-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KZeG6MRGDHaDhP+I1L6B6Ly0CugwtJV29wdZ2ek0R08BV8BbEr7LxTBNJGm1zicd PnMCNuvb1HhOax8vevyCgQ== 0000950116-96-000118.txt : 19960304 0000950116-96-000118.hdr.sgml : 19960304 ACCESSION NUMBER: 0000950116-96-000118 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951203 FILED AS OF DATE: 19960301 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT MANUFACTURING CO CENTRAL INDEX KEY: 0000049146 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 210481254 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08044 FILM NUMBER: 96529762 BUSINESS ADDRESS: STREET 1: 230 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2157327700 MAIL ADDRESS: STREET 1: 230 S BROAD STREET CITY: PHILADELPHIA STATE: PA ZIP: 19102 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 3, 1995 Commission File No. 1-8044 HUNT MANUFACTURING CO. (Registrant) Pennsylvania 21-0481254 ---------------------- ------------------------------- (State of incorporation) (IRS Employer Identification No.) One Commerce Square, 2005 Market Street Philadelphia, PA 19103-7085 - -------------------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 656-0300 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class: on which registered: -------------------- ---------------------- Common Shares, par value $.10 per share New York Stock Exchange Rights to Purchase Series A Junior New York Stock Exchange Participating Preferred Stock Securities registered pursuant to Section 12(g) of the Act: None The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. -------- The aggregate market value of the registrant's Common Shares (its only voting stock) held by non-affiliates of the registrant as of February 2, 1996 was approximately $167,000,000. (Reference is made to the final paragraph of Part I herein for a statement of the assumptions upon which this calculation is based.) The number of shares of the registrant's Common Shares outstanding as of February 2, 1996 was 10,964,644. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the registrant's 1996 definitive proxy statement relating to its scheduled April 1996 Annual Meeting of Shareholders (which proxy statement is expected to be filed with the Commission not later than 120 days after the end of the registrant's last fiscal year) are incorporated by reference into Part III of this report. PART I Item 1. Business General Hunt Manufacturing Co. and its subsidiaries (herein called the "Company", unless the context indicates otherwise) are primarily engaged in the manufacture and distribution of office products and art/craft products which the Company markets worldwide. Reference is made to Item 7 and Note 3 to Consolidated Financial Statements herein for information concerning a pre-tax charge aggregating $5.3 million (approximately $3.5 million after income taxes, or $.22 per share) recorded in fiscal 1995 for costs relating to organizational changes and relocation and consolidation of certain of the Company's manufacturing and distribution operations. Reference is also made to Item 7 and Note 2 to Consolidated Financial Statements herein for information regarding the Company's private purchase of 2,150,165 shares at $16.32 per share and repurchase of 2,954,378 shares at $17.00 per share pursuant to a tender offer, both of which purchases were made subsequent to the Company's 1995 fiscal year-end. The Company also entered into a new five-year $125 million credit facility. The Company used borrowings under this new credit facility, together with cash on hand, to fund the aforesaid private purchase of shares and shares pursuant to the tender offer. Business Segments The following table sets forth the Company's net sales and operating profit by business segment for the last three fiscal years: 1995 1994 1993 -------- -------- ------ (In thousands) Net Sales: Office products ............. $163,378 $160,307 $142,462 Art/Craft products .......... 150,503 127,896 113,688 -------- -------- -------- Total ...................... $313,881 $288,203 $256,150 ======== ======== ======== Operating Profit: Office products ............. $ 6,966 $ 12,172 $ 11,411 Art/Craft products .......... 21,678 21,211 18,832 -------- -------- -------- Total ...................... $ 28,644 $ 33,383 $ 30,243 ======== ======== ======== - --------------- See Items 6 and 7 herein and Note 17 to Consolidated Financial Statements herein for further information concerning the Company's business segments (including information concerning identifiable assets). -2- Office Products The Company has three major classes of office products: mechanical and electromechanical products; office furniture; and desktop accessories and supplies. The amounts and percentages of net sales of these product classes for the last three fiscal years were as follows:
1995 1994 1993 --------------- --------------- -------------- (Dollars in thousands) Product Class: Mechanical and electromechanical..... $69,018 42% $ 76,897 48% $ 70,047 49% Office furniture........ 60,278 37 51,715 32 44,233 31 Desktop accessories and supplies.......... 34,082 21 31,695 20 28,182 20 -------- --- -------- --- -------- --- Total.................. $163,378 100% $160,307 100% $142,462 100% ======== ==== ======== ==== ======== ====
The Company's mechanical and electromechanical office products consist of a variety of items sold under the Company's BOSTON brand, including manual and electric pencil sharpeners; paper punches, trimmers and shredders; electric letter openers; spring clips used to hold sheets of paper; manual and electronic staplers; electric air cleaners; fans and heaters; laminators; and other related products. The Company's office furniture products are sold primarily under the BEVIS brand name. These products include conference, computer, utility and folding tables; office chairs; bookcases and screen panels; metal and wood workstations for computer terminals, personal computers, word processors, printers and other similar electronic office equipment; and home/office furniture. The Company's desktop accessories and supplies consist of a broad range of products that support the use of computers, such as computer diskette, CD and CD ROM storage and filing systems, printer stands, mouse pads and other computer related accessories which are marketed under the MEDIAMATE brand name. Also included in desktop accessories and supplies are an array of items marketed under the LIT-NING brand name, including metal horizontal and vertical files, letter trays, desk organizers and paper sorting racks. In 1994, the Company obtained exclusive distribution rights in the United States and Canada for Schwan-STABILO(1) highlighter markers and writing instruments which are included under desktop accessories and supplies. In 1995, the Company acquired the rights to the Calise line of lap-top computer carrying cases which are included under desktop accessories and supplies. The Company consistently has sought to expand its office products business through internal product development, the acquisition of distribution rights to products which complement or extend the Company's established lines, the acquisition of complementary businesses and through broadened distribution. Examples of new office product introductions by the Company in recent years are BOSTON brand electronic staplers, various models of air cleaners, fans and heaters, personal paper shredders, electric and battery powered pencil sharpeners, paper punches, and desk-top laminators; BEVIS - -------- 1. Trademark of Schwan-STABILO Schwanhausser GmbH & Co. -3- UNIWORX, BEVIS ULTRAWORX and BEVIS MEGAWORX lines of modular