NSHA Nashua (MM)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

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NASHUA CORPORATION
11 Trafalgar Square, Suite 201
Nashua, New Hampshire 03063

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on May 5, 2009

 

Dear Stockholder:

 

You are cordially invited to attend our 2009 Annual Meeting of Stockholders which will be held at our offices at 250 South Northwest Highway, Park Ridge, Illinois, on Tuesday, May 5, 2009 at 8:00 a.m., for the following purposes:

 

1. To elect seven directors for terms of one year each.

 

2. To approve the 2009 Value Creation Incentive Plan.

 

 

We have no knowledge of any other business to be transacted at the Annual Meeting.

 

You may vote at the Annual Meeting if you were a stockholder of record at the close of business on March 17, 2009.

 

Our 2008 Annual Report to Stockholders, which includes our Annual Report on Form 10-K with our financial statements, accompanies this proxy statement.

 

By order of the Board of Directors,

 

John L. Patenaude
Vice President-Finance, Chief
Financial Officer and Treasurer

 

Nashua, New Hampshire

March 31, 2009

 

 

YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the Annual Meeting, please complete, date, and sign
the enclosed proxy and mail it promptly in the enclosed envelope.
No postage is required if mailed in the United States.

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

NASHUA CORPORATION
11 Trafalgar Square, Suite 201
Nashua, New Hampshire 03063

PROXY STATEMENT

2009 Annual Meeting of Stockholders

 

This Proxy Statement is furnished to you in connection with the solicitation of proxies on behalf of the Board of Directors of Nashua Corporation for use at the 2009 Annual Meeting of Stockholders to be held on Tuesday, May 5, 2009 (the “Annual Meeting”), at 8:00 a.m. (local time), at our offices at 250 South Northwest Highway, Park Ridge, Illinois 60068, and at any adjournments of that meeting. The notice of meeting, this proxy statement, the enclosed proxy and our Annual Report to Stockholders for the year ended December 31, 2008 are being mailed to stockholders on or about April 3, 2009.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders to be Held on May 5, 2009:

 

This proxy statement and the 2008 Annual Report to Stockholders
are available at www.nashua.com/investors/meetingmaterials.aspx.

 

At the Annual Meeting, you are being asked to consider and vote upon the following proposals:

 

(1) the election of seven directors for a term of one year each; and

 

(2) the approval of the 2009 Value Creation Incentive Plan.

 

Our Board of Directors recommends that you vote your shares as follows:

 

(1)  FOR the election of the seven directors for a term of one year each; and

 

(2)  FOR the approval of the 2009 Value Creation Incentive Plan.

 

Each share of our common stock outstanding as of the close of business on March 17, 2009, the record date, is entitled to one vote at the Annual Meeting. You may vote all of the shares owned directly by you or beneficially on your behalf as of the close of business on the record date of March 17, 2009. These shares include shares (1) that are held of record by you, directly in your name, (2) shares held on your behalf by a bank, broker or other nominee and (3) shares held on your behalf in our 401(k) retirement plan. At the close of business on March 17, 2009, there were 5,599,642 shares of our common stock outstanding.

 

You are considered the stockholder of record with respect to your shares if your shares are registered directly in your name with the American Stock Transfer & Trust Company, our stock transfer agent. Only stockholders of record are entitled to receive notice of and to vote at the Annual Meeting. If you are a stockholder of record, then these proxy materials are being sent to you directly by us. If you are a stockholder of record, you may vote in person at the Annual Meeting or by proxy, in the manner described below.

 

If your shares are held in an account with a bank, broker or another third party that holds shares on your behalf (we refer to such third parties herein as nominees) and such shares are not registered in your name, then you are considered the “beneficial owner” of these shares, and your shares are referred to as being held in “street name.” If you hold your shares in “street name,” your broker, bank or nominee is considered the stockholder of record with respect to those shares and these proxy materials are being forwarded to you by your broker, bank or nominee. As the beneficial owner, you have the right to direct your bank, broker or other

nominee on how to vote the shares in your account, and you are also invited to attend the Annual Meeting. Your bank, broker or nominee has enclosed or provided a voting instruction card with this proxy statement for you to use in directing the bank, broker or nominee how to vote your shares. To ensure that your shares are voted according to your wishes, be certain that you provide instructions to your bank, broker or nominee on how to vote your shares in the manner that they specify. If you hold your shares in “street name,” you must contact your bank, broker or nominee to revoke your proxy or change your voting instructions. Many brokers or banks also offer voting by Internet or telephone. Please refer to your voting instruction form for instructions on the voting methods offered by your broker or bank.

 

If you are a company employee, former employee, retiree or other person who is participating or has participated in our Employees’ Savings Plan 401(k), then you may be receiving this material in part because of shares held on your behalf in our 401(k) plan. Fidelity Management Trust Company, as trustee of the 401(k) plan, is considered the stockholder of record with respect to those shares. On March 17, 2009, our 401(k) plan held 216,188 shares of our common stock. If you are a participant in the 401(k) plan, then you are entitled to instruct Fidelity Management Trust Company as to how to vote shares of common stock credited to your 401(k) plan account by indicating your instructions on the enclosed instruction card and returning it to Fidelity Management Trust Company by April 30, 2009. Any shares held in the 401(k) plan for which Fidelity Management Trust Company does not receive voting instructions by April 30, 2009, will not be voted at the Annual Meeting. The trustee will vote the shares as instructed if proper instructions are received by 11:59 p.m., Eastern Daylight Time, on April 30, 2009. If you are a company employee or retiree who holds shares as a participant in our 401(k) plan, pursuant to the terms of the 401(k) plan, you may not revoke your voting instructions once your proxy card has been delivered to Fidelity Management Trust Company. You are invited to attend the Annual Meeting but you are not entitled to vote shares held in our
401(k) plan at the Annual Meeting, as it is necessary to submit your vote by April 30, 2009 to provide Fidelity Management Trust Company with sufficient time to vote on behalf of the plan.

 

Shares held directly in your name as the stockholder of record may be voted in person at the Annual Meeting. If you choose to vote in person, please bring proof of identification.

