year. 10.13 BROKERAGE. Tenant agrees to defend, indemnify and save Landlord harmless from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by a broker or agent, other than Hunneman Real Estate Corporation and Corporate Properties, Ltd. with respect to Tenant's dealings in connection with this Lease. Landlord agrees to pay any commissions or other charges of Hunneman Real Estate Corporation and Corporate Properties, Ltd. 10.14 SUBMISSION NOT AN OFFER. The submission of a draft of this Lease or a summary of some or all of its provisions does not constitute an offer to lease or demise the Premises, it being understood and agreed that neither Landlord nor Tenant shall be 18 19 legally bound with respect to the leasing of the Premises unless and until this Lease has been executed by both Landlord and Tenant and a fully executed copy has been delivered to each of them. 10.15 APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and construed in accordance with the laws of the State of New Hampshire. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstances shall be declared invalid or unenforceable by the final ruling of a court of competent jurisdiction having final review, the remaining terms, covenants, conditions and provisions of this Lease and their application to persons or circumstances shall not be affected thereby and shall continue to be enforced and recognized as valid agreements of the parties, and in the place of such invalid or unenforceable provision, there shall be substituted a like, but valid and enforceable provision which comports to the findings of the aforesaid court and most nearly accomplishes the original intention of the parties. There are no oral or written agreements between Landlord and Tenant affecting this Lease. This Lease may be amended, and the provisions hereof may be waived or modified, only by instruments in writing executed by Landlord and Tenant. The titles of the several Articles and Sections contained herein are for convenience only and shall not be considered in construing this Lease. Unless repugnant to the context, the words "Landlord" and "Tenant" appearing in this Lease shall be construed to mean those named above and their respective heirs, executors, administrators, successors and assigns, and those claiming through or under them respectively. If there be more than one Tenant, the obligations imposed by this Lease upon Tenant shall be joint and several. ARTICLE XI SECURITY DEPOSIT [ARTICLE OMITTED] ARTICLE XII APPROVALS TENANT ACKNOWLEDGES THAT TENANT'S BOARD OF DIRECTORS HAS APPROVED THIS LEASE AS EVIDENCED THEREOF BY EXHIBIT F. EXECUTED as a sealed instrument in three or more counterparts on the day and year first written above. LANDLORD: SUN LIFE ASSURANCE COMPANY OF CANADA (US) By: /s/ ----------------------------------------- By: /s/ ----------------------------------------- TENANT: NASHUA CORPORATION By: /s/ William Luke -------------------------------------- 19 20 Name: William Luke -------------------------------------- (please print or type) Title: Vice President & CFO ------------------------------------- (please print or type) A COPY OF TENANT'S CORPORATE AUTHORIZATION FOR SUCH EXECUTION IS ATTACHED HERETO. 20 21 Exhibit A Nashua Corporation Approximately 17,102 r.s.f. [FLOOR PLAN] Second Floor 11 Trafalgar Square Nashua, NH Cross hatched for Location purposes Only 21 22 EXHIBIT B RIDER TO LEASE BETWEEN SUN LIFE ASSURANCE COMPANY OF CANADA (US) AND NASHUA CORPORATION The following provisions are incorporated as an integral part of the captioned Lease. 1. ANNUAL RENT INCREASE The Annual Rent for years six (6) through ten (10) shall increase to $15.00/RSF effective the first day of the sixty-first (61st) month of lease term. 2. BASE FOR ANNUAL OPERATING AND REAL ESTATE TAX EXPENSES The Operating Expense Base included in the Annual Rent will be the actual operating expenses for calendar year 1995. The Real Estate Tax Base included in the Annual Rent will be the actual taxes paid for Tax Year April 1, 1995 - March 31, 1996. 3. LEASEHOLD IMPROVEMENTS Landlord agrees to provide Tenant with an allowance of up to $20.00 per rentable square foot of Tenant's premises ($342,040) to be applied toward the cost of Leasehold Improvements and $38,000 to be applied toward architectural and engineering costs to prepare the Complete Plans. Such allowance is contingent upon Landlord's review of Tenant's audited financial statements. 