office furniture systems; BEVIS CONVERGENCE panel systems; MEDIAMATE LASERRAK printer stands; MEDIAMATE FASTRAC mouse pads; MEDIAMATE multi-media storage files, MEDIAMATE ROLL'N RAK portable printer stands, MEDIAMATE CD storage products; MEDIAMATE DISCFINDER CD filing system and CALISE computer carrying cases. There are three major and generally distinct domestic markets for the Company's office products: commercial offices, home offices and the general consumer. The commercial line of the Company's office products is distributed primarily through a network of office supply wholesalers and dealers and office product superstores. Sales to the home office and the general consumer include mechanical and electromechanical, and desktop accessories and supplies products which are sold through large retail outlets, such as office products superstores, drug and food chain stores, variety stores, discount chains, catalog showrooms and membership chains. The consumer market has increased significantly over the last several years primarily due to the dramatic growth of office products superstores. A more limited line of products is sold to schools through specialized school supply distributors. Art/Craft Products The Company manufactures and distributes three major classes of art/craft products: presentation graphics products; art supplies; and hobby/craft products. The amounts and percentages of net sales of these three product classes for the last three fiscal years were as follows:
1995 1994 1993 --------------- ------------- ---------------- (Dollars in thousands) Product Class: Presentation graphics............. $104,271 69% $ 83,354 65% $ 68,734 61% Art supplies........... 26,610 18 26,772 21 27,569 24 Hobby/craft............ 19,622 13 17,770 14 17,385 15 -------- --- ------ --- -------- --- Total................ $150,503 100% $127,896 100% $113,688 100% ======== === ======== === ======== ===
The Company's presentation graphics products are used largely by picture framers, graphic artists, display designers and photo laboratories, and include a range of BIENFANG and CENTAFOAM foam boards (which constitute a significant portion, although less than 40%, of presentation graphics products); TECHMOUNT dry mount adhesive products; pressure sensitive and dry mount adhesive products sold under the SEAL and ADEMCO-SEAL brands, as well as under the COLORMOUNT, SEALEZE, PRINT GUARD, PRINT MOUNT and GARDIAN brand names; THERMASHIELD laminating films; an array of mounting and laminating equipment sold under the CLEAR TECH, SEALEZE, and IMAGE brand names; and specialty tapes and films supplied under various private brands. The Company's art supply products are used primarily by commercial and amateur artists, and include commercial and fine art papers which the Company converts, finishes and sells under its BIENFANG brand name; various types of X-ACTO brand knives and blades; -4- SPEEDBALL paint markers and acrylic and water-color paints; and CONTE(2) pastels, crayons and related drawing products, for which the Company is the exclusive United States and Canadian distributor. The Company's hobby/craft products generally are used by hobbyists and craft enthusiasts and include SPEEDBALL print-making products; ACCENT MATS beveled-edge picture framing mats; SPEEDBALL ELEGANT WRITERS; LETTERSHOP calligraphy kits and PANACHE calligraphy products; a range of punch quilting products; PAPER KRAZE paper making and casting products; and X-ACTO brand tools and kits. The Company consistently has sought to expand its art/craft business primarily through acquisitions of complementary businesses and of distribution rights to complementary products manufactured by others, through internal product development, and through broadened distribution. Major art/craft products introduced during the last several fiscal years include SINGLE STEP adhesive coated BIENFANG foam board; BIENFANG project display boards; ARMORCORE and STRATOCORE line of board products; PANACHE calligraphy products; LETTERSHOP calligraphy kits; punch quilting products; PAPER KRAZE papermaking and casting products; CLEAR TECH pouch laminators; IMAGE brand large format laminators; GARDIAN outdoor protective laminates and adhesives; PRINT MOUNT pressure sensitive adhesives; and THERMASHIELD laminating films. In 1993, the Company acquired IMAGE TECHNOLOGIES, Inc., a start-up company engaged in the development and production of large format laminators, which has allowed the Company to broaden its distribution into the digital imaging market. In late April, 1995, the Company acquired the Centafoam business of Spicers, Ltd., a division of David S. Smith (Holdings) PLC, a United Kingdom manufacturer and marketers of a line of styrene-based foam board products, which will enable the Company to be more competitive in international foam board markets, as well as provide the Company with a base from which to build a rigid substrate business for sign and display markets in Europe. BIENFANG foam board has been particularly important, as it has allowed the Company to penetrate the picture framing, sign, display and exhibit markets, yet it also holds wide appeal to the traditional customer groups in art supply and hobby/craft markets. The success of foam board has been attributable, in significant part, to the Company's ability to offer the end-user a variety of value-added foam board products, such as colored or adhesive coated foam board. Traditionally, the Company's art/craft products have been distributed primarily through wholesalers (framing, photomounting, art and hobby), dealers (specialized art supply and hobby/craft stores), general consumer-oriented retail outlets (primarily office product superstores and chain stores), industrial concerns (photo labs, screen printers) and through specialized school supply distributors. Over the last several years, consumer-oriented retail outlets have become an increasingly important distribution channel for the Company's art/craft products. - -------- 2. Trademark of Conte S.A. -5- Sales and Marketing General The Company has over 12,000 active customers, the ten largest of which accounted for approximately 35% of its sales in fiscal 1995. Three of these ten largest customers were office products superstore chains. The largest single customer accounted for 9.4% of sales for that year. There is a continuing trend toward consolidation of wholesalers, dealers and superstores, particularly in the office products market, resulting in an increasing percentage of the Company's sales being attributable to a smaller number of customers. See Item 7 of this report. Because most of the Company's sales are made from inventory, the Company generally operates without a material backlog. The Company's sales generally are not subject to material seasonal fluctuations. See Note 16 to Consolidated Financial Statements herein. Domestic Operations Domestic marketing of the Company's office products and art/craft products is effected principally through six separate sales forces, one each for office products, furniture, computer accessory products, art/craft products, photomounting and mass market. The combined sales forces are comprised of over 30 Company salespeople and over 300 independent manufacturers' representatives. The Company maintains domestic distribution operations in Florence, Alabama; for office products; in Naugatuck, Connecticut; and Cottage Grove, Wisconsin, for art/craft products; and in Statesville, North Carolina, for both office and art/craft products. Foreign Operations The Company distributes its products in more than 60 foreign markets through its own sales force of eight