 

If your shares are held in “street name” through your bank, broker or other nominee and you wish to vote in person at the Annual Meeting, since you are not the stockholder of record for those shares, you must bring with you to the Annual Meeting a legal proxy from your broker, bank or other nominee authorizing you to vote your shares. A legal proxy is a valid authorization from your bank, broker or other nominee to vote the shares that it holds in its name.

 

If you hold shares as a participant in our 401(k) plan, you may not vote those shares in person at the Annual Meeting.

 

If you are a stockholder of record, you may vote your shares by proxy. A “proxy” is another person that you designate to vote your stock. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. For the purposes of the Annual Meeting, if you complete the enclosed proxy card and return it to us prior to the start of the Annual Meeting, you will be designating the officers of our company named on the proxy card to act as your proxy and to vote on your behalf at the Annual Meeting in accordance with the instructions set forth on your proxy card. To vote by proxy, you must complete, sign, date and return the proxy card in the enclosed envelope. For your proxy to be counted at the Annual Meeting, we must receive your proxy card prior to the start of the Annual Meeting. If you sign and timely return your proxy card, but do not indicate how your shares are to be voted with respect to one or more of the proposals to be voted on at the Annual Meeting, as necessary to vote your shares on each proposal, your shares will be voted in accordance with the recommendations of our Board of Directors: “FOR” the election of each of the director nominees; and “FOR” the approval of the 2009 Value Creation Incentive Plan.

We recommend that you vote by proxy even if you currently plan to attend the Annual Meeting so that your vote will be counted if you later decide not to or are unable to attend the Annual Meeting. You can always subsequently change or revoke your proxy by either (1) completing another proxy card with a later date and delivering it to us prior to the start of the Annual Meeting, or (2) notifying our Corporate Secretary in writing prior to the start of the Annual Meeting that you have revoked your proxy. Attendance at the Annual Meeting will not itself constitute revocation of a proxy unless you affirmatively revoke your proxy.

 

As stated above, if your shares are held in “street name” through your bank, broker or other nominee, your bank, broker or other nominee is the stockholder of record and has the option of voting by proxy. As the beneficial owner of such shares, you are entitled to instruct your bank, broker or other nominee as to how to vote your shares and if you properly complete, sign and return the instruction card provided by your bank, broker or other nominee in the manner specified thereby, then your bank, broker or other nominee is required to vote your shares in the manner in which you instruct regardless of whether your bank, broker or other nominee votes by proxy or in person at the Annual Meeting.

 

If your shares are held on your behalf in our 401(k) plan, Fidelity Management Trust Company, as trustee of the 401(k) plan is the stockholder of record and has the option of voting by proxy. As the beneficial owner of such shares, you are entitled to instruct Fidelity Management Trust Company as to how to vote your shares and if you properly complete, sign and return the instruction card provided by Fidelity Management Trust Company in the manner specified thereby, then Fidelity Management Trust Company is required by the terms of the 401(k) plan to vote your shares in the manner in which you instruct regardless of whether Fidelity Management Trust Company votes by proxy or in person at the Annual Meeting.

 

A “quorum” of stockholders is necessary to hold and transact business at the Annual Meeting. A quorum will exist at the Annual Meeting if the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the Annual Meeting are present in person or represented by proxy at the Annual Meeting. “Broker non-votes” and shares of our common stock held by stockholders of record who are present in person or represented by proxy but that abstain or do not vote with respect to one or more of the matters presented at the Annual Meeting, also will be counted for purposes of determining whether a quorum exists at the Annual Meeting. A “broker non-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power with respect to the item and has not received voting instructions from the beneficial owner.

 

At the Annual Meeting directors will be elected by a plurality of the votes cast by the shares voting for the election of directors. Voting by plurality means that the seven nominees for director who receive the greatest number of votes will be elected as directors.

 

The affirmative vote of the holders of a majority of the shares voting on the matter is required for the approval of the 2009 Value Creation Incentive Plan.

 

Shares held by stockholders who abstain from voting as to a particular matter, and “broker non-votes” on a particular matter, will not be counted as shares voted in favor of such matter and will not be counted as shares voting on such a matter. Brokers who hold shares in street name for customers are prohibited from giving a proxy to vote such shares without specific instructions from such customers for “non-discretionary” or “non-routine” proposals. Accordingly, abstentions and “broker non-votes” will have no effect on the voting on the election of directors and the approval of the 2009 Value Creation Incentive Plan.

 

We are soliciting proxies in connection with the Annual Meeting and we will pay all the costs of soliciting such proxies. In addition to solicitations by mail, our directors, officers and employees may solicit proxies in person or by use of other communication media. We will reimburse banks, brokerage firms and others for forwarding proxy materials to beneficial owners of our common stock. We have also engaged Georgeson Inc. to assist us in the solicitation of proxies for a fee of $7,500 plus out-of-pocket expenses.

 

ELECTION OF DIRECTORS

 

Our Board of Directors has fixed the number of directors to be elected at the Annual Meeting at seven and proposes the election of the individuals listed below as our directors. Each of our current directors has been nominated for reelection, except for George R. Mrkonic, Jr., a director for nine years, who has decided not to stand for reelection to the Board of Directors upon the expiration of his term at the Annual Meeting. Also nominated for reelection to the Board is Clinton J. Coleman, who was initially elected to the Board by the Board of Directors on March 3, 2009. Our directors are elected annually by the stockholders and hold office until successors are elected and qualified or until their death, resignation or removal. Any vacancies or any newly created directorships resulting from an increase in the authorized number of directors may be filled by the majority of directors then in office. Any director appointed in this manner will hold office until his or her successor is elected and qualified, death, resignation, removal or the next annual meeting of stockholders.

 

The persons named in the enclosed proxy will vote to elect each of the director nominees listed below, unless the proxy is marked otherwise. Each director nominee will be elected to hold office until the annual meeting of stockholders held in 2010 and until his successor is elected and qualified. Each of the nominees has indicated his willingness to serve as a director if elected; however, if any nominee becomes unable to serve, the persons named as proxies may, in their discretion, vote for another nominee. Our Board of Directors has no reason to believe that any of the nominees will be unable to serve if elected.

