-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jMydTqDjktfwmz0HswSTMlHN3kcKbWHfbSVbaPWACNwXftKubkh9Ai1i1B3NOQk7 0MeyfcIb05+7KgMsioAlMw== 0000950135-95-000785.txt : 199507120000950135-95-000785.hdr.sgml : 19950711 ACCESSION NUMBER: 0000950135-95-000785 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 SROS: NYSE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05492 FILM NUMBER: 95523909 BUSINESS ADDRESS: STREET 1: 44 FRANKLIN ST STREET 2: PO BOX 2002 CITY: NASHUA STATE: NH ZIP: 03061-2002 BUSINESS PHONE: 6038802323 MAIL ADDRESS: STREET 1: 44 FRANKLIN STREET STREET 2: P.O. BOX 2002 CITY: NASHUA STATE: NH ZIP: 03061-2002 10-K 1 FORM 10-K FOR NASHUA CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1994 ----------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to --------------------------- ------------------- Commission File Number 1-5492-1 -------- NASHUA CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its Charter) Delaware 02-0170100 - ------------------------------------ --------------------------------------- (State of incorporation) (I.R.S. Employer Identification Number) 44 Franklin Street P.O. Box 2002 Nashua, New Hampshire 03061-2002 - ------------------------------------ --------------------------------------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code (603) 880-2323 --------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------------------------- Common Stock, par value $1.00 New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ( ). Continued 2 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The aggregate market value of voting stock held by non-affiliates of the registrant as of March 15, 1995 was approximately $124,287,150. The number of shares outstanding of the registrant's Common Stock as of March 15, 1995 was 6,373,700 (excluding 23,870 shares held in treasury). DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement dated March 24, 1995 for the annual meeting of stockholders to be held on April 28, 1995 are incorporated by reference into Part III of this report. 3 PART I ITEM 1. BUSINESS - ----------------- GENERAL - ------- Nashua Corporation conducts business in three segments: Commercial Products, Photofinishing and Precision Technologies. Foreign sales and export sales from the United States totaled $102.4 million and represented 21 percent of the Company's total sales in fiscal 1994. Nashua was incorporated in Massachusetts in 1904 and changed its state of incorporation to Delaware in 1957. The Company has its principal executive offices at 44 Franklin Street, P.O. Box 2002, Nashua, New Hampshire 03061-2002 (Telephone: (603) 880- 2323). References to the "Company" or to "Nashua" refer to Nashua Corporation and its consolidated subsidiaries, unless the context otherwise requires. In the fourth quarter of 1993, the Company recorded restructuring and other unusual charges totaling $48.5 million. Approximately $36.7 million of this amount related to management's decision to sell or otherwise liquidate the thin-film, oxide and diskette manufacturing operations of the Computer Products Group. The 1993 charge also included approximately $11.8 million related to the integration and streamlining of the Commercial Products Group, including workforce reductions, as well as consolidation of facilities and the write-down of certain assets. As part of the restructuring plan, the Company offered certain of its employees an early retirement program and recorded an additional pretax charge in the first quarter of 1994 of $5.7 million, of which $2.6 million related to the Company's continuing operations and $3.1 million related to discontinued operations. During the second quarter of 1994, the Company sold substantially all of its Computer Products businesses for total cash proceeds of $11.1 million, subordinated notes of $4.9 million and future royalty payments based on sales of the oxide disk and head- disk assembly operations. In addition, the Company will receive cash proceeds of approximately $2.0 million based on the 1994 operating results of the thin-film disk operation. The amounts received were not materially different from the estimates included in the 1993 charge. As a result of the sale of the businesses, the related results of operations were reclassified as discontinued operations. On January 13, 1995, the Company acquired certain photofinishing operations from Nexus Photo Ltd. The acquisition includes mail-order photofinishing operations in France, Belgium, the Netherlands and Spain, and a wholesale film-processing business in Northern Ireland. The annual sales of the acquired businesses are approximately $43 million. The total purchase price was approximately $25.6 million, plus an additional payment based on certain future sales volume in the Northern Ireland operation. Management estimates that the additional payment will not exceed $1.3 million. Approximately $20.7 million of the purchase price was provided by a new $75 million revolving credit agreement dated January 5, 1995. The Note entitled "Information About Operations" to the Company's Consolidated Financial Statements, which appears on page 33 of this Form 10-K, contains financial information concerning Nashua's business segments. COMMERCIAL PRODUCTS - ------------------- In 1994, the Company consolidated the Office Supplies and Coated Products Groups into the Commercial Products Group. The objective of the reorganization was to improve service levels, leverage -2- 4 selling capabilities and reduce costs by offering the full breadth of products to all customers through available distribution channels. The Commercial Products Group manufactures and sells office and industrial imaging supplies and industrial and commercial tape products to several customer types, including: resellers (dealers, distributors and paper merchants), merchant retailers, industrial end-users, third-party converters, original equipment manufacturers and private label distributors. Imaging Supplies. The Company's imaging supplies consist of a variety of consumable products used in the process of reproducing readable images on plain or specially treated papers and labels. Nashua's imaging supplies are comprised of toners, developers, remanufactured laser printer cartridges, facsimile paper, copy paper, labels and label papers, carbonless papers and thermal papers. Imaging supply sales were $259.5 million for 1994, $264.8 million for 1993 and $261.1 million for 1992. Nashua markets its toners, developers, facsimile paper, copy paper and remanufactured laser printer cartridges to its national and government accounts through a network of approximately 150 dealers located throughout the United States. These dealers also purchase Nashua's imaging supplies for resale directly to end-users. The Company also sells certain of these products through its own sales force to office supply distributors, and to original equipment manufacturers and private label distributors. Nashua's competitors for toners and developers include Xerox Corporation, Canon, Inc., Ricoh Corporation and Eastman Kodak Company, which sell supplies for use in machines manufactured by them. The Company also competes with other smaller independent manufacturers of toner and developer products. This market segment is competitive, with more sophisticated toner formulas and shorter product life cycles requiring timely product development and marketing. The Company's primary competitor for its remanufactured laser printer cartridges is Canon, Inc. which manufactures both new and remanufactured laser printer cartridges principally for sale to large original equipment manufacturers, including Hewlett Packard Company, for resale under their brand names. In addition, there are several thousand small laser printer cartridge rechargers who provide low volumes to small customers. In order to reduce manufacturing costs and maintain competitive pricing, the Company announced in January, 1995 its intention to relocate remanufactured laser printer cartridge production from its leased facility in Exeter, New Hampshire to Mexico. The Company's label and label paper products consist of thermosensitive label papers, dry-gummed label papers and pressure- sensitive labels and label roll stock. Nashua's thermosensitive label papers are coated with an adhesive which is activated when heat is applied. These products are usually sold through fine paper merchants who, in turn, resell these products to printers who convert the papers into labels for use primarily in the pharmaceutical industry. Nashua's thermosensitive label papers are also used in the bakery industry and the meat packaging industry. DavacR dry-gummed label paper is a paper which is coated with a moisture-activated adhesive. DavacR dry-gummed label paper is sold primarily to fine paper merchants and business forms manufacturers. It is ultimately converted into various types of labels and stamps. Nashua's competitors in the thermosensitive and dry-gummed label industries include Brown- Bridge Company (a division of Spinnaker Industries, Inc.) and Ivex Corporation. -3- 5 Nashua manufactures pressure-sensitive labels and roll stock using both plain and thermal imaging papers. Nashua sells labels through distributors and directly to end-users and sells roll stock to the label converting industry. Significant uses of such labels include grocery scale marking, inventory control and address labels. Nashua is a major supplier of labels to the supermarket industry and labels for use in the distribution and transportation of products. Nashua's label business is price sensitive and competitive, and includes competitors such as Avery/Dennison Corporation and Uarco, Inc., plus numerous small regional competitors. Nashua's 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 3M. Nashua's thermal papers develop an image upon contact with either a heated stylus or a thermal print head. A major application for these papers is for use in thermal facsimile machines. This application is expected to be adversely affected in the future by the increased use of plain paper facsimile machines. Thermal papers are also used in point of sale printers, airline and package identification systems, gaming and ticketing systems, medical and industrial recording charts and for conversion to labels. Nashua markets facsimile paper primarily to dealers and distributors for resale. Other thermal papers are sold to printers, office equipment dealers, small-roll converters, original equipment manufacturers and converted into pressure-sensitive thermal labels. The thermal paper industry is competitive and price sensitive. Nashua's competitors include major integrated companies such as Appleton Papers, Inc., Kanzaki Paper Mfg. Co., Ltd., Jujo Paper Co., Ltd., Ricoh Corporation, as well as several other manufacturers in Japan and Europe. Tape. Nashua's tape products include duct tape and masking tape for various industrial and consumer uses. Additionally, Nashua sells foil and strapping tape which it acquires from other manufacturers. Nashua sells both duct and foil tapes through distributors for use in a variety of applications in many different markets. The heating, ventilating and air conditioning and asbestos remediation markets are large consumers of Nashua duct and foil tapes. Nashua has a prominent market position in the sale of duct tapes. The masking tape market is highly competitive and Nashua sells its products through distributors for resale in many applications and markets. Duct and masking tapes are also sold to large retail chains for resale to consumers and general industrial users. Nashua's key competitors are Anchor, Tesa/Tuck, American Tape, Polyken Technologies, 3M and Shuford Mills, Inc. Supplies and Materials. Nashua depends on outside suppliers for most of the raw materials used to produce toners and developers, labels and label papers, carbonless papers, thermal papers and tapes, including paper to be converted and chemicals to be used in producing the various coatings Nashua applies. The Company purchases these materials from several suppliers and believes that adequate supplies are available. The Company experienced significantly higher raw material prices across many product lines in the latter half of 1994, and management anticipates this trend will continue into the first half of 1995. Products purchased in finished form (including certain toners and developers, papers and foil and strapping tapes) are readily available from a variety of sources. -4- 6 PHOTOFINISHING Nashua traditionally has provided mail-order photofinishing services to amateur photographers under the tradenames York Photo Labs in the United States, Truprint and York Photo Labs in the United Kingdom and Scot Foto and York Photo in Canada. Nashua develops and prints films received by mail at its processing facilities in the United States, the United Kingdom and Canada, and also sells film, cameras and associated products to its base of customers. Nashua is the market leader in the mail-order photofinishing business in all three countries. The January 1995 acquisition of certain Continental European and Northern Ireland photofinishing operations will allow the Company to leverage its existing marketing, processing and system capabilities to expand into the mail-order photofinishing markets in France, Belgium, the Netherlands and Spain, and the wholesale market in Northern Ireland. Nashua will continue to operate the businesses under the tradenames Maxicolor and Trifica in France, Belgium and the Netherlands, Labopost in Spain and Belmont in Northern Ireland. Nashua expects to continue to be the market leader in the France, Belgium and the Netherlands mail-order businesses, and the Northern Ireland wholesale photofinishing business. In both the mail-order and wholesale businesses, demand is generally strongest during the third quarter due to increased picture taking by amateur photographers during the summer months. SUPPLIES AND MATERIALS. The principal materials used by Nashua's photofinishing business include color print paper, photo developing chemicals and color print films, all of which are available from several manufacturers. COMPETITION. The Company's major mail-order photofinishing competitors include District Photo, Inc., Mystic Color Labs Inc. and Seattle Film Works, Inc. in the United States, Grunwick Processing Laboratories Limited in the United Kingdom, Chas Abel Photo Services, Ltd. in Canada, Extra Film in France and Colorado in the Netherlands, as well as numerous other national, regional and local processors in countries in which the Company operates. The proliferation of minilabs and retail stores offering reduced price processing could adversely impact the mail-order segment of the photofinishing market, which has typically relied on its lower prices as a competitive advantage over retail services. PRECISION TECHNOLOGIES Precision Technologies primarily manufactures precision machined parts used as substrates in the manufacture of magnetic computer disks. Precision Technologies had previously been a captive supplier to the Company's Computer Products Group. Aluminum substrates are sold to computer disk manufacturers who supply a limited number of large disk-drive manufacturers. Sales in 1994 were primarily to the company which acquired Nashua's thin-film disk operation in the second quarter of 1994, though by year end the dependence on this customer had dropped to approximately 50%. The physical differences among product types of substrates are dictated by the different disk manufacturers. The Company works closely with disk manufacturers to improve compatibility and to meet evolving product specifications. Significant efforts are often required to become qualified as an approved supplier; at the same time product life cycles are becoming increasingly shorter. Precision Technologies' competitors include Kobe Precision, Inc. and International Components Technology Corporation. -5- 7 The Company has expended considerable effort to extend its precision-machining capabilities to applications involving a variety of materials with the objective of entering new markets with additional products. SUPPLIES AND MATERIALS. Precision Technologies depends on outside suppliers for the continued availability of materials, primarily aluminum. The Company purchases these parts from several suppliers and believes adequate future supplies are available. RESEARCH AND DEVELOPMENT - ------------------------ Nashua's research and development efforts have been instrumental in the development of many of the products it markets. The increase in expenditures in 1994 reflects increased focus on new product development. Nashua's research and development expenditures were $9.6 million in 1994, $7.4 million in 1993 and $6.6 million in 1992. During 1994, the Company acquired MicrosharpTM display technology and is working to develop applications for the flat screen display market including projection screens, televisions and computer monitors. ENVIRONMENTAL MATTERS - --------------------- The Company (and its competitors) are subject to various environmental laws and regulations. These include the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act and other state and local counterparts of these statutes. The Company believes that its operations have been and continue to be operating in compliance in all material respects with the applicable environmental laws and regulations. (Violation of these laws and regulations could result in substantial fines and penalties.) Nevertheless, in the past and potentially in the future, the Company has and could receive notices of alleged environmental violations. The Company has endeavored to promptly remedy any such violations upon notification. For the past three years the Company has spent approximately $1 million per year in order to keep its operations in compliance with pertinent environmental laws and regulations. In addition, for those sites which the Company has received notification of the need to remediate, the Company has assessed its liability and accrued what it considers to be the most likely amount within the estimated range of remediation costs. At December 31, 1993 the accrual for potential environmental liabilities was $.9 million. Liability of "potentially responsible parties" (PRP) under CERCLA and RCRA, however, is joint and several, and actual remediation expenses at sites where the Company is a PRP may exceed current estimates. The Company believes that based on the facts currently known, and the environmental accrual recorded, its remediation expense with respect to those sites and on-going costs of compliance are not likely to have a material adverse effect on its liquidity, consolidated financial position or results of operations. EMPLOYEES - --------- Nashua and its subsidiaries had approximately 3,100 full-time employees at March 1, 1995. Most of the hourly employees of Nashua's Commercial Products segment are members of one of several unions, principally the United Paperworkers International Union. -6- 8 FOREIGN OPERATIONS - ------------------ During 1994, Nashua had Photofinishing subsidiaries in Canada and the United Kingdom. In connection with the 1995 acquisition of certain Continental European and Northern Ireland photofinishing operations, the Company has established subsidiaries in Northern Ireland, France and the Netherlands. Nashua had export sales of approximately $41.0 million in 1994, $46.9 million in 1993 and $50.2 million in 1992. Nashua includes revenues and other financial data from its foreign operations in its business segment reporting according to the nature of the product sold. The Note to the Company's Consolidated Financial Statements entitled "Information About Operations," which appears on page 33 of this Form 10-K, contains additional information regarding Nashua's foreign operations during the last three years, including identifiable assets, net sales and operating income by geographic area. Nashua's international sales are subject to risks that generally do not affect businesses operating wholly within a single country. These include political risks associated with doing business in foreign countries, exchange control and import limitations which may impede the free movement of goods and funds from one country to another and currency exchange rate risks. Nashua's foreign business generally is adversely affected as the United States dollar strengthens against the foreign currencies of the countries in which it does business. From time-to-time Nashua enters into various foreign exchange contracts to mitigate the risk of foreign currency fluctuations with respect to foreign currency denominated transactions. ITEM 2. PROPERTIES - ------------------- Nashua's manufacturing facilities are located in the United States, Canada, United Kingdom and Northern Ireland. Nashua considers its properties to be in good operating condition and suitable for the production of its products. The principal manufacturing facilities of the Company are listed by industry segment, location and principal products produced. Except as otherwise noted, each of these facilities is owned by the Company. -7- 9 PRINCIPAL PROPERTIES
SQUARE PRINCIPAL LOCATION FOOTAGE PRODUCTS PRODUCED - -------- ------- ----------------- COMMERCIAL PRODUCTS - ------------------- Merrimack, New Hampshire 435,000 carbonless paper, facsimile paper, thermosensitive and dry-gummed label papers, chemicals Omaha, Nebraska 170,000 pressure-sensitive labels and laminate paper Watervliet, New York 422,000 pressure-sensitive tapes Nashua, New Hampshire 198,000 dry toners and developers, chemicals Exeter, New Hampshire 77,000 (1)(3) remanufactured laser printer cartridges Chelmsford, Massachusetts 35,000 (1) liquid toners PHOTOFINISHING - -------------- Parkersburg, West Virginia 81,000 (1) photofinishing Newton Abbot, United Kingdom 46,000 (1) photofinishing Telford, United Kingdom 38,000 (1) photofinishing Saskatoon, Saskatchewan, Canada 15,000 photofinishing Deal, United Kingdom 12,000 (1)(2) photofinishing Belfast, Northern Ireland 24,000 (1)(2) photofinishing PRECISION TECHNOLOGIES - ---------------------- Champaign, Illinois 32,000 aluminum substrates for computer disks _____________________ (1) Leased facilities (2) Acquired by the Company on January 13, 1995. (3) The Company has announced its intention to relocate remanufactured laser printer cartridge production from its Exeter, New Hampshire facility to Mexico.
-8- 10 ITEM 3. LEGAL PROCEEDINGS - -------------------------- In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh") filed a Complaint with the United States District Court, District of New Hampshire, alleging Nashua's infringement of U.S. patents 4,611,730 and 4,878,603 relating to certain toner cartridges for Ricoh copiers. The Complaint seeks damages and injunctive relief. The products involved constitute an insignificant amount of Nashua's sales. The Company believes it has substantial defenses and intends to defend the action vigorously. During 1994, the Internal Revenue Service (IRS) completed an examination of the Company's corporate income tax returns for the years 1988 through 1991. As a result of the IRS' findings, the Company agreed to and paid additional taxes and interest of $7.8 million in January 1995 in connection with adjustments related mainly to the tax treatment of certain items associated with the 1990 sale of the International Office Systems business. On January 13, 1995, the IRS issued a Notice of Deficiency in the amount of $8.7 million in connection with the tax years 1990 and 1991. The tax deficiency relates to the tax treatment of income recognized in connection with the 1990 sale of the Office Systems business. The major issues relate to foreign tax credits, foreign earnings and profits computation, and the treatment of the disposition of preferred stock of a foreign subsidiary. The Company disagrees with the position taken by the IRS and filed a formal protest of the deficiency on February 9, 1995. In management's opinion, the ultimate disposition of this matter will not have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ Set forth below are the present executive officers of the Company, their ages and their positions held with the Company:
NAME AGE POSITION - ---- --- -------- William E. Mitchell 51 President and Chief Executive Officer Francis J. Lunger 49 Vice President and Chief Administrative Officer William Luke 47 Vice President-Finance and Chief Financial Officer
Mr. Mitchell has been Chief Executive Officer of Nashua since July 1994 and President since September 1993. He was Chief Operating Officer of Nashua from September 1993 to July 1994. Prior to September 1993, he was a Senior Vice President of Raychem Corporation. Mr. Lunger has been Vice President, Chief Administrative Officer of Nashua since February 1994. Prior to February 1994, he was Vice President of Raychem Corporation. Mr. Luke has been Vice President-Finance and Chief Financial Officer since prior to 1989. Executive officers are generally elected to their offices each year by the Board of Directors shortly after the Annual Meeting of Shareholders. -9- 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS - ------- -------------------------------------------------------------------- Reference is made to the Note entitled "Quarterly Operating Results and Common Stock Information (Unaudited)" to the Company's Consolidated Financial Statements, which appears on page 35 of this Form 10-K. -10- 12 ITEM 6. SELECTED FINANCIAL DATA - ------- ----------------------- Nashua Corporation and Subsidiaries FIVE YEAR FINANCIAL REVIEW (In thousands, except per share data, price range, number of employees and percentages)
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- OPERATIONS Net sales $478,571 $479,838 $491,738 $479,127 $502,754 Gross margin percentage 24.4% 25.2% 26.1% 26.0% 25.9% Selling, distribution and administrative expenses as a percentage of sales 19.9% 20.1% 20.7% 20.1% 19.3% Income before interest expense and taxes as a percentage of sales* 2.1% 1.2% 4.2% 5.0% 6.1% Income before taxes as a percentage of sales* 1.6% 0.8% 3.6% 4.6% 5.7% Income as a percentage of sales* 0.9% 0.5% 2.1% 2.7% 3.5% Effective tax rate 40.5% 31.0% 41.5% 40.9% 39.5% Income before income taxes* $7,467 $3,647 $17,836 $22,221 $28,678 Income after taxes* 4,442 2,516 10,434 13,133 17,350 Income (loss) from discontinued operations (2,295) (21,685) (5,126) (12,581) 3,445 Cumulative effect of accounting principle changes - - (10,131) - - Net income (loss) 2,147 (19,169) (4,823) 552 20,795 Earnings (loss) per share: Income (loss)* $.70 $.40 $1.65 $2.07 $2.28 Discontinued operations (.36) (3.42) (.81) (1.98) .45 Cumulative effect of accounting principle changes - - (1.60) - - Net income (loss) .34 (3.02) (.76) .09 2.73 FINANCIAL POSITION Working capital $46,789 $ 23,728 $ 40,630 $ 35,974 $ 17,207 Total assets 227,825 219,065 236,699 243,200 239,474 Long-term debt 49,166 20,342 27,865 25,386 10,404 Total debt 49,816 25,742 31,065 30,386 10,404 Total capital employed 142,512 118,865 148,217 160,098 144,330 Total debt as a percentage of capital employed 35.0% 21.7% 21.0% 19.0% 7.2% Shareholders' equity $92,696 $ 93,123 $117,152 $129,712 $133,926 Shareholders' equity per common share 14.55 14.74 18.57 20.64 21.32 OTHER SELECTED DATA Investment in plant and equipment $16,835 $ 15,050 $12,604 $12,720 $16,069 Depreciation and amortization 15,270 14,569 14,050 13,387 11,588 Dividends per common share .72 .72 .72 .72 .69 Return on average shareholders' equity 2.3% (18.2)% (3.9%) 0.4% 11.2% Common stock price range: High $30-3/4 $ 31-3/4 $ 31-1/4 $ 37 $ 44-7/8 Low 19-3/4 25-1/4 21 18-1/8 30-1/2 Year-end closing price 20-1/2 27-1/2 28-3/8 23-1/8 34-3/8 Number of employees 3,054 4,011 4,145 3,869 4,506 Average common and common equivalent shares 6,360 6,343 6,325 6,332 7,617
See Discontinued Operations and Restructuring Activities, Income Taxes and Postretirement Benefits Notes to Consolidated Financial Statements for a description of certain matters relevant to this data. * Income is from continuing operations and before the cumulative effect of accounting principle changes. -11- 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- RESULTS OF CONTINUING OPERATIONS - 1994 COMPARED TO 1993 Net sales of $478.6 million declined slightly from 1993. The Company generated after-tax income from continuing operations of $4.4 million which included a pretax restructuring charge of $2.6 million. This compared to after-tax income from continuing operations of $2.5 million in 1993 which included a pretax restructuring charge of $11.8 million. Net sales for the year increased in the Commercial Products Group, decreased in the Photofinishing Group, and were substantially unchanged for Precision Technologies. Pretax income from continuing operations, excluding restructuring charges, was $10.1 million compared to $15.4 million in 1993 primarily due to the decline in operating income in the Commercial Products Group and expenses related to the development of the new Microsharp business. In 1994, the Company created the Commercial Products Group by combining the former Office Supplies and Coated Products Groups. The objective of this reorganization was to improve service levels, leverage selling capabilities and reduce costs by offering the full breadth of Nashua products to all customers. In connection with these changes, the Company's office supplies catalog business was merged with existing sales and marketing operations of the new Commercial Products Group. In addition, the Company spent approximately $1 million in 1994 on professional fees associated with the development of customer interface systems. Net sales for the Commercial Products Group increased $2.2 million, or 1 percent, driven by strong volume gains for tape, thermal labels, heat seal and copy paper, partially offset by reduced diskette and laser printer cartridge volume. However, operating income before restructuring charges compares unfavorably to 1993 by $3.0 million, primarily due to extremely competitive toner pricing, a shift to lower margin toners and tapes, lower laser printer cartridge volume, and significantly higher raw material prices across many product lines. Realized selling price increases only partially offset the impact of higher raw material costs. Management anticipates that the raw material price trend evidenced in the second half of 1994 will continue into the first half of 1995. Net sales in the Photofinishing Group decreased $3.3 million, approximately 2 percent, from the prior year. Continued competitive pressure resulted in lower volume in the U.S. compared to the prior year, partially offset by higher volume in the U.K. operation. In addition, U.S. sales in 1994 were depressed by lower prices in the first quarter compared to the comparable period of the prior year, partially offset by improvements in price throughout the year, especially the fourth quarter. While volume and pricing pressures adversely impacted gross margin, operating income, excluding restructuring charges, was substantially unchanged year over year due to lower administrative costs. Precision Technologies transitioned in 1994 from a captive supplier of substrates to an independent supplier. Net sales were substantially unchanged year to year. Operating income declined $.8 million, primarily due to manufacturing changeover costs and market introduction costs associated with new products being offered to an expanded customer base. Administrative expenses decreased approximately 8 percent, primarily as a result of efficiencies resulting from the restructuring actions taken in 1994. Selling and distribution expenses as a percentage of sales were essentially unchanged. Research and development expenses increased $2.3 million as a result of the Company's investment in MicrosharpTM display technology and new product development for the Commercial Products Group. -12- 14 In the fourth quarter of 1993, the Company recorded restructuring and other unusual charges totaling $48.5 million. Approximately $36.7 million of this amount related to management's decision to sell or otherwise liquidate the thin-film, oxide and diskette manufacturing operations of the Computer Products Group. The 1993 charge also included approximately $11.8 million related to the integration and streamlining of the operations of the Commercial Products Group, including workforce reductions, as well as consolidation of facilities and the write-down of certain assets. As part of the restructuring plan, the Company offered certain of its employees an early retirement program and recorded an additional pretax charge in the first quarter of 1994 of $5.7 million, of which $2.6 million related to the Company's continuing operations and $3.1 million related to discontinued operations. During the second quarter of 1994, the Company sold substantially all of its Computer Products businesses for total cash proceeds of $11.1 million, subordinated notes of $4.9 million and future royalty payments based on sales of the oxide disk and head disk assembly operations. In addition, the Company will receive cash proceeds of approximately $2.0 million based on the 1994 operating results of the thin-film disk operation. The amounts received were not materially different from the estimates included in the 1993 charge. As a result of the sale of these businesses, the related results of operations were reclassified as discontinued operations. The details of the Company's 1993 restructuring charge related to continuing operations and the activity recorded during 1994, are as follows:
Balance Balance Dec. 31, 1994 1994 Dec. 31, (In thousands) 1993 Provision Charges 1994 -------- --------- -------- ------ Provisions related to workforce reductions: Severance costs $ 3,850 $ 700 $ 3,000 $1,550 Pension and OPEB costs 900 2,600 3,500 - Provisions related to employees not terminated 1,100 - 950 150 Provisions for assets to be sold or discarded 5,100 (1,100) 2,750 1,250 Other 850 400 1,250 - ------- ------ ------- ------ Total $11,800 $2,600 $11,450 $2,950 ======= ====== ======= ======
The 1993 restructuring charge included provisions for salary and benefit continuation costs for approximately 170 employees. The 1994 provision represents a revision in the Company's original estimate of severance costs primarily as a result of approximately 20 additional employee terminations from the Company's Commercial Products Group rather than from discontinued operations. As of December 31, 1994, substantially all planned employee reductions have taken place, and the remaining accrual represents payments to be made to these former employees in the first half of 1995. Pension and OPEB costs recorded in 1993 relate to curtailment charges recognized in connection with the planned workforce reductions. The provision recognized in 1994 was recorded in connection with the Company's early retirement program based upon the actual number of employee acceptances. Provisions for employees not terminated relate primarily to relocation costs. The provisions for assets to be sold or discarded included a charge of approximately $1.8 million to write down certain corporate and manufacturing facilities to their estimated net realizable value, as well as the costs associated with holding certain vacated portions of these facilities during the period until the property can be sold or otherwise disposed. During the year, the Company commissioned an appraisal of its corporate -13- 15 and manufacturing facilities, and as a result of the appraisal revised upward its estimate of proceeds to be realized upon disposal. Other than as described above, there were no material changes during the year to the Company's original estimate of the costs associated with the restructuring actions. Management anticipates all remaining actions will be completed by the end of 1995. As a result of these restructuring actions, the Company anticipates savings in personnel and facility related costs of approximately $8 million in 1995. The effective tax rate for continuing operations was 40.5 percent compared to 31.0 percent in 1993. The effective tax rate is higher than the U.S. statutory rate in 1994 primarily due to the impact of non-deductible goodwill. On January 13, 1995, the Company acquired certain photofinishing operations from Nexus Photo Ltd. The acquisition includes mail- order photofinishing operations in France, Belgium, the Netherlands and Spain, and a wholesale film processing business in Northern Ireland. The annual sales of the acquired businesses are approximately $43 million. The total purchase price was approximately $25.6 million, plus an additional payment based on certain future volume in the Northern Ireland operation. Approximately $20.7 million of the purchase price was provided by a new $75 million revolving credit agreement dated January 5, 1995. RESULTS OF CONTINUING OPERATIONS - 1993 COMPARED TO 1992 Net sales were $479.8 million in 1993, a decrease of 2 percent from 1992, as a result of reduced Photofinishing sales. The Company recorded after-tax income from continuing operations of $2.5 million, which included pretax restructuring charges of $11.8 million. Pretax income from continuing operations, excluding restructuring charges, decreased 13 percent to $15.4 million, primarily due to Commercial Products. In 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes" which resulted in a net charge of $10.1 million. Net sales for the Commercial Products Group increased 1 percent compared to 1992, as higher label and facsimile paper volumes more than offset the decline in toner, developer and copier paper sales. Operating profit, before pretax restructuring charges of $3.5 million, decreased 32 percent from 1992 as lower margins on toner, developer and laser toner cartridges more than offset the impact of higher facsimile paper volume, lower carbonless paper manufacturing costs and reduced postretirement benefit expense resulting from changes to the Company's postretirement benefit plans. Net sales in the Photofinishing Group decreased 8 percent from 1992 due to a decline in the value of the British pound, and lower prices and volume in the United States. Operating income, before pretax restructuring charges of $.8 million, increased 8 percent as higher volume in the United Kingdom more than offset the effect of lower sales in the United States and a weaker exchange rate. Precision Technologies experienced a decrease in sales of 15 percent, resulting in a reduction of operating profit of 63 percent from 1992. Administrative expenses increased moderately in 1993 compared to 1992 due primarily to overall wage increases. Selling and distribution expense as a percentage of sales was lower than 1992 due to lower marketing expense in the United Kingdom and lower sales of toner products which generally have a higher associated selling and distribution expense. Research and development expense for 1993 increased 11 percent, primarily in the Commercial Products Group. -14- 16 The effective tax rate for continuing operations was 31.0 percent in 1993 versus 41.5 percent in 1992. The effective tax rate was less than the U.S. statutory rate in 1993, primarily due to the benefit of state tax loss carrybacks and the revaluation of tax assets caused by the increase in the U.S. statutory rate. In April 1990, the Company sold the international portion of its Office Systems and Supplies Group to Gestetner Holdings PLC (Gestetner). Under the terms of the Purchase Agreement, Gestetner raised certain objections to the purchase price totaling $15.3 million, excluding interest, which were submitted to arbitration. In January 1994, the arbitrator issued a final ruling which resulted in a total payment by Nashua of $1.8 million, including interest, to Gestetner. Resolution of the purchase price allowed the Company to recognize an after-tax gain from discontinued operations of $2.5 million. EFFECT OF INFLATION AND CHANGING PRICES The Company believes that results of operations as reported in its historical cost financial statements reasonably match current costs, except for depreciation, with revenues generated in the period. Depreciation expense based on the current costs of plant and equipment would be significantly higher than depreciation expense reported in the historical financial statements; however, such expense would not affect cash provided by operating activities. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Working capital increased approximately $23 million in 1994. This increase was comprised primarily of reductions in accrued restructuring charges, increased inventories and receivables in the Commercial Products Group, and increased receivables in Precision Technologies as it transitioned to an independent supplier. At year end the ratio of total debt to equity increased to 54 percent from 28 percent at December 31, 1993. The ratio of long-term debt to equity increased to 53 percent from 22 percent a year ago. The Company generated $7.1 million in cash from continuing operations before using cash of $6.7 million to fund restructuring activities in 1994. For 1994, cash dividends were $.72 per share reflecting an $.18 per share dividend each quarter. The Company relies primarily on cash provided by operating activities to fund its normal additions to plant and equipment. Investments in plant and equipment in 1994 were approximately $17 million. Borrowings of $28 million against the Company's revolving credit agreement were primarily used to repay the Company's senior notes, increase working capital and fund restructuring activities. In January 1995, the Company replaced its existing $40 million revolving credit facility with a similar $75 million facility. This new agreement provided $20.5 million of the purchase price for the photofinishing businesses acquired on January 13, 1995. Management believes that available borrowing capacity will provide sufficient resources to meet liquidity needs. The Company had $28.2 million of deferred tax assets and $4.4 million of deferred tax liabilities at December 31, 1994. The deferred tax assets include $10.7 million of loss and tax credit carryforwards which expire as follows: $3.1 million in 1996, $.7 million in 1997, $.1 million in 1998, $.6 million in 1999, $.1 million in 2000, $2.4 million in 2001, $.2 million in 2002, and $3.5 million thereafter. These carryforwards relate primarily to the U.S. and will require a minimum of approximately $31 million in cumulative U.S. taxable income prior to the carryforwards' expiration in order to be fully utilized. The remainder of the deferred tax assets pertain to net deductible temporary differences between financial and taxable bases of assets and -15- 17 liabilities such as accruals not yet paid or reserves not yet deductible for tax purposes. In the past, taxable income has generally been higher than income for financial reporting purposes. The Company expects this relationship to continue in the future. The Company had $7.2 million of tax receivables at December 31, 1994, generated primarily from the carryback of the 1994 tax loss of approximately $31 million. During 1994, the Internal Revenue Service (IRS) completed an examination of the Company's corporate income tax returns for the years 1988 through 1991. As a result of the IRS' findings, the Company agreed to and paid additional taxes and interest of $7.8 million in January 1995 in connection with adjustments related mainly to the tax treatment of certain items associated with the 1990 sale of the International Office Systems business. On January 13, 1995, the IRS issued a Notice of Deficiency in the amount of $8.7 million in connection with the tax years 1990 and 1991. The tax deficiency relates to the tax treatment of income recognized in connection with the 1990 sale of the Office Systems business. The major issues relate to foreign tax credits, foreign earnings and profits computation, and the treatment of the disposition of preferred stock of a foreign subsidiary. The Company disagrees with the position taken by the IRS and filed a formal protest of the deficiency on February 9, 1995. In management's opinion, the ultimate disposition of this matter will not have a material adverse effect on the financial position or results of operations of the Company. The Company (and its competitors) are subject to various environmental laws and regulations. These include the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Clean Water Act and other state and local counterparts of these statutes. The Company believes that its operations have been and continue to be operating in compliance in all material respects with the applicable environmental laws and regulations. (Violation of these laws and regulations could result in substantial fines and penalties.) Nevertheless, in the past and potentially in the future, the Company has and could receive notices of alleged environmental violations. The Company has endeavored to promptly remedy any such violations upon notification. For the past three years the Company has spent approximately $1 million per year in order to keep its operations in compliance with pertinent environmental laws and regulations. In addition, for those sites which the Company has received notification of the need to remediate, the Company has assessed its liability and accrued what it considers to be the most likely amount within the estimated range of remediation costs. At December 31, 1994 the accrual for potential environmental liability was $.9 million. Liability of "potentially responsible parties" (PRP) under CERCLA and RCRA, however, is joint and several, and actual remediation expenses at sites where the Company is a PRP may exceed current estimates. The Company believes that based on the facts currently known, and the environmental accrual recorded, its remediation expense with respect to those sites and on-going costs of compliance are not likely to have a material adverse effect on its liquidity, consolidated financial position or results of operations. -16- 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- ------------------------------------------- CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended December 31, 1994 1993 1992 (In thousands, except per share data) -------- -------- ------- Net sales $478,571 $479,838 $491,738 Cost of products sold 361,933 358,954 363,531 Selling, distribution and administrative expenses 95,101 96,221 101,888 Research and development expense 9,604 7,351 6,625 Restructuring charges 2,600 11,800 - Interest expense 2,451 2,179 2,811 Interest income (585) (314) (953) -------- -------- -------- Total costs and expenses 471,104 476,191 473,902 Income from continuing operations before income taxes and cumulative effect of accounting principle changes 7,467 3,647 17,836 Income taxes 3,025 1,131 7,402 -------- -------- -------- Income from continuing operations before cumulative effect of accounting principle changes 4,442 2,516 10,434 -------- -------- -------- Loss from discontinued operations (2,295) (21,685) (5,126) -------- -------- -------- Cumulative effect on prior years of changes in accounting principles for: Postretirement health care and other benefits, net - - (9,367) Income taxes - - (764) -------- -------- -------- Net income (loss) 2,147 (19,169) (4,823) Retained earnings, beginning of year 82,166 105,880 129,055 Dividends (4,569) (4,545) (4,537) Retirement of treasury shares - - (13,815) -------- -------- -------- Retained earnings, end of year $ 79,744 $ 82,166 $105,880 ======== ======== ======== Earnings (loss) per common and common equivalent share: Income from continuing operations before cumulative effect of accounting principle changes $ .70 $ .40 $ 1.65 Loss from discontinued operations (.36) (3.42) (.81) Cumulative effect on prior years of changes in accounting principles for: Postretirement health care and other benefits, net - - (1.48) Income taxes - - (.12) -------- -------- -------- Net income (loss) $ .34 $ (3.02) $ (.76) ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. -17- 19 CONSOLIDATED BALANCE SHEET
December 31, (In thousands, except share data) 1994 1993 ---- ---- ASSETS Current Assets Cash and cash equivalents $ 10,219 $ 5,883 Accounts receivable 40,811 47,657 Inventories Materials and supplies 15,713 11,793 Work in process 4,942 4,875 Finished goods 13,506 17,000 -------- -------- 34,161 33,668 Other current assets 22,971 22,573 -------- -------- 108,162 109,781 -------- -------- Plant and Equipment Land 1,441 1,447 Buildings and improvements 36,638 39,492 Machinery and equipment 84,827 110,439 Construction in progress 6,684 13,364 -------- -------- 129,590 164,742 Accumulated depreciation (58,733) (93,509) -------- -------- 70,857 71,233 -------- -------- Other Assets 48,806 38,051 -------- -------- Total Assets $227,825 $219,065 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes and loans payable $ 200 $ 2,900 Current maturities of long-term debt 450 2,500 Accounts payable 27,374 29,951 Accrued expenses 22,107 48,669 Income taxes payable 11,242 2,033 -------- -------- 61,373 86,053 -------- -------- Long-Term Debt Borrowings under revolving credit agreement 33,000 5,000 Senior notes 15,000 15,000 Other long-term debt 1,166 342 -------- -------- 49,166 20,342 -------- -------- Other Long-Term Liabilities 24,590 19,547 Shareholders' Equity Preferred stock, par value $1.00: 2,000,000 shares authorized and unissued - - Common stock, par value $1.00: Authorized 40,000,000 shares Issued 6,396,570 shares in 1994 and 6,340,430 shares in 1993 6,397 6,340 Additional capital 12,270 11,246 Retained earnings 79,744 82,166 Cumulative translation adjustment (4,928) (5,844) Treasury stock, at cost (787) (785) -------- -------- 92,696 93,123 -------- -------- Commitments and Contingencies Total Liabilities and Shareholders' Equity $227,825 $219,065 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. -18- 20 CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31, (In thousands) 1994 1993 1992 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS: Net income (loss) $ 2,147 $(19,169) $(4,823) Adjustments to reconcile net income to cash provided by continuing operating activities: Depreciation and amortization 15,270 14,569 14,050 Deferred income taxes (293) (3,790) (8) Write-down of fixed assets to net realizable value - 2,000 - Loss from discontinued operations 2,295 21,685 5,126 Cumulative effect on prior years of changes in accounting principles - - 10,131 Change in operating assets and liabilities, net of effects from acquisition and disposal of businesses: Accounts receivable (6,707) 3,561 (4,344) Inventories (6,270) (92) 567 Other assets (3,939) 6,173 511 Accounts payable 215 (2,398) (1,441) Accrued expenses (13,526) 11,108 (3,228) Other long-term liabilities 2,144 (1,289) (1,444) Income taxes payable 9,029 (149) (218) -------- ------- ------ Cash provided by operating activities 365 32,209 14,879 CASH FLOWS FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS Investment in plant and equipment (16,835) (15,050) (12,604) Acquisition of business - (4,286) - ------- ------- ------ Cash used in investing activities (16,835) (19,336) (12,604) CASH FLOWS FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS Proceeds from borrowings 52,900 9,900 15,910 Repayment of borrowings (28,826) (15,223) (15,231) Dividends paid (4,569) (4,545) (4,537) Proceeds and tax benefits from shares issued under stock option plans 1,081 122 487 Purchase and reissuance of treasury stock (2) 14 13 ------- ------ ------ Cash provided by (used in) financing activities 20,584 (9,732) (3,358) Proceeds from sale of discontinued operations 11,115 - - Cash applied to activities of discontinued operations (11,108) (9,405) (16,148) Effect of exchange rate changes on cash 215 (65) (572) ------- ------- -------- Increase (decrease) in cash and cash equivalents 4,336 (6,329) (17,803) Cash and cash equivalents at beginning of year 5,883 12,212 30,015 ------- ------- -------- Cash and cash equivalents at end of year $ 10,219 $ 5,883 $ 12,212 ======== ======= ======== Interest paid $ 2,457 $ 2,051 $ 2,891 ======== ======= ======== Income taxes paid $ 1,171 $ 5,355 $ 3,560 ========= ======= ========
The accompanying notes are an integral part of the consolidated financial statements. -19- 21 NOTES TO CONSOLIATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Nashua Corporation and its subsidiaries (the Company), all of which are wholly-owned. CASH EQUIVALENTS: The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. At December 31, 1994 and 1993, the Company held $5.9 million and $1.9 million, respectively, of various money market instruments carried at cost, which approximated market. . ACCOUNTS RECEIVABLE: The consolidated balance is net of allowance for doubtful accounts of $2.6 million and $1.9 million, at December 31, 1994 and 1993, respectively. INVENTORIES: Inventories are carried at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method for 80 percent of the inventories at December 31, 1994 and 1993, and by the last-in, first-out (LIFO) method for the balance. Had the FIFO method been used to cost all inventories, the inventory balances would have been approximately $2.7 and $2.5 million higher at December 31, 1994 and 1993, 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 3-20 years During 1993, the Company recorded charges of $21.2 million related to the write-down of fixed assets in connection with discontinued operations. See the Discontinued Operations and Restructuring Activities note. GOODWILL: Included in "Other Assets" is the excess of cost over the fair value of net assets acquired (goodwill), which is being amortized on a straight-line basis over periods ranging from 5 to 20 years. Goodwill amounted to $14.5 million and $14.7 million at December 31, 1994 and 1993, respectively, which is net of accumulated amortization of $5.2 million and $4.5 million, respectively. During 1993, the Company wrote-off goodwill of $6.3 million associated with discontinued operations, and $.4 million associated with continuing operations. See the Discontinued Operations and Restructuring Activities note. INCOME TAXES: Prepaid or deferred income taxes result principally from the use of different methods of depreciation and amortization for income tax 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. -20- 22 FOREIGN CURRENCY TRANSLATION: The functional currency of the Company's foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these subsidiaries have been translated using exchange rates prevailing at the appropriate balance sheet date, and income statement items have been translated using average monthly exchange rates. FINANCIAL INSTRUMENTS: The Company enters into foreign exchange contracts as hedges against exposure to fluctuations in exchange rates associated with certain transactions denominated in foreign currencies, principally receivables. Market value gains or losses on these contracts are included in the results of operations and generally offset gains or losses on the related transactions. The Company also utilizes forward sales contracts to hedge market price exposure on anticipated sales of silver alloy, a by-product of its photofinishing process. The terms of the Company's forward contracts are generally less than one year. Gains and losses on these contracts are deferred and recognized as adjustments of carrying amounts when the hedged transaction occurs. Deferred gains or losses at December 31, 1994 are not significant. The Company does not hold derivative financial instruments for trading purposes. ENVIRONMENTAL EXPENDITURES: Environmental expenditures relating to on-going operations are expensed when incurred unless the expenditures extend the life, increase the capacity or improve the safety or efficiency of the property; mitigate or prevent environmental contamination that has yet to occur and improve the property compared with its original condition; or are incurred in preparing for sale that property currently 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. These estimates are based on in-house or third party studies considering current technologies, remediation alternatives and current environmental standards. In addition, if there are other participants and the liability is joint and several, the financial stability of the other participants is considered in determining the Company's accrual. Insurance and other recoveries relating to these expenditures are recorded separately once recovery is probable. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Earnings per common and common equivalent share are computed based on the total of the weighted average number of common shares and the weighted average number of common equivalent shares outstanding during the period presented. DISCONTINUED OPERATIONS AND RESTRUCTURING ACTIVITIES In the fourth quarter of 1993, the Company recorded restructuring and other unusual charges totaling $48.5 million. Approximately $36.7 million of this amount related to management's decision to sell or otherwise liquidate the thin-film, oxide and diskette manufacturing operations of the Computer Products Group. The 1993 charge also included approximately $11.8 million related to the integration and streamlining of the operations of the Commercial Products Group, including workforce reductions, as well as consolidation of facilities and the write-down of certain assets. Discontinued Operations During the second quarter of 1994, the Company sold substantially all of its Computer Products businesses for total cash proceeds of $11.1 million, subordinated notes of $4.9 million and future royalty payments based on sales of the oxide disk and head disk assembly operations. In addition, the Company will receive cash proceeds of approximately $2.0 million based on the 1994 operating results of the thin-film disk operation. -21- 23 The amounts received were not materially different from the estimates included in the 1993 charge. As a result of the sale of these businesses, the related results of operations were reclassified as discontinued operations. During the first quarter of 1994, the Company offered its employees an early retirement program, and recorded an additional pretax charge of $3.1 million to discontinued operations related to the program. The results of operations of the discontinued thin-film disk, oxide disk and head disk assembly operations, are reported as discontinued operations in the accompanying consolidated statement of operations, and are summarized as follows:
Year Ended --------------------------------------------------- December 31, December 31, December 31, (In thousands) 1994 1993 1992 ----------- ------------ ------------ Net sales $19,243 $ 88,704 $73,409 Loss before income taxes (3,279) (35,049) (7,384) Income tax benefit (984) (10,852) (2,258) Loss from discontinued operations $(2,295) $(24,197) $(5,126) ======= ======== =======
In April 1990, the Company sold the international portion of its Office Systems and Supplies Group to Gestetner Holdings PLC (Gestetner). Under the terms of the Purchase Agreement, Gestetner raised certain objections to the purchase price totaling $15.3 million, excluding interest, which were submitted to arbitration. In January 1994, the arbitrator issued a final ruling which resulted in a total payment by Nashua of $1.8 million, including interest, to Gestetner. Resolution of the purchase price allowed the Company to recognize an after-tax gain from discontinued operations of $2.5 million in 1993. Restructuring Activities The details of the Company's 1993 restructuring charge related to continuing operations and the activity recorded during 1994, are as follows:
Balance Balance Dec. 31, 1994 1994 Dec. 31, (In thousands) 1993 Provision Charges 1994 -------- ----------- ------- -------- Provisions related to workforce reductions: Severance costs $ 3,850 $ 700 $ 3,000 $1,550 Pension and OPEB costs 900 2,600 3,500 - Provisions related to employees not terminated 1,100 - 950 150 Provisions for assets to be sold or discarded 5,100 (1,100) 2,750 1,250 Other 850 400 1,250 - ------- ------ ------- ------ Total $11,800 $2,600 $11,450 $2,950 ======= ====== ======= ======
