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Exhibit 10.16
EMPLOYMENT AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation
(the "Company") and FRANCIS J. LUNGER (the "Executive"), dated as of the 6th
day of February, l994.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the
first date during the "Change of Control Period" (as defined in Section 1(b))
on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if the Executive's employment with the Company is
terminated or the Executive ceases to be an officer of the Company prior to the
date on which a Change of Control occurs, and it is reasonably demonstrated
that such termination of employment (1) was at the request of a third party who
has taken steps reasonably calculated to effect the Change of Control or (2)
otherwise arose in connection with or anticipation of the Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the
date immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof is hereinafter referred to as the "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of l934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) (a "Person") of 20% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company Common
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Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), provided, however, that any
acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
of its subsidiaries or (y) any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Company Voting Securities immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, shall not constitute a Change of Control; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
the date hereof whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the Outstanding Company
Common Stock and Company Voting Securities immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from Business Combination in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be; or
(d) (i) a complete liquidation or dissolution of the Company or of
(ii) sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, following such sale
or disposition, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then
owned beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities immediately
prior to such sale or disposition in substantially the same proportion as their
ownership of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, immediately prior to such sale or disposition.
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3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, for the period commencing on the Effective Date and
ending on the third anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35
miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary awarded in the ordinary course of
business to other peer executives of the Company and its affiliated companies.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" includes any company
controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year beginning or ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the average bonus paid or payable, including by reason of deferral, to the
Executive by the Company and its affiliated companies in respect of the three
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fiscal years immediately preceding the fiscal year in which the Effective Date
occurs (annualized for any fiscal year during the Employment Period consisting
of less than twelve full months or with respect to which the Executive has been
employed by the Company for less than twelve full months) (the "Recent Annual
Bonus"). Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary and Annual Bonus payable as hereinabove provided, the Executive
shall be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive, savings and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than (x) the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during
the 90-day period immediately preceding the Effective Date or (y) if more
favorable to the Executive, those provided at any time after the Effective Date
to other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent generally
applicable to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than (x) the most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or (y) if more favorable to the Executive, those
provided at any time after the Effective Date generally to other peer
executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
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(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer incentives of the Company and
its affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" means the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected
by the Company or its insurers and acceptable to the Executive or Executive's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" means (i) an action taken by the Executive involving willful and wanton
malfeasance involving specifically a wholly wrongful and unlawful act, or (ii)
the Executive being convicted of a felony.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
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(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Agreement, any good faith determination of Good
Reason made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than fifteen days after the giving of such notice). In the case of a
termination of the Executive's employment for Cause, a Notice of Termination
shall include a copy of a resolution duly adopted by the affirmative vote of
not less than two-thirds of the entire membership of the Board at a meeting of
the Board called and held for the purpose (after reasonable notice to the
Executive and reasonable opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board prior to such vote), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
constituting Cause. No purported termination of the Executive's employment for
Cause shall be effective without a Notice of Termination. The failure by the
Executive to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for Cause or
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Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (ii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) Death. If
the Executive's employment is terminated by reason of the Executive's death
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement,
other than the following obligations: (i) payment of the Executive's Annual
Base Salary through the Date of Termination to the extent not theretofore paid,
(ii) payment of the product of (x) the greater of (A) the Annual Bonus paid or
payable, including by reason of deferral, (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) for the most recently completed
fiscal year during the Employment Period, if any, and (B) the Recent Annual
Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus")
and (y) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of which is
365 and (iii) payment of any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company
and any accrued vacation pay not yet paid by the Company (the amounts described
in paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued
Obligations"). All Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. In addition, the Executive's estate or designated
beneficiaries shall be entitled to receive the Executive's Annual Base Salary
for the balance of the Employment Period; provided, however, that such payments
of Annual Base Salary shall be reduced by any survivor benefits paid to the
Executive's estate or designated beneficiary under the Retirement Plan.
Anything in this Agreement to the contrary notwithstanding, the Executive's
estate and family shall be entitled to receive benefits at least equal to the
most favorable benefits provided generally by the Company and any of its
affiliated companies to the estates and surviving families of peer executives
of the Company and such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect
generally with respect to other peer executives and their estates and families
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive and/or the Executive's family, as in
effect on the date of the Executive's death generally with respect to other
peer executives of the Company and its affiliated companies and their families.
(b) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations. All Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination. In
addition, the Executive shall be entitled to receive the Executive's Annual
Base Salary for the balance of the Employment Period; provided, however, that
such payments of Annual Base Salary shall be reduced by any benefits paid to
the Executive under the Retirement Plan by reason of Disability. Anything in
this Agreement to the contrary notwithstanding, the Executive shall be entitled
after the Disability Effective Date to receive disability and other benefits at
least equal to the most favorable of those generally provided by the Company
and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs,
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practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time
thereafter generally with respect to other peer executives of the Company and
its affiliated companies and their families.
(c) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive Annual Base Salary through the Date
of Termination plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Employment Period other than for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
(d) Good Reason; Other Than for Cause or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of
the following amounts:
A. all Accrued Obligations; and
B. the product of (x) three and (y) the sum of (i) Annual
Base Salary and (ii) the Highest Annual Bonus; and
C. a lump-sum retirement benefit equal to the difference
between (a) the actuarial equivalent of the benefit
under the Nashua Corporation Retirement Plan for
Salaried Employees (the "Retirement Plan") and any
supplemental and/or excess retirement plan providing
benefits for the Executive (the "SERP") which the
Executive would receive if the Executive's employment
continued at the compensation level provided for in
Sections 4(b)(i) and 4(b)(ii) of this Agreement for the
remainder of the Employment Period, assuming for this
purpose that all accrued benefits are fully vested, and
(b) the actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the Retirement
Plan and the SERP; for purposes of determining the
amount payable pursuant to this Section 6(d)(i)C the
accrual formulas and actuarial assumptions utilized
shall be no less favorable than those in effect with
respect to the Retirement Plan and the SERP during the
90-day period immediately prior to the Effective Date;
and
(ii) for the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide,
the Company shall continue benefits to
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the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance
with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the
Company and its affiliated companies applicable generally to
other peer executives and their families during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the
Company and its affiliated companies and their families. For
purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs
and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and
to have retired on the last day of such period.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any other agreements with the Company or
any of its affiliated companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement. The Company agrees to pay, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to Section 9 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of l986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an
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additional payment (a "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes and
Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
used in arriving at such determinations, shall be made by Price Waterhouse (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within fifteen business days of the Date of
Termination, if applicable, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne solely by
the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 9(b), shall be paid by the Company to the Executive within five
days of the receipt of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report the Excise
Tax on the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company;
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(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts
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by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Francis J. Lunger
1499 Edgewood Drive
Palo Alto, CA 94301
If to the Company:
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03060
Attention: Counsel
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with
any provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment for
Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver
of such provision or right or any other provision or right thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof. The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will" and, prior to the
Effective Date, both the Executive's employment and this Agreement may be
terminated by either the Company or the Executive at any time. If the
Executive's employment or this Agreement is terminated prior to the Effective
Date, the Executive shall have no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.
Francis J. Lunger
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FRANCIS J. LUNGER
NASHUA CORPORATION
By Charles E. Clough
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Charles E. Clough
Chief Executive Officer