 

There are no family relationships among our director nominees and executive officers.

 

For each nominee for director, there follows information given by each concerning his principal occupation, business experience for at least the past five years, the names of other publicly held companies of which he serves as a director, his age and his length of service as one of our directors.

Nominees for Director:

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES LISTED ABOVE.

 

Under applicable NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has determined that none of the following directors has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 4200(a)(15) of the NASDAQ Stock Market, Inc. Marketplace Rules: L. Scott Barnard, Clinton J. Coleman, Avrum Gray, Michael T. Leatherman, George R. Mrkonic, Jr. and Mark E. Schwarz.

 

Our Board of Directors has long believed that good corporate governance is important to ensure that we are managed for the long-term benefit of stockholders. The Board has adopted a Corporate Governance Framework to assist it in the exercise of its duties and responsibilities and to serve our stockholders and our best interests. A copy of the Corporate Governance Framework can be found on our website at www.nashua.com under the “Investor Relations/Corporate Governance” section.

 

Our Corporate Governance Framework provides that directors are expected to attend all meetings of the Board and the Board committees on which they serve and to ensure proper representation at annual meetings of stockholders. In 2008, the Board of Directors held five regular meetings and seven special meetings. Each member of the Board participated in at least 75% of all Board and applicable committee meetings held during the period for which he was a director. All of the directors, except Mr. Schwarz, attended the 2008 annual meeting of stockholders.

 

Our Board has established the position of Lead Director, who acts as Chairman of the Board in the Chairman’s absence, chairs the Governance and Nominating Committee and coordinates all activities related to Chief Executive Officer performance and succession. Mr. Mrkonic is the Board’s current Lead Director and presides at executive sessions of non-management directors.

 

Our Corporate Governance Framework provides that the Board of Directors shall conduct an annual self-evaluation of the Board to determine whether the Board and its committees are functioning effectively. The Audit/Finance and Investment Committee, the Governance and Nominating Committee and the Leadership and Compensation Committee are also required to each evaluate their performance.

 

We have adopted a written Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller. We have posted a current copy of the code on our website, www.nashua.com, under the “Investor Relations/Corporate Governance” section. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ stock market listing standards concerning any amendments to, or waivers from, any provision of the code.

 

Our Board of Directors will give appropriate attention to written communications on issues that are submitted by stockholders and will respond if and as appropriate. The Chairman of the Board of Directors, if an independent director, or Lead Director, if one is appointed, or otherwise the Chairman of the Governance and Nominating Committee will, subject to any required assistance or advice from legal counsel, (1) be

primarily responsible for monitoring communications from stockholders and (2) provide copies or summaries of such communications to the other directors as he or she considers appropriate.

 

Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairman of the Board of Directors or Chairman of the Governance and Nominating Committee considers to be important for the directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances and matters as to which we tend to receive repetitive or duplicative communications.

 

Stockholders who wish to send communications on any topic to the Board of Directors should address such communications to the Governance and Nominating Committee, c/o Corporate Secretary, Nashua Corporation, 11 Trafalgar Square, Suite 201, Nashua, New Hampshire 03063.

 

Our Board of Directors has three standing committees: the Audit/Finance and Investment Committee, the Leadership and Compensation Committee and the Governance and Nominating Committee.

 

Charters.   Each Committee operates under a written charter approved by the Board of Directors. A copy of each current charter can be found on our website, www.nashua.com, under the “Investor Relations/Corporate Governance” section. Alternatively, you can request a copy of these charters and the Corporate Governance Framework by writing to Nashua Corporation, c/o Corporate Secretary, 11 Trafalgar Square, Suite 201, Nashua, New Hampshire 03063.

 

Committee Members.   The current members of the Committees are as follows:

 

 

Independence.   Our Board has determined that all of the members of each of the three standing committees are independent as defined under the rules of the NASDAQ Stock Market, including, in the case of all members of the Audit/Finance and Investment Committee, the additional independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934.

 

Audit/Finance and Investment Committee.

 

The Audit/Finance and Investment Committee is responsible for overseeing our financial reporting process and our relationship with our independent public auditors. In doing so, the committee reviews the independent public auditor’s reports and audit findings, the scope and plans for future audit programs, annual and quarterly financial statements, accounting, financial and internal controls, information systems, risk management activities and compliance programs, prepares the audit committee report, meets independently with our internal auditing staff, independent auditors and management, oversees our internal audit function, monitors our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics and reviews and approves or ratifies related person transactions. The Audit/Finance and Investment Committee appoints, evaluates, retains and sets the compensation of the independent public auditors and reviews their procedures for ensuring their independence with respect to the services performed for us. The committee establishes policies regarding hiring employees from the independent auditor and procedures for the receipt and retention of accounting related complaints and concerns. The Audit/Finance and Investment Committee is also responsible for supervising policies and decisions relating to financing and pension funding.

The Audit/Finance and Investment Committee is composed of outside directors who are not our officers or employees. The Board has determined that Mr. Leatherman is an “audit committee financial expert” as defined by applicable Securities and Exchange Commission rules. In addition, the Board has determined that each member of the Audit/Finance and Investment Committee has sufficient knowledge in financial and auditing matters to serve on the Audit/Finance and Investment Committee. No current member of the Audit/Finance and Investment Committee serves on the audit committees of more than two other public companies. The Audit/Finance and Investment Committee held six meetings in 2008.

 

Leadership and Compensation Committee.

 

The Leadership and Compensation Committee is responsible for annually reviewing and approving corporate goals and objectives relevant to Chief Executive Officer compensation, reviewing and approving the compensation of our Chief Executive Officer, reviewing executive salaries, overseeing and administering any bonus, incentive compensation and stock option plans, and reviewing, approving and recommending the Board of Directors to approve the salaries and other benefits of our executive officers. The Leadership and Compensation Committee held four meetings in 2008.