The 1993 restructuring charge included provisions for salary and benefit continuation costs for approximately 170 employees. The 1994 provision represents a revision in the Company's original estimate of severance costs primarily as a result of approximately 20 additional employee terminations from the Company's Commercial Products Group rather than from discontinued operations. As of December 31, 1994, substantially all planned employee reductions have taken place, and the remaining accrual represents payments to be made to these former employees in the first half of 1995. Pension and OPEB costs recorded -22- 24 in 1993 relate to curtailment charges recognized in connection with the planned workforce reductions. The provision recognized in 1994 was recorded in connection with the Company's early retirement program based upon the actual number of employee acceptances. Provisions for employees not terminated relate primarily to relocation costs. The provisions for assets to be sold or discarded included a charge of $1.8 million to write-down certain corporate and manufacturing facilities to their estimated net realizable value, as well as the costs associated with holding certain vacated portions of these facilities during the period until the property can be sold, or otherwise disposed. During the year, the Company commissioned an appraisal of its corporate and manufacturing facilities, and as a result of the appraisal revised upward its estimate of proceeds to be realized upon disposal. Other than as described above, there were no material changes during the year to the Company's original estimate of the costs associated with the restructuring actions. Management anticipates all the remaining actions will be completed by the end of 1995. As a result of these restructuring actions, the Company anticipates savings in personnel and facility related costs of approximately $8 million in 1995. INDEBTEDNESS At December 31, 1994, the Company maintained an unsecured $40 million revolving credit facility under an agreement dated July 29, 1994. Borrowings of $33 million were outstanding under the terms of this facility at December 31, 1994, compared with $5 million outstanding under a similar facility at December 31, 1993. On January 5, 1995, the Company replaced the $40 million revolving credit facility with a similar $75 million revolving credit facility. The facility expires on December 31, 1997 unless otherwise extended. Interest on amounts outstanding is payable at either LIBOR plus .75 to 1.125 percent, based on amounts outstanding, or at the agent bank's "Reference Rate" at the Company's election, or, if amounts outstanding are borrowed under competitive bid, interest is payable at the quoted rate. The Company is required to pay an annual commitment fee of .3125 percent on the unused portion of the facility and .25 percent on any loans advanced under competitive bids. The agreement contains restrictive covenants which relate primarily to interest coverage, leverage and tangible net worth. The Company is in compliance with these covenants. On September 13, 1991, the Company entered into a senior note agreement, as amended, with an insurance company under which the Company borrowed $20 million at a fixed rate of 9.17 percent. In connection with the Company's renegotiation of its revolving credit facility, the interest rate applicable to the senior notes was increased to 9.67 percent as of January 1, 1995. Mandatory payments of $2.5 million were made in 1993 and 1994. The remaining balance of the notes will become due beginning in 1997 with the final payment due in 2001. The senior notes contain restrictive covenants which relate principally to additional debt, tangible net worth and fixed charges coverage. The Company is in compliance with these covenants. The Company maintains short term money market lines with commercial banks on an "as offered" basis. The borrowings and repayments occur daily and contain no specific terms other than due dates and interest rates. The due dates are generally overnight and interest rates are based on current market rates. There were no borrowings outstanding under these lines at December 31, 1994, and approximately $2.5 million at December 31, 1993. The fair value of the Company's total debt was approximately $.4 and $2.5 million higher than the carrying amount at December 31, 1994 and 1993, respectively. The fair value is based on management's estimate of current rates available to the Company for similar debt with the same remaining maturity. -23- 25 Following is the combined aggregate amount of minimum principal payments for each of the five years subsequent to December 31, 1994, for all long-term indebtedness: 1995 - $.5 million; 1996 - $.6 million; 1997 - $36.3 million; 1998 - $3.0 million; 1999 - $3.0 million; thereafter - $6.2 million. INCOME TAXES The domestic and foreign components of income from continuing operations before income taxes and cumulative effect of accounting principle changes are as follows:
(In thousands) 1994 1993 1992 ---- ---- ---- Domestic $1,661 $(2,933) $12,951 Foreign 5,806 6,580 4,885 ------ ------- ------- Consolidated $7,467 $ 3,647 $17,836 ====== ======= =======
Income tax expense (benefit) charged to continuing operations consists of the following:
(In thousands) 1994 1993 1992 ---- ---- ---- Current United States $ - $ 2,424 $6,002 Foreign 3,303 2,640 1,055 State and local 15 82 353 ------- -------- ------ Total current 3,318 5,146 7,410 Deferred: United States 592 (3,873) (1,137) Foreign (885) 83 1,129 ------- -------- ------ Total deferred (293) (3,790) (8) ------- -------- ------ Changes in statutory rates - (225) - Income tax expense $ 3,025 $ 1,131 $7,402 ======= ======== ======
Deferred tax liabilities (assets) are comprised of the following:
Dec. 31, (In thousands) 1994 1993 ---- ---- Depreciation $ 4,393 $ 5,468 Other - 85 --------- --------- Gross deferred tax liabilities 4,393 5,553 --------- --------- Restructuring (1,033) (16,783) Pension and postretirement benefits (11,505) (7,531) Loss and credit carryforwards (10,675) (3,349) Workers compensation accrual (1,372) (1,536) Inventory reserve (875) (1,526) Bad debt reserve (1,261) (1,183) Other (1,460) (2,379) --------- --------- Gross deferred tax assets (28,181) (34,287) Deferred tax assets valuation allowance - - --------- --------- $(23,788) $(28,734) ========= =========
-24- 26 Reconciliations between income taxes from continuing operations computed using the United States statutory income tax rate and the Company's effective tax rate are as follows:
1994 1993 1992 ---- ---- ---- United States statutory rate (benefit) 35.0% 35.0% 34.0% Goodwill 4.4 13.7 2.3 Dividend income - 6.4 4.1 State and local income taxes, net of federal tax benefit .1 (13.3) .9 Rate revaluation - (8.1) - Rate difference-foreign subsidiaries (1.7) (3.2) .8 Other, net 2.7 .5 (.6) ---- ---- ---- Effective tax rate (benefit) 40.5% 31.0% 41.5% ==== ==== ====
The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1992 which changed the Company's method of accounting for income taxes from the deferred method to an asset and liability approach. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities and of tax carryforwards. The Company adopted this statement prospectively on January 1, 1992, and the adjustments to the balance sheet resulted in a net charge of $.8 million. This amount is reflected in net income for 1992 as the cumulative effect of a change in accounting principle. It primarily represents the impact of adjusting prepaid and deferred taxes to reflect the 1992 statutory tax rate as opposed to the tax rates that were in effect when the prepaid and deferred taxes originated. The adoption of this statement had no effect on pretax operating income for 1992. At December 31, 1994, $6.3 million and $17.5 million of tax assets were included in "Other current assets" and "Other Assets," respectively. At December 31, 1993, $14.0 million and $14.7 million of tax assets were included in "Other current assets" and "Other Assets," respectively. At December 31, 1994, the Company had $10.7 million of net operating loss and tax credit carryforwards, which are primarily limited to offset certain future domestic taxable earnings. The carryforwards expire as follows: $3.1 million in 1996, $.7 million in 1997, $.1 million in 1998, $.6 million in 1999, $.1 million in 2000, $2.4 million in 2001, $.2 million in 2002 and $3.5 million thereafter. During 1994 the Internal Revenue Service (IRS) completed an examination of the Company's corporate income tax returns for the years 1988 through 1991. As a result of the IRS' findings, the Company agreed to and paid additional taxes and interest of $7.8 million in January 1995 in connection with adjustments related mainly to the tax treatment of certain items associated with the 1990 sale of the International Office Systems business. On January 13, 1995, the IRS issued a Notice of Deficiency in the amount of $8.7 million in connection with the tax years 1990 and 1991. The tax deficiency relates to the tax treatment of income recognized in connection with the 1990 sale of the Office Systems business. The major issues relate to foreign tax credits, foreign earnings and profits computation, and the treatment of the disposition of preferred stock of a foreign subsidiary. The Company disagrees with the position taken by the IRS and filed a formal protest of the deficiency on February 9, 1995. In management's opinion, the ultimate disposition of this matter will not have a material adverse effect on the financial position or results of operations of the Company. -25- 27 It is management's intention to reinvest undistributed earnings of foreign subsidiaries which aggregate approximately $25 million, based on exchange rates at December 31, 1994. These earnings could become subject to additional tax if they were remitted as dividends, if foreign earnings were lent to the Company or if the Company should sell its stock in the subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on undistributed foreign earnings. SHAREHOLDERS' EQUITY The Company is authorized to issue up to 200,000 shares of Series A Participating Preferred Stock in connection with its Rights Agreement under which holders of the Company's common stock received a dividend of one preferred stock purchase right for each outstanding share of common stock. Each Right entitles the registered holder to purchase from the Company one one-hundredth share of the Company's Series A Participating Preferred Stock, at a price of $90.00. The Rights do not detach or become exercisable until the tenth business day following the public announcement that a person has acquired, or obtained the right to acquire, 10 percent or more of the outstanding common stock of the Company, or the commencement of a tender or exchange offer which would result in the acquisition of beneficial ownership of 10 percent or more of the Company's common stock. The Rights Agreement provides that if any person or group were to acquire 10 percent or more of the Company's common stock, then shareholders other than the acquiring person would be entitled to purchase, at the Rights' then-current exercise price, a number of additional Company shares having a market value of twice the Rights' exercise price, unless the acquiring person purchases at least 85 percent of Nashua's common stock in a cash tender offer for all shares. The Company's Board of Directors may, at their option, exchange one Company share of common stock for each Right (other than the Rights held by the acquiring person) if the acquiring person has acquired more than 10 percent but less than 50 percent of the Company's common stock. The Rights Agreement further provides that, upon the occurrence of certain events including transactions in which the Company is acquired and certain self-dealing transactions with the Company by an acquirer, each Right entitles the holder thereof (other than the acquirer) to purchase shares of capital stock of either the Company or of the acquirer having a value equal to twice the then-current exercise price of the Rights. At any time prior to a person's acquiring beneficial ownership of 10 percent or more of the Company's common stock, the Continuing Directors, by a two-thirds vote, may authorize the Company to redeem the Rights at any time at a redemption price of five cents per Right. The Rights will expire on September 2, 1996, unless earlier redeemed by the Company. In addition to the Rights attaching to the common stock outstanding, Rights will be issued with each common share that is issued prior to the time the Rights become exercisable or expire. In 1989, the Board of Directors authorized the Company to repurchase up to 1,000,000 shares of its common stock. As of December 31, 1994, the Company had purchased approximately 435,000 shares under this program. -26- 28 The following summarizes the changes in selected shareholders' equity accounts for each of the three years in the period ended December 31, 1994:
Common Stock Cumulative Par Additional Translation Treasury Stock (In thousands, except share data) Shares Value Capital Adjustment Shares Cost ------ ----- ---------- ----------- ------ ---- BALANCE, DECEMBER 31, 1991 6,681,763 $6,682 $10,668 $(1,693) (398,149) $(15,000) Stock options exercised and related tax benefit 24,610 25 462 - - - Translation adjustments and gains and losses from certain inter-company balances - - - (3,700) - - Purchase of treasury shares - - - - (44) (1) Reissuance of treasury shares - - - - 510 14 Retirement of treasury shares (372,683) (373) - - 372,683 14,188 --------- ------ ------- ------- -------- -------- BALANCE, DECEMBER 31, 1992 6,333,690 6,334 11,130 (5,393) (25,000) (799) Stock options exercised and related tax benefit 6,740 6 116 - - - Translation adjustments and gains and losses from certain inter-company balances - - - (451) - - Purchase of treasury shares - - - - (120) (3) Reissuance of treasury shares - - - - 530 17 --------- ------ ------- ------- -------- -------- BALANCE, DECEMBER 31, 1993 6,340,430 6,340 11,246 (5,844) (24,590) (785) Stock options exercised and related tax benefit 56,140 57 1,024 - - - Translation adjustments and gains and losses from certain inter-company balances - - - 916 - - Purchase of treasury shares - - - - (60) (2) --------- ------ ------- ------- -------- -------- BALANCE, DECEMBER 31, 1994 6,396,570 $6,397 $12,270 $(4,928) (24,650) $ (787) ========= ====== ======= ======= ======= ========
STOCK OPTION AND STOCK AWARD PLANS The Company has three stock compensation plans at December 31, 1994: the 1980 Stock Award Plan (1980 plan), the 1987 Stock Option Plan (1987 plan) and the 1993 Stock Incentive Plan (1993 plan). Awards can no longer be granted under the 1980 plan. Awards under the 1987 plan and 1993 plan are made at the discretion of the Executive Salary Committee of the Board of Directors. Stock options awarded under the 1980 plan which are outstanding at December 31, 1994, are currently exercisable and expire on the tenth anniversary of the date of grant. Under the 1987 plan, nonqualified stock options and incentive stock options may be awarded. Stock options under the 1987 plan become exercisable either (a) 50 percent on the first anniversary of grant, and the remainder on the second anniversary of grant, (b) 100 percent at six months from the date of grant, or (c) 100 percent at one year from the date of grant. Nonqualified stock options expire 10 years and one day from the date of grant, and incentive stock options expire 10 years from the date of grant. Under the 1993 plan, non-statutory stock options and incentive stock options may be awarded. Stock options under the 1993 plan become exercisable either (a) 50 percent on the first anniversary of grant and the remainder on the second anniversary of grant, or (b) 100 percent at one year from the date of grant. Non-statutory stock options expire 10 years and one day from the date of grant, and incentive stock options expire 10 years from the date of grant. -27- 29 In the event of a change of control, as defined in the 1987 plan and the 1993 plan, the option holder may, with respect to stock option agreements which so provide, have a limited right with respect to options under the plans to elect to surrender the options and receive cash or shares equal in value to the difference between the option price and the larger of either the highest reported price per share on the New York Stock Exchange during the sixty-day period before the change in control or, if the change in control is the result of certain defined transactions, the highest price per share paid in such defined transactions. Because the exercise price of all stock options awarded under these plans has been equal to the quoted market price of the Company's common stock at date of grant, no compensation expense has been recorded for these awards. A summary of the status of the Company's stock option plans follows:
Outstanding Option Price Exercisable Options Per Share Options ----------- ------------ ----------- December 31, 1991 429,170 $ 5.13-38.38 381,920 Options granted 43,600 28.13 - Options that became exercisable - 25.50-34.63 45,850 Options exercised (24,646) 5.13-19.38 (24,646) Options lapsed and cancelled (52,734) 25.50-34.63 (45,134) -------- ------------ ------- December 31, 1992 395,390 $11.81-38.38 357,990 Options granted 113,800 25.75-30.25 - Options that became exercisable - 25.50-34.63 25,350 Options exercised (6,740) 11.81-25.50 (6,740) Options lapsed and cancelled (6,380) 25.75-34.63 (2,900) -------- ------------ ------- December 31, 1993 496,070 $11.81-38.38 373,700 Options granted 103,950 22.63-29.50 - Options that became exercisable - 25.75-28.13 62,406 Options exercised (56,140) 11.81-28.13 (56,140) Options lapsed and cancelled (158,046) 25.75-38.38 (151,981) -------- ------------ ------- December 31, 1994 385,834 $13.75-34.63 227,985 ======== ============ =======
COMMITMENTS AND CONTINGENCIES Rent expense for office equipment, facilities and vehicles was $2.1 million, $1.8 million and $2.0 million for 1994, 1993 and 1992, respectively. At December 31, 1994, the Company was committed, under non-cancelable operating leases, to minimum annual rentals as follows: 1995 - $1.8 million; 1996 - $1.7 million; 1997 - $1.6 million; 1998 - $1.3 million; 1999 - $1.3 million; thereafter - $9.5 million. At December 31, 1994, the Company was obligated under approximately $6.0 million in standby letters of credit. 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 -28- 30 of other potential participants, the ultimate cost to the Company of remediation for each site is difficult to determine. At December 31, 1994, 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 $.8 million to $1.0 million. This range is based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRP's are unable to bear their allocated share. At December 31, 1994, the Company has accrued $.9 million which represents, in management's view, the most likely amount within the range stated above. Based on information currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the costs apportioned to them. Management believes that, based on its financial position and the estimated environmental accrual recorded, its remediation expense with respect to those sites is not likely to have a material adverse effect on its consolidated financial position or results of operations. POSTRETIREMENT BENEFITS PENSION PLANS: The Company and its subsidiaries have several pension plans which cover substantially all of its regular full-time employees. Benefits under these plans are generally based on years of service and the levels of compensation during those years. The Company's policy is to fund amounts deductible for income tax purposes. Assets of the plans are invested in interest-bearing cash equivalent instruments, fixed-income securities and common stocks. Net periodic pension cost from continuing operations for the plans, exclusive of enhanced early retirement and curtailment pension costs, includes the following components:
(In thousands) 1994 1993 1992 ---- ---- ---- Service cost-benefits earned during the period $ 2,771 $ 2,884 $ 2,929 Interest cost on projected benefit obligation 7,916 7,196 6,749 Actual return on plan assets 1,826 (17,554) (10,814) Net amortization and deferral (9,491) 10,839 4,754 ------- -------- ------- Net periodic pension cost $ 3,022 $ 3,365 $ 3,618 ======= ======== =======
In February 1994, the Company offered certain of its United States employee groups an enhanced early retirement pension benefit. The cost of the enhanced pension benefit was $4.2 million, $2.2 million of which was attributable to discontinued operations. In 1993, the Company recognized a curtailment expense of $1.2 million, approximately $.6 million of which related to discontinued operations. -29- 31 The following sets forth the funded status of the plans and the amounts recognized in the Company's consolidated balance sheet at December 31, 1994:
Accumulated Benefit Obligation ------------------------- Less Than Exceeds (In thousands) Assets Assets --------- ------- Actuarial present value of: Vested benefit obligation $41,052 $ 58,035 ------- -------- Accumulated benefit obligation $41,863 $ 58,158 ------- -------- Projected benefit obligation $42,189 $ 62,046 ------- -------- Market value of plan assets $47,117 $ 53,137 ------- -------- Plan assets in excess of (less than) projected benefit obligation $ 4,928 $ (8,909) Unrecognized transition (asset) obligation (2,196) 2,363 Unrecognized prior service costs 1,452 5,568 Unrecognized net gain (1,390) (7,731) Additional liability - (143) ------- -------- Prepaid (accrued) pension cost $ 2,794 $ (8,852) ======= ========
The following sets forth the funded status of the plans and the amounts recognized in the Company's consolidated balance sheet at December 31, 1993:
Accumulated Benefit Obligation ------------------------- (In thousands) Less Than Exceeds Assets Assets --------- ------- Actuarial present value of: Vested benefit obligation $41,286 $ 58,490 ------- -------- Accumulated benefit obligation $41,519 $ 58,686 ------- -------- Projected benefit obligation $41,837 $ 60,759 ------- -------- Market value of plan assets $47,992 $ 55,695 ------- -------- Plan assets in excess of (less than) projected benefit obligation $ 6,155 $ (5,064) Unrecognized transition (asset) obligation (2,389) 3,324 Unrecognized prior service costs 448 3,712 Unrecognized net gain (1,199) (7,029) Additional liability - (1,027) ------- -------- Prepaid (accrued) pension cost $ 3,015 $ (6,084) ======= ========
During 1994, the Company updated the definition of average annual compensation, the effect of which increased the unrecognized prior service liability by $1.8 million. Approximately $7.5 million and $4.2 million of the accrued pension cost for 1994 and 1993, respectively, are included in "Other Long-Term Liabilities" in the accompanying consolidated balance sheet. The significant actuarial assumptions used for the plans' valuations were:
1994 1993 ---- ---- Weighted-average discount rate 8.2% 7.3% Expected long-term rate of return on plan assets 9.7% 9.1% Rate of increase in future compensation levels 5.0% 4.7%
-30- 32 RETIREE HEALTH CARE AND OTHER BENEFITS: The Company provides certain health care and other benefits to eligible retired employees and spouses. Salaried participants generally become eligible for retiree health care benefits after reaching age 60 with ten years of service. Benefits, eligibility and cost-sharing provisions for hourly employees vary by location or bargaining unit. Generally, the medical plans pay a stated percentage of most medical expenses, reduced for any deductibles and payments made by government programs and other group coverage. In 1992, the cost of providing most of these benefits was shared with retirees, except for a group of retirees at one manufacturing facility. In 1993, the plan was changed to share the cost of these benefits with all retirees, resulting in an unrecognized benefit which is being amortized over the future service period of the active employees. The following table sets forth the funded status of the plans, reconciled to the accrued postretirement benefit cost recognized in the Company's balance sheet:
(In thousands) 1994 1993 ---- ---- Accumulated postretirement benefit obligation: Retirees $ 7,264 $ 5,864 Fully eligible active plan participants 1,668 2,400 Other active participants 2,453 2,918 --------- -------- Market value of plan assets - - Accumulated postretirement benefit obligation in excess of plan assets (11,385) (11,182) Unrecognized prior service benefit (5,221) (4,821) Unrecognized net (gain) loss (1,232) 70 --------- -------- Accrued postretirement benefit cost $ (17,838) $(15,933) ========= ========
Approximately $17.1 million and $15.1 million of accrued postretirement benefits for 1994 and 1993, respectively, are included in "Other Long-Term Liabilities" in the accompanying consolidated balance sheet. Net periodic postretirement benefit cost of continuing operations, exclusive of enhanced early retirement and curtailment costs, included the following components:
(In thousands) 1994 1993 1992 ---- ---- ---- Service cost of benefits earned $ 133 $ 162 $ 284 Interest cost on accumulated postretirement benefit obligation 942 791 1,208 Amortization of prior service benefit (554) (554) - ----- ----- ------ Net periodic postretirement benefit cost $ 521 $ 399 $1,492 ===== ===== ======
As part of the 1994 early retirement program, the Company offered certain of its United States employee groups an enhanced early retirement health care benefit. The cost of the enhanced health care benefit was $1.5 million, $.9 million of which was attributable to discontinued operations. At December 31, 1994, the postretirement benefit plans were amended to transfer the cost of health supplement benefit payments to the Company's pension plan. In 1993, the Company recognized a curtailment expense of $.8 million, approximately half of which related to discontinued operations, in connection with its decision to dispose of certain operations and reduce personnel in the remaining businesses. -31- 33 For measurement purposes, an 8.0 percent annual rate of increase in the per capita claims cost of medical benefits was assumed for the various plans in 1995. These rates were assumed to decrease gradually to 5.5 percent in 1999 and remain at that level thereafter. The discount rate used in determining the accumulated postretirement benefit obligation was 8.25 percent. If the health care cost trend rate were increased 1 percent in each future year, the accumulated postretirement benefit obligation as of December 31, 1994 would have increased by 2 percent. The effect of this assumed change on the aggregate of service and interest cost for 1994 would have been an increase of 4 percent. The Company adopted Financial Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1992 which requires the accrual of the cost of providing non-pension postretirement benefits ("postretirement benefits"), primarily medical coverage, during the employee's active service period. The Company elected to immediately recognize the accumulated liability, measured as of January 1, 1992. This resulted in a one-time charge of $9.4 million, after reduction for income taxes of $6.3 million. The pro forma effect of the change on years prior to 1992 was not determinable. Prior to 1992, the Company recognized expense in the year the benefits were provided. -32- 34 INFORMATION ABOUT OPERATIONS The Company conducts business in three segments: Commercial Products, Photofinishing and Precision Technologies. In 1994, the Company combined its Coated Products and Office Supplies business segments to form Commercial Products. Commercial Products produces and sells facsimile and thermal papers, pressure sensitive labels, specialty papers and tapes, and copier and laser printer supplies. Photofinishing provides mail-order photofinishing services. Precision Technologies manufactures precision metallic parts primarily for the computer industry, and was previously included in the discontinued Computer Products segment. Net sales, operating income and identifiable assets of the Company's three business segments and the geographic areas in which they operate are set forth below:
Net Sales From Income From Continuing Operations Continuing Operations Identifiable Assets (In millions) 1994 1993 1992 1994 1993(b) 1992(c) 1994 1993 1992 BY BUSINESS Commercial Products $319.2 $317.0 $313.3 $(.6)(a) $ 1.5 $ 7.4 $121.5 $106.7 $106.7 Photofinishing 145.4 148.7 161.9 16.4 15.9 15.4 58.1 47.5 54.3 Precision Technologies 14.0 14.1 16.5 (.2) .6 1.6 7.4 4.3 3.0 Corporate expenses, including interest and assets - - - (8.1) (14.4) (6.6) 40.8 33.4 19.6 Discontinued Operations - - - - - - - 27.2 53.1 ------ ------ ------ ---- ------ ----- ------ ------ ------ Consolidated $478.6 $479.8 $491.7 $7.5 $ 3.6 $17.8 $227.8 $219.1 $236.7 ====== ====== ====== ==== ====== ===== ====== ====== ====== BY GEOGRAPHIC AREA United States $417.2 $418.5 $420.7 $9.7 $ 7.5 $19.5 $150.1 $125.8 $130.0 Europe 53.6 52.3 60.8 5.0 8.6 2.4 33.3 26.7 29.2 Other 7.8 9.0 10.2 .9 1.9 2.5 3.6 6.0 4.8 Eliminations, corporate expenses, including interest and assets - - - (8.1) (14.4) (6.6) 40.8 33.4 19.6 Discontinued Operations - - - - - - - 27.2 53.1 ------ ------ ------ ---- ------ ----- ------ ------ ------ Consolidated $478.6 $479.8 $491.7 $7.5 $ 3.6 $17.8 $227.8 $219.1 $236.7 ====== ====== ====== ==== ====== ===== ====== ====== ====== Sales between business segments are insignificant. Intrasegment sales between geographic areas are generally priced at the lowest price offered to unaffiliated customers. (a) Includes restructuring charges of $2.6 million. (b) Includes restructuring charges of $3.5 million, $.8 million, and $7.5 million, for Commercial Products, Photofinishing and Corporate, respectively. (c) Before the cumulative effect of changes in accounting principles.
-33- 35 Capital expenditures and depreciation and amortization by business segment are set forth below:
Depreciation and Capital Expenditures Amortization 1994 1993 1992 1994 1993 1992 ---- ---- ---- ---- ---- ---- Commercial Products $12.0 $10.4 $ 8.9 $ 9.1 $ 8.0 $ 7.2 Photofinishing 3.8 2.9 3.2 5.4 5.9 6.0 Precision Technologies 1.0 1.8 .5 .8 .7 .8 ----- ----- ----- ----- ----- ----- Consolidated $16.8 $15.1 $12.6 $15.3 $14.6 $14.0 ===== ===== ===== ===== ===== =====
SUBSEQUENT EVENTS On January 13, 1995, the Company acquired certain photofinishing operations from Nexus Photo Ltd. The acquisition includes mail- order photofinishing operations in France, Belgium, the Netherlands and Spain, and a wholesale film processing business in Northern Ireland. The total purchase price was approximately $25.6 million, plus an additional payment based on certain volume in the Northern Ireland operation. The acquisition will be accounted for as a purchase business combination and, accordingly, operating results of this business subsequent to the date of acquisition will be included in the Company's Consolidated Statement of Income. The unaudited pro forma combined condensed balance sheet of the Company and the acquired businesses as of December 31, 1994, after giving effect to certain pro forma adjustments, is as follows:
(In thousands) Current assets $109,136 Property and equipment, net 79,474 Other assets 66,312 -------- $254,922 ======== Current liabilities $ 67,788 Non-current liabilities 94,438 Shareholder's equity 92,696 -------- $254,922 ========
The unaudited combined condensed pro forma results listed below reflect purchase price accounting adjustments assuming the acquisition occurred at the beginning of 1994. (In thousands, except per share data) Net sales $521,769 ======== Income from continuing operations $ 5,322 ======== Earnings per common and common equivalent share $ .84 ========
-34- 36
QUARTERLY OPERATING RESULTS AND COMMON STOCK INFORMATION (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA) 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- ------ 1994 Net sales $112.8 $122.7 $127.9 $115.2 $478.6 Gross profit 26.2 31.9 33.3 25.2 116.6 Income (loss) from continuing operations(1) (1.2) 2.9 2.4 .3 4.4 Income (loss) from discontinued operations (2.3) - - - (2.3) Net income (loss)(1) (3.5) 2.9 2.4 .3 2.1 Earnings (loss) per common and common equivalent share: Continuing operations(1) (.18) .46 .37 .05 .70 Discontinued operations (.36) - - - (.36) Net income (loss)(1) (.54) .46 .37 .05 .34 Dividends .18 .18 .18 .18 .72 Market price: High 30 3/4 27 3/8 29 1/4 23 1/8 30 3/4 Low 26 1/4 24 3/8 22 7/8 19 3/4 19 3/4 1993 Net sales $116.2 $120.3 $133.3 $110.0 $479.8 Gross profit 28.3 31.8 36.0 24.8 120.9 Income (loss) from continuing operations(2) 1.0 2.5 4.9 (5.9) 2.5 Income (loss) from discontinued operations 1.6 1.4 (.5) (24.2) (21.7) Net income (loss)(2) 2.6 3.9 4.4 (30.1) (19.2) Earnings (loss) per common and common equivalent share: Continuing operations(2) .17 .40 .76 (.93) .40 Discontinued operations .25 .21 (.07) (3.81) (3.42) Net income (loss)(2) .42 .61 .69 (4.74) (3.02) Dividends .18 .18 .18 .18 .72 Market price: High 29 7/8 29 5/8 31 3/4 31 3/4 31 3/4 Low 25 1/4 25 3/8 27 3/8 25 3/8 25 1/4 ------ ------ ------ ------ ------ (1)The first quarter includes restructuring charges of $2.6 million. (2)The fourth quarter includes restructuring charges of $11.8 million.