area sales managers and 9 salespersons, and through over 30 independent sales agents and over 300 distributors. Sales of office products and art/craft products represented approximately 40% and 60%, respectively, of the Company's export sales in fiscal 1995, with electrical and mechanical pencil sharpeners, paper punches, staplers, X-ACTO brand knives and blades, BIENFANG paper and foam board products, and pressure sensitive and dry mount adhesive products accounting for the major portion of these sales. Sales from foreign operations in Europe included principally presentation graphics products. See Note 17 to Consolidated Financial Statements herein for further information concerning the Company's foreign operations. The Company maintains distribution operations in Ontario, Canada; Basildon, England; Kornwestheim, Germany and in Hong Kong. Foreign operations are subject to the usual risks of doing business abroad, particularly currency fluctuations and foreign exchange controls. See also Note 1 to Consolidated Financial Statements herein for information concerning hedging. -6- Manufacturing and Production The Company's operations include manufacturing and converting of products, as well as purchasing and assembly of various component parts. Excluding products for which it acts as a distributor, the vast majority of the Company's sales are of products which are either manufactured, converted or assembled by it. See Item 2 herein for information concerning the Company's major manufacturing facilities. The Company customarily has more than one source of supply for its critical raw materials and component parts and its businesses have not been materially hindered by shortages or increased prices of such items. Although higher costs were experienced, particularly during the first three quarters of fiscal 1995 for commodities, such as wood, corrugated packaging material, steel and styrene plastic, the Company began experiencing moderation of prices of some of its raw materials near the end of fiscal 1995. However, management expects the price of some of its raw materials to continue to increase in fiscal 1996. See Item 7 herein. Competition The Company does not have any single competitor which offers substantially the same overall lines of either office products or art/craft products as the Company. However, competition in a number of areas of the Company's businesses, such as electric pencil sharpeners, paper punches, staplers, office furniture, computer diskette storage and related accessory products, paints and foam board, is substantial, and some of the Company's competitors are larger and have considerably greater financial resources than the Company. Because of the fragmented nature of the office products and art/craft products businesses, the multiple markets served by the Company, and the absence of published market data, the Company generally is not able to determine with certainty its relative domestic or foreign market share for its various products. Nevertheless, the Company believes that it is among the leaders in domestic markets in a number of its products, including manual and electric pencil sharpeners; electronic staplers; metal desktop paper organizing products; BIENFANG foam board products; presentation graphics materials and equipment; X-ACTO brand knives and blades; and calligraphy products. The Company also believes that it is among the leaders in the United Kingdom picture framing and photomounting market for dry mounting products. The Company considers product performance and brand recognition to be important competitive factors in its businesses, but competitive pricing and promotional discounts also have become increasingly important factors. Trademarks, Patents and Licenses The Company's business is not dependent, to a material extent, upon any patents. However, the Company regards its many trademarks as being of substantial value in the marketing of its various products. The following trademarks mentioned in this report are owned by the Company: ACCENT MATS(R), ADEMCO-SEAL(TM), BEVIS(R), BEVIS(R) CONVERGENCE(TM), BEVIS(R) MEGAWORX(TM), BEVIS(R) ULTRAWORX(R), BEVIS(R) UNIWORX(R), BIENFANG(R), BOSTON(R), CALISE(TM), CENTAFOAM(TM), CLEAR TECH(R), COLORMOUNT(R), GARDIAN(TM), IMAGE(TM), LETTERSHOP(TM), LIT-NING(R), MEDIAMATE(R), MEDIAMATE DISCFINDER(TM), -7- MEDIAMATE(R), FASTRAC(R), MEDIAMATE(R) LASERRAK(R), MEDIAMATE ROLL'N RAK(R), PANACHE(R), PAPER KRAZE(TM), PRINT GUARD(R), PRINT MOUNT(R), SEAL(R), SEALEZE(R), SINGLE STEP(R), SPEEDBALL(R), SPEEDBALL(R) ELEGANT WRITERS(R), SPEEDBALL(R) FABRIC PAINTERS(TM), SPEEDBALL(R) PAINTERS(R), TECHMOUNT(R), THERMASHIELD(TM) and X-ACTO(R). The Company also has been granted exclusive distribution rights in designated territories with respect to various products, including CONTE drawing products; Schwan-STABILO highlighter markers and writing instruments (the distribution rights to which in the U.S. and Canada were obtained in fiscal 1994), air cleaners, fans and heaters which are manufactured by other companies and sold by the Company under the BOSTON brand name; and PERFECT DATA(3) computer cleaning products. Such rights customarily are granted for limited periods, after which they expire or may be terminated at the option of the grantor. The Company's distribution rights generally are of limited duration (the longest usually not exceeding approximately seven years) and may be terminated or expire, in certain cases, with as little as approximately six months notice from the grantor of such rights. While the Company's business is not dependent upon any of these distribution rights (no line of such distributed products having accounted for as much as 3% of the Company's net sales in fiscal 1995), the loss of the right to market certain products could have an adverse effect on the Company's profitability. Research and Development During fiscal 1995, the Company spent approximately $1.7 million on Company-sponsored research and development, as compared with approximately $1.6 million in fiscal 1994 and $1.7 million in fiscal 1993. Personnel As of February 1, 1996, the Company had approximately 2,050 full-time employees. Environmental Matters Prior to the Company's acquisition of Seal Products, Inc. ("Seal") from Bunzl plc in May 1990, it was discovered that some hazardous waste materials had been stored at Seal's premises located in Naugatuck, Connecticut. In compliance with applicable state law, this environmental condition was reported to the Connecticut Department of Environmental Protection by Bunzl. Seal, which now is a subsidiary of the Company, may be partially responsible under law for the environmental conditions on the premises and any liabilities resulting therefrom. However, in connection with the Company's acquisition of Seal, Bunzl agreed to take responsibility for correcting such environmental conditions and, for a period of seven years, to indemnify Seal and the Company for such resulting liabilities, subject to certain limitations. Bunzl is continuing the process of remediating the environmental conditions. A substantial portion of the remediation has been completed, although testing is continuing. - -------- 3. Trademark of Perfect Data Corporation. -8- The Company is also involved on a continuing basis in monitoring its compliance with environmental laws and in making capital and operating improvements necessary to comply with existing and anticipated environmental requirements. Despite its efforts, the Company has been cited for occasional violations or alleged violations of environmental laws or permits and on several occasions has been named as a potentially responsible party for remediation of sites. Expenses incurred by the Company to date relating to violations of and compliance with environmental laws and permits and site remediation have not been material. While it is impossible to predict with certainty, management currently does not foresee such expenses in the future as having a material effect on the Company's business, results of operations or financial condition. See Note 13 to Consolidated Financial Statements herein. Item 2. Properties The Company presently maintains its principal executive offices at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103 in approximately 56,000 square feet of leased space under a sublease expiring in 2002. The following table sets forth information with respect to certain of the other facilities of the Company:
Industry Primary Approximate Owned or segment function Location size leased -------- --------- -------- ----------- -------- Office Manufacturing Florence, 108,000 sq. (1) Products & Offices KY ft. bldg. on 27 acres Manufacturing, Florence, 293,000 sq. Owned Distribution AL ft. bldg. & Offices on 24 acres ------------ Art/Craft Manufacturing States- 219,000 sq. (2) Products & Offices ville, NC ft. bldg. on 13 acres Manufacturing, Naugatuck, 86,000 sq. Leased Distribution & CT ft. bldg. (exp. 2000) Offices on 15 acres Manufacturing, Basildon, 64,000 sq. Owned Distribution & England ft. in two Offices bldgs. on 3 acres ------------
-9-
Industry Primary Approximate Owned or segment function Location size leased -------- --------- -------- ----------- -------- Office Manufacturing States- 218,000 sq. Owned Products & Offices ville, ft. bldg. and Art/ NC on 16 acres Craft Products Distribution States- 320,000 sq. Leased & Offices ville, ft. bldg. (exp. 2005) NC Distribution Ontario, 59,000 sq. Leased & Offices Canada ft. bldg. (exp. 2001)
- ----------- (1) The construction and expansion of this facility was financed by the issuance of industrial revenue bonds by the City of Florence, Kentucky, which bonds have matured and been paid off. The City retains title to the property and leases it to the Company for a nominal consideration, and the Company has the option, subject to certain conditions, to purchase the property for a nominal consideration. (2) A portion of this facility was financed by the issuance of industrial revenue bonds, due 2004, by the Iredell County Industrial Facilities and Pollution Control Financing Authority. The Authority retains title to the property and leases it to the Company for rental payments equal to principal and interest payments on the bonds. The Company has the option, subject to certain conditions, to purchase the property for a nominal consideration upon payment of the bonds. At present, the above facilities generally are believed to be adequately utilized and suitable for the Company's present needs. Item 3. Pending Legal Proceedings There currently are no material pending legal proceedings (within the meaning of the Form 10-K Instructions), other than routine litigation incidental to the business of the Company, to which the Company is a party or to which any of its property is subject. See Note 13 to Consolidated Financial Statements herein and Item 1-- "Environmental Matters" herein. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the security holders of the Company during the fourth quarter of the fiscal year covered by this report. -10- Additional Information The following information is furnished in this Part I pursuant to Instruction 3 to Item 401(b) of Regulation S-K: Executive Officers of the Company
Name Age Position ---- --- -------- Robert B. Fritsch 64 President and Chief Executive Officer John W. Carney 52 Vice President, Human Resources/Strategic Planning William E. Chandler 52 Senior Vice President, Finance (Chief Financial Officer), and Secretary Spencer W. O'Meara 49 Executive Vice President and General Manager W. Ernest Precious 54 Executive Vice President and General Manager Eugene A. Stiefel 48 Vice President, Information Services
The executive officers of the Company customarily are elected annually by the Board of Directors to serve, at the pleasure of the Board, for a period of one year or until their successors are elected. All of the executive officers of the Company, except for Messrs. Chandler and Stiefel have served in varying executive capacities with the Company for over five years. Mr. Chandler was elected an executive officer of the Company in February 1993. He joined the Company in September 1992 after three years at Bally Manufacturing Corporation during which he held positions as Acting Chief Financial Officer and Vice President, Financial Operations and Controller. Prior to that, he served for three years at Household Manufacturing, Inc. as Senior Vice President of Finance, Treasurer and Chief Financial Officer. Mr. Stiefel was elected an executive officer of the Company in April 1993. He joined the Company in February 1985 and has served as Vice President, Information Services since 1987. ------------ For the purposes of calculating the aggregate market value of the shares of common stock of the Company held by nonaffiliates, as shown on the cover page of this report, it has been assumed that all the outstanding shares were held by nonaffiliates except for the shares held by directors and officers of the Company. However, this should not be deemed to constitute an admission that all directors and officers of the Company are, in fact, affiliates of the Company, or that there are not other persons who may be deemed to be affiliates of the Company. Further information concerning shareholdings of officers, directors and principal shareholders is included in the Company's definitive proxy statement filed or to be filed with the Securities and Exchange Commission. ----------- -11- PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (a) The Company's common stock is traded on the New York Stock Exchange (trading symbol "HUN"). The following table sets forth the high and low quarterly sales prices of the Company's common stock during the two most recent fiscal years (all as reported by The Wall Street Journal): Fiscal Quarter 1995 ----------------------------------------------------- First Second Third Fourth ----- ------ ----- ------ High $14 3/4 $15 1/2 $15 1/4 $18 3/8 Low 12 5/8 13 13 1/2 13 3/4 Fiscal Quarter 1994 ------------------------------------------------------- First Second Third Fourth ----- ------ ----- ------ High $18 1/4 $18 1/4 $17 $16 5/8 Low 15 1/8 15 1/4 15 1/8 14 1/4 See Note 12 to Consolidated Financial Statements herein for information concerning certain Rights which were distributed by the Company to shareholders and which currently are deemed to be attached to the Company's common stock. (b) As of February 2, 1996, there were over 800 record holders of the Company's common stock, which number does not include shareholders whose shares were held in nominee name. (c) During the past two fiscal years, the Company has paid regular quarterly cash dividends on its common stock at the following rates per share: 1995 - $.095 per quarter and 1994 - $.09 per quarter. Certain of the Company's credit agreements contain restrictions on the Company's present and future ability to pay dividends. See Notes 2 and 8 to Consolidated Financial Statements herein. -12- Item 6. Selected Financial Data The following table contains selected financial data for each of the Company's last five fiscal years. This data should be read in conjunction with the Company's Consolidated Financial Statements (and related notes) appearing elsewhere in this report and with Item 7 of this report.