 

The Leadership and Compensation Committee reviews annually the compensation of our executive officers. The Committee evaluates the performance of the chief executive officer and relies on input from the chief executive officer with respect to the performance of the other executive officers. The Committee makes its compensation decisions based on competitive market data, internal pay equity, responsibilities and performance. The Committee makes all final determinations regarding executive compensation, including salary, bonus targets, and equity awards. In light of the uncertainties caused by the global economic downturn, the Leadership and Compensation Committee decided to freeze 2009 base salaries for all of our executive officers, including our Chief Executive Officer, at 2008 levels.

 

The Leadership and Compensation Committee has implemented an annual performance review program for executives, under which annual performance goals are determined and set forth in writing at the beginning of each calendar year for the company as a whole, each corporate department and each executive. Annual corporate goals are proposed by management and approved by the Board of Directors at the end of each calendar year for the following year. These corporate goals target the achievement of specified milestones. Annual department and individual goals focus on contributions that facilitate the achievement of the corporate goals and are set during the first quarter of each calendar year. Department goals are proposed by each department head and approved by the chief executive officer. Individual goals are proposed by each executive and approved by the chief executive officer. The chief executive officer’s goals are approved by the Leadership and Compensation Committee. Annual salary increases, annual bonuses, and restricted stock awards granted to our executives are tied to the achievement of these corporate, department and individual performance goals.

 

Governance and Nominating Committee.

 

The Governance and Nominating Committee is responsible for identifying individuals qualified to become Board members, recommending to the Board the persons to be nominated by the Board for election as directors at the annual meeting of stockholders, recommending revisions, updates and amendment to the Corporate Governance Framework to the Board, overseeing the evaluation of the Board and our senior management and making recommendations regarding management succession planning. The Governance and Nominating Committee held four meetings in 2008. The processes and procedures followed by the Governance and Nominating Committee in identifying and evaluating director candidates are described below under the heading “Director Candidates.”

 

The Governance and Nominating Committee is also responsible for reviewing the compensation of our directors. The Committee makes recommendations to the Board regarding director compensation guidelines based on its experience and review of the compensation paid to directors of comparable-sized publicly traded companies.

 

Director Candidates .  The process followed by the Governance and Nominating Committee to identify and evaluate director candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Governance and Nominating Committee

and the Board of Directors. The Governance and Nominating Committee is authorized to retain advisors and consultants and to compensate them for their services. The Governance and Nominating Committee did not retain such advisors or consultants during fiscal 2008.

 

In considering whether to recommend any particular candidate for inclusion in the Board’s slate of recommended director nominees, the Governance and Nominating Committee will apply the criteria set forth in our Corporate Governance Framework. These criteria include the candidate’s integrity, business acumen, knowledge of our business and industry, experience, diligence, conflicts of interest and the ability to act in the interests of all stockholders. The Governance and Nominating Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities.

 

Stockholders may recommend individuals to the Governance and Nominating Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the Governance and Nominating Committee, c/o Corporate Secretary, Nashua Corporation, 11 Trafalgar Square, Suite 201, Nashua, New Hampshire 03063. Assuming that appropriate biographical and background material has been provided on a timely basis, the Governance and Nominating Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. If the Board of Directors determines to nominate a stockholder-recommended candidate and recommends his or her election as a director by the stockholders, his or her name will be included in our proxy card for the stockholder meeting at which his or her election is recommended. Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the Governance and Nominating Committee or the Board of Directors, by following the procedures set forth under “Submission of Stockholder Proposals.”

Compensation of Directors

 

In 2008, our non-employee directors received restricted stock units having an aggregate value equivalent to $85,000 on the date of the 2008 annual meeting of stockholders. They also received $1,000 in cash plus expenses for each Board meeting or Committee meeting they attended.

 

We paid our Lead Director an additional $7,500 in cash, our Chairman of the Audit/Finance and Investment Committee an additional $2,500 in cash, and our Chairman of the Leadership and Compensation Committee an additional $1,500 in cash.

 

In March 2009, our Board of Directors established a new compensation policy for our directors. Effective as of the date of our 2009 annual meeting, our directors will receive an annual retainer of $50,000 in cash, payable in quarterly installments. Each director will continue to receive $1,000 in cash plus expenses for each Board meeting or Committee meeting they attend. In addition, the retainers paid to the chairmen of our Board committees will remain unchanged.

 

On April 24, 2006, we entered into a letter agreement with Mr. Albert pursuant to which he became a non-executive employee of our company from January 1, 2007 until August 31, 2008. During this time, Mr. Albert also acted as an advisor to our Chief Executive Officer and served as the Board’s non-executive Chairman. For his service during that period, Mr. Albert received the same compensation paid to our non-employee directors (other than committee meeting fees) plus an additional $50,000 annual stipend and was eligible to participate in our benefit plans. Though Mr. Albert’s employment with our company terminated on August 31, 2008, Mr. Albert continues to serve, at the pleasure of the Board of Directors, as our non-executive Chairman. For his service as a director from August 31, 2008 until the date of the Annual Meeting, Mr. Albert received the same compensation paid to our other non-employee directors plus an additional $50,000 annual stipend. Mr. Albert has been nominated for election to the Board of Directors at the Annual Meeting for a term that would last until the 2010 Annual Meeting of Stockholders.

Mr. Brooker, as our President and Chief Executive Officer, does not receive additional or special compensation for serving as a director. Mr. Brooker will be entitled to receive certain payments upon our change of control or his termination of employment. For further details, refer to the section on “Potential Payments Upon Termination or Change-in-Control” in this proxy statement.

 

The following table sets forth the compensation paid to each of our non-employee directors in 2008:

 

 

 

 

 

 

Since January 1, 2006, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates of our directors, executive officers and 5% stockholders. We believe that all of the transactions described below were made on terms no less favorable to us than could have been obtained from unaffiliated third parties.

 

We paid $266,496 during 2008 and $278,151 during 2007 under a certain lease for our facility in Vernon, California, which is 40% owned by a family partnership of which Mr. Albert, our non-executive Chairman, and his family have total interest, and 20% by a partnership in which Mr. Albert is a 50% partner.