The Company's stock is traded on the New York Stock Exchange. At December 31, 1994, there were 1,599 record holders of Nashua's common stock. -35- 37 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, 1994 and 1993 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in the Income Taxes and Postretirement Benefits notes to the financial statements, the Company changed its method of accounting for income taxes by adopting Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income Taxes," and its accounting for non-pension benefit plans by adopting FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1992. Price Waterhouse LLP Boston, Massachusetts February 1, 1995 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The section entitled "Nominees for Election as Directors", which appears on pages 2 through 3 of the Company's Proxy Statement dated March 24, 1995, is incorporated by reference in this Form 10-K. See also the section entitled "Executive Officers of the Registrant" appearing in Part I hereof. -36- 38 ITEM 11. EXECUTIVE COMPENSATION The section entitled "Compensation of Directors" and "Compensation of Executive Officers," which appears on pages 4 through 9 of the Company's Proxy Statement dated March 24, 1995, is incorporated by reference in this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The sections entitled "Security Ownership of Management" and "Security Ownership of Certain Beneficial Owners," which appear on pages 11 through 12 of the Company's Proxy Statement dated March 24, 1995, are incorporated by reference in this Form 10- K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The section entitled "Certain Transactions and Indebtedness," which appears on page 8 of the Company's Proxy Statement dated March 24, 1995, is incorporated by reference in this Form 10-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: (1) Consolidated Financial Statements Report of Independent Accountants (See page 36) Consolidated Balance Sheet at December 31, 1994 and 1993 (See page 18) Consolidated Statement of Operations and Retained Earnings for each of the three years in the period ended December 31, 1994 (See page 17) Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1994 (See page 19). Notes to Consolidated Financial Statements (See pages 20 through 35) (2) Financial Statement Schedules: Report of Independent Accountants on Financial Statement Schedule For the three years ended December 31, 1994: Schedule II - Valuation and Qualifying Accounts -37- 39 All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or the Notes thereto. (3) Exhibits: 2.01 Purchase and Sale Agreement, by and among Nashua Corporation and subsidiaries and Nexus Photo Limited and subsidiaries. Exhibit to the Company's Form 8-K dated January 13, 1995, and incorporated herein by reference. 3.01 Composite Certificate of Incorporation of the Company, as amended. Exhibit to the Company Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 3.02 By-laws of the Company, as amended. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 4.01 Note Agreement dated as of September 13, 1991. Exhibit to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. 4.02 Amendment No. 1 dated as of December 31, 1991 to the Note Agreement dated September 13, 1991. Exhibit to the Company's Form 10-K for the year ended December 31, 1993, and incorporated herein by reference. 4.03 Amendment No. 2 dated as of January 27, 1994 to the Note Agreement dated September 13, 1991. Exhibit to the Company's Form 10-K for the year ended December 31, 1993, and incorporated herein by reference. 4.04 Amendment No. 3 dated as of May 12, 1994 to the Note Agreement dated September 13, 1991. 4.05 Amendment No. 4 dated as of December 31, 1994 to the Note Agreement dated September 13, 1991. 4.06 Allonge dated December 31, 1994 to the Note Agreement dated September 13, 1991. 4.07 Credit Agreement dated July 29, 1994. Exhibit to the Company's Form 10-Q dated July 1, 1994, and incorporated herein by reference. 4.08 Credit Agreement dated as of January 5, 1995. 4.09 Rights Agreement dated as of August 22, 1986 between the Company and The First National Bank of Boston. Exhibit to the Company's Form 8-K dated August 22, 1986, and incorporated herein by reference. 4.10 Amendment No. 1, dated April 22, 1988 to the Rights Agreement dated as of August 22, 1986 between the Company and The First National Bank of Boston. Exhibit to the Company's Form 8-K dated May 3, 1988, and incorporated herein by reference. -38- 40 4.11 Amendment No. 2, dated May 17, 1989 to the Rights Agreement dated as of August 22, 1986 between the Company and the First National Bank of Boston. Exhibit to the Company's Form 8-K dated May 17, 1989 and incorporated herein by reference. 4.12 Amendment No. 3, dated October 27, 1989 to the Rights Agreement dated as of August 22, 1986 between the Company and the First National Bank of Boston. Exhibit to the Company's Form 8-K dated October 31, 1989 and incorporated herein by reference. 4.13 Amendment No. 4, dated March 22, 1993 to the Rights Agreement dated as of August 22, 1986 between the Company and the First National Bank of Boston. Exhibit to the Company's Form 8-K dated March 22, 1993 and incorporated herein by reference. 10.01 Management Incentive Compensation Program of the Company, as amended 1993. Exhibit to the Company's Form 10-K for the year ended December 31, 1992 and incorporated herein by reference. 10.02 Nashua Corporation Supplemental Compensation Plan (as amended February 24, 1994). Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 10.03 1980 Stock Award Plan of the Company, as amended. Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1981, and incorporated herein by reference. 10.04 1987 Stock Option Plan of the Company. Exhibit to the Company's Proxy Statement dated March 24, 1987, and incorporated herein by reference. 10.05 Amendments to Nashua Corporation 1987 Stock Option Plan effective as of April 28, 1989. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.06 1993 Stock Option Plan of the Company. Exhibit to the Company's Proxy Statement dated March 19, 1993, and incorporated herein by reference. 10.07 Severance Agreement dated March 8, 1988 between the Company and William Luke. Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10.08 Employment Agreement dated as of April 28, 1989 between the Company and William Luke. Exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1989, and incorporated herein by reference. 10.09 Employment Agreement dated as of February 6, 1994 between the Company and Francis J. Lunger. Exhibit to the Company's Form 10-K for the year ended December 31, 1993, and incorporated herein by reference. 10.10 Letter agreement dated July 21, 1993 between the Company and William E. Mitchell. Exhibit to the Company's Form 10-Q for the quarterly period ended October 1, 1993, and incorporated by reference. -39- 41 10.11 Employment Agreement dated as of September 1, 1993 between the Company and William E. Mitchell. Exhibit to the Company's Form 10-Q for the quarterly period ended October 1, 1993, and incorporated by reference. 10.12 Promissory Note dated January 31, 1995 from William E. Mitchell to Nashua Corporation. 10.13 Continuing Corporate Guarantee dated January 20, 1995 by Nashua Corporation of residential loan to William E. Mitchell by Boston Safe Deposit and Trust Company. 10.14 Stock Appreciation Right Agreement dated March 20, 1992 between the Company and Charles E. Clough with respect to 15,000 shares of the Company. Exhibit to the Company's Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. 10.15 Consulting Agreement dated August 12, 1994 between the Company and Charles E. Clough. 11.01 Statement regarding Computation of Earnings Per Share and Common Equivalent Share. 21.01 Subsidiaries of the Registrant. 23.01 Consent of Independent Accountants. 24.01 Powers of Attorney. 27.01 Financial Data Schedule. (b) Reports on Form 8-K: No reports on Form 8-K were filed or required to be filed by the Company during the fourth quarter of the fiscal year ended December 31, 1994. -40- 42 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NASHUA CORPORATION Date: March 28, 1995 By William Luke --------------------------- William Luke Vice President-Finance and Chief Financial Officer
SIGNATURE TITLE DATE William E. Mitchell President and March 28, 1995 - -------------------- William E. Mitchell Chief Executive Officer William Luke Vice President-Finance March 28, 1995 - -------------------- William Luke and Chief Financial Officer Joseph R. Matson Corporate Controller and March 28, 1995 - -------------------- Joseph R. Matson Chief Accounting Officer Joseph A. Baute* Director - -------------------- Joseph A. Baute Sheldon A. Buckler* Director - -------------------- Sheldon A. Buckler Richard E. Carter* Director - -------------------- Richard E. Carter Charles E. Clough* Director - -------------------- Charles E. Clough Thomas W. Eagar* Director - -------------------- Thomas W. Eagar John M. Kucharski* Director - -------------------- John M. Kucharski *By /s/ William Luke March 28, 1995 ------------------ William Luke Attorney-In-Fact
-41- 43 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE TO THE BOARD OF DIRECTORS OF NASHUA CORPORATION Our audits of the consolidated financial statements referred to in our report dated February 1, 1995, appearing on page 36 of this Annual Report on Form 10-K also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Price Waterhouse LLP Boston, Massachusetts February 1, 1995 -42- 44 SCHEDULE II ===========
NASHUA CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS (In Thousands) Deductions- Additions Uncollectible Balance at Charged to Accounts Balance at Beginning Costs and Charged to End of of Period Expenses Reserves Period --------- ---------- ------------- ---------- Year ended December 31, 1994 $1,883 $1,374 $ (629) $2,628 ====== ====== ======= ====== Year ended December 31, 1993 $2,433 $ 836 $(1,386) $1,883 ====== ====== ======= ====== Year ended December 31, 1992 $2,634 $ 654 $ (855) $2,433 ====== ====== ======= ======
EX-4.04 2 AMENDMENT NO. 3 TO NOTE AGREEMENT 1 EXHIBIT 4.04 ------------ AMENDMENT NO. 3 TO NOTE AGREEMENT --------------------------------- THIS AGREEMENT, entered into as of May 12, 1994 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and NASHUA CORPORATION (the "Company"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the parties hereto have executed and delivered that certain Note Agreement, dated as of September 13, 1991 (the "Note Agreement"); WHEREAS, Prudential is the holder of 100% of the Notes issued under the Note Agreement; and WHEREAS, the parties hereto wish to amend certain terms of the Note Agreement. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS TO THE NOTE AGREEMENT. 1.1 Paragraph 6H of the Note Agreement is hereby amended: (a) to delete the word "and" at the end of clause (vii) thereof: (b) to insert the following new clause (viii) immediately after clause (vii) thereof: "(vii) an Investment in a subordinated note with an aggregate principal amount of up to $5,000,000 made in connection with, and as a part of the consideration for, the Transfer of the Property associated with the Company's 'computer products segment' (such Investment referred to herein as the 'Transfer Investment'); and"; (c) to amend and renumber the existing clause (viii) to be clause (ix) and to read in its entirety as follows: "(ix) Investments not otherwise permitted by the provisions of this paragraph 6H if, on the date of the making of any such 1 2 Investment, and after giving effect thereto, (a) the aggregate cost of all Investments outstanding on such date made pursuant to this paragraph 6H(ix), minus (b) the net return of capital received by the Company and the Subsidiaries on or prior to such date from all Investments made pursuant to this paragraph 6H(ix) during the period commencing on the Closing Date and ending on such date, would not exceed (X) 3% of Consolidated Tangible Net Worth during any period in which the Company holds any amount of the Transfer Investment and (Y) 5% of Consolidated Tangible Net Worth at any time thereafter, in each case determined as of the end of the fiscal quarter of the Company most recently ended as of such date." 2. EFFECTIVE DATE. The terms of Section 1 of this Agreement shall be effective as of March 31, 1994. 3. MISCELLANEOUS. 3.1 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Note Agreement. 3.2 On and after the date hereof, each reference in the Note Agreement and the Notes issued thereunder shall mean and be a reference to the Note Agreement as amended by this Agreement. 3.3 The Note Agreement, as amended by this Agreement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. 3.4 This Agreement may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same Agreement. 2 3 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to set their hands below as of the day and year first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Kevin Kraska -------------------------- Title: Vice President NASHUA CORPORATION By: /s/ Daniel M. Junius -------------------------- Title: Treasurer 3 EX-4.05 3 AMENDMENT NO. 4 TO NOTE AGREEMENT 1 EXHIBIT 4.05 ------------ AMENDMENT NO. 4 TO NOTE AGREEMENT --------------------------------- THIS AGREEMENT, entered into as of December 31, 1994 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and NASHUA CORPORATION (the "Company"). W I T N E S S E T H: ------------------- WHEREAS, the parties hereto have executed and delivered that certain Note Agreement, dated as of September 13, 1991 (the "Note Agreement"); WHEREAS, Prudential is the holder of 100% of the Notes issued under the Note Agreement; and WHEREAS, the parties hereto wish to amend certain terms of the Note Agreement. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS TO THE NOTE AGREEMENT. 1.1 Paragraph 6B of the Note Agreement is hereby amended to read in its entirety as follows: "6B. FIXED-CHARGE COVERAGE RATIO. The Company will not permit (i) sixty-six and two-thirds percent (66-/ /%) of Consolidated Trailing Adjusted Cash Flow for any period of six (6) consecutive fiscal quarters of the Company ending on any date to be less than (ii) (a) one hundred forty percent (140%) of Consolidated Fixed Charges for the period of four (4) consecutive fiscal quarters of the Company ending on any such date through and including March 31, 1995 or (b) two hundred percent (200%) of Consolidated Fixed Charges for the period of four (4) consecutive fiscal quarters of the Company ending on any such date after March 31, 1995." 1 2 1.2 Clause (i) of paragraph 6C of the Note Agreement is hereby amended to read in its entirety as follows: "(i) Consolidated Debt to be greater than (a) sixty percent (60%) of Consolidated Tangible Gross Worth through December 31, 1995, (b) fifty-five (55%) of Consolidated Tangible Gross Worth for the period commencing January 1, 1996 through December 31, 1996 and (c) fifty percent (50%) thereafter;" 1.3 A new paragraph 6P is hereby added to the end of paragraph 6 of the Note Agreement, which shall read in its entirety as follows: "6P. CONSOLIDATED TANGIBLE NET WORTH. The Company will not permit Consolidated Tangible Net Worth at any time to be less than an amount equal to $51,000,000 plus the sum of (i) fifty percent (50%) of Consolidated Net Income arising after December 31, 1994 and computed on a cumulative basis (without any deduction, however, for any fiscal quarter for which Consolidated Net Income is negative) through the end of the fiscal quarter immediately preceding the date of determination and (ii) the net proceeds paid to the Company of any offering of any shares of capital stock of the Company (other than, in the case of any preferred stock requiring mandatory redemption or sinking fund payments prior to May 31, 1995, those shares which are subject to such requirement) from December 31, 1994 and through the end of the fiscal quarter immediately preceding the date of determination (including any such proceeds derived from the issuance of shares of capital stock of the Company (other than, in the case of any preferred stock requiring mandatory redemption or sinking fund payments prior to May 31, 1995, those shares of which that are subject to such requirement) as a result of the exercise of stock options of the Company or from the conversion of debt securities of the Company)." 1.4 Clause (xi) of the definition of "Consolidated Net Income" in paragraph 10B of the Note Agreement is hereby amended to read in its entirety as follows: "(xi) a one time charge appearing as a separate line item on the Company's income statement as 'restructuring and other charges' of up to $48,500,000 before income taxes of the Company incurred in the fourth fiscal quarter of fiscal year 1993, a one time charge appearing as a separate line item on the Company's income statement as 'restructuring and other charges' of up to $2,600,000 before income taxes of the Company incurred in the first fiscal quarter of fiscal year 1994 and a one time charge of up to $3,700,000 before income taxes of the Company relating to losses from discontinued operations incurred in the first fiscal quarter of fiscal year 1994." 2 3 2. EFFECTIVENESS OF AGREEMENT. The terms of Section 1 of this Agreement and the allonge (the form of which is attached hereto as Exhibit A, the "Allonge") for the outstanding Note shall be deemed to be effective as of December 31, 1994 upon the occurrence of (a) Prudential's receipt of a copy hereof duly authorized, executed and delivered by the Company, (b) Prudential's receipt of the duly authorirzed, executed and delivered Allonge, (c) the acquisition by the Company on or before January 31, 1995 of certain assets of Nexus Ltd. related to the photoprocessing business (the "Acquisition"), and (d) simultaneously with the completion of the Acquisition, the payment by the Company to Prudential of a fee, in immediately available funds, of $75,000 by wire transfer to the following account: Account No. 050-54-526 Morgan Guaranty Trust Company of New York 23 Wall Street New York, New York 10015 (ABA No.: 021-000-238) 3. MISCELLANEOUS. 3.1 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Note Agreement. 3.2 On and after the date hereof, each reference in the Note Agreement and the Notes issued thereunder shall mean and be a reference to the Note Agreement as amended by this Agreement. 3.3 The Note Agreement, as amended by this Agreement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. 3.4 This Agreement may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same Agreement. 3 4 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to set their hands below as of the day and year first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Kevin Kraska ------------------------- Title: Vice President NASHUA CORPORATION By: /s/ Daniel M. Junius ------------------------- Title: Treasurer 4 EX-4.06 4 ALLONGE TO PRUDENTIAL PROMISSORY NOTE 1 EXHIBIT 4.06 ------------ ALLONGE TO PRUDENTIAL PROMISSORY NOTE THIS ALLONGE is attached to, made a part of and amends that certain promissory note, No. R-1, dated September 17, 1991, entitled "NASHUA CORPORATION 9.17% SENIOR NOTE DUE March 20, 2001" (the "Note"), in the principal amount of $20,000,000 made by NASHUA CORPORATION, a Delaware corporation (the "Company") to The Prudential Insurance Company of America ("Prudential"). WITNESSETH: WHEREAS, the Company and Prudential desire to amend the interest rate of the Note appearing in the heading and the first paragraph thereof: NOW, THEREFORE, the Companies agree that: (1) the heading and first sentence of the Note are each hereby amended by deleting the reference to "9.17%" in the heading and clause (a) of the first sentence thereof, and substituting a reference to "9.67%"; and (2) the first sentence of the Note is hereby further amended by deleting the reference to "11.17%" in the nineteenth line thereof, and substituting a reference to "11.67%". IN WITNESS WHEREOF, the Company has caused this Allonge to be executed and delivered effective the 31st day of December, 1994, by an officer thereunto validly authorized, and Prudential has accepted this Allonge and caused the same to be attached to and become a part of the Note. NASHUA CORPORATION Suzane L. Ansara Attest:_____________________________ By: /s/ Daniel M. Junius --------------------- Name: Daniel M. Junius Name: Title: Treasurer Title: Accepted effective the 31st day of December, 1994. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Kevin Kraska By:________________________ Title: Second Vice President EX-4.08 5 CREDIT AGREEMENT 1 EXHIBIT 4.08 ------------ ________________________________________________________________________________ ________________________________________________________________________________ $75,000,000 CREDIT AGREEMENT among NASHUA CORPORATION, THE BANKS PARTIES HERETO and CHEMICAL BANK, as Agent Dated as of January 5, 1995 ________________________________________________________________________________ ________________________________________________________________________________ 2 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2. THE COMMITTED RATE LOANS; THE BID LOANS; AMOUNT AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.1 The Committed Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.2 Committed Rate Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3 Procedure for Committed Rate Loan Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.4 Conversion and Continuation Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.5 The Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.6 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.7 Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.8 Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.9 Mandatory Prepayments and Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.10 Minimum Principal Amount and Maximum Number of Eurodollar Tranches . . . . . . . . . . . . . . . . . . 20 2.11 Loan Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.12 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.13 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.14 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.15 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.16 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.17 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.18 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.20 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.21 Extension of Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . 28 3.5 No Legal Bar; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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Page ---- 3.7 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.8 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.10 Nexus Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.1 Conditions to Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . . 34 5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 6.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 6.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6.3 Limitation on Consolidation, Merger and Dispositions and Purchases of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.4 Limitation on Sale of Accounts Receivable, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.5 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.6 Prohibition on Certain Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.7 No Modification of Insurance and Other Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 8. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 8.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 8.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 8.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 8.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 8.6 Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 8.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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Page ---- 8.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 8.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 9.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.6 Successors and Assigns; Participations; Purchasing Banks . . . . . . . . . . . . . . . . . . . . . . . 47 9.7 Adjustments; Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.8 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.9 Table of Contents and Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.12 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.14 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.15 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.17 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXHIBITS: A Form of Committed Rate Note B Form of Grid Bid Loan Note C Form of Individual Bid Loan Note D Form of Committed Rate Borrowing Notice E Form of Bid Loan Request F Form of Bid Loan Offer G Form of Bid Loan Confirmation H-1 Form of Bid Loan Assignment H-2 Form of Commitment Assignment I Form of Officer's Certificate J Form of Certificate of Assistant Secretary of the Company K Form of Opinion of Counsel to the Company L Form of Extension Request iii 5 SCHEDULES: Page ---- 1.1 Commitments 3.3 Subsidiaries Schedule 3.3 has been omitted in accordance with SK-601(b)(2) and will be submitted to the Commission upon request. iv 6 CREDIT AGREEMENT, dated as of January 5, 1995, among NASHUA CORPORATION, a Delaware corporation (the "COMPANY"), the several banks parties to this Agreement (collectively, the "Banks"; individually, a "BANK") and CHEMICAL BANK, a New York banking corporation, as agent for the Banks hereunder (in such capacity, the "Agent"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Company has requested the Banks to make loans to it in an aggregate amount up to $75,000,000 at any one time outstanding as more particularly described herein; WHEREAS, the Banks are willing to make such loans on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINED TERMS. As used in this Agreement, terms defined in the Preamble to this Agreement have the meanings therein indicated, and the following terms have the following meanings: "AFFILIATE": as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person shall be deemed to be "controlled by" a Person if such Person possesses, directly or indirectly, power either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "APPLICABLE MARGIN": the Applicable Margin shall be 0% for all Reference Rate Loans and .75% for all Eurodollar Loans; PROVIDED, on any day that the aggregate principal amount of the Committed Rate Loans outstanding shall be in excess of 50% of the aggregate Commitments on the date hereof, the Applicable Margin for all Reference Rate Loans shall be .50% and the Applicable Margin for all Eurodollar Loans shall be 1.125%. "ASSET DISPOSITION": any transaction consisting of the sale, lease, transfer or other disposition of assets (other than (i) transactions between Subsidiaries or between the Company and a Subsidiary, (ii) the sale of inventory in the ordinary course of 7 2 business, (iii) repurchases by the Company of its own common stock and (iv) the sale by the Company of its own equity securities) having a book value at the time of such transaction equal to or greater than $1,000,000. Any group of related sales, leases, transfers or other dispositions shall be treated as one transaction for purposes of determining whether the same is an Asset Disposition. "BENEFITTED BANK": as defined in subsection 9.7. "BID LOAN": each Bid Loan made pursuant to subsection 2.5; the aggregate amount advanced by a Bank pursuant to subsection 2.5 on each Bid Loan Date shall constitute one or more Bid Loans, as specified by such Bank pursuant to subsection 2.5(b)(vii). "BID LOAN ASSIGNEES": as defined in subsection 9.6(c). "BID LOAN ASSIGNMENT": a Bid Loan Assignment, substantially in the form of Exhibit H-1. "BID LOAN CONFIRMATION": each confirmation by the Company of its acceptance of Bid Loan Offers, which Bid Loan Confirmation shall be substantially in the form of Exhibit G and shall be delivered to the Agent in writing, by telex or by facsimile transmission. "BID LOAN DATE": in respect of a Bid Loan, the day on which a Bank makes such Bid Loan pursuant to subsection 2.5. "BID LOAN OFFER": each offer by a Bank to make Bid Loans pursuant to a Bid Loan Request, which Bid Loan Offer shall contain the information specified in Exhibit F and shall be delivered to the Agent in writing, by telex or by facsimile transmission, or by telephone, immediately confirmed by telex or facsimile transmission. "BID LOAN REQUEST": each request by the Company for Banks to submit bids to make Bid Loans, which shall contain the information in respect of such requested Bid Loans specified in Exhibit E and shall be delivered to the Agent in writing, by telex or facsimile transmission, or by telephone, immediately confirmed by telex or facsimile transmission. "BID NOTES": the collective reference to the Grid Bid Loan Notes and the Individual Bid Loan Notes; individually, a "Bid Note". "BORROWING DATE": in respect of any Committed Rate Loan, the date such Committed Rate Loan is made. "BUSINESS DAY": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; PROVIDED, HOWEVER, that the term "Business Day" shall also exclude when used in 8 3 connection with a Eurodollar Loan, any day on which commercial banks are not open for dealing in Dollar deposits in the London interbank market. "CASH EQUIVALENTS": (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof having maturities of not more than twelve months from the date of acquisition, (ii) time deposits and certificates of deposit having maturities of not more than twelve months from the date of acquisition of any Bank or of any domestic commercial bank having capital and surplus in excess of $500,000,000 which has, or the holding company of which has, a commercial paper rating meeting the requirements specified in clause (iv) below, (iii) repurchase obligations with a term of not more than ten days for underlying securities of the types described in clauses (i) and (ii) entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within six months from the date of acquisition, (v) auction rate preferred stock rated at least A3 or the equivalent thereof by Standard & Poor's Corporation or A- or the equivalent thereof by Moody's Investors Service, Inc., and (vi) floating rate tax exempt bonds rated at least MIG1 or the equivalent thereof by Standard & Poor's Corporation or SP1+ or the equivalent thereof by Moody's Investors Service, Inc. "CHEMICAL": Chemical Bank. "CLOSING DATE": the date on which the conditions specified in subsection 4.1 are satisfied in full. "CODE": the Internal Revenue Code of 1986, as amended from time to time. "COMMITMENT": as to any Bank on the Closing Date, the amount set forth opposite such Bank's name on Schedule 1.1 hereto under the caption "Commitment Amount", as such amount may from time to time be reduced in accordance with this Agreement; collectively, as to all the Banks, the "Commitments". "COMMITMENT ASSIGNMENT": as defined is subsection 9.6(d). "COMMITMENT PERCENTAGE": as to any Bank, the percentage of the aggregate Commitments from time to time constituted by such Bank's Commitment; collectively, as to all the Banks, the "Commitment Percentages". "COMMITMENT PERIOD": the period from and including the Closing Date to but not including the Termination Date. "COMMITTED RATE LOANS": Loans made pursuant to subsection 2.1. "COMMITTED RATE NOTE": as defined in subsection 2.2; collectively, the "COMMITTED RATE NOTES". 9 4 "COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 4001 of ERISA. "CONSOLIDATED CURRENT ASSETS": at any date, all amounts which would, in conformity with GAAP, be included under current assets on a consolidated balance sheet of the Company and its Subsidiaries at such date. "CONSOLIDATED CURRENT LIABILITIES": at a particular date, all amounts which would, in conformity with GAAP, be included under current liabilities on a consolidated balance sheet of the Company and its Subsidiaries as at such date. "CONSOLIDATED INTANGIBLES": at a particular date, all assets of the Company and its Subsidiaries, determined on a consolidated basis at such date, that would be classified as intangible assets in accordance with GAAP, but in any event including, without limitation, unamortized debt discount and expense, unamortized organization and reorganization expense, patents, trade or service marks, franchises, trade names, goodwill and the amount of any write-up in the book value of any assets resulting from any revaluation thereof after April 1, 1994. "CONSOLIDATED INTEREST COVERAGE RATIO": for any period, the ratio of (a) the sum of (i) Consolidated Pre-tax Income for such period and (ii) Consolidated Interest Expense for such period to (b) Consolidated Interest Expense for such period. "CONSOLIDATED INTEREST EXPENSE": for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" or any like caption on the consolidated income statement of the Company and its Subsidiaries for such period. "CONSOLIDATED NET INCOME": for any period, the consolidated net income of the Company and its Subsidiaries for such period determined in accordance with GAAP. "CONSOLIDATED NET WORTH": at a particular date, all amounts which would be included under shareholders' equity on a consolidated balance sheet of the Company and its Subsidiaries determined in accordance with GAAP as at such date (other than any amounts (whether positive or negative) included therein in respect of cumulative effect of foreign currency translation). "CONSOLIDATED PRE-TAX INCOME": for any period which such amount is being determined, the earnings from operations before taxes based on income for such period as determined on a consolidated basis for the Company and its consolidated Subsidiaries in accordance with GAAP. "CONSOLIDATED TANGIBLE NET WORTH": at a particular date, the excess, if any, of Consolidated Net Worth over Consolidated Intangibles as at such date. 10 5 "CONTRACTUAL OBLIGATION": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "DEFAULT": any of the events specified in Section 7, whether or not any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "DOLLARS" and "$": dollars in lawful currency of the United States of America. "ELIGIBLE ASSIGNEE": any of (a) a commercial bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $500,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with generally accepted accounting principles; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, PROVIDED that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; and (d) the central bank of any country which is a member of the OECD. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "ESCROW ACCOUNT": shall mean the deposit accounts designated in the Escrow Agreement. "ESCROW AGREEMENT": the Escrow Agreement dated as of January 5, 1995 among the Company, the Agent and the Banks. "EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements, if any, in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto), dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "EURODOLLAR BASE RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum at which Chemical is offered Dollar deposits two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations are customarily conducted at or about 10:00 A.M., New York City time, for 11 6 delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of Chemical to be outstanding during such Interest Period. "EURODOLLAR LOANS": Committed Rate Loans that bear interest for the Interest Period applicable thereto at an interest rate based on the Eurodollar Rate. "EURODOLLAR RATE": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such Interest Period in accordance with the following formula (rounded upwards to the nearest whole multiple of 1/100th of one percent): Eurodollar Base Rate ------------------------------------- 1.00 - Eurodollar Reserve Requirement "EVENT OF DEFAULT": any of the events specified in Section 7; PROVIDED, HOWEVER, that any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "EXTENSION REQUEST": each request by the Company made pursuant to subsection 2.21 for the Banks to extend this Agreement, which shall contain the information in respect of such extension specified in Exhibit L and shall be delivered to the Agent in writing. "FINANCIAL INDEBTEDNESS": shall mean (a) any loan, advance of funds, overdraft, or other borrowing, (b) any obligation under leases, conditional sale or other title retention agreements that, in accordance with GAAP, are required to be capitalized, (c) any recourse obligation of the seller protecting the buyer against credit risk in connection with the sale of accounts receivable, leases, rental agreements or other chattel paper, (d) any reimbursement obligation not satisfied substantially contemporaneously with a drawing under any letter of credit, (e) any other financial obligation evidenced by a promissory note or similar instrument, (f) any Guaranty (excluding any Guaranty of performance) of any of the foregoing, or (g) in the case of any preferred stock requiring any mandatory redemption or sinking fund payments prior to the Termination Date, those shares of which that are subject to such requirement; in determining whether any of the foregoing shall constitute Financial Indebtedness it shall be of no consequence that such item does not appear on the liability side of a balance sheet of such Person but instead appears on the asset side of a balance sheet of such Person as a part of net assets of discontinued businesses or of businesses held for sale. "FINANCING LEASE": any obligation of a type described in clause (b) of the definition of Financial Indebtedness. "FUNDED DEBT": any obligations of a type described in clauses (a), (b), (d) or (e) of the definition of Financial Indebtedness. 