Year Ended --------------------------------------------------------------------------- Dec. 3, Nov. 27, Nov. 28, Nov. 29, Dec. 1, 1995(1) 1994 1993 1992 1991(2) ------- -------- -------- -------- ------- (In thousands, except per share data) Net Sales $313,881 $288,203 $256,150 $234,929 $228,622 Income from Continuing Operations 15,335 17,197 14,928 13,302 9,586 Income from Continuing Operations Per Common Share .96 1.07 .93 .83 .60 Total Assets 182,810 173,385 156,317 144,170 151,824 Long-Term Debt 3,559 3,559 3,003 6,160 17,271 Cash Dividends Per Share .38 .36 .35 .34 .32
- --------- (1) In fiscal 1995, the Company recorded a charge to net income of approximately $3.5 million, or $.22 per share, for anticipated costs relating to organizational changes and relocation and consolidation of operations. (2) In fiscal 1991, the Company recorded a charge to net income of approximately $2.7 million, or $.17 per share, for anticipated costs relating to the relocation and consolidation of certain manufacturing and distribution operations. -13- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition The Company's financial condition was further improved in fiscal 1995 with working capital increasing to $69.1 million at the end of fiscal 1995 from $64.6 million and $47.1 million at the end of fiscal 1994 and 1993, respectively. Net cash flows of $23.4 million, provided by operating activities in fiscal 1995 combined with available cash balances, were more than sufficient to fund additions to property, plant and equipment of $9.5 million, to pay cash dividends of $6.1 million, to repurchase shares of the Company's common stock for $2.8 million primarily for use in the Company's various compensation plans, and to fund a portion ($1.9 million) of the Centafoam acquisition. The Company acquired the Centafoam business of Spicers, Ltd., a division of David S. Smith (Holdings) PLC, for cash consideration and related costs aggregating $2.8 million. Centafoam, whose facilities are located in the United Kingdom, manufactures and markets a line of styrene-based foam board products. Net cash flows provided by operating activities were $20.8 million in fiscal 1994 and $23.2 million in fiscal 1993. The return on average equity, before special charges and an accounting change discussed below, improved to 13.9% in fiscal 1995 from 13.8% in fiscal 1994 and 13.1% in fiscal 1993. The current ratio improved to 3.2 at the end of fiscal 1995 from 3.1 and 2.4 at the end of fiscal 1994 and 1993, respectively, and the percentage of debt to equity at the end of fiscal 1995 was further reduced to 3.2% from 3.5% and 5.3% for the same comparable years. The Company's current assets increased to $100.1 million at the end of fiscal 1995 from $95.3 million at the end of fiscal 1994, largely attributable to a $2.6 million increase in inventories and a $1.7 million increase in cash and cash equivalents. The increase in inventories was due principally to additional inventories of new products, the Centafoam business acquisition and the anticipated higher sales volume. Other non-current assets increased to $4.7 million at the end of fiscal 1995 from $2.4 million at the end of fiscal 1994, largely due to an increase in the cash surrender value of officers' life insurance. Current liabilities were essentially unchanged at the end of fiscal 1995 from the levels at the end of fiscal 1994. The $1.4 million decrease in income taxes payable was principally due to lower earnings and a lower effective tax rate in fiscal 1995 than in fiscal 1994. The $1.2 million increase in other accrued expenses was largely due to the accrual associated with the provision for organizational changes and relocation and consolidation of operations discussed below. Other non-current liabilities increased to $7.6 million at the end of fiscal 1995 from $5.5 million at the end of fiscal 1994 due to several factors, including the accrual associated with the provision referred to above and increases in pension liabilities. At December 3, 1995, the Company had revolving credit agreements with three banks that provided borrowing capacity totaling $45 million. There were no borrowings under these agreements at the end of fiscal 1995. -14- Recent Developments On December 19, 1995, the Company purchased from Mary F. Bartol an aggregate of 2,150,165 of the Company's common shares for a cash purchase price of $16.32 per share in a private purchase transaction. On December 21, 1995, the Company commenced a tender offer to purchase up to 3,230,000 of its common shares at $17.00 net per share in cash. Aggregate of 2,954,378 shares were tendered to and purchased by the Company in January 1996 pursuant to the tender offer. The purchase price of the common shares purchased in the tender offer and estimated expenses pursuant to the offer aggregated $51.5 million. The Company also obtained a new five-year $125 million credit facility, of which $75 million was used to finance the shares repurchased from Mary F. Bartol and in the tender offer. This new credit facility replaced the revolving credit agreements discussed above which were in effect at December 3, 1995. (See Notes 2 and 8 of the Notes to the Consolidated Financial Statements.) Management believes that funds generated from operations combined with the new credit facility will be sufficient to meet currently anticipated working capital and other capital and debt service requirements. Management currently anticipates expenditures for additions to property, plant and equipment to be approximately $11 million in fiscal 1996. If additional resources are needed, management believes that the Company could obtain funds at competitive costs. Results of Operations Comparison of Fiscal 1995 vs. 1994 The Company's 1995 fiscal year was comprised of 53 weeks, compared to 52 weeks for fiscal 1994. Net Sales and Earnings. Net sales increased 8.9% to $313.9 million in fiscal 1995 from $288.2 million in fiscal 1994. The increase was primarily the result of higher unit volume, particularly from new products, and from average selling price increases of approximately 2%. Office products sales increased 1.9% in fiscal 1995 to $163.4 million from $160.3 million in fiscal 1994 as a result of higher sales of office furniture products (up 16.6%) and desktop accessories and supplies (up 7.5%), partially offset by lower sales of mechanical and electromechanical products (down 10.2%). The sales growth in office furniture products was due primarily to higher sales of Bevis brand products, particularly folding tables, computer-related furniture, conference tables and screen panels. The sales increase in desktop accessories and supplies was the result of higher sales of MediaMate brand products and Schwan-STABILO brand products, partially offset by lower sales of Lit-Ning brand metal desk organizing products. The decrease in mechanical and electromechanical sales was largely due to lower sales of Boston brand products, particularly pencil sharpeners, manual staplers, paper punches and office machines. The decrease in Boston brand products was primarily attributable to lost distribution at some of the Company's large retail customers and to general softness in demand. Management is taking measures aimed at regaining such lost market share. Export sales of office products decreased 10.7% in fiscal 1995 as compared to fiscal 1994, primarily due to lower sales to Latin America (particularly Mexico) and