Security Ownership of Certain Beneficial Owners

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 17, 2009 by each person known to us to own beneficially more than 5% of the outstanding shares of our common stock:

 

 

 

Security Ownership of Management

 

The following table sets forth certain information as of March 17, 2009 regarding the beneficial ownership of our common stock by (1) each of our directors or nominees for director, (2) each of our named executive officers, and (3) all of our directors, nominees for director and executive officers as a group.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our Board of Directors has adopted executive stock ownership guidelines that apply to our chief executive officer, chief financial officer and each senior management participant in our 2008 Value Creation Incentive Plan and our 2007 Value Creation Incentive Plan. The executive stock ownership guidelines were adopted to further align the interests and actions of our executive officers with the interest of our stockholders and to further promote our longstanding commitment to sound corporate governance.

 

The executive stock ownership guidelines provide for ownership requirements for shares granted under the 2008 Value Creation Incentive Plan and the 2007 Value Creation Incentive Plan that must be met within one year of the grant date, which we refer to as the front-end ownership requirement, and ownership requirements that relate to shares obtained from option exercises or the vesting of awards under both plans or similar plans in the future, which we refer to as the back-end ownership requirement. The front-end and back-end ownership requirements under our executive stock ownership guidelines are as follows:

 

 

Front-End Ownership Requirement.   If the front-end ownership requirement is not achieved, all of the shares subject to the award grant under the 2007 Value Creation Incentive Plan or the 2008 Value Creation Incentive Plan would be automatically forfeited on the first anniversary of the award grant date, unless the period of compliance is extended by the Board. If an executive officer achieves a portion of the front-end ownership requirement, a pro rata portion of the shares subject to the award grant, equal to the pro rata portion of the requirement that is not achieved, will automatically be forfeited on the first anniversary of the award grant date. Future equity awards will also be subject to the front-end ownership requirement.

 

Back-End Ownership Requirement.   The back-end ownership requirement applies to currently held or newly acquired shares to be met upon and following the vesting of awards under the 2007 Value Creation Incentive Plan, the 2008 Value Creation Incentive Plan or the vesting of any future restricted stock or similar award or the exercise of any future option or similar award. If the back-end ownership requirement is not

achieved upon the vesting of the award under the 2007 Value Creation Incentive Plan or the 2008 Value Creation Incentive Plan or maintained after that time, the executive officer will not be eligible to receive future equity awards from us until the executive officer is in compliance.

 

Section 16(a) of the Exchange Act requires our directors, executive officers and 10% stockholders to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. We assist our directors and executive officers in complying with these filing requirements. Directors, executive officers and 10% stockholders are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) forms they file. Based on a review of the copies of reports furnished to us and written representations from our directors and executive officers, we believe that during 2008 our directors, executive officers and 10% stockholders have complied with all Section 16(a) filing requirements, except as follows: (a) Mr. Albert filed a late Form 4 on December 29, 2008 with respect to a sale of shares on December 19, 2008.

Equity Compensation Plan Information

 

The following table provides information with respect to the securities authorized for issuance under our equity compensation plans as of December 31, 2008:

 

 

 

 

Summary Compensation Table

 

The following table summarizes the compensation earned by our Chief Executive Officer and our two other most highly compensated executive officers, which we refer to as our named executive officers, for the fiscal years indicated.

 

 

 

 

 

 

We entered into an employment agreement with Mr. Brooker on March 12, 2006. Pursuant to the employment agreement, Mr. Brooker’s annual base salary for 2006 was $350,000 and increased to $400,000 effective January 1, 2007. Additionally, under the employment agreement, Mr. Brooker is entitled to an annual cash bonus of between 0% and 200% of his annual base salary based upon the achievement of certain plan goals established by our Board of Directors.

 

We entered into an employment agreement with Mr. McKeown on September 1, 2006. Pursuant to the employment agreement, Mr. McKeown’s annual base salary for 2006 was $250,000. Additionally, under the employment agreement, Mr. McKeown is eligible to receive an annual cash bonus up to 60% of his annual base salary based upon the achievement of certain plan goals established by our Chief Executive Officer.

Outstanding Equity Awards At Fiscal Year-End

 

The following table sets forth information with respect to stock options and restricted stock awards outstanding as of December 31, 2008 for our named executive officers:

 

 

 

 

 

 

 

 

 

 

 

We provide retirement benefits to our salaried employees, including Mr. Patenaude, under the Nashua Corporation Retirement Plan for Salaried Employees or the Nashua Retirement Plan, which is a qualified retirement plan under the Internal Revenue Code. The Employee Retirement Income Security Act of 1974 limits pensions that may be paid under plans qualified under the Internal Revenue Code. Pension amounts exceeding this limit may be paid outside of qualified plans.

 

Benefits under the Nashua Retirement Plan were frozen as of December 31, 2002, and all employees ceased accruing additional retirement benefits under the plan on that date. The Nashua Retirement Plan will continue to require us to make contributions for benefits accrued prior to December 31, 2002.

 

Compensation covered by the Nashua Retirement Plan generally refers to total annual cash compensation, including salary and bonus, but excluding certain items such as the value of stock option awards and employer allocations to our Employees’ Savings Plan. For purposes of the Nashua Retirement Plan, the five-year average compensation is equal to the average annual salary and bonus over the preceding five years of employment prior to December 31, 2002, the date on which the plan was frozen. As noted above, the Nashua Retirement Plan was frozen on December 31, 2002 and, as a result, average compensation and years of service no longer increase and no additional benefits under the plan are earned.

 

Benefits are available for participants whose pensions start after reaching age 65. Participants who have five or more years of service are eligible to receive pensions after reaching age 60 and participants who have ten or more years of service are eligible to receive pensions after reaching age 55, but payments are reduced 4.2% per year for each year that a recipient starts receiving benefits earlier than at age 65. Benefits under the Nashua Retirement Plan are computed on the basis of a straight life annuity. These benefits are not subject to any deduction for Social Security or other offset.