4. OPTION TO EXTEND TERM Tenant is given the option to extend the term on all provisions contained in this Lease, except for the Annual Rent, for two five (5) year periods ("Extended Term") following expiration of the Lease term by giving written notice of exercise of the Option ("Option Notice") to Landlord at least two hundred seventy (270) days before the expiration of the Original Lease Term and First Extended Term provided that this Lease is in full force and effect and that Tenant has not been in default under the terms of this Lease whereby Tenant has not cured such default within the allotted cure period at any time during the Original Term or Extended Term or on the date of Tenant giving the Option Notice, the Option Notice shall be ineffective, or if Tenant is in default on the day the Extended Term (s) is to commence, without reasonable assurances such default will be cured, within the allotted cure period. The Extended Term(s) shall not commence and this Lease shall expire at the end of the Lease Term. 22 23 Exhibit B Page 2 of 3 The parties shall have ninety (90) days after Landlord receives the Option Notice in which to agree on the Annual Rent during the Extended Term. If the parties agree on the Annual Rent during that period, they shall immediately execute an amendment to this Lease stating the Annual Rent. In the event the Landlord and Tenant are unable to agree on the Annual Rent for the Extended Term, then within fifteen (15) days the parties shall make application to the President of the local Chapter of the American Institute of Appraisers, or its successor having jurisdiction over the city, who shall appoint an independent appraiser to determine fair market Annual Rent and whose sole determination shall be final. Under no circumstances, whether the Annual Rent for the Extended Term is agreed by the parties or determined by appointed appraiser, shall the Annual Rent for the Extended Term be reduced below the previous Annual Rent. The expense of the appointed appraiser shall be borne equally by the Landlord and Tenant. All such appraisers shall be disinterested persons who have had at least ten (10) years experience in appraising commercial real estate in the state. Landlord agrees to provide Tenant with an allowance up to $75,000 for painting and carpeting the Tenant's premises at the commencement of the First Extended Term. 5. EXTERIOR SIGNAGE Tenant shall be permitted, at its sole cost and expense to install and maintain an appropriate sign on the Premises identifying Tenant subject to: a) The reasonable approval of Landlord as to location, quality, size and style provided that such sign may be located on the exterior of the Premises above the second floor. b) Limitations of applicable law. Tenant shall secure all permits necessary for the installation of such sign at its own cost and expense. Tenant also agrees to remove the signage at the end of the Lease Term or Extended Term (s) and the cost to restore the building facade to its original condition prior to installation of such signage shall be paid for by Tenant. 23 24 Exhibit B Page 3 of 3 6. SATELLITE DISH Tenant shall be permitted at its sole cost and expense to install and maintain a satellite dish on the roof of 11 Trafalgar Square subject to Landlord's approval as to exact location and size. Any reasonable expense incurred by Landlord in reviewing the location shall be immediately reimbursed to Landlord by Tenant (i.e., structural review). Tenant shall operate the equipment in accordance with all Federal, State, and Local regulations. Tenant shall remove the equipment at the end of the Lease Term or Extended Term(s) and the cost to repair any resulting damage to the roof shall be paid by Tenant. 7. SELECTION OF CONTRACTOR, SUBCONTRACTOR Spaulding & Slye Construction Company, Inc., the Landlord's Contractor, shall act as General Contractor for the Leasehold Improvements provided its fees for such services shall not exceed those which are reasonable and customary for comparable services in Nashua, New Hampshire. Subcontractors to perform each type of work shall be the low qualified bidder selected from among three bidders for each type of work, tow of which bidders shall be selected by Landlord and one of which shall be selected by Tenant, provided that Tenant provides the names of such contractor to Landlord's Contractor before the Complete Plans are approved and further provided that Landlord's Contractor shall have approved such contractor as having met in Landlord's Contractor's reasonable judgements, the qualifications required in selecting the other contractor. 24 25 EXHIBIT D LANDLORD'S SERVICES I. CLEANING A. GENERAL 1. All cleaning work will be performed between 5:30 p.m. and 12 midnight, Monday through Friday, unless otherwise necessary for stripping, waxing, etc. 2. Abnormal waste removal (e.g., computer installation paper, bulk packaging, wood or cardboard crates, shall be Tenant's responsibility. B. DAILY OPERATIONS (5 TIMES PER WEEK) 1. Tenant Areas a. Empty and clean all waste receptacles; wash receptacles as necessary. b. Vacuum all rugs and carpeted areas. c. Empty, damp-wipe and dry all ashtrays. 