12 7 "GAAP": generally accepted accounting principles in effect in the United States of America on the date hereof. "GOVERNMENTAL AUTHORITY": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GRID BID LOAN NOTE": as defined in subsection 2.5(b)(vi); collectively, the "GRID BID LOAN NOTES". "GUARANTY": as to any Person (the "GUARANTYING PERSON"), any guaranty of indebtedness or other obligation of any other Person or any assurance with respect to the financial condition of any other Person (including, without limitation, any purchase or repurchase agreement, any indemnity or any keep-well, take-or-pay, through-put or other arrangement having the effect of assuring or holding harmless any third Person against loss with respect to any obligation of such other Person), but excluding (a) any agreement or arrangement under which there is no obligation of the Guarantying Person with respect to the indebtedness or other obligations of any other Person, except that the Guarantying Person waives its right to receive or agrees not to accept dividends, returns on capital or other payments from such other Person, or concurs in such other Person's agreement not to pay such amounts, in order to maintain the financial condition of such other Person to induce the extension of credit to such other Person and (b) endorsements of negotiable instruments for deposit or collection in the ordinary course of business. "INDIVIDUAL BID LOAN NOTE": as defined in subsection 2.5(b)(vi); collectively, the "INDIVIDUAL BID LOAN NOTES". "INSOLVENCY": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA. "INSOLVENT": pertaining to a condition of Insolvency. "INSURANCE AND OTHER DEBT": the indebtedness of the Company to holders of the Company's 9.17% Senior Notes due 2001. "INTEREST PAYMENT DATE": (a) as to any Reference Rate Loan, the last day of each March, July, September and December to occur while such Loan is outstanding, (b) as to any Eurodollar Loan in respect of which the Company has selected an Interest Period of one, two or three months, the last day of such Interest Period, and (c) as to any Eurodollar Loan in respect of which the Company has selected an Interest Period of six months, the date which is three (3) months from the first day of such Interest Period and the last day of such Interest Period. "INTEREST PERIOD": (a) with respect to any Eurodollar Loan, 13 8 (i) the period commencing on the Borrowing Date or conversion date with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company in its notice of borrowing or notice of conversion as provided in subsections 2.3 and 2.4, respectively; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan ending one, two, three or six months thereafter, as selected by the Company by irrevocable notice to the Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; (b) with respect to any Bid Loan, the period commencing on the Bid Loan Date with respect to such Bid Loan and ending on the date not less than 14 nor more than 180 days thereafter, as specified by the Company in such Bid Loan Request; PROVIDED that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (3) the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan; (4) if any Interest Period pertaining to a Bid Loan would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day; and (5) no Interest Period in respect of a Loan shall extend beyond the Termination Date. "LIEN": shall mean (a) any judgment lien or execution, attachment, levy, distraint or similar legal process and (b) any mortgage, pledge, hypothecation, assignment, lien, charge, encumbrance or other security interest of any kind or nature whatsoever (including, without limitation, the interest of the lessor under any capital 14 9 lease and the interest of the seller under any conditional sale or other title retention agreement), which secures or purports to secure any Financial Indebtedness. "LOANS": the collective reference to the Committed Rate Loans and the Bid Loans. "MAJORITY BANKS": Banks whose Commitment Percentages aggregate at least 50.1%. "MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET PROCEEDS" shall mean, with respect to any Net Proceeds Event, (a) the gross cash consideration, and all cash proceeds (as and when received) of non-cash consideration (including, without limitation, any such cash proceeds in the nature of principal and interest payments on account of promissory notes or similar obligations), received by the Company and its Subsidiaries in connection with such Net Proceeds Event, MINUS (b) the sum, without duplication, of: (i) for all Net Proceeds Events contemplated by clause (b) of the definition of such term, any taxes which are paid or actually payable to any federal, state, local or foreign taxing authority during the then current or next fiscal year by the Company and its Subsidiaries and are directly attributable to the receipt of such Net Proceeds; (ii) the amount of reasonable and customary fees and commissions (including reasonable investment banking fees), legal, accounting, consulting, survey, title and recording tax expenses and other costs and expenses directly incident to such Net Proceeds Event which are paid or payable by the Company and its Subsidiaries, other than fees and commissions (including, without limitation, consulting and financial services fees) paid or payable to Affiliates and Subsidiaries of the Company (or officers or employees of the Company or any of its Affiliates or Subsidiaries); and (iii) for all Net Proceeds Events contemplated by clause (b) of the definition of such term, the amount of liabilities (other than intercompany liabilities or liabilities owing to any Affiliate or Subsidiary of the Company), if any, which are required to be repaid by the Company or any of its Subsidiaries at the time or as a result of such Net Proceeds Event. "NET PROCEEDS EVENT": shall mean (a) the incurrence by the Company or any of its Subsidiaries of any obligations of the type described in clauses (a) and (e) of Financial Indebtedness in excess of $5,000,000 in any fiscal year; provided that, the incurrence of debt under this Agreement and of up to an additional $10,000,000 at any time under overdraft lines in the ordinary course of business shall not be considered a 15 10 Net Proceeds Event and (b) any Asset Disposition by the Company or any of its Subsidiaries in excess of $4,000,000 in any fiscal year; "NEXUS ACQUISITION": shall mean the acquisition by the Company of certain assets and stock of Nexus Photo Limited pursuant to the Nexus Acquisition Documents. "NEXUS ACQUISITION DOCUMENTS": shall mean (i) the Agreement For the Sale and Purchase of the Northern Ireland Business and European Direct Mail Services Business of Nexus Photo Limited dated as of January , 1995 among Nexus Photo Limited, Nashua Photo Limited, Nashua Nederland B.V., Nashua Photo Licensing Inc., Nashua Corporation, Nashua Belmont Limited, Nashua Photo International Investments, Inc. and Nashua Photo European Investments, Inc. (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto), and (ii) the Share Transfer Agreement among ColourCare International S.A., Nexus Photo Limited, Nashua Photo International Investments, Inc. and Nashua Photo European Investments, Inc. (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto) as each may be amended, supplemented or otherwise modified from time to time; "NOTE PURCHASE AGREEMENTS": any Note Agreement related to the Company's 9.17% Senior Notes due March 20, 2001, as amended by Amendments Nos. 1 through 4 thereto; "NOTES": the collective reference to the Committed Rate Notes and the Bid Notes. "OBJECTING BANK": as defined in subsection 2.21(a). "OBLIGATIONS": all indebtedness, obligations and liabilities of the Company to the Agent and/or any of the Banks incurred under or arising out of or in connection with this Agreement and the Notes, whether for principal, interest, fees, expenses or otherwise. "PARTICIPANTS": as defined in subsection 9.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PERSON": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PLAN": at any particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, 16 11 if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PRIOR CREDIT AGREEMENT": shall mean the Credit Agreement, dated as of July 29, 1994, as amended, among the Company, the banks parties thereto and Chemical, as Agent for such Banks. "REFERENCE RATE": at any particular date, the higher of (a) the rate of interest publicly announced by Chemical in New York, New York from time to time as its reference rate and (b) 1/2% above the rate set forth for such date opposite the caption "Federal Funds (Effective)" in the weekly statistical release designated as "H.15 (519)", or any successor publication, published by the Board of Governors of the Federal Reserve System. The reference rate is not intended to be the lowest rate of interest charged by Chemical in connection with extensions of credit to debtors. "REFERENCE RATE LOANS": Committed Rate Loans that bear interest at an interest rate based upon the Reference Rate. "REGISTER": as defined in subsection 9.6(e). "REORGANIZATION": with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "REPORTABLE EVENT": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty-day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615. "REQUIREMENT OF LAW": as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and each law, treaty, rule or regulation or determination of an arbitrator or Governmental Authority, applicable to or binding upon such Person or any of its property. "RESPONSIBLE OFFICER": as to the Company, the Chairman, the President, the Chief Financial Officer, the Treasurer or the Controller. "SINGLE EMPLOYER PLAN": any Plan which is an "employee pension benefit plan" under ERISA and is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "SUBSIDIARY": as to any Person, (i) a corporation, association, trust or other business entity of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly 17 12 through one or more intermediaries, or both, by such Person and (ii) any partnership of which such Person or any Subsidiary is a general partner or any partnership more than 50% of the equity interests of which are owned, directly or indirectly, by such Person or by one or more other Subsidiaries, or by such Person and one or more other Subsidiaries. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "TERMINATION DATE": December 31, 1997 or such later date as shall be determined pursuant to subsection 2.21 with respect to non-Objecting Banks or such other date on which the Commitments shall terminate in accordance with the provisions of this Agreement. "TOTAL CAPITALIZATION": for any period, the sum of Consolidated Net Worth and Funded Debt. "TRANCHE": Eurodollar Loans the Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall have originally been made on the same day). Tranches may be identified as Eurodollar Tranches. "TRANSFEREES": as defined in subsection 9.6(g). "TRANSFER EFFECTIVE DATE": as defined in each Commitment Assignment and each Bid Loan Assignment. "TYPE": as to any Committed Rate Loan, its nature as a Reference Rate Loan or Eurodollar Loan, as the case may be. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) As used herein, accounting terms not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. SECTION 2. THE COMMITTED RATE LOANS; THE BID LOANS; AMOUNT AND TERMS 2.1 THE COMMITTED RATE LOANS. (a) During the Commitment Period, subject to the terms and conditions hereof, each Bank severally agrees to make loans (individually, a "COMMITTED RATE LOAN"; collectively, the "COMMITTED RATE LOANS") to the Company from 18 13 time to time in an aggregate principal amount at any one time outstanding not to exceed such Bank's Commitment, PROVIDED that no Committed Rate Loan shall be made hereunder if after giving effect thereto the aggregate principal amount of all outstanding Loans would exceed the aggregate amount of the Commitments then in effect. During the Commitment Period, the Company may use the Commitments by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. (b) The Committed Rate Loans may be either (i) Eurodollar Loans, (ii) Reference Rate Loans, or (iii) a combination thereof, as determined by the Company and notified to the Agent in accordance with subsections 2.3 and 2.4, PROVIDED that no Committed Rate Loan shall be made as a Eurodollar Loan after the date that is one month prior to the Termination Date. (c) Upon the release of the funds deposited in the Escrow Account pursuant to Section 3 of the Escrow Agreement, the Dollar amount initially transferred by the Banks to the Escrow Account shall automatically be deemed outstanding under this Agreement as Reference Rate Loans. For purposes of calculating interest and commitment fees, such Loans shall be deemed to have been outstanding from the date the funds were deposited by the Banks in the Escrow Account. 2.2 COMMITTED RATE NOTES. Committed Rate Loans made by each Bank shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit A with appropriate insertions (a "COMMITTED RATE NOTE"), payable to the order of such Bank and representing the obligation of the Company to pay the lesser of (a) the amount of the initial Commitment of such Bank and (b) the aggregate unpaid principal amount of all Committed Rate Loans made by such Bank to the Company. Each Bank is hereby authorized to record the date, Type and amount of each Committed Rate Loan made by such Bank, the maturity date thereof, the date and amount of each payment or prepayment of principal thereof and the interest rate with respect thereto on the schedule annexed to and constituting a part of its Committed Rate Note, and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that the failure to make any such recordation shall not affect the obligations of the Company hereunder or under such Committed Rate Note. Each Committed Rate Note shall (i) be dated the Closing Date, (ii) be stated to mature on the Termination Date, and (iii) bear interest for the period from the Borrowing Date thereof until payment in full on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in subsection 2.11. 2.3 PROCEDURE FOR COMMITTED RATE LOAN BORROWING. Subject to the terms and conditions of this Agreement, the Company may borrow Committed Rate Loans during the Commitment Period on any Business Day PROVIDED, HOWEVER, that the Company shall give the Agent irrevocable notice thereof (which notice must be received by the Agent (i) prior to 12:00 Noon, New York City time, three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, and (ii) prior to 11:00 A.M., New York City time, on the requested Borrowing Date, in the case of Reference Rate Loans). Each such notice shall be given in writing, by telex or by facsimile transmission substantially in the form of Exhibit D (with appropriate insertions) or shall be given by telephone (specifying the information set forth in Exhibit D) promptly confirmed by notice given in writing, by telex or by facsimile transmission substantially in the form of Exhibit 19 14 D (with appropriate insertions). On the day of receipt of any such notice from the Company, the Agent shall promptly notify each Bank thereof. Subject to subsection 2.4 below, each Bank will make the amount of its share of each borrowing available to the Agent for the account of the Company at the office of the Agent set forth in subsection 9.2 at 11:00 A.M. (or 3:00 P.M., in the case of Reference Rate Loans), New York City time, on the Borrowing Date requested by the Company in funds immediately available to the Agent as the Agent may direct. The proceeds of all such Committed Rate Loans will then be made available to the Company by the Agent at the office of the Agent specified in subsection 9.2 by crediting the account of the Company on the books of such office of the Agent with the aggregate of the amount made available to the Agent by the Banks and in like funds as received by the Agent. 2.4 CONVERSION AND CONTINUATION OPTIONS. (a) The Company may elect from time to time to convert Eurodollar Loans to Reference Rate Loans by giving the Agent prior irrevocable notice prior to 11:00 A.M. on any Business Day of such election, PROVIDED that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Company may elect from time to time to convert Reference Rate Loans to Eurodollar Loans by giving the Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Agent shall promptly notify each Bank thereof. All or any part of outstanding Eurodollar Loans and Reference Rate Loans may be converted as provided herein, provided that (i) no Reference Rate Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Agent or the Majority Banks have determined that such a conversion is not appropriate and (ii) no Reference Rate Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Company giving notice to the Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans, PROVIDED that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Agent or the Majority Banks have determined that such a continuation is not appropriate, (ii) if, after giving effect thereto, subsection 2.10 would be contravened or (iii) after the date that is one month prior to the Termination Date; and PROVIDED, FURTHER, that if the Company shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to Reference Rate Loans on the last day of such then expiring Interest Period. 2.5 THE BID LOANS. (a) The Company may borrow Bid Loans from time to time on any Business Day during the period from the Closing Date until the date occurring 14 days prior to the Termination Date in the manner set forth in this subsection 2.5 and in 20 15 amounts such that the aggregate principal amount of all Loans at any time outstanding shall not exceed the aggregate amount of the Commitments at such time, PROVIDED, HOWEVER, that the aggregate principal amount of the outstanding Bid Loans of a Bank may (but shall not be required to) exceed its Commitment. (b)(i) The Company shall request Bid Loans by giving telephone notice (to be immediately confirmed by delivering a Bid Loan Request) to the Agent, not later than 10:30 A.M. (New York City time) one Business Day prior to the proposed Bid Loan Date. Each Bid Loan Request may solicit bids for Bid Loans in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and for not more than three alternative Interest Periods for such Bid Loans. The Interest Period for each Bid Loan shall end not less than 14 days nor more than 180 days after the Bid Loan Date therefor (and in any event subject to the proviso to the definition of "Interest Period" in subsection 1.1). The Agent shall promptly notify each Bank by telex or facsimile transmission of the contents of each Bid Loan Request received by it. (ii) Upon receipt of notice from the Agent of the contents of a Bid Loan Request, any Bank that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more Bid Loans at a rate or rates of interest for each such Bid Loan determined by such Bank in its sole discretion. Any such irrevocable offer shall be made by giving telephone notice (to be immediately confirmed by delivering a Bid Loan Offer) to the Agent before 9:30 A.M. (New York City time) on the proposed Bid Loan Date, setting forth the maximum amount of Bid Loans for each Interest Period, and the aggregate maximum amount for all Interest Periods, which such Bank would be willing to make (which amount may, subject to subsection 2.5(a), exceed such Bank's Commitment) and the rate or rates of interest at which such Bank is willing to make each such Bid Loan; the Agent shall advise the Company before 10:00 A.M. (New York City time) on the proposed Bid Loan Date of the contents of each such Bid Loan Offer received by it. If the Agent in its capacity as a Bank shall, in its sole discretion, elect to make any such offer, it shall advise the Company of the contents of its Bid Loan Offer before 9:15 A.M. (New York City time) on the proposed Bid Loan Date. (iii) The Company shall before 10:25 A.M. (New York City time) on the proposed Bid Loan Date either, in its absolute discretion: (A) cancel such Bid Loan Request by giving the Agent telephone notice to that effect, or (B) accept one or more of the offers made by any Bank or Banks pursuant to clause (ii) above by giving telephone notice to the Agent (to be immediately confirmed by delivery to the Agent of a Bid Loan Confirmation) of the amount of Bid Loans for each relevant Interest Period to be made by each Bank (which amount shall be equal to or less than the maximum amount for such Interest Period specified in the Bid Loan Offer of such Bank, and for all Interest Periods included in such Bid Loan Offer shall be equal to or less than the aggregate maximum amount specified in such Bid Loan Offer for all such Interest Periods) and reject any remaining offers made by 21 16 Banks pursuant to clause (ii) above; PROVIDED, HOWEVER, that (x) the Company may not accept offers for Bid Loans for any Interest Period in an aggregate principal amount in excess of the maximum principal amount requested for such Interest Period in the related Bid Loan Request, (y) if the Company accepts any of such offers, it must accept offers strictly based upon pricing for such relevant Interest Period and no other criteria whatsoever and (z) if two or more Banks submit offers for any Interest Period at identical pricing and the Company accepts any of such offers but does not wish to borrow the total amount offered by such Banks with such identical pricing, the Company shall accept offers from all of such Banks in amounts allocated among thempro rata according to the amounts offered by such Banks (or as nearly pro rata as shall be practicable, after giving effect to the requirement that Bid Loans made by a Bank on a Bid Loan Date for each relevant Interest Period shall be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, it being agreed that to the extent that it is impossible to make allocations in accordance with the provisions of this clause (B) such allocations shall be made in accordance with the instructions of the Company). (iv) If the Company notifies the Agent that a Bid Loan Request is cancelled pursuant to clause (iii)(A) above, the Agent shall give prompt telephone notice thereof to the Banks, and the Bid Loans requested thereby shall not be made. (v) If the Company accepts pursuant to clause (iii)(B) above one or more of the offers made by any Bank or Banks, the Agent shall notify each Bank which has made such an offer before 10:55 A.M. (New York City time) on the Bid Loan Date of the aggregate amount of such Bid Loans to be made on such Bid Loan Date for each Interest Period and of the acceptance or rejection of any offers to make such Bid Loans made by such Bank. Each Bank which is to make a Bid Loan shall, before 12:00 Noon (New York City time) on the Bid Loan Date specified in the Bid Loan Request applicable thereto, make available to the Agent at its office set forth in subsection 9.2 the amount of Bid Loans to be made by such Bank, in immediately available funds. The Agent will make such funds available to the Company as soon as practicable on such date at the Agent's aforesaid address. As soon as practicable after each Bid Loan Date, the Agent shall notify each Bank of the aggregate amount of Bid Loans advanced on such Bid Loan Date, the respective Interest Periods therefor and the range of bids received on such date. (vi) Bid Loans made by each Bank shall be evidenced by a promissory note of the Company substantially in the form of Exhibit B with appropriate insertions (a "GRID BID LOAN NOTE") or (pursuant to the terms of subsection 2.5(b)(vii)), by a promissory note of the Company in the form of Exhibit C with appropriate insertions (an "INDIVIDUAL BID LOAN NOTE"). Each Grid Bid Loan Note shall represent the obligation of the Company to pay the lesser of (i) the Commitments, and (ii) the aggregate unpaid principal amount of all Bid Loans made by such Bank (other than those evidenced by an Individual Bid Loan Note) to the Company. Each Bank is hereby authorized to record the date and amount of each Bid Loan made by such Bank, the maturity date thereof, the date of payment thereof and the interest rate with respect thereto on the schedule annexed to and constituting a part of its Grid Bid Loan Note, and any such recordation shall constitute PRIMA FACIE evidence of the accuracy 22 17 of the information so recorded; PROVIDED, HOWEVER, that the failure to make any such recordation shall not affect the obligations of the Company hereunder or under such Grid Bid Loan Note. Each Grid Bid Loan Note shall be dated the Closing Date. (vii) Amounts advanced by a Bank on a Bid Loan Date which have the same Interest Period and interest rate shall be deemed to constitute one Bid Loan so long as such amounts remain evidenced by the Grid Bid Loan Note of such Bank. Any such Bank that wishes such amounts to constitute more than one Bid Loan and to have each such Bid Loan evidenced by an Individual Bid Loan Note shall notify the Agent and the Company by telex or facsimile transmission of the respective principal amounts of the Bid Loans (which principal amounts shall not be less than $5,000,000 for any of such Bid Loans) to be evidenced by each such Individual Bid Loan Note. Not later than three Business Days after receipt of such notice, the Company shall deliver to such Bank an Individual Bid Loan Note payable to the order of such Bank in the principal amount of each such Bid Loan and otherwise conforming to the requirements of this Agreement. Upon receipt of such Individual Bid Loan Note, such Bank shall endorse on the Schedule attached to its Grid Bid Loan Note the transfer of such Bid Loan from such Grid Bid Loan Note to such Individual Bid Loan Note. (c) Within the limits and on the conditions set forth in this subsection 2.5, the Company may from time to time borrow under this subsection 2.5, repay pursuant to paragraph (d) below, and reborrow under this subsection 2.5. (d) The Company shall repay to the Agent for the account of each Bank which has made a Bid Loan (or the Bid Loan Assignee in respect thereof, as the case may be) on the last day of the Interest Period for each Bid Loan (such Interest Period being that specified by the Company for repayment of such Bid Loan in the related Bid Loan Request) the then unpaid principal amount of such Bid Loan. The Company shall not have the right to prepay any principal amount of any Bid Loan. (e) The Company shall pay interest on the unpaid principal amount of each Bid Loan from the applicable Bid Loan Date to the stated maturity date thereof, at the rate of interest determined pursuant to paragraph (b) above (calculated on the basis of a 360 day year for actual days elapsed), payable on the interest payment date or dates specified by the Company for such Bid Loan in the related Bid Loan Request as provided in the Bid Note evidencing such Bid Loan. If all or a portion of the principal amount of any Bid Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue principal amount shall, without limiting any rights of any Bank under this Agreement, bear interest from the date on which such payment was due at a rate per annum which is 2% above the Reference Rate until paid in full (as well after as before judgment). 2.6 FEES. (a) The Company agrees to pay to the Agent, for the ratable accounts of the Banks based upon their respective Commitment Percentages, a fee equal to .10% of the aggregate Commitments payable on the Closing Date. 23 18 (b) The Company agrees to pay to the Agent for the ratable accounts of the Banks based upon their respective Commitment Percentages commitment fees from and including the date hereof to but excluding the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date (or such earlier date on which the Commitments shall terminate as provided herein), commencing on the first of such dates to occur after the date hereof, (i) computed at the rate of .3125% per annum on each Bank's Commitment Percentage of the average daily unused amount of the Commitments less the daily average principal amount of Bid Loans outstanding during the period for which payment is being made, and (ii) computed at the rate of .25% per annum on each Bank's Commitment Percentage of the daily average principal amount of the Bid Loans outstanding during the period for which payment is being made. (c) The Company agrees to pay to the Agent the fees in the amounts and on the dates specified in the letter agreement between them dated December 22, 1994. 2.7 COMMITMENT REDUCTIONS. The Company shall have the right to terminate or reduce the unused portion of the Commitments at any time or from time to time on or prior to the Termination Date upon not less than five Business Days' prior notice by the Company to the Agent (which shall notify the Banks thereof as soon as practicable) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which shall be in a minimum amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof) and shall be irrevocable and effective only upon receipt by the Agent, PROVIDED that no such reduction or termination shall be permitted if after giving effect thereto, and to any prepayments of the Committed Rate Loans made on the effective date thereof, the then outstanding aggregate unpaid principal amount of all Loans would exceed the amount of the Commitments then in effect. (b) The Commitments once terminated or reduced pursuant to this subsection 2.7 may not be reinstated. 2.8 OPTIONAL PREPAYMENT. The Company may, upon five Business Days' irrevocable notice to the Agent (which shall notify the Banks thereof as soon as practicable), prepay Committed Rate Loans. If any Committed Rate Loan shall be prepaid on any day other than the last day of the Interest Period applicable thereto, the Company shall, on the date of such payment, also pay all interest accrued on such Loan to the date of such payment and all amounts payable pursuant to subsection 2.18 in connection therewith. 2.9 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS. (a) Upon the occurrence of a Net Proceeds Event, the Company shall reduce the Commitments by an amount equal to (i) in the case of a Net Proceeds Event contemplated by clause (a) of the definition of such term, 100% of the Net Proceeds thereof, within one Business Day following receipt thereof by the Company or any of its Subsidiaries, and (ii) in the case of a Net Proceeds Event contemplated by clause (b) of the definition of such term, 50% of the Net Proceeds, effective not later than the first day of the tenth month following such Asset Disposition; provided however, that to the extent the Net Proceeds from any Asset Disposition are used prior to such date, to finance the acquisition of the assets or capital stock of any 24 19 entity in the same line of business as the Company or any of its Subsidiaries which is not prohibited pursuant to the terms of this Agreement, no reduction shall be required. Any reduction shall be accompanied by prepayment by the Company of an amount equal to the excess, if any of the aggregate amount of Loans then outstanding over the amount of the Commitments after giving effect to such reduction and each such reduction shall permanently reduce the Commitments then in effect. (b) If, as a result of the making of any payment required to be made pursuant to this subsection 2.9 the Company would incur costs pursuant to subsection 2.18, it may deposit the amount of such payment with the Agent, for the benefit of the Banks, in a cash collateral account, until the end of the applicable Interest Period at which time such payment shall be made. The Company hereby grants to the Agent, for the benefit of the Banks, a security interest in all amounts from time to time on deposit in such cash collateral account and expressly waive all rights (which rights the Company hereby acknowledges and agrees are vested exclusively in the Agent) to exercise dominion or control over any such amounts. Upon written instruction from the Company, the Agent shall invest the funds on deposit in such cash collateral account for the account of the Company in obligations issued or guaranteed by the United States Government. 2.10 MINIMUM PRINCIPAL AMOUNT AND MAXIMUM NUMBER OF EURODOLLAR TRANCHES. All borrowings, conversions, payments and prepayments in respect of Committed Rate Loans shall be in such amounts and be made pursuant to such elections so that after giving effect thereto each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof, and the number of Eurodollar Tranches shall not exceed five. 2.11 LOAN INTEREST RATES AND PAYMENT DATES. (a) The Eurodollar Loans shall bear interest for the period from the date thereof until the stated maturity thereof on the unpaid principal amount thereof at a rate per annum equal to the Eurodollar Rate determined for the Interest Period therefor plus the Applicable Margin. (b) The Reference Rate Loans shall bear interest on the unpaid principal amount thereof for each day during the period from the date thereof until the payment in full thereof at a fluctuating rate per annum equal to the Reference Rate for such day PLUS the Applicable Margin. (c) If all or a portion of the principal amount of any of the Loans shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue principal amount of such Loan and unpaid interest accrued thereon (i) shall bear interest at a rate per annum which is 2% above the Reference Rate, from the date when such amount is due until the date on which such amount is paid in full and (ii) shall, if such Loan is a Eurodollar Loan, be converted to a Reference Rate Loan at the end of the Interest Period applicable thereto. (d) Interest on each Committed Rate Loan shall be payable in arrears on each Interest Payment Date. 25 20 2.12 COMPUTATION OF INTEREST AND FEES. (a) Interest payable hereunder with respect to Reference Rate Loans shall be calculated on the basis of a year of 365/6 days for the actual days elapsed. All other fees, interest and all other amounts payable hereunder shall be calculated on the basis of a 360 day year for the actual days elapsed. The Agent shall notify the Company and the Banks of each determination of a Eurodollar Rate on the Business Day of the determination thereof. Any change in the interest rate on a Committed Rate Loan resulting from a change in the Applicable Margin, the Eurocurrency Reserve Requirements, or the Reference Rate shall become effective as of the opening of business on the day on which such Applicable Margin changes as provided herein or such change in the Reserve Percentage, the Eurocurrency Reserve Requirements or Reference Rate shall become effective. The Agent shall as soon as practicable notify the Company and the Banks of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. 2.13 PRO RATA TREATMENT AND PAYMENTS. Each borrowing by the Company of Committed Rate Loans and any reduction of the Commitments shall be made PRO RATA according to the respective Commitment Percentages of the Banks. Each payment by the Company under this Agreement or any Note shall be applied, FIRST, to any fees then due and owing pursuant to subsection 2.6, SECOND, to interest then due and owing by the Company in respect of the Notes and, THIRD, to principal then due and owing by the Company hereunder and under the Notes. Each payment by the Company on account of any fees pursuant to subsection 2.6 shall be made PRO RATA in accordance with the respective amounts due and owing. Each payment (other than prepayments) by the Company on account of principal of and interest on the Loans shall be made PRO RATA according to the respective amounts due and owing by the Company. Each prepayment on account of principal of the Loans shall be applied, FIRST, to the Committed Rate Loans, PRO RATA according to the respective amounts outstanding of the Company and, SECOND, to Bid Loans, PRO RATA according to the respective amounts outstanding of the Company; PROVIDED, that nothing herein shall be deemed to permit optional prepayments on account of Bid Loans. All payments (including prepayments) to be made by the Company on account of principal, interest and fees shall be made without setoff or counterclaim and shall be made to the Agent for the account of the Banks at the Agent's office specified in subsection 9.2 in Dollars and in immediately available funds. The Agent shall distribute such payments to the Banks entitled thereto promptly upon receipt in like funds as received. If any payment hereunder of fees or principal of or interest on Reference Rate Loans or Bid Loans becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable during such extension at the rate then applicable hereunder. 2.14 NON-RECEIPT OF FUNDS BY THE AGENT. (a) Unless the Agent shall have been notified by a Bank prior to the date of the Committed Rate Loan or Loans to be made by such Bank (which notice shall be effective as to the Agent upon receipt) that such Bank does not intend to make the proceeds of such Committed Rate Loan or Loans available to the 26 21 Agent, the Agent may assume that such Bank has made such proceeds available to the Agent on such date, and the Agent may in reliance upon such assumption (but shall not be required to) make available to the Company a corresponding amount. If such amount is made available to the Agent on a date after such Borrowing Date, such Bank shall pay to the Agent on demand an amount equal to the product of (i) the daily average federal funds rate during such period as quoted by the Agent, times (ii) the amount of such Bank's Commitment Percentage of such borrowing, times (iii) a fraction, the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Bank's Commitment Percentage of such borrowing shall have become immediately available to the Agent and the denominator of which is 360. A certificate of the Agent submitted to any Bank with respect to any amounts owing under this subsection 2.14 shall be conclusive, absent manifest error. If such Bank's Commitment Percentage is not in fact made available to the Agent by such Bank within three Business Days of such Borrowing Date, the Agent shall as soon as practicable thereafter notify the Company thereof, and the Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to Reference Rate Loans hereunder, on demand, from the Company. (b) Unless the Agent shall have been notified by the Company prior to the date on which any payment is due from it hereunder (which notice shall be effective upon receipt) that the Company does not intend to make such payment, the Agent may assume that the Company has made such payment when due, and the Agent may in reliance upon such assumption (but shall not be required to) make available to each Bank on such payment date an amount equal to the portion of such assumed payment to which such Bank is entitled hereunder, and if the Company has not in fact made such payment to the Agent, such Bank shall, on demand, repay to the Agent the amount made available to such Bank together with interest thereon in respect of each day during the period commencing on the date such amount was made available to such Bank and ending on (but excluding) the date such Bank repays such amount to the Agent, at a rate per annum equal to the Agent's cost of obtaining overnight funds in the federal funds market in New York on each such day. (c) A certificate of the Agent submitted to the Company or any Bank with respect to any amount owing under this subsection shall be conclusive absent manifest error. 