The following table sets forth pension benefits to the named executive officers:

 

 

 

 

We have entered into change of control and severance agreements with Mr. Brooker, Mr. McKeown and Mr. Patenaude in order to ensure their continued service to us in the event of our change of control. These agreements provide that if, within one year after our change of control, we terminate the executive’s employment without cause or the executive terminates his employment for good reason, in each case as defined in the agreement, the executive would be entitled to the following:

 

 

If their employment is terminated by us for reasons other than misconduct prior to our change of control or more than one year after our change of control, Mr. Brooker, Mr. McKeown and Mr. Patenaude would be entitled to receive salary continuation and medical and dental benefits for a period of one year. However, if Mr. Brooker, Mr. McKeown or Mr. Patenaude is terminated or ceases to be an officer of the company prior to our change of control and is able to demonstrate that their termination of employment was at the request of a third party or was effected in connection with our change of control, then they will be treated as if they had been terminated after our change of control and entitled to the benefits set forth above.

 

The following table summarizes the value of the termination payments and benefits that the named executive officers would receive if they had terminated employment on December 31, 2008 under the circumstances shown. The named executive officers will not receive any termination payments or benefits if their employment is terminated by us for cause. The table excludes amounts accrued through December 31,

2008 that would be paid in the normal course of continued employment, such as accrued but unpaid salary and vacation pay.

 

 

 

PROPOSAL 2

 

APPROVAL OF THE 2009 VALUE CREATION INCENTIVE PLAN

 

Our Board of Directors is committed to creating and enhancing stockholder value. The Board of Directors believes that the creation of stockholder value depends, in large part, upon our ability to maintain a competitive position in attracting and retaining key personnel. Traditionally, we, like many of our peers, have used equity incentives such as stock options and restricted stock awards to attract and retain key personnel. However, our ability to use equity incentives has been limited because only a small number of shares are available for future awards under our three active equity incentive plans, the 2008 Value Creation Incentive Plan, or the 2008 Plan, the 2007 Value Creation Incentive Plan, or the 2007 Plan, and the 1999 Shareholder Value Plan, or the 1999 Plan. As of March 17, 2009, there were 5,000 shares of common stock available for future awards under the 2008 Plan, 20,000 shares of common stock were available for future awards under the 2007 Plan and 119,719 shares of common stock were available for future awards under the 1999 Plan. However, the 1999 Plan expires on April 30, 2009 and at that time no further awards can be issued under the 1999 Plan.

 

As part of our commitment to promote stockholder value, the Board of Directors has examined the various tools and alternatives available to us to enhance our ability to retain and motivate key personnel while aligning the interests of those individuals with the interests of our stockholders. To that end, on March 24, 2009, our Board of Directors adopted, subject to stockholder approval, the 2009 Value Creation Incentive Plan, or the 2009 Value Plan. The Board of Directors believes that the adoption of the 2009 Value Plan will promote stockholder value and is in the best interests of our stockholders and our company.

 

As discussed in more detail below, under the 2009 Value Plan:

 

 

 

In addition, in accordance with our stock ownership guidelines, participants that receive the awards granted under the 2009 Value Plan will be required to acquire our shares equal to a percentage of their award as determined by the Board of Directors.

 

Set forth below is a brief summary of the 2009 Value Plan, which is qualified in its entirety by reference to the 2009 Value Plan, a copy of which is attached to this proxy statement as Appendix A.

 

The affirmative vote of the holders of a majority of the shares voting on the proposal is required for the approval of the 2009 Value Plan. Stockholders may vote for or against the proposal or they may abstain from voting on the proposal. Shares will not be voted in favor of this proposal, and will not be counted as voting on this proposal, if they either (1) abstain from voting on the proposal or (2) are broker non-votes.

 

There are 95,000 shares of restricted stock outstanding under the 2008 Plan. There are 140,000 shares of restricted stock outstanding under the 2007 Plan. There are 137,694 shares of restricted stock and stock options outstanding under our 1999 Plan. Also, under our 1996 Stock Incentive Plan, which expired in 2006, there are 74,600 shares of restricted stock and stock options outstanding, and under our 2004 Value Creation Incentive Plan, which expired in 2007, there are 49,000 shares of restricted stock outstanding.

 

As of March 17, 2009, we have 5,599,642 shares of common stock issued and outstanding. Under our existing plans, we have 496,294 restricted shares and stock options outstanding, which represent 8.9% of our total issued and outstanding shares of common stock.

 

Purpose

 

The purpose of the 2009 Value Plan is to advance the interests of our stockholders by enhancing our ability to attract, retain and motivate persons who are in a position to significantly contribute to the creation of value for our stockholders. The Board of Directors believes that the 2009 Value Plan will provide such persons with equity ownership opportunities and performance-based incentives that will align their interests with those of our stockholders.

 

Administration and Shares Available for Award

 

The 2009 Value Plan is administered by the Leadership and Compensation Committee. Subject to the provisions of the 2009 Value Plan, the Leadership and Compensation Committee has the discretion to determine when awards are made, which individuals are granted awards, the number of shares subject to each award and all other relevant terms of the awards. The Leadership and Compensation Committee also has discretion to construe and interpret the 2009 Value Plan and adopt rules and regulations. Except as otherwise expressly authorized to do so by the Board of Directors, the Leadership and Compensation Committee is not authorized to amend the 2009 Value Plan.

 

Up to 110,000 shares of common stock (subject to adjustment in the event of stock splits or other similar events) will be available for grant as restricted stock awards under the 2009 Value Plan.

 

Eligibility

 

Certain of our employees, officers, directors, consultants and advisors (or any individuals who have accepted an offer for employment) and our present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Internal Revenue Code, are eligible to be granted awards under the 2009 Value Plan. The maximum number of shares with respect to which awards may be granted to any participant under the 2009 Value Plan may not exceed 25,000 shares during any calendar year.

While the Leadership and Compensation Committee expects to make awards to eligible persons based upon their level of responsibility and performance, the granting of awards under the 2009 Value Plan is discretionary.