2. Lavatories a. Sweep and wash floors with disinfectant. b. Wash both sides of toilet seats with disinfectant. c. Wash all mirrors, basins, bowls, urinals. d. Spot clean toilet partitions. e. Empty and disinfect sanitary napkin disposal receptacles. f. Refill toilet tissue, towel, soap, and sanitary napkin dispensers. 3. Public Areas a. Wipe down entrance doors and clean glass (interior and exterior). b. Vacuum elevator carpets and wipe down doors and walls. c. Clean water coolers. C. OPERATIONS AS NEEDED (BUT NOT LESS THAN EVERY OTHER DAY) 1. Tenant and Public Areas a. Buff all resilient floor areas and vacuum all carpeted areas. D. WEEKLY OPERATIONS 1. Tenant Areas, Lavatories, Public Areas a. Hand-dust and wipe clean all horizontal surfaces with treated cloths to include furniture, office equipment, window sills, door ledges, chair rails, baseboards, convertor tops, etc., within normal reach. b. Remove finger marks from private entrance doors, light switches, and doorways. c. Sweep all stairways. E. MONTHLY OPERATIONS 1. Tenant and Public Areas a. Thoroughly vacuum seat cushions on chairs, sofas, etc. b. Vacuum and dust grillwork. 2. Lavatories a. Wash down interior walls and partitions. F. AS REQUIRED AND WEATHER PERMITTING, BUT NOT LESS FREQUENTLY THAN TWICE A YEAR 1. Entire Building a. Clean inside of all windows. b. Clean outside of all windows. 25 26 G. YEARLY 1. Tenant and Public Areas a. Strip and wax all resilient tile floor areas. II. HEATING, VENTILATING, AND AIR CONDITIONING 1. Heating, ventilating, and air conditioning, (hereinafter called "HVAC") as required to provide reasonably comfortable temperatures for normal business day occupancy (excepting holidays); Monday through Friday from 8:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 12:00 p.m. although Tenant may have access to the Premises at all times every day of the year. 2. If the Tenant shall require HVAC at any other time (hereinafter called "After Hours"), the Landlord shall furnish HVAC After Hours upon reasonable advance notice from the Tenant and the Tenant shall pay as Additional Rent the then established reasonable charges of the Landlord. In the event more than one tenant in the office building shall request After HVAC at the same time or times, the Landlord shall use their best efforts to pro-rate the charges therefore among all users. 3. The Landlord shall not be responsible if the normal operation of the office building HVAC system shall fail to maintain reasonable temperatures within the Tenant's Premises or any portion thereof: a. which shall have an electrical load in excess of five (5) watts per square foot of usable area for all purposes or which shall have a human occupancy factor in excess of one (1) person per one hundred (100) square feet of usable area; or b. because of any design or arrangement or partitioning or other improvements to the Tenant's Premises; or c. if the Tenant fails to cooperate with the Landlord at all times and abide by regulations and requirements which the Landlord may reasonably prescribe for the proper functioning and protection of the HVAC system. 4. The Tenant shall not use or permit the use of any portion of the Premises for the preparation of foods except for normal microwave use or the conduct of any other activity which would permit fumes or odors to enter the HVAC system. 5. Maintenance of any additional or special air conditioning equipment and the associated operating cost will be at Tenant's expense. III. WATER Hot water for lavatory purposes and cold water for drinking, lavatory and toilet purposes. IV. ELEVATORS (if Building is Elevatored) Elevators for the use of all tenants and the general public for access to and from all floors of the Building. Programming of elevators (including, but not limited to, service elevators) shall be as Landlord from time to time determines best for the Building as a whole. V. RELAMPING OF LIGHT FIXTURES Tenant will reimburse Landlord for the cost of lamps, ballasts and starters and the cost of replacing same within the Premises. VI. CAFETERIA AND VENDING INSTALLATIONS 1. Any space to be used primarily for lunchroom or cafeteria operation shall be Tenant's responsibility to keep clean and sanitary, it being understood that Landlord's approval of such use must be first obtained in writing. Landlord will provide trash removal and cleaning services similar to other areas of the Premises. 