to a lesser extent the Middle East and Europe. Art/craft products sales of $150.5 million for fiscal 1995 increased 17.7% from fiscal 1994 sales of $127.9 million. This increase was led -15- by higher sales of presentation graphics products, which were up 25.1% due to a combination of factors, including higher sales in Europe, growth in the digital imaging market and increases in sales of certain mounting and laminating products (e.g., Seal and Image mounting and laminating equipment and Bienfang and Centafoam brand foam boards). Sales of hobby/craft products increased 10.4%, largely due to higher sales of Speedball Elegant Writer calligraphy markers and Speedball Painters markers, as well as to the introduction of new products. Art supplies products sales were essentially unchanged in fiscal 1995 when compared to fiscal 1994. Export sales of art/craft products grew by 2.7% in fiscal 1995 from fiscal 1994. Foreign sales of art/craft products continued to increase substantially, growing 51.9% in fiscal 1995 as compared to fiscal 1994. This increase was due primarily to higher sales of presentation graphics products in Europe, which includes sales of products of Centafoam (acquired in late April, 1995). Excluding sales from the Centafoam business, foreign sales grew 33.9% in fiscal 1995. The Company has experienced a 3% general decline in the rate of orders for its products during the first two months of fiscal 1996. Management is uncertain as to the reason for this and does not know if this is indicative of a trend. Net income of $15.3 million, or $.96 per share, for fiscal 1995 decreased approximately 15% from fiscal 1994 due to several factors, including a provision in fiscal 1995 for organizational changes and relocation and consolidation of operations aggregating $5.3 million (approximately $3.5 million after income taxes, or $.22 per share) discussed below and the adoption of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," in fiscal 1994, the cumulative effect of which increased fiscal 1994 net income by $.8 million, or $.05 per share. Gross Profit. The Company's gross profit margin decreased to 37.3% of net sales in fiscal 1995 from 39.3% in fiscal 1994. The decrease was primarily the result of changes in product sales mix (i.e., higher sales for certain office furniture products and higher foreign sales, which yield lower gross profit percentages than many of the Company's other products), higher raw material costs and lower sales and production volume of Boston brand products. The gross profit percentage for foreign sales was 28.5% in fiscal 1995 and 28.7% in fiscal 1994. Higher costs of commodities, such as wood, styrene plastics and corrugated packaging materials had the greatest impact on raw material cost increases. During the latter part of fiscal 1995, the Company began to realize the positive effects of its selling price increases and to some extent, stabilization of prices of some of its raw materials. However, management expects the price of some of its raw materials to continue to increase in fiscal 1996. Selling, Shipping, Administrative and General Expenses. Selling and shipping expenses decreased to 19.1% of net sales in fiscal 1995 from 20.3% in fiscal 1994, largely as a result of lower packing and shipping expense, primarily freight expenses, and lower sales commission expenses attributable to changes in customer sales mix. Administrative and general expenses increased 3.5% to $28.3 million primarily as a result of salary and wage increases, offset partially by lower fees for professional services. -16- Provision for Organizational Changes and Relocation and Consolidation of Operations. During fiscal 1995, the Company recorded a pre-tax charge aggregating $5.3 million (approximately $3.5 million after income taxes, or $.22 per share) as a provision for costs relating to organizational changes and relocation and consolidation of certain manufacturing and distribution operations. The pre-tax charge was comprised of $2.4 million for costs expected to be incurred in connection with organizational changes being made to more effectively align the Company's organization with its markets, including the resignation and planned replacement of the Company's former Chairman and Chief Executive Officer, and $2.9 million for anticipated costs relating to the relocation and consolidation of its Hunt Data Products manufacturing and distribution operations located in Nuevo Laredo, Mexico, and Laredo, Texas, with its manufacturing facilities in Statesville, North Carolina and the move of the distribution operations of its Lit-Ning business from Florence, Kentucky, to Statesville. The relocation and consolidation of operations is expected to reduce costs and improve product quality and distribution performance. The provision included recognition of future lease obligations, write-off of property, plant and equipment, relocation costs, employee severance costs and other related costs. Approximately $2.2 million of this provision is included in liabilities as of December 3, 1995 which principally relates to future severance related payments. It is anticipated that the total pre-tax charge associated with the relocation and consolidation of operations and organizational changes will range from $6.1 million to $7.1 million, or from $.25 to $.32 per share. The remaining portion of these charges (ranging from $.03 to $.10 per share) is expected to be incurred during fiscal 1996. Interest Income. Interest income increased $229,000 in fiscal 1995 from fiscal 1994 due primarily to higher average cash balances. Provision for Income Taxes. The Company's effective tax rate decreased to 35.1% in fiscal 1995 from 36.5% in fiscal 1994. This decrease was principally a result of a reversal of valuation allowances relating to tax net operating loss carryforwards from the European operations. New Accounting Standards SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," requires changes in accounting and reporting for impairments of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used, and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 is effective for fiscal years beginning after December 15, 1995. Accordingly, the Company will adopt SFAS No. 121 when required. Management does not believe the adoption of SFAS No. 121 will have a material effect on its results of operations or financial condition. SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based upon fair value or, alternatively, permits them to continue to apply the existing accounting rules contained in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). Companies choosing not to adopt the expense recognition provisions of SFAS No. 123 are required to disclose pro forma net income and earnings per share data as if such provisions had been applied. The Company anticipates continuing to account for stock-based compensation in accordance with APB No. 25 and therefore the adoption of SFAS No. 123 will not have an impact on the Company's financial position or results of operations. -17- Environmental Matters The Company is involved, on a continuing basis, in monitoring its compliance with environmental laws and in making capital and operating improvements necessary to comply with existing and anticipated environmental requirements. Despite its efforts, the Company has been cited for occasional violations or alleged violations of environmental laws or permits and