 

Description of Awards

 

The Leadership and Compensation Committee has sole and complete authority to determine the participants to whom restricted stock awards are granted, the number of shares of restricted stock to be granted to each participant, and the other terms and conditions of such awards, subject to the terms of the 2009 Value Plan. Restricted stock awards entitle recipients to acquire shares of common stock, subject to our right to require forfeiture of all or part of such shares from the participant in the event that the conditions specified in the applicable award are not satisfied prior to the end of the applicable restriction period for such award.

 

Stock certificates issued in respect of shares of restricted stock will be registered in the name of the participant and, unless otherwise determined by the Leadership and Compensation Committee, deposited by the participant together with a stock power endorsed in blank, with us. At the expiration of the restriction period, if the shares vest, we will deliver the stock certificates to the participant or the participant’s legal representative.

 

Adjustments for Changes in Common Stock and Certain Other Events

 

In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification, spin-off or other similar transaction or any distribution to holders of common stock other than a normal cash dividend, (1) the number and class of securities available under the 2009 Value Plan, (2) the per-participant share limit and (3) any applicable terms and conditions on outstanding awards will be appropriately and proportionately adjusted by the Leadership and Compensation Committee to the extent that the Board of Directors determines that such adjustment is necessary and appropriate.

 

Upon a change in control event, all restrictions and conditions on awards will automatically be deemed terminated and all shares will fully vest. A change in control event means the consummation of a merger, consolidation, tender offer, reorganization, recapitalization or share exchange involving us or a sale of all or substantially all of our assets, which we refer to as a Business Combination, unless, immediately following such Business Combination: (x) all or substantially all of the beneficial owners of our then-outstanding shares of common stock and our then-outstanding securities entitled to vote generally in the election of directors immediately prior to such Business Combination own more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination, which we refer to as the Acquiring Corporation, in substantially the same proportions immediately prior to such Business Combination and (y) no individual, entity or group owns 40% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination).

 

Amendment or Termination Upon Death or Disability

 

The Leadership and Compensation Committee may amend, modify or terminate any award upon the death or disability of the participant without the consent of the participant or the participant’s estate, unless the Leadership and Compensation Committee determines that the action would materially or adversely affect the participant or the participant’s estate, in which case such consent would be required. Except as otherwise expressly authorized to do so by the Board of Directors, the Leadership and Compensation Committee is not authorized to amend the 2009 Value Plan. The Board of Directors may at any time amend, suspend or terminate the 2009 Value Plan, except to the extent inconsistent with the provisions of Section 162(m) of the Internal Revenue Code and provided that any amendment that creates or confers material benefits to or on behalf of participants must be approved by our stockholders.

 

Federal Income Tax Consequences

 

The following generally summarizes the United States federal income tax consequences that generally will arise with respect to awards granted under the 2009 Value Plan. This summary is based on the tax laws in effect as of the date of this proxy statement. Changes to these laws could alter the tax consequences described below.

 

A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Internal Revenue Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a participant will have compensation income equal to the value of the stock less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the date of grant. If the participant does not make an 83(b) election, then when the stock vests the participant will have compensation income equal to the value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.

 

Tax Consequences to Us.   There will be no tax consequences to us except that we will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Internal Revenue Code. However, we expect that compensation received by participants will qualify as performance-based compensation that is not subject to the limits of Section 162(m).

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2009 VALUE CREATION INCENTIVE PLAN.

REPORT OF THE AUDIT/FINANCE AND INVESTMENT COMMITTEE

 

The Audit/Finance and Investment Committee of our Board of Directors is composed of three independent directors. The Committee operates under a written charter adopted by the Board of Directors. The members of the Committee are Michael T. Leatherman (Chairman), L. Scott Barnard and Avrum Gray. Clinton J. Coleman also currently serves as a member of the Audit/Finance and Investment Committee. However, Mr. Coleman was appointed as a member of the Audit/Finance and Investment Committee on March 3, 2009, subsequent to the Audit/Finance and Investment Committee’s approval of this Report of the Audit/Finance and Investment Committee.

 

The Committee reviewed our audited financial statements for the fiscal year ended December 31, 2008 and discussed these financial statements with our management and the Company’s registered public accounting firm, Ernst & Young LLP. The Committee also reviewed and discussed the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards , Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, with our registered public accounting firm.

 

The Committee has received the written disclosures and the letter from our registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding our registered public accounting firm’s communications with the Audit/Finance and Investment Committee concerning independence and has discussed with our registered public accounting firm their independence.

 

Based on the review and discussions referred to above, the Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2008.

 

Audit/Finance and Investment Committee

 

     Michael T. Leatherman, Chairman

     L. Scott Barnard

     Avrum Gray

 

The Audit/Finance and Investment Committee of the Board of Directors has selected the firm of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2009. Ernst & Young LLP served in this capacity for the year 2008. Representatives from Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Fees and Services

 

The following table sets forth the fees of Ernst & Young LLP billed to us for the fiscal years 2008 and 2007:

 

 

 

 

All engagements for services by Ernst & Young LLP or other independent accountants are subject to prior approval by the Audit/Finance and Investment Committee; however, de minimis non-audit services may instead be approved in accordance with applicable SEC rules. The prior approval of the Audit/Finance and Investment Committee was obtained for all services provided by Ernst & Young LLP in 2008.

 

The Audit/Finance and Investment Committee has policies and procedures related to preapproval of audit and non-audit services for the purpose of maintaining the independence of our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the services are specifically approved in advance by the Audit/Finance and Investment Committee or the engagement is entered into pursuant to one of the preapproval procedures described below.

 

From time to time, the Audit/Finance and Investment Committee may preapprove specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such preapproval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.

 

During fiscal 2008, no services were provided by Ernst & Young LLP or any other accounting firm other than in accordance with the preapproval policies and procedures described above.

SUBMISSION OF STOCKHOLDER PROPOSALS — 2010 ANNUAL MEETING

 

Any stockholder proposal which is to be included in the proxy materials for the 2010 annual meeting must be received by us on or before December 4, 2009. Such proposals should be directed to Nashua Corporation, 11 Trafalgar Square, Suite 201, Nashua, New Hampshire 03063, Attention: Corporate Secretary.