26 27 2. Vending machines or refreshment service installations by Tenant must be approved by Landlord in writing and shall be restricted in use to employees and business callers. All cleaning necessitated by such installations shall be at Tenant's expense. VII. ELECTRICITY 1. The Landlord will provide electrical energy for lighting of both land and common areas as well as equipment necessary to provide services included in this Lease. Tenant electricity (lights and plugs) will be separately metered and use thereof will be the sole responsibility of the Tenant within the Tenant's Premises. 2. The Tenant covenants that at no time shall the use of electrical energy in the Premises exceed the capacity of the existing feeders and wiring installations then serving the Premises. The Tenant shall not make any alterations in or additions to the wiring installations in the Premises or the size, type and number of business machines, office equipment or other appliances in or serving the Premises without prior written approval of the Landlord unless said machines, etc. are standard office equipment. Approval of the Landlord for such additions or alterations shall not be unreasonably withheld, provided the Tenant shall pay all costs of any additional risers or equipment required for such additional requirements and approval of the Landlord may be conditioned upon the Tenant's agreement to pay the Landlord, as Additional Rent, the cost of the additional electrical energy to be made available to the Premises and any other reasonable costs incurred by the Landlord in connection therewith. 27 28 EXHIBIT E RULES AND REGULATIONS 1. The entrances, lobbies, passages, corridors, elevators, halls, courts, sidewalks, vestibules, and stairways shall not be encumbered or obstructed by Tenant, Tenant's agents, servants, employees, licensees or visitors or used by them for any purposes other than ingress or egress to and from the Premises. 2. The moving in or out of all safes, freight, furniture, or bulky matter of any description shall take place during the hours which Landlord may determine from time to time. Landlord reserves the right to inspect all freight and bulky matter to be brought into the Building and to exclude from the Building all freight and bulky matter which violates any of the Rules and Regulations or the Lease of which these Rules and Regulations are a part. Landlord reserves the right to have Landlord's structural engineer review Tenant's floor loads on the Premises at Tenant's expense. 3. Tenant, or the employees, agents, servants, visitors or licensees of Tenant shall not at any time place, lease or discard any rubbish, paper, articles, or objects of any kind whatsoever outside the doors of the Premises or in the corridors or passageways of the Building. No animals or birds shall be brought or kept in or about the Building. Bicycles shall not be permitted in the Building. 4. Tenant shall not place objects against glass partitions or doors or windows or adjacent to any common space which would be unsightly from the Building corridors or from the exterior of the Building and will promptly remove the same upon notice from Landlord. 5. Tenant shall not make noises, cause disturbances, create vibrations, odors or noxious fumes or use or operate any electric or electrical devices or other devices that emit sound waves or are dangerous to other tenants and occupants of the Building or that would interfere with the operation of any device or equipment or radio or television broadcasting or reception from or within the Building or elsewhere, or with the operation of roads or highways in the vicinity of the Building, and shall not place or install any projections, antennae, aerials, or similar devices inside or outside of the Premises, without the prior written approval of Landlord. 6. Tenant may not (without Landlord's approval therefor, which approval will be signified of Tenant's Plans submitted pursuant to the Lease) and Tenant shall not permit or suffer anyone to: (a) cook in the Premises; (b) place vending or dispensing machines of any kind in our about the Premises; (c) at any time sell, purchase or give away, or permit the sale, purchase, or gift of food in any form except as set forth in Exhibit D. 7. Tenant shall not: (a) use the Premises for lodging, manufacturing or for any immoral or illegal purposes; (b) use the Premises to engage in the manufacture or sale of, or permit the use of spirituous, fermented, intoxicating or alcoholic beverages on the Premises; (c) use the Premises to engage in the manufacture or sale of, or permit the use of, any illegal drugs on the Premises. 8. No awning or other projections shall be attached to the outside walls or windows. No curtains, blinds, shades, screens or signs other than those furnished by Landlord shall be attached to, hung in, or used in connection with any window or door of the Premises without prior written consent of Landlord. 