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                                                                    Exhibit 4.07




                       AMENDMENT NO. 2 TO RIGHTS AGREEMENT


This amendment, dated as of December 15, 1998, amends the Rights Agreement (the
"Rights Agreement"), dated as of July 19, 1996, between Nashua Corporation, a
Delaware corporation (the "Company"), and The First National Bank of Boston, a
national banking association (the "Rights Agent"). Terms defined in the Rights
Agreement and not otherwise defined herein are used herein as so defined.

WITNESSETH:

WHEREAS, on July 19, 1996, the Board of Directors of the Company authorized the
issuance of Rights to purchase, on the terms and subject to the provisions of
the Rights Agreement, one one-hundredth of a share of the Company's Series B
Participating Preferred Stock;

WHEREAS, on July 19, 1996, the Board of Directors of the Company authorized and
declared a dividend distribution of one Right for every share of Common Stock of
the Company outstanding on the Record Date and authorized the issuance of one
Right (subject to certain adjustments) for each share of Common Stock of the
Company issued between the Record Date and the Distribution Date;

WHEREAS, on July 19, 1996, the Company and the Rights Agent entered into the
Rights Agreement to set forth the description and terms of the Rights; and

WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors
now desire to amend certain provisions of the Rights Agreement in order to
modify certain provisions contained therein;

NOW, THEREFORE, the Rights Agreement, as amended to date, is hereby further
amended as follows:

         1.   Delete Section 1(i) in its entirety;

         2.   Delete Section 23 in its entirety and substitute therefor a new
              Section 23 as follows:

              "Section 23.  REDEMPTION AND TERMINATION.

              (a) The Board may, at its option, at any time prior to the earlier
              of (i) the close of business on the tenth Business Day (or such
              later date as may be determined by the Board pursuant to clause
              (i) of the first sentence of Section 3(a) with respect to the
              Distribution Date) following the Stock Acquisition Date (or, if
              the Stock Acquisition Date shall have occurred prior to the Record
              Date, the close of business on the tenth Business Day following
              the Record Date) or (ii) the Final Expiration Date, redeem all but
              not less than all the then outstanding Rights at a redemption
              price of $.01 per Right, as such amount may be appropriately
              adjusted to reflect any stock split, stock dividend or similar
              transaction occurring after the date hereof (such redemption price
              being hereinafter referred to as the "Redemption Price"). The
              redemption of the Rights by the Board may be made effective at
              such time, on such basis and with such conditions as the Board in
              its sole discretion may establish. The Company may, at its option,
              pay the Redemption Price in cash, shares of Common Stock (based on
              the "current market price," as defined in Section 11(d)(i) hereof,
              of the Common Stock at the time of redemption) or any other form
              of consideration, or any combination of any of the foregoing,
              deemed appropriate by the Board. Notwithstanding anything
              contained in this Agreement to the contrary, the Rights shall not
              be exercisable after the first occurrence of a Section 11(a)(ii)
              Event until such time as the Company's right of redemption
              hereunder has expired.


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              (b) Immediately upon the action of the Board ordering the
              redemption of the Rights, evidence of which shall have been filed
              with the Rights Agent and without any further action and without
              any notice, the right to exercise the Rights shall terminate and
              the only right thereafter of the holders of Rights shall be to
              receive the Redemption Price for each Right so held. Promptly
              after the action of the Board ordering the redemption of the
              Rights, the Company shall give notice of such redemption to the
              Rights Agent and the holders of the then outstanding Rights by
              mailing such notice to all such holders at each holder's last
              address as it appears upon the registry books of the Rights Agent
              or, prior to the Distribution Date, on the registry books of the
              Transfer Agent for the Common Stock. Any notice which is mailed in
              the manner herein provided shall be deemed given, whether or not
              the holder receives the notice. Each such notice of redemption
              will state the method by which the payment of the Redemption Price
              will be made.

              (c) Notwithstanding the provisions of Section 23(a) hereof, in the
              event that a majority of the Board is elected by shareholder
              action by written consent, or is comprised of persons elected at a
              meeting of stockholders who were not nominated by the Board in
              office immediately prior to such meeting, then for a period of one
              hundred and twenty (120) days following the effectiveness of such
              election, the Rights shall not be redeemed if such redemption is
              reasonably likely to have the purpose or effect of allowing any
              Person to become an Acquiring Person or otherwise facilitating the
              occurrence of a Triggering Event or a transaction with an
              Acquiring Person.

              (d) The Company may, at its option, discharge all of its
              obligations with respect to the Rights by (i) issuing a press
              release announcing the manner of redemption of the Rights in
              accordance with this Agreement and (ii) mailing payment of the
              Redemption Price to the registered holders of the Rights at their
              last addresses as they appear on the registry books of the Rights
              Agent or, prior to the Distribution Date, on the registry books of
              the Transfer Agent of the Common Shares, and upon such action, all
              outstanding Rights and Right Certificates shall be null and void
              without any further action by the Company."

         3.   Delete the last sentence of Section 24(a).

         4.   Delete the proviso at the end of the second sentence of Section 27
              and substitute the following:

              ", provided that, in the event that a majority of the Board is
              elected by shareholder action by written consent, or is comprised
              of persons elected at a meeting of stockholders who were not
              nominated by the Board in office immediately prior to such
              meeting, then for a period of one hundred twenty (120) days
              following the effectiveness of such election, no such supplement
              or amendment shall be effective if such supplement or amendment is
              reasonably likely to have the purpose or effect of allowing any
              person to become an Acquiring Person or otherwise facilitating the
              occurrence of a Triggering Event or a transaction with an
              Acquiring Person."


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         5.   Delete Section 31 in its entirety and substitute the following:

              "Section 31. SEVERABILITY.

              If any term, provision, covenant or restriction of this Agreement
              is held by a court of competent jurisdiction or other authority to
              be invalid, void, or unenforceable, including, without limitation,
              any provision of Section 23(c) or the provision of the second
              sentence of Section 27 hereof, the remainder of the terms,
              provisions, covenants, and restrictions of this Agreement shall
              remain in full force and effect and shall in no way be affected,
              impaired or invalidated."

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to the
Rights Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.

Attest:                                   NASHUA CORPORATION

By /s/ Peter C. Anastos                   By /s/ Gerald G. Garbacz
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   Peter C. Anastos, Secretary               Gerald G. Garbacz
                                             Chairman, President and
                                             Chief Executive Officer

Attest:                                   THE FIRST NATIONAL BANK OF BOSTON

By /s/ James P. Mitchell                  By /s/ Carol Mulvey-Eori
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   James P. Mitchell                         Carol Mulvey-Eori
   Senior Account Manager                    Administration Manager