 

In addition, our by-laws require that we be given advance notice of stockholder nominations for election to the Board of Directors and of other matters which stockholders wish to present for action at an annual meeting of stockholders, other than matters included in our proxy statement in accordance with SEC Rule 14a-8. The required notice must be in writing and received by our Corporate Secretary at our principal executive offices not less than 60 days nor more than 90 days prior to the annual meeting of stockholders. However, in the event that less than 70 days’ prior disclosure of the date of the meeting is first given or made (whether by public disclosure or written notice to stockholders), notice by the stockholder to be timely must be received by our Corporate Secretary at our principal executive offices no later than the close of business on the 10th day following the day on which such disclosure of the date of the meeting was made. The date of our 2010 annual meeting of stockholders has not yet been established, but assuming it is held on May 5, 2010, in order to comply with the time periods set forth in our by-laws, appropriate notice for the 2010 annual meeting would need to be provided to our Corporate Secretary no earlier than February 4, 2010 and no later than March 8, 2010.

 

A copy of our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission, will be furnished without charge to any stockholder upon written request to Nashua. Please address all such requests to Nashua Corporation, 11 Trafalgar Square, Suite 201, Nashua, New Hampshire, Attention: Corporate Secretary.

 

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of the document to you if you write or call our Corporate Secretary at the following address or phone number: Nashua Corporation, 11 Trafalgar Square, Suite 201, Nashua, New Hampshire 03063, Attention: Corporate Secretary, telephone number (603) 880-2323. If you want to receive separate copies of the annual report and proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone number.

OTHER MATTERS

 

The Board of Directors knows of no other matters to be brought before the Annual Meeting. However, if other matters do properly come before the Annual Meeting or any adjournments thereof, the persons named in the proxies will vote upon such matters in accordance with their best judgment.

 

 

JOHN L. PATENAUDE
Vice President-Finance, Chief
Financial Officer and Treasurer

 

Nashua, New Hampshire
March 31, 2009

 

NASHUA CORPORATION

 

2009 VALUE CREATION INCENTIVE PLAN

 

 

The purpose of this 2009 Value Creation Incentive Plan (the “Plan”) of Nashua Corporation, a Massachusetts corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are in a position to significantly contribute to the creation of value for stockholders of the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

 

 

All of the Company’s employees, officers, directors, consultants and advisors (and any individuals who have accepted an offer for employment) are eligible to be granted restricted stock awards entitling recipients to acquire shares of common stock, par value $1.00 per share, of the Company (the “Common Stock”), subject to the right of the Company to require forfeiture of such shares from the recipient in the event that conditions specified by the Board in the applicable award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such award (each, an “Award”). Each person who has been granted an Award under the Plan shall be deemed a “Participant”.

 

 

(a)  Administration by Board of Directors.   The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

 

(b)  Appointment of Committees.   To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

 

 

(a)  Number of Shares.   Subject to adjustment under Section 6, Awards may be made under the Plan for up to 110,000 shares of Common Stock. If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

 

(b)  Per-Participant Limit.   Subject to adjustment under Section 6, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be

25,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (“Section 162(m)”).

 

 

(a)  Grants; Terms and Conditions.   The Board may grant Awards under the Plan. The Board shall determine the terms and conditions of the Award, including the conditions for vesting and forfeiture and the issue price, if any.

 

(b)  Stock Certificates.   Any stock certificates issued in respect of an Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

 

 

(a)  Changes in Capitalization.   In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b), and (iii) the target price per share set forth in the vesting provisions of each outstanding Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 6(a) applies and Section 6(b) also applies to any event, Section 6(b) shall be applicable to such event, and this Section 6(a) shall not be applicable.

 

(b)  Reorganization and Change in Control Events

 

(1)  Definitions .

 

(a) A “Reorganization Event” shall mean: (i) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (ii) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange or other transaction or (iii) any liquidation or dissolution of the Company.

 

(b) A “Change in Control Event” shall mean the consummation of a merger, consolidation, tender offer, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) and then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately

prior to such Business Combination and (y) no individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination).

 

(2)  Effect on Awards.

 

(a)  Reorganization Event that is not a Change in Control Event.   Upon the occurrence of a Reorganization Event that is not a Change in Control Event (other than a liquidation or dissolution of the Company), the forfeiture and other rights of the Company under each outstanding Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Award; provided , however , that the Board may provide for termination or deemed satisfaction of such forfeiture or other rights under the instrument evidencing any Award or any other agreement between a Participant and the Company, either initially or by amendment. Upon the occurrence of a Reorganization Event that is not a Change in Control Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Awards then outstanding shall automatically be deemed terminated or satisfied.

 

(b)  Change in Control Event.   Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes a Reorganization Event), except to the extent specifically provided to the contrary in the instrument evidencing any Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Awards then-outstanding shall automatically be deemed terminated or satisfied and all shares of Common Stock subject to all Awards then-outstanding shall be fully vested.

 

 

(a)  Transferability of Awards.   Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

 

(b)  Documentation.   Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.

 

(c)  Board Discretion.   Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

 

(d)  Termination of Status.   The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award.

 

(e)  Withholding.   Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, when the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the

Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

 

(f)  Amendment of Award Upon Death or Disability.   The Board may amend, modify or terminate any outstanding Award (including, but not limited to, accelerating the vesting of an Award) upon the death or disability of the Participant; provided that the consent of the Participant or the Participant’s estate to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant or the Participant’s estate.

 

(g)  Conditions on Delivery of Stock.   The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

 

 

(a)  No Right To Employment or Other Status.   No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

 

(b)  No Rights As Stockholder.   Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares.

 

(c)  Effective Date and Term of Plan.   The Plan shall become effective on the date on which it is approved by the Company’s stockholders, but no Award granted to a Participant that is intended to comply with Section 162(m) shall become vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company’s stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m) (including the vote required under Section 162(m)). No Awards shall be granted under the Plan after the completion of three years from the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

 

(d)  Amendment of Plan.   The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become vested or realizable, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)); provided further, that no such amendment shall create or confer any material benefit to or on behalf of Participants without the approval of the Company’s stockholders.

 

(e)  Governing Law.   The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to any applicable conflicts of law.

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