9. No signs, advertisement, object, notice or other lettering shall be exhibited, inscribed, painted or affixed on any part of the outside or inside of the Premises if visible from outside of the Premises other than what is set forth on Exhibit B. Interior signs on doors shall be painted of affixed for 28 29 Tenant by Landlord or by sign painters first approved by Landlord at the expense of Tenant and shall be of a size, color and style acceptable to Landlord. 10. Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord's opinion, tends to impair the reputation of the Building or its desirability for offices, and upon written notice from Landlord, Tenant will refrain from or discontinue such advertising. 11. Door keys for doors in the Premises will be furnished at the Commencement of the Lease by Landlord. Tenant shall not affix additional locks on doors and shall purchase duplicates keys only from Landlord. In the event of the loss of any keys so furnished by Landlord, Tenant shall pay to Landlord the cost thereof. 12. Tenant shall cooperate and participate in all security programs affecting the Building. 13. Tenant assumes full responsibility for protecting its space from theft, robbery, and pilferage, which includes keeping doors locked and other means of entry to the Premises closed and secured. 14. Tenant shall not make any room-to-room canvass to solicit business from other tenants in the Building, and shall not exhibit, sell or offer to sell, use, rent or exchange any item or services in or from the Premises unless ordinarily embraced within the Tenant's use of the Premises as specified in its Lease. Canvassing, soliciting and peddling in the Building are prohibited and Tenant shall cooperate to prevent the same. Peddlers, solicitors and beggars shall be reported to the Management Office. 15. Tenant shall not mark, paint, drill into, or in any way deface any part of the Building or Premises. No boring, driving of nails, or screws, cutting or stringing of wires shall be permitted, except with the prior written consent of Landlord, and as Landlord may direct. Tenant shall not install any resilient tile or similar floor covering the Premises except with the prior written approval of Landlord. The use of cement or other similar adhesive material is expressly prohibited. 16. Tenant shall not waste electricity or water and agrees to cooperate fully with Landlord to assure most effective operation of the Building's heating and air conditioning and shall refrain from attempting to adjust controls. Tenant shall keep corridor doors closed except when being used for access. 17. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. 18. Building employees shall not be required to perform, and shall not be requested by any tenant or occupant to perform, any work outside of their regular duties, unless under specific instructions from the office of the Managing Agent of the Building. 19. Tenant may request heating and/or air conditioning during other periods in addition to normal working hours by submitting its request in writing to the office of the Managing Agent of the Building no later than 2:00 p.m. the preceding work day (Monday through Friday) on forms available from the office of the Managing Agent. The request shall clearly state the start and stop hours of the "off-hour" service. Tenant shall submit to the Building Manager a list of personnel authorized to make such request. The Tenant shall be charged for such operation in the form of additional rent; such charges are to be determined by the Managing Agent and shall be fair and reasonable and reflect the additional operating costs involved. 29 30 20. Tenant shall submit to Landlord on December 31 of each year of the Term of this Lease a statement, certified by an authorized officer of Tenant, which contains the following information: name of all chemicals, gases, and hazardous substances, used, generated, or stored on the Premises; type of substance (liquid, gas, or granular); quantity used, stored or generated per year; method of disposal; permit number, if any, attributable to each substance, together with copies of all permits for such substances; and permit expiration date for each substance other than standard office supplies. 30 31 ASSISTANT SECRETARY'S CERTIFICATE I, Suzanne L. Ansara, hereby certify that: 1. I am the Assistant Secretary of Nashua Corporation, a Delaware Corporation. 2. The following is a true copy of a vote duly adopted by the Board of Directors of Nashua Corporation on October 28, 1994, which vote has not since been altered, amended or rescinded: VOTED: that the lease of space in Nashua, New Hampshire at 11 Trafalgar Square, for a period of ten years at a base rate not to exceed $2,500,000 for the ten year period be, and the same hereby is, approved. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said corporation this 15th day of December, 1994 /s/ Suzanne L. Ansara ---------------------------------------- Suzanne L. Ansara 31 EX-11.01 8 b38195ncex11-01.txt STATEMENT REGARDING COMPUTATION OF EARNINGS 1 EXHIBIT 11.01 NASHUA CORPORATION COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (In thousands, except per share data)