2.15 INABILITY TO DETERMINE INTEREST RATE. Notwithstanding any other provision of this Agreement, if (i) Chemical is not, for any reason whatsoever, being quoted a rate referred to in the definition of Eurodollar Base Rate or (ii) the Majority Banks shall determine (which determination shall be conclusive) that the rate quoted by Chemical for the purpose of computing the Eurodollar Base Rate does not adequately and fairly reflect the cost to such Banks of funding Eurodollar Loans that the Company has requested be made on a given Borrowing Date, the Agent shall forthwith give telex notice of such determination, confirmed in writing, to the Company and the Banks at least two Business Days prior to the requested Borrowing Date for such Eurodollar Loans. Unless the Company shall have notified the Agent upon receipt of such telex or telephone notice that it wishes to rescind or modify its request regarding such Eurodollar Loans, any requested Eurodollar Loans shall be made as Reference Rate Loans. Until any such notice has been withdrawn by the Agent, no further Eurodollar Loans shall be made. 27 22 2.16 ILLEGALITY. Notwithstanding any other provision of this Agreement, if any Requirement of Law or any change therein or in the interpretation or application thereof by the relevant Governmental Authority or any Bank shall make it unlawful for such Bank to make Eurodollar Loans as contemplated by this Agreement or to obtain in the interbank eurodollar market the funds with which to make such Loans, (a) such Bank shall promptly notify the Agent and the Company thereof, (b) the commitment of such Bank hereunder to make Eurodollar Loans shall forthwith be cancelled and (c) such Bank's Committed Rate Loans then outstanding as Eurodollar Loans, if any, shall be repaid and reborrowed on the Interest Payment Date for such Loans, or within such earlier period as required by law, as Reference Rate Loans. The Company agrees promptly to pay any Bank, upon its demand, any additional amounts necessary to compensate such Bank for actual and direct costs reasonably incurred by such Bank in making any repayment in accordance with this subsection 2.16 including, but not limited to, any interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its Eurodollar Loans hereunder. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Bank, through the Agent, to the Company shall be conclusive in the absence of manifest error. Each Bank agrees to use reasonable efforts to avoid or to minimize any amounts which may otherwise be payable pursuant to this subsection; PROVIDED, HOWEVER, that such efforts shall not cause the imposition on such Bank of any additional costs or legal or regulatory burdens deemed by such Bank to be material. 2.17 REQUIREMENTS OF LAW. (a) In the event that any change in any Requirement of Law or in the interpretation or application of any Requirement of Law by the relevant Governmental Authority or any Bank after the date hereof or compliance by any Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) does or shall subject such Bank to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Bank of principal, fees, interest or any other amount payable hereunder (except for taxes covered by subsection 2.19 and changes in the rate of tax on the overall net income of such Bank); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other extensions of credit extended by, or any other acquisition of funds by, any office of such Bank which is not otherwise included in the determination of the Eurodollar Rate hereunder; (iii) shall impose on such Bank any other condition; and the result of any of the foregoing is to increase the cost to such Bank, by an amount which such Bank deems to be material, of making, converting into, continuing or maintaining Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Company agrees to promptly pay such Bank, upon its demand, any additional amounts necessary to compensate such Bank for such cost or reduced amount receivable. A 28 23 certificate as to any additional amounts payable pursuant to this subsection submitted by such Bank, through the Agent, to the Company shall be conclusive in the absence of manifest error. Each Bank agrees to use reasonable efforts to avoid or to minimize any amounts which might otherwise be payable pursuant to this paragraph of this subsection; PROVIDED, HOWEVER, that such efforts shall not cause the imposition on such Bank of any additional costs or legal or regulatory burdens deemed by such Bank to be material. (b) In the event that any Bank shall have determined that any change in any Requirement of Law regarding capital adequacy, or any change in the interpretation or application of any such Requirement of Law or compliance by such Bank or any corporation controlling such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority made subsequent to the date hereof, does or shall have the effect of reducing the rate of return on such Bank's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Bank or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank, the Company agrees to pay to such Bank such additional amount as shall be certified by such Bank as being required to compensate it for such reduction. (c) The agreements in this subsection shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder. 2.18 INDEMNITY. The Company hereby agrees to indemnify each Bank and to hold such Bank harmless from any loss or expense which such Bank may sustain or incur as a consequence of (a) default by the Company in payment of the principal amount of or interest on any Eurodollar Loan by such Bank, (b) default by the Company in making a borrowing after the Company has given a notice in accordance with subsection 2.3 or a notice in accordance with paragraph 2.5(b)(ii) which has not been revoked in accordance with clause 2.5(b)(iii)(A), (c) default by the Company in making any prepayment after the Company has given a notice in accordance with subsection 2.8 and/or (d) the making by the Company of a prepayment of a Eurodollar Loan on a day which is not the last day of the Interest Period with respect thereto, in each case including, but not limited to, any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Loans hereunder. A certificate as to any additional amounts payable pursuant to this subsection submitted by any Bank, through the Agent, to the Company shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive termination of this Agreement and payment of the Notes and all other amounts payable hereunder. 2.19 TAXES. (a) All payments made by the Company under this Agreement and the Notes shall be made free and clear of, and without reduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding, in the case of the Agent and each Bank, net 29 24 income and franchise taxes based upon net income imposed on the Agent or such Bank, as the case may be, by the jurisdiction under the laws of which it is organized or in which is located any office from or at which such Bank is making or maintaining its Loan, or any political subdivision or taxing authority thereof or therein, (all such non-excluded taxes, levies, imposts, duties, deductions, charges, fees or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Bank hereunder or under the Notes, the amounts so payable to the Agent or such Bank shall be increased to the extent necessary to yield to the Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Taxes are payable by the Company, as promptly as possible thereafter, the Company shall send to the Agent, for its own account or for the account of such Bank, as the case may be, a certified copy of an original official receipt or other documentary evidence received by the Company showing payment thereof. If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Company shall indemnify the Agent and the Banks for any incremental taxes, interest or penalties that may become payable by the Agent or any Bank as a result of any such failure. (b) Prior to the first Interest Payment Date each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Company and the Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Bank is entitled to receive payments under this Agreement and the Notes payable to it, without deduction or withholding of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Bank which delivers to the Company and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the next preceding sentence further undertakes to deliver to the Company and the Agent two further copies of the said letter and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company, certifying in the case of a Form 1001 or 4224 that such Bank is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such letter or form with respect to it and such Bank advises the Company that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (c) Each Bank agrees to use reasonable efforts to avoid or to minimize any amounts which might otherwise be payable pursuant to this subsection; PROVIDED, HOWEVER, 30 25 that such efforts shall not cause the imposition on such Bank of any additional costs or legal or regulatory burdens deemed by such Bank to be material. (d) The agreements in this subsection shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 2.20 USE OF PROCEEDS. The Company agrees that the proceeds of the initial Loans shall be used to pay in full the Financial Indebtedness of the Company outstanding on the Closing Date under the Prior Credit Agreement, if any. The proceeds of subsequent Loans shall be used for working capital, other general corporate purposes of the Company and the Nexus Acquisition. 2.21 EXTENSION OF TERMINATION DATE. (a) No later than one year prior to the Termination Date then in effect, provided that no Default or Event of Default shall have occurred and be continuing, the Company may request an extension of such Termination Date by submitting to the Agent an Extension Request containing the information in respect of such extension specified in Exhibit L, which the Agent shall promptly furnish to each Bank. If the Majority Banks shall approve in writing the extension of the Termination Date requested in such Extension Request, the Termination Date shall automatically and without any further action by any Person be extended for the period specified in such Extension Request; PROVIDED that (i) each extension pursuant to this subsection 2.21 shall be for a maximum of one year, (ii) after giving effect to any extension, the Termination Date shall not be more than five years after the date of such extension and (iii) the Commitment of any Bank which does not consent in writing to such extension within 30 days of its receipt of such Extension Request (an "OBJECTING BANK") shall, unless earlier terminated in accordance with this Agreement, expire on the Termination Date in effect on the date of such Extension Request. If, within 30 days of their receipt of an Extension Request, the Majority Banks shall not approve in writing the extension of the Termination Date requested in such Extension Request, the Termination Date shall not be extended pursuant to such Extension Request. The Agent shall promptly notify (y) the Banks and the Company of any extension of the Termination Date pursuant to this subsection 2.21 and (z) the Company and any other Bank of any Bank which becomes an Objecting Bank. (b) Any Objecting Bank the Commitment of which shall expire prior to any extended Termination Date shall, subject to subsection 2.21(c), have its Committed Rate Loans prepaid in full on such expiration date, together with accrued interest thereon, and shall have any accrued and unpaid commitment fee and all other Obligations payable to it hereunder paid on the first date to occur following such expiration date on which the fees referred to in subsection 2.6(b) are payable to the non-Objecting Banks or, if such fees shall be so payable on such expiration date, such unpaid commitment fee and Obligations shall be paid on such expiration date. (c) The Company shall have the right, so long as no Default or Event of Default has occurred and is then continuing, upon giving notice to the Agent and an Objecting Bank in accordance with subsection 2.8, to prepay in full the Committed Rate Loans of such Objecting Bank, together with accrued interest thereon, any accrued and unpaid 31 26 commitment fee and all other Obligations payable to it hereunder and/or, upon giving not less than three Business Days' notice to such Objecting Bank and the Agent, to cancel the whole or part of the Commitment of such Objecting Bank. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Banks to enter into this Agreement and to make the Loans herein provided for, the Company hereby represents and warrants to the Agent and to each Bank that: 3.1 FINANCIAL CONDITION. (a) The audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 1993 and the related audited consolidated statements of income and retained earnings and of changes in cash flow for the year then ended, accompanied by the opinions of Price Waterhouse dated February 1, 1994 and March 1, 1994, copies of which have heretofore been furnished to each Bank, are complete and correct and present fairly the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and changes in cash flow for the fiscal year then ended. The unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at September 30, 1994 and the related unaudited consolidated statements of income and of cash flows for the nine- month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Bank, are complete and correct and present fairly the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the period involved (except as disclosed therein). 3.2 NO CHANGE. Since September 30, 1994, there has been no material adverse change in the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole. 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Company and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law, except, in the case of clauses (c) or (d) above, to the extent that the failure to comply therewith would not be reasonably likely, in the aggregate, to have a material adverse effect on the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole. Schedule 3.3 correctly sets forth the 32 27 ownership interests of the Company in each of its Subsidiaries and the Company has no Subsidiary not shown on Schedule 3.3. 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The Company has full power and authority and the legal right to make, deliver and perform this Agreement, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. No consent or authorization of, filing with or other act by or in respect of any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery or performance of this Agreement, or the Notes or with the validity or enforceability of this Agreement or the Notes against the Company. This Agreement has been duly executed and delivered on behalf of the Company. This Agreement will constitute a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). The Company has full power and authority and the legal right to make, deliver and perform the Notes and to borrow hereunder and has taken all necessary action to authorize the borrowings contemplated by this Agreement on the terms and conditions of this Agreement and the Notes and to authorize the execution, delivery and performance of the Notes. On the Closing Date, each Committed Rate Note and Grid Bid Loan Note, and on the date of delivery thereof, each Individual Bid Loan Note, will have been duly executed and delivered on behalf of the Company and will constitute a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 3.5 NO LEGAL BAR; NO DEFAULT. The execution, delivery and performance of this Agreement and the Notes, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of the Company or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation. Neither the Company nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could be materially adverse to the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole. No Default or Event of Default has occurred and is continuing. 3.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Company threatened by or against the Company or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to this Agreement or the Notes or any Loan or any of the transactions contemplated hereby, or (b) which has any reasonable likelihood of having a material adverse effect on the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole. 33 28 3.7 INVESTMENT COMPANY ACT. The Company is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 3.8 FEDERAL REGULATIONS. No part of the proceeds of any Loan hereunder will be used directly or indirectly for any purpose which violates, or which would be inconsistent with, the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 3.9 ERISA. No Reportable Event has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. The present value of all benefit obligations under each Single Employer Plan maintained by the Company or any Commonly Controlled Entity (based on those assumptions used to fund the Plans) did not, as of the last annual valuation date, exceed the value of the assets of each such Plan allocable to such obligations by an amount in excess of $7,500,000. Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan and the liability to which the Company or any Commonly Controlled Entity would become subject under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date hereof is not in excess of $0. No such Multiemployer Plan is in Reorganization or Insolvent. 3.10 NEXUS ACQUISITION DOCUMENTS. As of the Closing Date the Agent and each Bank has received complete and correct copies of each of the Nexus Acquisition Documents (including, without limitation, all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto) and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof. Each Nexus Acquisition Document to which the Company or any of its Subsidiaries is a party has been duly executed and delivered by the Company or such Subsidiary, as the case may be, and to the best knowledge of the Company and each of its Subsidiaries, each Nexus Acquisition Document has been duly executed and delivered by the parties thereto other than the Company and its Subsidiaries and is in full force and effect. The representations and warranties of the Company and each of its Subsidiaries contained in each Nexus Acquisition Document to which the Company or such Subsidiary, as the case may be, is a party are true and correct in all material respects on the date hereof and will be true and correct in all material respects on the Closing Date, and the Agent and each Bank shall be entitled to rely upon such representations and warranties with the same force and effect as if they were incorporated in this Credit Agreement and made to each Bank directly. To the best knowledge of the Company and each of its Subsidiaries, the representations and warranties of each other party to each Nexus Acquisition Document contained therein are true and correct in all material respects on the date hereof and on the Closing Date as if made on and as of the date hereof and the Closing Date, such knowledge qualification being given only with respect to parties to the Nexus Acquisition Documents other than the Company and its Subsidiaries. 34 29 SECTION 4. CONDITIONS PRECEDENT 4.1 CONDITIONS TO INITIAL LOANS. The obligation of each Bank to make its initial Loan hereunder is subject to the satisfaction of the following conditions precedent: (a) EXECUTION OF AGREEMENT. The Agent shall have received one or more counterparts of this Agreement, executed by a duly authorized officer of each party hereto. (b) NOTES. The Agent shall have received for the account of each Bank a Committed Rate Note and a Grid Bid Loan Note from the Company conforming to the requirements hereof and executed by a duly authorized officer of the Company, and the Agent shall promptly forward such Notes to the appropriate Banks. (c) OFFICERS' CERTIFICATE. The Agent shall have received, with a counterpart for each Bank, an Officers' Certificate of the Company, dated the Closing Date, substantially in the form of Exhibit I with appropriate insertions, executed by a Responsible Officer of the Company. (d) ASSISTANT SECRETARY'S CERTIFICATE. The Agent shall have received, with a counterpart for each Bank, a certificate of the Assistant Secretary of the Company dated the Closing Date, substantially in the form of Exhibit J with appropriate insertions and attachments. (e) LEGAL OPINION OF COUNSEL TO THE COMPANY. The Agent shall have received, with a copy for each Bank, an opinion of Paul Buffum, Secretary and Counsel of the Company, dated the Closing Date and addressed to the Agent and the Banks, substantially in the form of Exhibit K. Such opinion shall also cover such other matters incident to the transactions contemplated by this Agreement as the Agent shall reasonably require. (f) FEES. The Agent shall have received the fees to be received on the Closing Date in connection with this Agreement. (g) CONDITIONS PRECEDENT UNDER ESCROW AGREEMENT. The conditions precedent in Section 2 of the Escrow Agreement shall have been satisfied. (h) ADDITIONAL MATTERS. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Agent and its counsel. 4.2 CONDITIONS TO ALL LOANS. The obligation of each Bank to make any Loan to be made by it hereunder (including the initial Loan) is subject to the satisfaction of the following conditions precedent on the date of making such Loan: 35 30 (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Company herein or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith shall be correct on and as of the date of such Loan as if made on and as of such date. (b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loan to be made on such date. (c) ADDITIONAL CONDITIONS TO BID LOANS. If such Loan is made pursuant to subsection 2.5, all conditions set forth in such subsection shall have been satisfied. Each acceptance by the Company of a Loan shall be deemed to constitute a representation and warranty by the Company as of the date of such Loan that the applicable conditions in paragraphs (a), (b) and (c) of this subsection have been satisfied. SECTION 5. AFFIRMATIVE COVENANTS The Company hereby agrees that, so long as the Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to the Agent or any Bank hereunder, the Company shall and, in the case of subsections 5.3, 5.4, 5.5 and 5.6, shall cause each of its Subsidiaries to: 5.1 FINANCIAL STATEMENTS. Furnish to the Agent and each Bank: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Company, a copy of the consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and changes in cash flow for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by independent certified public accountants of nationally recognized standing not unacceptable to the Banks; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of each such quarter and the related unaudited consolidated statements of income and retained earnings of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through such date and cash flows of the Company and its consolidated Subsidiaries for such date, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer (subject to normal year-end audit adjustments); 36 31 all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as approved by such accountants or officer, as the case may be, and disclosed therein). 5.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Bank: (a) concurrently with the delivery of the financial statements referred to in subsections 5.1(a), (b), (c) and (d), a certificate of a Responsible Officer stating that, to the best of such officer's knowledge, the Company during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and in the Notes to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; each certificate delivered pursuant to this subsection 5.2(a) shall be accompanied by a schedule setting forth computations as of the date of the relevant financial statements of each of the financial covenants specified in subsections 6.1(a) through (d), 6.2 (stating the principal amount of indebtedness which is secured by permitted Liens), 6.3, 6.4, and 6.5 and of the total amount of Asset Dispositions made subsequent to July 1, 1994; (b) within five Business Days after the same are sent, copies of all financial statements and reports which the Company sends to its stockholders, and within five days after the same are filed, copies of all financial statements and reports which the Company may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (c) promptly, such additional financial and other information as any Bank may from time to time reasonably request. 5.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent and any additional costs are imposed as a result thereof, as the case may be, all its material obligations of whatever nature, except when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company or its Subsidiaries, as the case may be. 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to engage in business of the same general type as now conducted by the Company and its Subsidiaries taken as a whole and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges, licenses, qualifications, permits and franchises necessary or desirable in the normal conduct of its businesses; comply with all Contractual Obligations and Requirements of Law applicable to it except to the extent that failure to comply therewith could not, in the aggregate, have a material adverse effect on the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole and could not adversely affect the ability of the Company to perform its obligations under this Agreement and the Notes. 37 32 5.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Bank, upon written request, full information as to the insurance carried; PROVIDED, HOWEVER, that the Company may maintain self insured plans to the extent companies of similar size and in similar businesses do so. 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its businesses and activities; and permit representatives of any Bank to visit and inspect any of its properties and examine and make abstracts from any of its books and records during normal business hours and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Company and its Subsidiaries with officers and employees of the Company and its Subsidiaries and with its independent certified public accountants. 5.7 NOTICES. Promptly give notice to the Agent (which shall promptly transmit such notice to each Bank): (a) of the occurrence of any Event of Default or any Default, such notice to be accompanied by a certificate of a Responsible Officer specifying the nature of such event, the period of existence thereof and what action the Company proposes to take with respect thereto; (b) of any (i) default or event of default under any Contractual Obligation of the Company or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, would have a material adverse effect on the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole or would have an adverse effect on the ability of the Company to perform its obligations under this Agreement and the Notes; (c) of any material litigation or proceeding affecting the Company or any of its Subsidiaries; (d) of any material adverse change in the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole or of any event which could adversely affect the ability of the Company to perform its obligations under this Agreement and the Notes. 38 33 Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto. SECTION 6. NEGATIVE COVENANTS The Company hereby agrees that, so long as the Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to the Agent or any Bank hereunder, the Company shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly: 6.1 FINANCIAL CONDITION COVENANTS. (a) CONSOLIDATED INTEREST COVERAGE RATIO. At the last day of each fiscal quarter, permit the Consolidated Interest Coverage Ratio for the period of four consecutive fiscal quarters ending on such day (or in the case of December 31, 1994 and March 31, 1995, the six- and nine-month periods, respectively, ending on such dates) to be less than the ratio set forth below opposite such quarter:
Quarter Ratio ------- ----- Fourth quarter 1994 3.00 to 1.00 First quarter 1995 2.50 to 1.00 Second quarter 1995 2.75 to 1.00 Third quarter 1995 and thereafter 3.00 to 1.00
(b) CONSOLIDATED TANGIBLE NET WORTH. Permit Consolidated Tangible Net Worth at any time to be less than an amount equal to $51,000,000 plus the sum of (i) 50% of Consolidated Net Income arising after December 31, 1994 and computed on a cumulative basis (without any deduction, however, for any fiscal quarter for which Consolidated Net Income is negative) through the end of the fiscal quarter immediately preceding the date of determination and (ii) the net proceeds paid to the Company of any offering of any shares of capital stock of the Company from the Closing Date and through the end of the fiscal quarter immediately preceding the date of determination (including any such proceeds derived from the issuance of shares of capital stock of the Company as a result of the exercise of stock options of the Company or from the conversion of debt securities of the Company). (c) FUNDED DEBT TO TOTAL CAPITALIZATION. Permit the ratio of Funded Debt to Total Capitalization to exceed 0.5 to 1 at any time. 6.2 LIENS. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except: 39 34 (a) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or its Subsidiaries, as the case may be, in accordance with generally accepted accounting principles; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings; (c) pledges or deposits in connection with workmen's compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, leases, trade contracts (other than for borrowed money), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries; (f) Liens in existence on the date hereof and which secure obligations reflected in the financial statements referred to in subsection 3.1; (g) Liens on assets of Persons which become Subsidiaries after the date of this Agreement; PROVIDED, HOWEVER, that such Liens existed at the time the respective Persons became Subsidiaries and were not created in anticipation thereof; (h) Liens in respect of judgments or awards or in respect of attachments (i) in an aggregate amount less than $250,000 that remain in existence for a period of no more than 60 days after the same shall have been created or (ii) which shall have been discharged, stayed pending appeal or bonded within 5 Business Days after the creation thereof and which shall, at the time, be contested in good faith in appropriate proceedings; (i) purchase money Liens (including the interest of lessors under capital leases and of the seller under conditional sale or other title retention agreements) securing Financial Indebtedness of any type described in clause (a) or (b) of the definition of Financial Indebtedness, or of the Company of the type described in clause (f) of said definition incurred to finance the acquisition of a capital asset after the Closing Date in accordance with the provisions hereof, PROVIDED that the principal amount of such Financial Indebtedness shall not exceed in any case the cost to the Company or any Subsidiary of the real or personal property acquired and each such 40 35 Lien shall cover only such real or personal property acquired, the proceeds thereof, substitutions therefor and replacements thereof, the land on which real property acquired is located, and improvements on real property acquired which under law become part of such real property; (j) Liens on documents and goods in transit securing Financial Indebtedness of the type described in clause (d) of the definition of Financial Indebtedness in respect of commercial letters of credit; (k) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in the foregoing clauses paragraphs (a) through (j); PROVIDED, HOWEVER, that the principal amount of Financial Indebtedness secured thereby shall not exceed the principal amount of Financial Indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement Lien shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property); and (l) Liens with respect to which the aggregate principal amount of Financial Indebtedness secured thereby does not exceed $500,000 at any time. 6.3 LIMITATION ON CONSOLIDATION, MERGER AND DISPOSITIONS AND PURCHASES OF PROPERTY. (a) Enter into any Asset Disposition if, after giving effect to such Asset Disposition, the aggregate book value of all assets which are the subject of Asset Dispositions subsequent to July 1, 1994 would exceed 20% of the excess of consolidated total assets over goodwill, cash and Cash Equivalents of the Company and its Subsidiaries as at the date of the most recent quarter end for which financial statements shall have been delivered to the Banks pursuant to subsection 5.1. (b) Consolidate with or merge into any other Person or permit any other Person to merge into or consolidate with it, except that (i) a Subsidiary may merge into or consolidate with a wholly-owned Subsidiary, (ii) the Company may merge into or consolidate with a wholly-owned Subsidiary, PROVIDED, that the Company is the entity surviving such merger, (iii) another Person may merge into a Subsidiary, PROVIDED that such Subsidiary shall be the entity surviving such merger, and (iv) another Person may merge into the Company, PROVIDED that the Company is the entity surviving such merger. (c) Purchase any assets, including, without limitation, any capital stock (other than common stock of the Company), but excluding purchases of inventory in the ordinary course of business, in a transaction or a series of related transactions, with an aggregate fair market value of $25,000,000 or more over the term of this Agreement. The provisions in the foregoing sentence shall not apply to the Nexus Acquisition. 41 36 6.4 LIMITATION ON SALE OF ACCOUNTS RECEIVABLE, etc. Sell or in any manner dispose of any accounts receivable or chattel paper, PROVIDED, HOWEVER, that the Company or any Subsidiary may sell (a) delinquent accounts receivable and chattel paper for the purposes of collection, and (b) receivables that, at the time of sale, have a due date occurring one year or longer from such time, provided that the cumulative amount of such receivables sold subsequent to the date hereof pursuant to this clause (b) does not exceed $10,000,000. 6.5 LIMITATION ON SALES AND LEASEBACKS. Directly or indirectly become liable, as lessee or guarantor or other surety, with respect to any lease of real or personal property, whether now owned or hereafter acquired, (a) which is to be sold or transferred by the Company or any Subsidiary, to any Person, or (b) which the Company or any Subsidiary intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by the Company or any Subsidiary to any Person in connection with such lease, except that the Company or any Subsidiary may become liable as such a lessee (or, in the case of the Company, as such a guarantor or surety) (i) under any such lease representing Financial Indebtedness described in clause (b) of the definition of Financial Indebtedness, if after giving effect to such lease, the aggregate Financial Indebtedness described in said clause (b) under such leases (other than the leases described in subclause (ii) and (iii) below) does not exceed $5,000,000, (ii) if such a lease is entered into with respect to a tax exempt financing of such leased property, the Company or any such Subsidiary is required to enter into such sale and leaseback in order to obtain such tax exemption, (iii) if such lease is entered into with respect to a bona fide research and development project and the aggregate Financial Indebtedness described in said clause (b) of said definition under such leases relating to research and development does not exceed $3,000,000, or (iv) if such sale and leaseback is entered into within six months of (x) the acquisition date of such property or (y) the date of completion of any material capital improvement on such property. 6.6 PROHIBITION ON CERTAIN LEASES. As lessee, to enter into, or permit to remain in effect, any agreements to rent or lease any real or personal property (exclusive of Financing Leases) having a remaining committed term exceeding one year if the aggregate amount of rental obligations to accrue during any period of twelve consecutive months under all such agreements to which the Company or any Subsidiary is a party, as lessee, will exceed the greater of $10,000,000 or 6% of Consolidated Tangible Net Worth (as at the end of such period). 