on several occasions has been named as a potentially responsible party for the remediation of sites. Expenses incurred by the Company for all years presented in the consolidated financial statements relating to violations of and compliance with environmental laws and permits and site remediation have not been material. While it is impossible to predict with certainty, management currently does not foresee such expenses in the future as having a material effect on the Company's business, results of operations or financial condition. (See Note 13 of the Notes to Consolidated Financial Statements.) Comparison of Fiscal 1994 vs. 1993 Net Sales and Earnings. Net sales increased 12.5% to $288.2 million in fiscal 1994 from $256.2 million in fiscal 1993. This increase was largely the result of higher unit volume, particularly from new products, as selling prices were essentially unchanged in fiscal 1994 from those in fiscal 1993. Sales for both of the Company's business segments, office products and art/craft products, grew by 12.5% in fiscal 1994. The office products sales increase to $160.3 million in fiscal 1994 from $142.5 million in fiscal 1993 was led by a 16.9% increase in sales of office furniture, while desktop accessories and supplies and mechanical and electromechanical products contributed increases of 12.5% and 9.8%, respectively. The office furniture sales increase was primarily due to higher sales of Bevis brand furniture. The desktop accessories and supplies sales increase was principally attributable to Schwan-STABILO highlighter markers, the exclusive distribution rights to which in the United States and Canada were obtained by the Company in fiscal 1994, and the mechanical and electromechanical products sales increase was due to higher sales of Boston brand office products. Export sales of office products increased 8.6% in fiscal 1994 as compared with sales in fiscal 1993. Art/craft products sales grew to $127.9 million in fiscal 1994 from $113.7 million in fiscal 1993 led by a 21.3% increase in sales of presentation graphics products. Sales of art supplies and hobby/craft products were essentially unchanged in fiscal 1994 from the levels in fiscal 1993. The presentation graphics products sales increase was largely the result of new products, growth in the digital imaging market, and improved economic conditions in the United Kingdom. Foreign sales of art/craft products grew 34.6%, and export sales were up 4.4% in fiscal 1994 from sales in fiscal 1993. Net income of $18 million, or $1.12 per share, in fiscal 1994 represents an increase of 20.5% over net income for fiscal 1993. The Company adopted SFAS No. 109, "Accounting for Income Taxes," in fiscal 1994, the cumulative effect of which increased net income by $.8 million, or $.05 per share. Income before the cumulative effect of this accounting change was up 15.2% from the comparable net income for fiscal 1993. Gross Profit. Gross profit, as a percentage of net sales, decreased to 39.3% in fiscal 1994 from 40.1% in fiscal 1993 due to several factors, including changes in sales mix and higher raw material costs. Higher sales of certain furniture products and higher foreign sales, which yield lower gross profit percentages than the Company's other businesses, caused most of the gross profit percentage decrease attributable to changes in sales mix. The gross -18- profit percentage for foreign sales was 28.7% in fiscal 1994 and 26.7% in fiscal 1993. Higher costs, particularly near the end of fiscal 1994, for commodities such as wood, corrugated packaging materials and styrene plastic were not offset by selling price increases due in large part to continued competitive pressures and the increasing power of superstores and other large customers in the office products area. Selling, Shipping, Administrative and General Expenses. Selling and shipping expenses, as a percentage of net sales, were reduced to 20.3% in fiscal 1994 from 20.6% in fiscal 1993 largely as a result of lower sales commission expenses attributable to changes in customer sales mix. Lower freight expenses in the fourth quarter of fiscal 1994 also accounted for a portion of the decrease. Administrative and general expenses increased 7.6% to $27.3 million in fiscal 1994 from $25.4 million in fiscal 1993. This increase was the result of several factors, including higher management incentive compensation and new product development expenses, as well as a stronger British pound sterling, which increased foreign administrative and general expenses in U.S. dollar terms. Interest Income and Expense. Interest income increased $152,000 in fiscal 1994 from fiscal 1993 due primarily to higher average cash balances. Interest expense was reduced by $157,000 in fiscal 1994 from fiscal 1993 largely as a result of debt reduction and higher capitalized interest related to additions to property, plant and equipment. Provision for Income Taxes. The Company's effective tax rate decreased to 36.5% in fiscal 1994 from 37.9% in fiscal 1993. This decrease was the result of several factors, including lower state and local income taxes. Item 8. Financial Statements and Supplementary Data Financial statements and supplementary financial information specified by this Item, together with the report of Coopers & Lybrand L.L.P. thereon, are presented following Item 14 of this report. Item 9. Disagreements on Accounting and Financial Disclosure Not applicable. PART III Incorporated by Reference The information called for by Item 10 "Directors and Executive Officers of the Registrant" (other than the information concerning executive officers set forth after Item 4 herein), Item 11 "Executive Compensation", Item 12 "Security Ownership of Certain Beneficial Owners and Management" and Item 13 "Certain Relationships and Related Transactions" is incorporated herein by reference to the Company's definitive proxy statement for its Annual Meeting of Shareholders scheduled to be held April 17, 1996, which definitive proxy statement is expected to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates. -19- PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Documents Filed as a part of the Report 1. Financial Statements: Pages ----- Report of Independent Accountants F-1 Consolidated Statements of Income for the fiscal years 1995, 1994 and 1993 F-2 Consolidated Balance Sheets, December 3, 1995 and November 27, 1994 F-3 Consolidated Statements of Stockholders' Equity for the fiscal years 1995, 1994 and 1993 F-4 Consolidated Statements of Cash Flows for the fiscal years 1995, 1994 and 1993 F-5 Notes to Consolidated Financial F-6-33 Statements 2. Financial Statement Schedule: II. Valuation and Qualifying Accounts for the fiscal years 1995, 1994 and 1993 F-34 All other schedules not listed above have been omitted, since they are not applicable or are not required, or because the required information is included in the consolidated financial statements or notes thereto. Individual financial statements of the Company have been omitted, since the Company is primarily an -20- operating company and any subsidiary companies included in the consolidated financial statements are directly or indirectly wholly-owned and are not indebted to any person, other than the parent or the consolidated subsidiaries, in an amount which is material in relation to total consolidated assets at the date of the latest balance sheet filed, except indebtedness incurred in the