Year Ended December 31, ------------------------------------------ 2000 1999 1998 ---- ---- ---- Income (loss) from continuing operations $ 5,386 $ (420) $ (7,229) Loss from discontinued operations, net of taxes -- (4,001) (6,687) Gain on sale of discontinued operation, net of taxes -- -- 1,052 ------------------------------------------ Net income (loss) $ 5,386 $ (4,421) $(12,864) ========================================== Shares: Weighted average common shares outstanding during the period 5,649 5,718 6,320 Weighted average common and potential common shares Outstanding during the period 5,667 5,718 6,320 Basic and diluted earnings per share: Income (loss) from continuing operations $ .95 $ (.07) $ (1.15) Loss from discontinued operations -- (.70) (1.06) Gain on disposal of discontinued operations -- -- .17 ------------------------------------------ Net income (loss) $ .95 $ (.77) $ (2.04) ==========================================
EX-21.01 9 b38195ncex21-01.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.01 SUBSIDIARIES OF THE REGISTRANT
Domestic Incorporated - -------- ------------ Nashua International, Inc. (1) Delaware Nashua Photo European Investments, Inc. (2) Delaware Nashua Photo Inc. (1) Delaware Nashua Photo International Investments, Inc. (2) Delaware Nashua P.R., Inc. (1) Delaware Rittenhouse, LLC (1) Illinois
Foreign Incorporated - ------- ------------ Nashua FSC Limited (1) Jamaica Nashua Photo B.V. (2)(4) Netherlands Nashua Imaging Supplies (UK) Limited (2) England Nashua Photo S.N.C. (3) (4) France
- --------------- (1) Stock held by Nashua Corporation. (2) Stock held by Nashua Photo Inc. (3) Stock held 99.9% by Nashua Photo European Investments, Inc. and .1% by Nashua Photo International Investments, Inc. (4) In liquidation. - --------------- NOTE: Nashua Corporation has certificates representing 15% of Multitek, S.A. de C.V. (Mexico). Nashua Corporation owns a 37% interest in Cerion Technologies Liquidating Trust. Nashua Corporation owns a 39% interest in Labelnet, S.A. de C.V. (Mexico). EX-23.01 10 b38195ncex23-01.txt CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.01 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-13995, 33-67940, 33-72438, 333-06025 and 333-88683) pertaining to the Nashua Corporation 1987 Stock Option Plan, Nashua Corporation 1993 Stock Incentive Plan, Nashua Corporation Employees' Savings Plan, Nashua Corporation Amended 1996 Stock Incentive Plan and the Nashua Corporation 1999 Shareholder Value Plan, with respect to the consolidated financial statements and schedule of Nashua Corporation included in the Annual Report (Form 10-K) for the year ended December 31, 2000. ERNST & YOUNG LLP Manchester, New Hampshire March 28, 2001 EX-23.02 11 b38195ncex23-02.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.02 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-1 3995, No. 33-67940, No. 33-72438, No. 333-06025 and No. 333-88683) of Nashua Corporation of our reports dated February 18, 2000, relating to the financial statements and financial statement schedule, which appear in this Form 10-K. PricewaterhouseCoopers LLP Boston, Massachusetts March 28, 2001 EX-24.01 12 b38195ncex24-01.txt POWER OF ATTORNEY 1 EXHIBIT 24.01 COMMISSION FILE NO. 1-5492-1 POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints John L. Patenaude and Robert S. Amrein and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign Nashua Corporation's Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE - --------- ----- ---- /s/Sheldon A. Buckler Director March 28, 2001 - ----------------------------- Sheldon A. Buckler /s/Avrum Gray Director March 27, 2001 - ----------------------------- Avrum Gray /s/Charles S. Hoppin Director March 27, 2001 - ------------------------------ Charles S. Hoppin /s/John M. Kucharski Director March 23, 2001 - ------------------------------ John M. Kucharski /s/David C. Miller, Jr. Director March 23, 2001 - ------------------------------ David C. Miller, Jr. /s/George R. Mrkonic, Jr. Director March 26, 2001 - ------------------------------ George R. Mrkonic, Jr. /s/Peter J. Murphy Director March 27, 2001 - ------------------------------ Peter J. Murphy /s/James F. Orr III Director March 28, 2001 - ------------------------------- James F. Orr III
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