6.7 NO MODIFICATION OF INSURANCE AND OTHER DEBT. Amend or modify the terms of any Note Purchase Agreement or any evidence of indebtedness issued pursuant to any of them in such manner as to accelerate any maturity of the Insurance and Other Debt or increase the interest rate, premium, fees or other amounts payable thereon. SECTION 7. EVENTS OF DEFAULT Upon the occurrence of any of the following events: (a) (i) The Company shall fail to pay any principal on any Note when due in accordance with the terms thereof or hereof on the maturity date thereof; or (ii) the 42 37 Company shall fail to pay any interest on any Note or any fee or other Obligation payable hereunder when due in accordance with the terms thereof or hereof and such failure shall continue unremedied for five Business Days; or (b) Any representation or warranty made or deemed made by the Company herein or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect, false or misleading in any material respect on or as of the date made or deemed made; or (c) The Company shall default in the observance or performance of any agreement contained in Section 6 or in subsection 5.1 or 5.2 and such default in respect of subsection 5.1 or 5.2 shall continue unremedied for a period of five Business Days; or (d) The Company shall default in the observance or performance of any other material agreement contained in this Agreement, and such default shall continue unremedied for a period of 30 days; or (e) The Company or any of its Subsidiaries shall (i) default in any payment of principal of or interest on any of its Financial Indebtedness (other than the Notes) having a principal amount of at least $500,000 in the aggregate beyond the period of grace, if any, provided in the instrument or agreement under which such Financial Indebtedness was created; or (ii) default in the observance or performance of any other agreement or condition relating to such Financial Indebtedness having an unpaid principal amount of at least $1,000,000 in the aggregate for the Company and its Subsidiaries or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Financial Indebtedness to cause, with the giving of notice if required, such Financial Indebtedness to become due prior to its stated maturity; or (f)(i) The Company or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Company or any such Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company or any such Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment and (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company or any such 43 38 Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company or any such Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (g) One or more judgments or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability of $1,000,000 or more which is not paid or covered by insurance and all such judgments or decrees (to the extent they involve aggregate liability of $1,000,000 or more) (i) shall not have been stayed or bonded pending appeal or (ii) shall not have been vacated or discharged within 60 days from the entry thereof; or (h)(i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA) shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed to administer or to terminate, any Single Employer Plan, which Reportable Event or institution of proceedings is, in the reasonable opinion of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company, any of its Subsidiaries or any Commonly Controlled Entity shall withdraw from any Multiemployer Plan, or any Multiemployer Plan to which the Company, any of its Subsidiaries or any Commonly Controlled Entity contributes shall be terminated or shall be in Reorganization or shall be Insolvent, or (vi) any other event or condition shall occur or exist; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could subject the Company or any of its Subsidiaries to any tax, penalty or other liabilities under ERISA which in the aggregate could be or are material in relation to the business, operations, property or financial or other condition of the Company and its Subsidiaries taken as a whole; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon), and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Banks, the Agent may, or upon the request of the Majority Banks, the Agent shall, by notice to the Company declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Banks, the Agent may, or upon the request of the Majority Banks, the Agent shall, by notice of default to the Company, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, 44 39 whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 8. THE AGENT 8.1 APPOINTMENT. Each Bank hereby irrevocably designates and appoints Chemical Bank as the Agent of such Bank under this Agreement, and each such Bank irrevocably authorizes Chemical Bank, as the Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. 8.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 8.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the Notes or for any failure of the Company to perform its obligations hereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance by the Company of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Company. 8.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless (a) a written notice of assignment, negotiation or 45 40 transfer thereof shall have been filed with the Agent and (b) the Agent shall have received the written agreement of such assignee to be bound hereby as fully and to the same extent as if such assignee were an original Bank party hereto, in each case in form satisfactory to the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received written notice from a Bank or the Company referring to this Agreement, describing such Default of Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Banks except as provided in Article VII; PROVIDED, HOWEVER, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 8.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 46 41 8.7 INDEMNIFICATION. The Banks agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to their respective Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; PROVIDED, HOWEVER, that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder. 8.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company as though the Agent were not the Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include the Agent in its individual capacity. 8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 10 days' notice to the Company and the Banks. If the Agent shall resign as Agent under this Agreement, then, the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company, whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's resignation hereunder as Agent, the provisions of this subsection 8.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 9. MISCELLANEOUS 9.1 AMENDMENTS AND WAIVERS. Only with the prior written consent of the Majority Banks may the Agent and the Company, from time to time, enter into written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or the Notes or changing in any manner the rights of the Banks or the Company hereunder or thereunder, and only with the prior written consent of the Majority Banks may the Agent enter into instruments waiving, on such terms and conditions as the Agent may specify in such instruments, any of the requirements of this Agreement or the Notes or any Default or Event of Default and its consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment, supplement or modification shall directly (a) extend the 47 42 maturity of any Loan, or reduce the rate or extend the time of payment of interest thereon, or reduce any fee payable to the Banks hereunder, or forgive the principal amount thereof, or increase the amount of any Bank's Commitment or amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Majority Banks, or consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement, in each case without the written consent of each Bank affected thereby, or (b) amend, modify or waive any provision of Section 8 without the written consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Company, the Banks, the Agent and all future holders of the Notes. In the case of any waiver, the Company, the Banks and the Agent shall be restored to their former positions and rights hereunder and under the Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing, but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 9.2 NOTICES. Except as otherwise provided in Section 2, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing, and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when deposited in the mail, postage prepaid, or, in the case of telegraphic notice, when delivered to the telegraph company, or, in the case of telex notice, when sent, answerback received, or, in the case of facsimile transmission, when received, addressed as follows in the case of the Company and the Agent, and as set forth on the signature pages hereof in the case of the Banks, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Company: NASHUA CORPORATION 44 Franklin Street P.O. Box 2002 Nashua, New Hampshire 03061-2002 Telex: 94-3438 Answerback: NASHCORP Telecopier: (603) 880-5860 Attention: Treasurer The Agent: Chemical Bank (For notices pursuant 270 Park Avenue to subsection 2.2) New York, New York 10017 Attention: Owen Lake Telecopier: (212) 622-0854 Telephone: (212) 622-0691 PROVIDED, HOWEVER, that any notice, request or demand to or upon the Agent or the Banks pursuant to subsections 2.1, 2.3, 2.4, 2.5, 2.7 and 2.8 shall not be effective until received. 48 43 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans. 9.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees (a) to pay or reimburse the Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, printing and execution of, and any amendment, supplement or modification to, this Agreement and the Notes and any other documents prepared in connection herewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agent, (b) to pay or reimburse each Bank and the Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes and any such other documents, including, without limitation, fees and disbursements of counsel to the Agent and to the several Banks, and (c) on demand, to pay, indemnify, and hold each Bank and the Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes and any such other documents, and (d) to pay, indemnify, and hold each Bank and the Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, out-of-pocket costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes and any such other documents (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED, however, that the Company shall not have any obligation hereunder with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Agent or any such Bank, (ii) legal proceedings commenced against any Bank by any security holder or creditor thereof arising out of and based upon rights afforded such security holder or creditor solely in its capacity as such or (iii) legal proceedings commenced against the Agent or any Bank by any other Bank; PROVIDED, FURTHER, that except as provided in clause (b) and (d) above, the Company is not obligated to pay the fees and disbursements of any counsel other than that of the Agent. The agreements in this subsection shall survive repayment of the Notes and all other amounts payable hereunder. 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Banks, the 49 44 Agent, all future holders of the Notes and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. (b) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank, or any other interest of such Bank hereunder. In the event of any such sale by a Bank of participating interests to a Participant, such Bank's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. The Company agrees that if amounts outstanding under this Agreement and the Notes are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have, to the extent permitted by applicable law, the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Note; PROVIDED, that such right of setoff shall be subject to the obligation of such Participant to share with the Banks as provided in subsection 9.7. The Company also agrees that each Participant shall be entitled to the benefits of subsections 2.20, 2.21, 2.22 and 9.5 with respect to its participation in the Commitments and the Loans outstanding from time to time; PROVIDED, that no Participant shall be entitled to receive any greater amount pursuant to such subsections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. Each Bank agrees that any agreement between such Bank and any Participant in respect of such participating interest shall not restrict such Bank's right to agree to any amendment, supplement or modification to this Agreement except to extend the final maturity of any Note or reduce the rate or extend the time of payment of interest thereon or reduce the principal amount thereof or change the fees as set forth in subsection 2.6 hereof. (c) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time assign to one or more banks or other entities ("BID LOAN ASSIGNEE") any Bid Loan owing to such Bank and any Individual Bid Loan Note held by such Bank evidencing such Bid Loan, pursuant to a Bid Loan Assignment executed by the assignor Bank and the Assignee. Upon such execution, from and after the Transfer Effective Date specified in such Bid Loan Assignment, the Bid Loan Assignee shall, to the extent of the assignment provided for in such Bid Loan Assignment and to the extent permitted by applicable law, be deemed to have the same rights and benefits with respect to such Bid Loans and Individual Bid Loan Note and the same rights of setoff and obligation to share pursuant to subsection 9.7 as it would have had if it were a Bank hereunder; PROVIDED that unless such Bid Loan Assignment shall otherwise specify and a copy of such Bid Loan Assignment shall have been delivered to the Agent for its acceptance and recording in the Register in accordance with subsection 9.6(e), the as signor Bank shall act as collection agent 50 45 for the Bid Loan Assignee, and the Agent shall pay all amounts received from the Company which are allocable to the assigned Bid Loan or Bid Note directly to the assignor Bank without any further liability to the Bid Loan Assignee. The Bid Loan Assignee shall not, by virtue of such Bid Loan Assignment, become a party to this Agreement or have any rights to consent to or refrain from consenting to any amendment, waiver or other modification of any provision of this Agreement or any related document; PROVIDED that (x) the assignor Bank and the Bid Loan Assignee may, in their discretion, agree between themselves upon the manner in which the assignor Bank will exercise its rights under this Agreement and any related document, and (y) if a copy of such Bid Loan Assignment shall have been delivered to the Agent for its acceptance and recording in the Register in accordance with subsection 9.6(f), neither the principal amount of, the interest rate on, nor the maturity date of any Bid Loan or Bid Note assigned to a Bid Loan Assignee will be modified without the written consent of such Bid Loan Assignee. (d) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law and with the approval of the Company, which shall not be unreasonably withheld and upon notice to the Agent, at any time sell to any Bank or any affiliate thereof, or to any Eligible Assignee (a "PURCHASING BANK") all or any part, in an amount not less than the lesser of (i) $5,000,000 and (ii) the remainder of the principal amount then held by such Bank, of its rights and obligations under this Agreement and the Committed Rate Notes (a "COMMITMENT ASSIGNMENT") pursuant to a Commitment Assignment substantially in the form of Exhibit H-2, executed by such Purchasing Bank, such transferor Bank (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company and the Agent) and delivered to the Agent for its acceptance and recording in the Register. Upon such execution, delivery and recording and from and after the Transfer Effective Date determined pursuant to such Commitment Assignment, (x) the Purchasing Bank hereunder shall be a party hereto and, to the extent provided in such Commitment Assignment, have the rights and obligations of a Bank hereunder with a Commitment as set forth therein, and (y) the transferor Bank thereunder shall, to the extent provided in such Commitment Assignment, be released from its obligations under this Agreement (and, in the case of a Commitment Assignment covering all or the remaining portion of a transferor Bank's rights and obligations under this Agreement, such transferor Bank shall cease to be a party hereto). Such Commitment Assignment shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such transferor Bank under this Agreement and the Committed Rate Notes. On or prior to the Transfer Effective Date determined pursuant to such Commitment Assignment, the Company, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Committed Rate Note, to the order of such Purchasing Bank in an amount equal to the Commitment assumed by it pursuant to such Commitment Assignment and, if the transferor Bank has retained a Commitment hereunder, a new Committed Rate Note, to the order of the transferor Bank in an amount equal to the Commitment retained by it hereunder. Such new Committed Rate Notes, shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby and shall be given in substitution and extinguishment of, and not in 51 46 repayment of, the Note replaced thereby. The Notes surrendered by the transferor Bank shall be returned by the Agent to the Company marked "cancelled". (e) The Agent shall maintain at its address referred to in subsection 9.2 a copy of each Bid Loan Assignment or Commitment Assignment delivered to it and a register (the "REGISTER") for the recordation of (i) the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time, and (ii) with respect to each Bid Loan Assignment delivered to the Agent, the name and address of the Bid Loan Assignee and the principal amount of each Bid Loan owing to such Bid Loan Assignee. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Bank or Bid Loan Assignee at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of a duly-executed Commitment Assignment, together with payment to the Agent (by the assignor Bank or the relevant assignee, as agreed between them) of a registration and processing fee of $1,000, the Agent shall (i) accept such Commitment Assignment, (ii) record the information contained therein in the Register and (iii) give prompt notice of such acceptance and recordation to the assignor Bank, the assignee and the Company. (g) The Company authorizes each Bank to disclose to any Participant or Purchasing Bank (each, a "TRANSFEREE") and any prospective Transferee, subject to the provisions of Section 9.16, any and all information in such Bank's possession concerning the Company and its Subsidiaries which has been delivered to such Bank by or on behalf of the Company pursuant to this Agreement or in connection with such Bank's credit evaluation of the Company and its Subsidiaries prior to becoming a party to this Agreement. (h) If, pursuant to this subsection, any interest on this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank, the Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Company or the transferor Bank with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Bank, the Agent and the Company either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Bank, the Agent and the Company) to provide the transferor Bank, the Agent and the Company a new Form 4224 or Form 1001 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to 52 47 time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. (i) Nothing herein shall prohibit any Bank from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. 9.7 ADJUSTMENTS; SETOFF. (a) Each Bank agrees that if any Bank (a "BENEFITTED BANK") shall at any time receive any payment of all or part of its Committed Rate Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by setoff, pursuant to events or proceedings of the nature referred to in clause (f) of Section 7, or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Committed Rate Loans, or interest thereon, such Benefitted Bank shall purchase for cash from the other Banks such portion of each such other Bank's Committed Rate Loan, or shall provide such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered by the Company or any third party from such Benefitted Bank, such purchase by the other Banks shall be rescinded, and the purchase price and benefits returned to the Benefitted Bank, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another Bank's Committed Rate Loan may exercise all rights of payment (including without limitation rights of setoff) with respect to such portion as fully as if such Bank were the direct holder of such portion. (b) In addition to any rights and remedies of the Banks provided by law (including, without limitation, other rights of setoff), each Bank shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon the occurrence and during the continuance of any Event of Default, to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect or contingent or matured or unmatured, at any time held or owing by such Bank to or for the credit or the account of the Company, or any part thereof in such amounts as such Bank may elect, against and on account of the obligations and liabilities of the Company to such Bank hereunder and claims of every nature and description of such Bank against the Company, in any currency, whether arising hereunder, under the Notes or otherwise, as such Bank may elect, whether or not such Bank has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agent after any such setoff and application made by such Bank; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such setoff and application. 9.8 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the 53 48 limitations of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or such condition exists. 9.9 TABLE OF CONTENTS AND SECTION HEADINGS. The table of contents and the Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Agreement. 9.10 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 9.11 SEVERABILITY. Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.12 INTEGRATION. This Agreement represents the agreement of the parties hereto with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any party hereto relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes. 9.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.14 SUBMISSION TO JURISDICTION; WAIVERS. The Company hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating hereto and to the Notes, or for recognition and enforcement of any judgment in respect thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof, (b) consents that any such action or proceeding may be brought in such courts, and waives, to the maximum extent not prohibited by law, any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court, or that such action or proceeding was brought in an inconvenient court, and agrees not to plead or claim the same; 54 49 (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form or mail), postage prepaid, to the Company at its address set forth in subsection 9.2 or at such other address of which the Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 9.15 ACKNOWLEDGMENTS. The Company hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery hereof and of the Notes; (b) neither the Agent nor any Bank has any fiduciary relationship to the Company in respect of this Agreement, the Loans and the Notes, and the relationship between the Agent and the Banks, on one hand, and the Company, on the other hand, in respect of this Agreement, the Loans and the Notes is solely that of debtor and creditor; and (c) no joint venture exists among the Banks or among the Company and the Banks. 9.16 CONFIDENTIALITY. Each Bank agrees to keep confidential all information provided to it by the Company pursuant to this Agreement that is not included in a report filed by the Company with the Securities and Exchange Commission; PROVIDED that nothing herein shall prevent any Bank from disclosing any such information (i) to the Agent or any other Bank, (ii) to any Transferee which receives such information and agrees to be bound by these confidentiality provisions, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Bank, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 9.17 WAIVERS OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING HERETO, OR TO THE NOTES OR ANY OTHER LOAN DOCUMENT, AND FOR ANY COUNTERCLAIM THEREIN. 55 50 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in New York, New York by its proper and duly authorized officers as of the day and year first above written. NASHUA CORPORATION By: /s/ Daniel M. Junius ------------------------- Name: Daniel M. Junius Title: Treasurer CHEMICAL BANK, as Agent and as a Bank By: /s/ Jeffrey C. Howe ------------------------- Name: Jeffrey C. Howe Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ Thomas F. Farley, Jr. ------------------------- Name: Thomas F. Farley, Jr. Title: Director BANK OF MONTREAL By: /s/ Glen A. Pole ------------------------- Name: Glen A. Pole Title: Director 56 Caption> SCHEDULE 1.1 ------------ Initial Initial Commitment Commitment Amount Percentage ---------- ---------- Chemical Bank $25,000,000 33.33% The First National Bank of Boston $25,000,000 33.33% Bank of Montreal $25,000,000 33.33% ----------- ------ Totals $75,000,000 100% =========== ====
57 1 EXHIBIT A --------- COMMITTED RATE -------------- PROMISSORY NOTE --------------- $__________ New York, New York January 13, 1995 FOR VALUE RECEIVED, the undersigned, NASHUA CORPORATION, hereby unconditionally promises to pay to the order of _______________ (the "BANK") at the office of Chemical Bank located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) __________ ($__________), or, if less, (b) the aggregate unpaid principal amount of all Committed Rate Loans made by the Bank to the undersigned pursuant to subsection 2.1 of the "Credit Agreement" hereinafter referred to on the Termination Date as defined in the Credit Agreement. The undersigned further agrees to pay interest in like money at such office on the unpaid principal amount hereof and, to the extent permitted by law, accrued interest in respect hereof from time to time from the date hereof until payment in full of the principal amount hereof and accrued interest hereon at the rates and on the dates set forth in the Credit Agreement. The holder of this Note is authorized to endorse the date and amount of each loan pursuant to subsection 2.1 of the Credit Agreement and each payment of principal with respect thereto and its character as a Eurodollar Loan or a Reference Rate Loan on the schedule annexed hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, which endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed; PROVIDED, HOWEVER, that the failure to make any such endorsement shall not affect the obligations of the undersigned under this Note. This Note is one of the Committed Rate Notes referred to in the Credit Agreement dated as of January 5, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Bank, the other banks parties thereto and Chemical Bank, as Agent, and is entitled to the benefits thereof and is subject to mandatory prepayment in whole or in part as provided therein. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. 58 2 All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. NASHUA CORPORATION By:_________________________ Name: Title: 59 SCHEDULE TO COMMITTED RATE NOTE ----------- LOANS AND PAYMENTS OF PRINCIPAL -------------------------------
Date of Transfer Date Amount Interest to Indi- of of Interest Payment Maturity Payment vidual Author- Loan Loan Rate Dates Date Date Note ization - ---- ------ -------- -------- -------- ------- -------- ------- ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______
60 EXHIBIT B --------- [FORM OF GRID BID LOAN NOTE] ---------------------------- PROMISSORY NOTE --------------- $75,000,000 New York, New York January 13, 1995 FOR VALUE RECEIVED, the undersigned, NASHUA CORPORATION hereby unconditionally promises to pay to the order of _________________________ (the "BANK") at the office of Chemical Bank located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of (a) SEVENTY FIVE MILLION DOLLARS ($75,000,000) or, if less, (b) the aggregate unpaid principal amount of each Bid Loan which is (i) made by the Bank to the undersigned pursuant to subsection 2.5 of the Credit Agreement hereinafter referred to and (ii) not evidenced by an Individual Bid Loan Note executed and delivered by the undersigned pursuant to subsection 2.5(b)(vii) of the Credit Agreement. The principal amount of each Bid Loan evidenced hereby shall be payable on the maturity date therefor set forth on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof (the "Grid"). The undersigned further agrees to pay interest in like money at such office on the unpaid principal amount of each Bid Loan evidenced hereby, at the rate per annum set forth in respect of such Bid Loan on the Grid calculated on the basis of a year of 360 days and actual days elapsed from the date of such Bid Loan until the due date thereof (whether at the stated maturity, by acceleration or otherwise) and thereafter at the rates determined in accordance with subsection 2.5(e) of the Credit Agreement. Interest on each Bid Loan evidenced hereby shall be payable on the date or dates set forth in respect of such Bid Loan on the Grid. Bid Loans evidenced by this Note may not be prepaid. The holder of this Note is authorized to endorse on the Grid the date, amount, interest rate, interest payment dates and maturity date in respect of each Bid Loan made pursuant to subsection 2.5 of the Credit Agreement, each payment of principal with respect thereto and any transfer of such Bid Loan from this Note to an Individual Bid Loan Note delivered to the Bank pursuant to subsection 2.5(b)(vii) of the Credit Agreement, which endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed; PROVIDED, HOWEVER, that the failure to make any such endorsement shall not affect the obligations of the undersigned in respect of such Bid Loan. This Note is one of the Grid Bid Loan Notes referred to in the Credit Agreement, dated as of January 5, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") among the undersigned, the Bank, the other banks parties thereto and Chemical Bank, as Agent, and is entitled to the benefits thereof and is subject to mandatory prepayment in whole or in part as provided therein. 61 2 Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. NASHUA CORPORATION By:_________________________ Name: Title: 62 SCHEDULE OF BID LOANS
Date of Transfer Date Amount Interest to Indi- of of Interest Payment Maturity Payment vidual Author- Loan Loan Rate Dates Date Date Note ization - ---- ------ -------- -------- -------- ------- -------- ------- ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______ ____ ______ ________ ________ ________ _______ ________ _______
63 EXHIBIT C --------- [FORM OF INDIVIDUAL BID LOAN NOTE] NON-NEGOTIABLE BID NOTE ----------------------- $__________ New York, New York January __, 1995 FOR VALUE RECEIVED, the undersigned, NASHUA CORPORATION, a Delaware corporation, hereby promises to pay on ________, 199_ to _______________ at the office of Chemical Bank located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal sum of __________ Dollars ($__________). The undersigned further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time from the date hereof at the rate of __% per annum (calculated on the basis of a year of 360 days and actual days elapsed) until the due date hereof (whether at the stated maturity, by acceleration, or otherwise) and thereafter at the rates determined in accordance with subsection 2.5(e) of the Credit Agreement, dated as of January 5, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the undersigned, the Banks parties thereto, and Chemical Bank, as Agent. Interest shall be payable on __________. This Note may not be prepaid. This Note is one of the Bid Notes referred to in, is subject to and is entitled to the benefits of, the Credit Agreement, which Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by and construed in accordance with the laws of the State of New York. NASHUA CORPORATION By:_________________________ Name: Title: 64 EXHIBIT D --------- [FORM OF BORROWING NOTICE FOR COMMITTED RATE LOANS] [Date] Chemical Bank, as Agent under the Credit Agreement referred to below Gentlemen: Pursuant to subsection 2.3 of the Credit Agreement (as the same may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT") dated as of January 5, 1995 among Nashua Corporation, the Banks parties thereto and Chemical Bank, as Agent, the undersigned hereby requests that the following Committed Rate Loans be made on [date] as follows: (1). Total Amount of Committed Rate Loans . . . . . . . . . $__________ (2). Amount of (1) to be allocated to Eurodollar Loans . . . $__________ (3). Amount of (1) to be allocated to Reference Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . $__________ (4). Interest Periods and amounts to be allocated thereto in respect of Eurodollar Loans made on a given Borrowing Date (amounts must total (2)): (i) one month . . . . . . . . . . . . . . . . . . . $__________ (ii) two months . . . . . . . . . . . . . . . . . . . $__________ (iii) three months . . . . . . . . . . . . . . . . . . $__________ (iv) six months . . . . . . . . . . . . . . . . . . . $__________ Total Eurodollar Loans . . . . . . . . . . . . . . $__________ NOTE: EACH AMOUNT APPEARING IN LINES (2) AND (4) ABOVE MUST BE AT LEAST EQUAL TO $5,000,000 AND IN A WHOLE MULTIPLE OF $1,000,000 65 2 Terms defined in the Credit Agreement shall have the same meanings when used herein. Very truly yours, NASHUA CORPORATION By:_________________________ Name: Title: 66 EXHIBIT E --------- [FORM OF BID LOAN REQUEST] _______________, 19__ Chemical Bank as Agent 270 Park Avenue New York, New York 10017 Dear Sirs: Reference is made to the Credit Agreement, dated as of January 5, 1995, among Nashua Corporation, the Banks named therein and Chemical Bank, as Agent for such Banks (as the same may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein as therein defined. This is a Bid Loan Request pursuant to subsection 2.5 of the Credit Agreement requesting quotes for the following Bid Loans: Aggregate Principal Amount $_______ $_______ $_______ Bid Loan Date _______ _______ _______ Maturity Date _______ _______ _______ Interest Payment Dates _______ _______ _______ Interest Rate Basis 360 day year Very truly yours, NASHUA CORPORATION By:________________________________ Name: Title: __________________ 67 2 Note: Pursuant to the Credit Agreement, a Bid Loan Request may be transmitted in writing, by telex or by facsimile transmission, or by telephone, immediately confirmed by telex or facsimile transmission. In any case, a Bid Loan Request shall contain the information specified in the second paragraph of this form. 68 EXHIBIT F [FORM OF BID LOAN OFFER] _______________, 19__ Chemical Bank 270 Park Avenue New York, New York 10017 Dear Sirs: Reference is made to the Credit Agreement, dated as of January 5, 1995, among Nashua Corporation, the Banks named therein, and Chemical Bank, as Agent (as the same may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein as therein defined. In accordance with subsection 2.5 of the Credit Agreement, the undersigned Bank offers to make Bid Loans thereunder in the following amounts with the following maturity dates: Bid Loan Date: __________, 19__ Aggregate Maximum Amount: $__________ Maturity Date 1 ___: Maturity Date 2: ___: Maturity Date 3 ___: - --------------- --------------- --------------- Maximum Amount $___ Maximum Amount $___ Maximum Amount $___ Rate __ Amount $___ Rate __ Amount $___ Rate __ Amount $___ Rate __ Amount $___ Rate __ Amount $___ Rate __ Amount $___
Very truly yours, [NAME OF BIDDING BANK] By:_________________________ Name: Title: Telephone No.: Fax No: 69 EXHIBIT G --------- [FORM OF BID LOAN CONFIRMATION] _______________, 19__ Chemical Bank 270 Park Avenue New York, New York 10017 Dear Sirs: Reference is made to the Credit Agreement, dated as of January 5, 1995, among the Nashua Corporation, the Banks named therein, and Chemical Bank, as Agent (as the same may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein as therein defined. In accordance with subsection 2.5 of the Credit Agreement, the undersigned accepts and confirms the offers by Bid Loan Bank(s) to make Bid Loans to the undersigned on __________, 19__ [Bid Loan Date] under said subsection 2.5 in the (respective) amount(s) set forth on the attached list of Bid Loan offered. Very truly yours, NASHUA CORPORATION By:_________________________ Name: Title: [Company to attach Bid Loan offer list prepared by Agent with accepted amount entered by the Company to right of each Bid Loan offer]. 70 EXHIBIT H-1 ----------- [FORM OF BID LOAN ASSIGNMENT] BID LOAN ASSIGNMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Assignor Bank set forth in Item 2 of Schedule I hereto (the "ASSIGNOR BANK"), the Bid Loan Assignee set forth in Item 3 of Schedule I hereto (the "BID LOAN ASSIGNEE"), and Chemical Bank, as agent for the Banks under the Credit Agreement described below (in such capacity, the "AGENT"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, this Bid Loan Assignment is being executed and delivered in accordance with subsection 9.6(c) of the Credit Agreement, dated as of January 5, 1995, among Nashua Corporation (the "COMPANY"), the Assignor Bank and the other Banks party thereto and the Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined); and WHEREAS, the Assignor Bank has advanced to the Company the Bid Loan described in Item 4 of Schedule I hereto (the "BID LOAN") evidenced by the Bid Loan Note described in such Item 4 (the "BID NOTE"), and the Assignor Bank is assigning the Bid Loan and the Bid Note to the Bid Loan Assignee pursuant to this Bid Loan Assignment; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Assignor Bank acknowledges receipt from the Bid Loan Assignee of an amount equal to the purchase price, as agreed between the Assignor Bank and the Bid Loan Assignee, of the outstanding principal amount of, and accrued interest on, the Bid Loan and the Bid Note. The Assignor Bank hereby irrevocably sells, assigns and transfers to the Bid Loan Assignee without recourse, representation or warranty, and the Bid Loan Assignee hereby irrevocably purchases, takes and acquires from the Assignor Bank, the Bid Loan and the Bid Note, together with all instruments, documents and collateral security pertaining thereto. The Assignor Bank will deliver the Bid Note to the Bid Loan Assignee promptly upon its receipt thereof from the Company in accordance with subsection 2.5 of the Credit Agreement. 2. (a) From and after the date hereof (the "TRANSFER EFFECTIVE DATE"), principal and interest that would otherwise be payable to or for the account of the Assignor Bank pursuant to the Bid Loan and the Bid Note shall, instead, be payable to or for the account of the Bid Loan Assignee, whether such amounts have accrued prior to the Transfer Effective Date or accrue subsequent to the Transfer Effective Date. 71 2 (b) If Item 5 of Schedule I hereto contains payment instructions for the Bid Loan Assignee and if the Bid Loan Assignee delivers a copy of this Bid Loan Assignment to the Agent in accordance with subsection 9.6(e) of the Credit Agreement at least 5 Business Days prior to the due date of any payment to the Bid Loan Assignee, the Bid Loan Assignee hereby instructs the Agent to pay all such amounts payable to it pursuant to the provision of subparagraph (a) of this paragraph 2, in accordance with such payment instructions. If Item 5 of Schedule I hereto does not contain payment instructions for the Bid Loan Assignee (or a copy hereof is not delivered to the Agent as aforesaid), the Assignor Bank and the Bid Loan Assignee agree that, notwithstanding the provisions of subparagraph (a) of this paragraph 2, the Assignor Bank is hereby appointed by the Bid Loan Assignee as its collection agent to receive from the Agent, for and on behalf of and for the account of the Bid Loan Assignee, all amounts payable to or for the account of the Bid Loan Assignee under the Bid Loan and the Bid Note; the Assignor Bank will immediately pay over to the Bid Loan Assignee any such amounts received by it, in like funds as received. 3. Each of the parties to this Bid Loan Assignment agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Bid Loan Assignment. 4. By executing and delivering this Bid Loan Assignment, the Assignor Bank and the Bid Loan Assignee confirm to and agree with each other and the Agent and the Banks as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Assignor Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Notes or any other instrument or document furnished pursuant thereto; (ii) the Assignor Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement, the Notes or any other instrument or document furnished pursuant hereto; (iii) the Bid Loan Assignee confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in subsection 3.1, the financial statements delivered pursuant to subsection 5.1, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Bid Loan Assignment; (iv) the Bid Loan Assignee will, independently and without reliance upon the Agent, the Assignor Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in respect of the Credit Agreement; and (v) the Bid Loan Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 8 of the Credit Agreement. 5. If the Bid Loan Assignee is organized under the laws of any jurisdiction other than the United States or any State thereof, the Bid Loan Assignee (i) represents to the 72 3 Assignor Bank (for the benefit of the Assignor Bank, the Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Company or the Assignor Bank with respect to any payments to be made to the Bid Loan Assignee in respect of the Bid Loan, (ii) will furnish to the Assignor Bank, the Agent and the Company, on or prior to the Transfer Effective Date, (x) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or successor applicable form, as the case may be, certifying in each case that the Bid Loan Assignee is entitled to receive payments under the Bid Loan without deduction or withholding of any United States federal income taxes, and (y) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes, and (iii) agrees (for the benefit of the Assignor Bank, the Agent and the Company) to provide the Assignor Bank, the Agent and the Company a new Form 4224 or Form 1001 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company, certifying in the case of a Form 1001 or 4224 that such Bid Loan Assignee is entitled to receive payments under the Bid Loan without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent the Bid Loan Assignee from duly completing and delivering any such letter or form with respect to it and such Bid Loan Assignee advises the Assignor Bank, the Agent and the Company that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. 6. This Bid Loan Assignment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Bid Loan Assignment to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. 73 SCHEDULE I TO BID LOAN ASSIGNMENT ------------- Item 1 (Date of Assignment): [Insert date of Assignment] Item 2 (Assignor Bank): [Insert name of Assignor Bank] Item 3 (Assignee): [Insert name, address, telephone and telex numbers and name of contact party of Assignee]
Item 4 (Description of Loans): a. Date of Loans and Note: b. Principal Amounts of Loans and Note: Item 5 (Payment Instructions): [Complete only if payments are to be made by Agent to Assignee rather than to Assignor Bank as collection agent for Assignee; leave blank if Assignor Bank is to act as such collection agent] Item 6 (Signatures): ______________________, as Assignor Bank By:_________________________ Title: ______________________, as Assignee By:_________________________ Title: ACCEPTED FOR RECORDATION IN REGISTER: CHEMICAL BANK, as Agent By:_________________________ Title: 74 EXHIBIT H-2 ----------- [FORM OF COMMITMENT ASSIGNMENT] COMMITMENT ASSIGNMENT --------------------- COMMITMENT ASSIGNMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Assignor Bank set forth in Item 2 of Schedule I hereto (the "ASSIGNOR BANK"), the Assignee set forth in Item 3 of Schedule I hereto (the "ASSIGNEE"), and Chemical Bank, as agent for the Banks under the Credit Agreement described below (in such capacity, the "AGENT"). W I T N E S E T H : - - - - - - - - - WHEREAS, this Commitment Assignment is being executed and delivered in accordance with subsection 9.6(d) of the Credit Agreement, dated as of January 5, 1995, among Nashua Corporation (the "COMPANY"), the Assignor Bank and the other Banks party thereto and the Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "CREDIT AGREEMENT"; terms defined therein being used herein as therein defined); and WHEREAS, the Assignor Bank has advanced to the Company the Committed Rate Loans described in Item 4 of Schedule I hereto (the "LOANS") evidenced by the Committed Rate Notes, described in such Item 4 (the "NOTES"), and the Assignor Bank is assigning the Loan and the Notes to the Committed Rate Assignee pursuant to this Commitment Assignment; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Assignor Bank acknowledges receipt from the Assignee of an amount equal to the purchase price, as agreed between the Assignor Bank and the Assignee, of the outstanding principal amount of, and accrued interest on, the Loans and the Notes. The Assignor Bank hereby irrevocably sells, assigns and transfers to the Assignee without recourse, representation or warranty, and the Assignee hereby irrevocably purchases, takes and acquires from the Assignor Bank, the Loans and the Notes, together with all instruments, documents and collateral security pertaining thereto. The Assignor Bank will deliver the Notes to the Assignee promptly upon its receipt thereof from the Company. 2. (a) From and after the date hereof (the "TRANSFER EFFECTIVE DATE"), principal and interest that would otherwise be payable to or for the account of the Assignor Bank pursuant to the Loans and the Notes shall, instead, be payable to or for the account of 75 2 the Assignee, whether such amounts have accrued prior to the Transfer Effective Date or accrue subsequent to the Transfer Effective Date. (b) If Item 5 of Schedule I hereto contains payment instructions for the Assignee and if the Assignee delivers a copy of this Commitment Assignment to the Agent in accordance with subsection 9.6(e) of the Credit Agreement at least 5 Business Days prior to the due date of any payment to the Assignee, the Assignee hereby instructs the Agent to pay all such amounts payable to it pursuant to the provision of subparagraph (a) of this paragraph 2, in accordance with such payment instructions. If Item 5 of Schedule I hereto does not contain payment instructions for the Assignee (or a copy hereof is not delivered to the Agent as aforesaid), the Assignor Bank and the Assignee agree that, notwithstanding the provisions of subparagraph (a) of this paragraph 2, the Assignor Bank is hereby appointed by the Assignee as its collection agent to receive from the Agent, for and on behalf of and for the account of the Assignee, all amounts payable to or for the account of the Assignee under the Loans and the Notes; the Assignor Bank will immediately pay over to the Assignee any such amounts received by it, in like funds as received. 3. Each of the parties to this Commitment Assignment agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Assignment. 4. By executing and delivering this Commitment Assignment, the Assignor Bank and the Assignee confirm to and agree with each other and the Agent and the Banks as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Assignor Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Notes or any other instrument or document furnished pursuant thereto; (ii) the Assignor Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement, the Notes or any other instrument or document furnished pursuant hereto; (iii) the Assignee confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in subsection 3.1, the financial statements delivered pursuant to subsection 5.1, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Assignment; (iv) the Assignee will, independently and without reliance upon the Agent, the Assignor Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in respect of the Credit Agreement; and (v) the Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 8 of the Credit Agreement. 76 3 5. If the Assignee is organized under the laws of any jurisdiction other than the United States or any State thereof, the Assignee (i) represents to the Assignor Bank (for the benefit of the Assignor Bank, the Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Company or the Assignor Bank with respect to any payments to be made to the Assignee in respect of the Loans, (ii) will furnish to the Assignor Bank, the Agent and the Company, on or prior to the Transfer Effective Date, (x) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or successor applicable form, as the case may be, certifying in each case that the Assignee is entitled to receive payments under the Committed Rate Loan without deduction or withholding of any United States federal income taxes, and (y) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes, and (iii) agrees (for the benefit of the Assignor Bank, the Agent and the Company) to provide the Assignor Bank, the Agent and the Company a new Form 4224 or Form 1001 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company, certifying in the case of a Form 1001 or 4224 that such Assignee is entitled to receive payments under the Loans without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent the Assignee from duly completing and delivering any such letter or form with respect to it and such Assignee advises the Assignor Bank, the Agent and the Company that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. 6. THIS COMMITMENT ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Commitment Assignment to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. 77 SCHEDULE I TO COMMITMENT ASSIGNMENT -------------
Item 1 (Date of Assignment): [Insert date of Assignment] Item 2 (Assignor Bank): [Insert name of Assignor Bank] Item 3 (Assignee): [Insert name, address, telephone and telex numbers and name of contact party of Assignee]
Item 4 (Description of Loans): a. Date of Loans and Notes: b. Principal Amounts of Loans and Notes: Item 5 (Payment Instructions): [Complete only if payments are to be made by Agent to Assignee rather than to Assignor Bank as collection agent for Assignee; leave blank if Assignor Bank is to act as such collection agent] Item 6 (Signatures): ______________________, as Assignor Bank By:_________________________ Title: ______________________, as Assignee By:_________________________ Title: 78 2 ACCEPTED FOR RECORDATION IN REGISTER: CHEMICAL BANK, as Agent By:_________________________ Title: CONSENTED TO: NASHUA CORPORATION By:____________________________________ Title: 79 EXHIBIT I --------- [FORM OF OFFICER'S CERTIFICATE] OFFICER'S CERTIFICATE --------------------- Pursuant to Section 4 of the Credit Agreement (the "CREDIT AGREEMENT"), dated as of January 5, 1995 among Nashua Corporation (the "COMPANY"), Chemical Bank, as Agent, and the banks parties thereto, the undersigned of the Company hereby certifies as follows: 1. The representations and warranties of the Company set forth in the Credit Agreement or which are contained in any certificate, document or financial or other statement furnished pursuant to or in connection with the Credit Agreement are true and correct on and as of the date hereof with the same effect as if made on the date hereof; and 2. On the date hereof, no Default or Event of Default (both as defined in the Credit Agreement) has occurred and is continuing or will occur after giving effect to the Loans to be made on the date hereof under the Credit Agreement. IN WITNESS WHEREOF, the undersigned has hereunto set his name. NASHUA CORPORATION By:_________________________ Name: Title: Date: January , 1995 80 EXHIBIT J --------- [Form of Certificate of Secretary] SECRETARY'S CERTIFICATE ----------------------- I, [ ], hereby certify that: 1. I am the Secretary of Nashua Corporation, a Delaware corporation. 2. Attached hereto as Annex I is a true and complete copy of a vote adopted by the Board of Directors of the said corporation on ________ ___, 1994, which vote has not been altered, amended or rescinded. 3. Attached hereto as Annex II is a true and complete copy of the Composite Certificate of Incorporation of the said corporation as in effect on the date hereof. 4. Attached hereto as Annex III is a true and complete copy of the By-Laws of the said corporation as in effect at all times since __________. 5. The following person has been duly elected to, and has qualified for, and on the date hereof does hold, the office set forth below opposite his name; and that the signature appearing opposite his name is his true and genuine signature. Name Office _______________ IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said corporation this ___ day of January 1995. __________________________ [ ] 81 2 The undersigned, [insert title ] of Nashua Corporation, does hereby certify that [insert name of Secretary] is the duly qualified and acting Secretary of Nashua Corporation and that the signature set forth directly above is his true signature. ___________________________ [ ] January __, 1995 82 EXHIBIT K FORM OF OPINION OF COUNSEL TO THE COMPANY ----------------------------------------- Exhibit has been omitted in accordance with S-K 601(b)(2) and will be submitted to the Commission upon request. 83 EXHIBIT L --------- [FORM OF EXTENSION REQUEST] _______________, ____ Chemical Bank, as Agent 270 Park Avenue New York, New York 10017 Attention: ________________________ Dear Sirs: Reference is made to the $75,000,000 Credit Agreement, dated as of January 5, 1995 among Nashua Corporation, the Banks parties thereto and Chemical Bank, as Agent. Terms defined in the Credit Agreement are used herein as therein defined. This is an Extension Request pursuant to subsection 2.21 of the Credit Agreement requesting an extension of the Termination Date to [requested Termination Date]. Please transmit a copy of this Extension Request to each of the Banks. Very truly yours, NASHUA CORPORATION By:_____________________ Name: Title: CHEMICAL BANK By:_____________________ Name: Title: EX-10.12 6 PROMISSORY NOTE 1 EXHIBIT 10.12 ------------- PROMISSORY NOTE $500,000.00 Boston, Massachusetts FOR VALUE RECEIVED, WILLIAM E. MITCHELL (the "Borrower"), of 59 Essex Road, Chestnut Hill, Massachusetts, hereby promises to pay to the order of NASHUA CORPORATION, a Delaware corporation, (the "Payee") at the offices of the Payee at 44 Franklin Street, Nashua, New Hampshire 03061, or such other address as the Payee shall designate in a written notice to the Borrower, the principal amount of $500,000 without interest on the Maturity Date defined below. Overdue principal and interest shall bear interest at the rate of 10% per annum, payable on demand. Nothing contained in this Note or the instruments securing this Note shall be deemed to establish or require the payment of a rate of interest in excess of the amount legally enforceable. In the event that the rate of interest so required to be paid exceeds the maximum rate legally enforceable, the rate of interest so required to be paid shall be automatically reduced to the maximum enforceable rate shall be automatically credited on account of the principal hereof without premium or penalty. This Note is secured by a Mortgage from the maker hereof and his spouse, as mortgagors, to the Payee hereof, as mortgagee, on certain property, more particularly described therein, located at 59 Essex Road, Chestnut Hill, Massachusetts (the "Massachusetts Property") and a Deed of Trust on certain property, more particularly described therein, located at 142 Tuscaloosa Avenue, Atherton, California 94025 (the "California Property"). The term "Maturity Date" as used herein shall mean the earlier of (a) January 31, 1997 or (b) the date of the sale of or the transfer of title to either the Massachusetts Property or the California Property. Every maker, endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable. This Note shall be governed by the laws of the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as an instrument under seal, as of this 31st day of January, 1995. /s/ William E. Mitchell __________________________ WILLIAM E. MITCHELL EX-10.13 7 CONTINUING CORPORATE GUARANTY 1 EXHIBIT 10.13 CONTINUING CORPORATE GUARANTY ----------------------------- BOSTON SAFE DEPOSIT AND TRUST COMPANY, WILLIAM E. MITCHELL, Lender Obligor NASHUA CORPORATION, JAN SCHREYER MITCHELL, Guarantor Obligor In consideration of, and as an inducement for BOSTON SAFE DEPOSIT AND TRUST COMPANY (hereinafter called the "Lender") to make a mortgage loan to WILLIAM E. MITCHELL and JAN SCHREYER MITCHELL (hereinafter collectively referred to as the "Obligor"), in an aggregate principal amount not to exceed One Million One Hundred Thousand and No/Hundreds Dollars ($1,100,000.00) (hereinafter individually and collectively called the "Loan(s)"), the undersigned, NASHUA CORPORATION, a Delaware corporation (hereinafter called the "Guarantor"), with its principal place of business at 44 Franklin Street, Nashua, New Hampshire 03061, does hereby unconditionally and irrevocably guarantee to the Lender and its successors and assigns, without offset or deduction, the prompt payment when due, whether by acceleration or otherwise, of all payments of the principal of and interest on the promissory notes from time to time executed by the Obligor evidencing the Loan(s) (hereinafter individually and collectively called the "Note"), and all other amounts whatsoever now or hereafter owing and payable by the Obligor under, arising out of or in connection with any Note evidencing the Loan(s), the guaranty under this clause constituting hereby a guaranty of payment and not of collection. The Guarantor does hereby agree that in the event that the Obligor does not or is unable to pay or perform in accordance with the terms of the Note for any reason (including, without limitation and to the extent applicable, the liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceedings affecting the status, existence, assets or obligations of, the Obligor) it will pay the installments of principal and interest (and premium, if any) due on such Note or otherwise provide for and bring about promptly when due such payment and the performance of such duties, agreements, covenants and obligations of the Obligor. Guarantor specifically and unconditionally agrees that if a petition in bankruptcy or for an arrangement or reorganization of Guarantor under the bankruptcy laws or for the appointment of a receiver for Obligor or Guarantor, or any of the property of Obligor or Guarantor is filed by or against Obligor or Guarantor, or if Obligor or Guarantor shall make an assignment for the benefit of creditors or shall become insolvent, all Obligations of Obligor to Lender shall, for purposes of this guaranty, be deemed at Lender's election to have become immediately due and payable. Guarantor further agrees Lender may declare all the Obligations due and payable for purposes of the Guaranty if there is a material change in the financial status of Guarantor. All of the liabilities and obligations of the Obligor hereby guaranteed are hereinafter collectively referred to as the "Obligations". 2 Without limiting the generality of clause (i) above, the Guarantor specifically agrees that it shall not be necessary or required, and that the Guarantor shall not be entitled to require, that the Lender, or any successor or assignee of Lender, file suit or proceed to obtain or assert a claim for personal judgment against the Obligor for the Obligations or make any effort at collection of the Obligations from the Obligor or foreclose against or seek to realize upon any security now or hereafter existing for the Obligations or file suit or proceed to obtain or assert a claim for personal judgment against any other party liable for the Obligations or make any effort at collection of the Obligations from any such other party or exercise or assert any other right or remedy to which any of them is or may be entitled in connection with the Obligations or any security or other guaranty therefor or assert or file any claim against the assets of the Obligor or other person liable for the Obligations, or any part thereof, before or as a condition of enforcing the liability of the Guarantor under this Guaranty or requiring payment of said Obligations by the Guarantor hereunder, or at any time thereafter. The Guarantor agrees, upon demand of the Lender to either, at the Lender's option, pay directly or reimburse the Lender for the payment of, all costs, fees and expenses, including, without limitation, attorneys' fees, incurred by the Lender in the enforcement or attempted enforcement of any of its rights hereunder. The Guarantor specifically agrees that it shall not be necessary or required in order to enforce the obligations of the Guarantor hereunder that there be, and the Guarantor specifically waives: notice of the acceptance of this Guaranty and of the performance or nonperformance of any of the Obligations; demand of payment from the Obligor except to the extent required by the Note; presentment for payment upon the Obligor or the making of any protest; notice of the amount of the Obligations outstanding at any time; and notice of nonpayment or failure to perform on the part of the Obligor. The Guarantor further waives all defenses, offsets and counterclaims which the Guarantor may at any time have to the payment or performance of the Obligations. The obligations of the Guarantor under this Guaranty shall be absolute and unconditional and shall remain in full force and effect until the Obligor shall have fully and satisfactorily discharged the Obligations and shall not be released or discharged by reason of: (i) any waiver by the Lender, or its successors or assigns, of the performance or observance by the Obligor of any of the agreements, covenants, terms or conditions contained in the Note; (ii) the extension of the time for payment by the Obligor of any payment of principal and interest due on the Note or other sums or any part thereof owing or payable under or pursuant to the Note, or any Loan or of the time for performance by the Obligor of any other obligations under or pursuant to the Note; (iii) any failure, omission or delay of the Lender or its successors or assigns to enforce, assert or exercise any right, power or remedy conferred on the Lender under or pursuant to the Note or any action on the part of the Lender or its successors or assigns granting any extension or indulgence in any form to the Obligor; (iv) any compromise, settlement, release, renewal, extension, indulgence, change in or waiver or modification of, any of the Obligations or the release or discharge of the Obligor from the performance or observance of any of the Obligations by operation of law; (v) any change in, waiver or modification of, or amendment to, any of the terms or provisions of the Note; (vi) if applicable, any consolidation or merger of Obligor, whether permitted under the terms of the Agreements or otherwise, or the sale, transfer or other disposition by the Obligor or all or substantially all of the assets and liabilities of the Obligor; (vii) if applicable, the voluntary or involuntary liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of 2 3 creditors, reorganization, arrangement, composition or readjustment of the Obligor, or any other similar proceeding affecting the status, existence, assets or obligations of the Obligor; (viii) if applicable, the death or mental or physical incapacity of the Obligor; (ix) any fictitiousness, incorrectness, invalidity or unenforceability, for any reason, of the Note or of any provision thereof, or of any of the Obligations; (x) any transfer or assignment by the Obligor of any of the Obligor's rights or obligations under the Note, or any use of the Collateral (as defined in the Note) or any part thereof by any person or party, or any sale, transfer, assignment, lease, mortgage, pledge, hypothecation or further encumbering of the Collateral or any part thereof by Obligor; or (xi) any other circumstance that might otherwise constitute a legal or equitable discharge of the Obligor (including a discharge in bankruptcy) or of the Guarantor. The Guarantor hereby represents and warrants to Lender that: (a) the Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation set forth above; (b) the Guarantor has the power and authority to execute and perform this Guaranty, and has duly authorized the execution, delivery and performance of this Guaranty; (c) no approval is required from any regulatory body, board, authority or commission, nor from any other administrative or governmental agency, nor from any other person, firm or corporation, with respect to the execution of this Guaranty by the Guarantor and the payment and performance by the Guarantor of all of the Guarantor's obligations hereunder; (d) this Guaranty constitutes the legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms, and the execution, delivery and performance of the same by the Guarantor will not violate the Guarantor's Charter, Certificate of Incorporation, or By-Laws, or any provision of law, any order of any court or other agency of government, or any indenture, agreement or other instrument to which the Guarantor is a party, or by or under which the Guarantor or any of the Guarantor's property is bound, or be in conflict with, result in a breach of, or constitute (with due notice and/or lapse of time) a default under, any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the Guarantor's property or assets; (e) the Guarantor will furnish Lender ( i) as soon as available, and in any event within 120 days after the last day of each fiscal year of the Guarantor, a copy of the consolidated balance sheet of the Guarantor and its consolidated subsidiaries as of the end of such fiscal years, and related consolidated statements of income and retained earnings of the Guarantor and its consolidated subsidiaries for such fiscal year, certified by an independent certified public accounting firm of recognized standing, each on a comparative basis with corresponding statements for the prior fiscal year, (ii) within 45 days after the last day of each fiscal quarter of the Guarantor (except the last such fiscal quarter), a copy of the balance sheet as of the end of such quarter, and statement of income and retained earnings of the Guarantor and its consolidated subsidiaries covering the fiscal year to date, each on a comparative basis with the corresponding period of the prior year, all in reasonable detail and certified by the chief financial officer of the Guarantor, (iii) contemporaneously with its transmittal to each stockholder of the Guarantor, such reports as the Guarantor shall send to its stockholders, and (iv) such additional financial information as Lender may reasonably request concerning the Guarantor; and (f) the Guarantor and its consolidated subsidiaries have filed all United States income tax returns which are required to be filed and have paid, or made provisions for the payment of, all taxes which have or may become due pursuant to said returns or pursuant to any assessment received 3 4 by the Guarantor or such consolidated subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. Notwithstanding any payment or payments made by the Guarantor hereunder, the Guarantor shall not be entitled to be subrogated to any of the Lender's rights against the Obligor or the Collateral (or any part thereof) until all amounts owing to the Lender by the Obligor for or on account of the Obligations shall have been paid in full. This Guaranty (a) may be assigned by the Lender without the consent of the Guarantor, but may not be assigned by the Guarantor; (b) may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (c) shall inure to the benefit of the Lender, and its successors and assigns, and be binding upon the successors and, subject to the restrictions of clause (a) of this paragraph, assigns of the Guarantor; (d) may be modified only by an instrument in writing, signed by the duly authorized representative of the party to be bound; and (e) shall in all respects be governed by, and be construed in accordance with, the laws of the Commonwealth of Massachusetts. All capitalized terms used herein which are not otherwise defined herein shall have the meanings given to such terms in the Note. The Guarantor hereby acknowledges receipt of a copy of the Note, as executed by the Obligor and/or the Lender. IN WITNESS WHEREOF; the Guarantor has caused this Guaranty to be executed by its duly authorized officer and its corporate seal to be affixed hereto this 20th day of January 1995. NASHUA CORPORATION, Guarantor By: /s/ William Luke ------------------------------- (Print Name) William Luke ---------------------- Its: Vice President-Finance Attest: ------------------------------ /s/ Suzanne Ansara [Corporate Seal] - ------------------- Asst. Secretary /s/ William e. Mitchell ---------------------------------- WILLIAM E. MITCHELL, Obligor /s/ Jan Schreyer Mitchell ---------------------------------- JAN SCHREYER MITCHELL, Obligor 4 EX-10.15 8 CONSULTING AGREEMENT 1 EXHIBIT 10.15 ------------- August 12, 1994 Charles E. Clough Route 3, Dolly Road Contoocook, NH 03229 Dear Charlie: I would like to summarize my understanding of the various agreements we have reached regarding your resignation as Chief Executive Officer, your consultation with Nashua and other issues that have been discussed during the last several weeks. 1. From July 25, 1994 through April 30, 1995, you agree to make yourself available at times reasonably agreeable to you and me for consultation concerning the businesses of Nashua Corporation. In that capacity, you will be an independent contractor, responsible for your own insurance, vacation and other benefits. 2. You understand that, pursuant to applicable Revenue Rulings of the Internal Revenue Service, the remuneration you will receive as a consultant may be subject to withholding for Federal Income Tax, State Income Tax and Social Security and Medicare Taxes. 3. In return for your services as a consultant, you will receive a lump sum payment of $300,000 within fifteen days following January 1, 1995. 4. Beginning August 1, 1994, you will also receive $10,000 per quarter for each quarter you serve as outside Director and Chairman of the Board of Nashua Corporation. 5. You will be able to purchase your 1991 Ford Taurus for $6,100. Please let Dan Lyman know how you would like the Bill of Sale and title made out. 6. Please note that your stock options pursuant to the 1980 Stock Award Plan must be exercised by October 21, 1994, under the 1987 Stock Option Plan by January 20, 1995, and under the 1993 Stock Incentive Plan by July 22, 1996. Your Stock Appreciation Rights must be exercised by January 20, 1995. The sheet attached sets out the various options and stock appreciation rights you hold and the last dates for exercise. 7. The payments referenced above also compensate you for any bonuses, severance, vacation pay or any other claim or remuneration you may have or to which you may be entitled (other than pension or supplemental compensation plan benefits) arising out of your employment at Nashua. 2 - 2 - Charlie, I believe this sets out our agreement. If so, please sign where indicated below and return a copy of this letter to me. Also, would you please sign and return the enclosed resignation for the corporate minutes. Thank you. Very truly yours, William E. Mitchell I have read and agree to the foregoing: /s/ Charles E. Clough _______________________________________ Charles E. Clough EX-11.01 9 COMPUTATION OF EARNINGS PER SHARE 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, ------------------------------------------ 1994 1993 1992 --------- -------- -------- Income from continuing operations before cumulative effect of accounting principle changes $ 4,442 $ 2,516 $10,434 ------- -------- ------- Loss from discontinued operations (2,295) (21,685) (5,126) ------- -------- ------- Cumulative effect on prior years of changes in accounting principles for Postretirement health care and other benefits - - (9,367) Income taxes - - (764) ------- -------- ------- Net income (loss) $ 2,147 $(19,169) $(4,823) ======= ======== ======= Shares: Weighted average common shares outstanding during the period 6,343 6,312 6,298 Common equivalent shares 17 31 27 ------- -------- ------- 6,360 6,343 6,325 Earnings per common share(1): Income from continuing operations before cumulative effect of accounting principle changes $ .70 $ .40 $ 1.65 ------- -------- ------- Loss from discontinued operations (.36) (3.42) (.81) ------- -------- ------- Cumulative effect on prior years of changes in accounting principles for Postretirement health care and other benefits(2) - - (1.48) Income taxes(2) - - (.12) ------- -------- ------- Net income (loss) $ .34 $ (3.02) $ (.76) ======= ======== ======= (1) The computation of earnings per common share on a fully diluted basis results in no change to the earnings per common share amounts indicated above. (2) Amounts are computed based on the average common and common equivalent shares outstanding in January 1992 of 6,318 (6,284 common shares and 34 common equivalent shares).
EX-21.01 10 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.01 SUBSIDIARIES OF THE REGISTRANT Nashua Corporation, or one of its wholly-owned subsidiaries, owns beneficially, directly or indirectly, all of the capital stock in the following subsidiaries:
Jurisdiction of Domestic Incorporation - -------- --------------- Nashua Belmont Limited (2) Delaware Nashua Commercial Products Corporation(1) Delaware 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 Photo Licensing Inc.(2) Delaware Nashua P.R., Inc.(1) Delaware Nippon Nashua Incorporated(1) Delaware Promolink Corporation(1) Delaware
Jurisdiction of Foreign Incorporation - ------- --------------- Nashua Europe B.V. (1) Netherlands Nashua FSC Limited (1) Jamaica Nashua Nederland B.V. (1) Netherlands Nashua Photo Limited (2) Canada Nashua Photo Limited (2) England Postal Film Services (Country-Wide) Limited (3) England
____________________ (1) Stock held by Nashua Corporation (2) Stock held by Nashua Photo Inc. (3) Stock held by Nashua Photo Limited (U.K.) All of the above listed subsidiaries are included in Nashua's consolidated financial statements. EX-23.01 11 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 2-88669, No. 33-13995, No. 33- 67940 and No. 33-72438) of Nashua Corporation of our report dated February 1, 1995, appearing on page 36 of this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 42 of this Form 10-K. Price Waterhouse LLP Boston, Massachusetts March 28, 1995 EX-24.01 12 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 Francis J. Lunger, William Luke and Paul Buffum and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign Nashua Corporation's Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title Date - --------- ----- ---- Joseph A. Baute Director March 17, 1995 - --------------------- --------------------- Joseph A. Baute Sheldon A. Buckler Director March 20, 1995 - --------------------- --------------------- Sheldon A. Buckler Richard E. Carter Director March 22, 1995 - --------------------- --------------------- Richard E. Carter Charles E. Clough Director March 18, 1995 - --------------------- --------------------- Charles E. Clough Thomas W. Eagar Director March 18, 1995 - --------------------- --------------------- Thomas W. Eagar John M. Kucharski Director March 18, 1995 - --------------------- --------------------- John M. Kucharski
EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF NASHUA CORPORATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 1 10,219 0 40,811 2,628 34,161 108,162 129,590 58,733 227,825 61,373 49,166 6,397 0 0 86,299 227,825 478,571 478,571 361,933 361,933 109,171 1,374 2,451 7,467 3,025 4,442 (2,295) 0 0 2,147 .34 .34
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