ordinary course of business which is not overdue and which matures in one year. 3. Exhibits: (3) Articles of incorporation and bylaws: (a) Restated Articles of Incorporation, as amended (composite) (incorp. by ref. to Ex. 4(a) to Reg. Stmt. No. 33-57105 on Form S-8) (reference also is made to Exhibit 4(b) below for the Designation of Powers, Preferences, Rights and Qualifications of Preferred Stock). (b) By-laws, as amended (incorp. by ref. to Ex. 3(b) to Form 10-Q for quarter ended May 28, 1995). (4) Instruments defining rights of security holders, including indentures:* (a) (1) Credit Agreement dated December 19, 1995 between the Company and NationsBank, N.A. (incorp. by ref. to Ex. 9(b) to the Company's Schedule 13E-4 filed with the SEC on December 21, 1995 (the "1995 Schedule 13E-4"); (2) Amendment dated as of February 1, 1996 to Credit Agreement (filed herewith); and (3) Amendment dated as of February 26, 1996 to Credit Agreement (filed herewith). (b) Rights Agreement dated as of August 8, 1990 (including as Exhibit A thereto the Designation of Powers, Preferences, Rights and Qualifications of Preferred Stock), between the Company and Mellon Bank (East), -21- N.A., as original Rights Agent (incorp. by ref. to Ex. 4.1 to August, 1990 Form 8-K) and Assignment and Assumption Agreement dated December 2, 1991, with American Stock Transfer and Trust Company, as successor Rights Agent (incorp. by ref. to Ex. 4(d) to fiscal 1991 Form 10-K). Miscellaneous long-term debt instruments and credit facility agreements of the Company, under which the underlying authorized debt is equal to less than 10% of the total assets of the Company and its subsidiaries on a consolidated basis, may not be filed as exhibits to this report. The Company agrees to furnish to the Commission, upon request, copies of any such unfiled instruments. (10) Material contracts: (a) Lease Agreement dated June 1, 1979 and First Supplemental Lease Agreement dated as of July 31, 1994 between the Iredell County Industrial Facilities and Pollution Control Financing Authority and the Company (incorp. by ref. to Ex. 10(a) to fiscal 1994 Form 10-K). (b) 1978 Stock Option Plan, as amended, of the Company (incorp. by ref. to Ex. 28(a) to Reg. Stat. No. 33-25947 on Form S-8).** (c) 1983 Stock Option and Stock Grant Plan, as amended, of the Company (filed herewith).** (d) 1993 Stock Option and Stock Grant Plan of the Company, as amended (filed herewith).** (e) 1988 Long-Term Incentive Compensation Plan of the Company (incorp. by ref. to Ex. 10(e) to fiscal 1994 Form 10-K).** (f) Form of Stock Grant Agreement between the Company and Messrs. Carney, Chandler, O'Meara and Precious (filed herewith).** -22- (g) 1994 Non-Employee Directors' Stock Option Plan (incorp. by ref. to Ex. 10(f) to fiscal 1993 Form 10-K).** (h) Loan and Security Agreement dated January 31, 1984, as amended, between the Company and Ronald J. Naples (incorp. by ref. to Ex. 10(g) to fiscal 1994 Form 10-K).** (i) Loan and Security Agreement dated April 20, 1988 between the Company and Robert B. Fritsch (incorp. by ref. to Exh 10(h) to fiscal 1994 Form 10-K).** (j) (1) Form of Change in Control Agreement between the Company and various officers of the Company (incorp. by ref. to Ex. 10(i) to fiscal 1994 Form 10-K)** and (2) list of executive officers who are parties (filed herewith).** (k) Employment-Severance Agreement between the Company and William E. Chandler (incorp. by ref. to Ex. 10(j) to fiscal 1993 Form 10-K).** (l) (1) Supplemental Executive Benefits Plan of the Company, effective April 16, 1992, and (2) related Amended and Restated Trust Agreement, effective February 17, 1993 (incorp. by ref. to Ex. 10(j) to fiscal 1992 Form 10-K).** (m) Employment-Severance arrangements with Robert B. Fritsch (filed herewith).** (n) Transition Agreement dated June 13, 1995 between the Company and Ronald J. Naples (incorp. by ref. to Form 10-Q for quarter ended Sept. 3, 1995)**. (o) Stock Purchase Agreement, dated December 19, 1996 between the Company and Mary F. Bartol (incorp. by ref. to Ex. 9(c) to the 1995 Schedule 13E-4). (11) Statement re: computation of per share earnings (filed herewith). -23- (21) Subsidiaries (incorp. by ref. to Ex. 21 to fiscal 1993 Form 10-K). (23) Consent of Coopers & Lybrand L.L.P. to incorporation by reference, in Registration Statement No.s 33-70660, 33-25947, 33-6359, 2-83144, 33-57105 and 33-57103 on Form S-8, of their report on the consolidated financial statements and schedules included in this report (filed herewith). (27) Financial Data Schedule (filed herewith). - --------------- * Reference also is made to (i) Articles 5th, 6th, 7th and 8th of the Company's composite Articles of Incorporation (Ex. 3(a) to this report), and (ii) to Sections 1, 7 and 8 of the Company's By-laws (Ex. 3 (b) to this report). ** Indicates a management contract or compensatory plan or arrangement. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the last quarter of the fiscal year covered by this report. ----------- -24- REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and the Board of Directors of Hunt Manufacturing Co.: We have audited the consolidated financial statements and the financial statement schedule of Hunt Manufacturing Co. and Subsidiaries listed in the index on page 20 of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hunt Manufacturing Co. and Subsidiaries as of December 3, 1995 and November 27, 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 3, 1995 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. As discussed in Notes 1 and 9 to the consolidated financial statements, the Company changed its method of accounting for income taxes in fiscal year 1994. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania January 15, 1996, except as to the information presented in Notes 2 and 8, for which the date is January 30, 1996 F-1 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME for the fiscal years 1995, 1994 and 1993 (In thousands except per share amounts)
1995 1994 1993 (53 weeks) (52 weeks) (52 weeks) ---------- ---------- ---------- Net sales $313,881 $288,203 $256,150 Cost of sales 196,720 174,927 153,353 -------- -------- -------- Gross profit 117,161 113,276 102,797 Selling and shipping expenses 59,960 58,572 52,831 Administrative and general expenses 28,296 27,338 25,405 Provision for organizational changes and relocation and consolidation of operations 5,342 -- -- -------- -------- -------- Income from operations 23,563 27,366 24,561 Interest expense (less $229, $354 and $283 capitalized in 1995, 1994 and 1993, respectively) (109) (85) (242) Interest income 571 342 190 Other expense, net (380) (542) (471) -------- -------- -------- Income before income taxes and cumulative effect of accounting change 23,645 27,081 24,038 Provision for income taxes 8,310 9,884 9,110 -------- -------- -------- Income before cumulative effect of accounting change 15,335 17,197 14,928 Cumulative effect of change in accounting for income taxes -- 795 -- -------- -------- -------- Net income $ 15,335 $ 17,992 $ 14,928 ======== ======== ======== Average shares of common stock outstanding 16,003 16,102 16,107 ======== ======== ======== Earnings per common share: Income before cumulative effect of accounting change $ .96 $ 1.07 $ .93 Cumulative effect of change in accounting for income taxes -- .05 -- -------- -------- -------- Net income per share $ .96 $ 1.12 $ .93 ======== ======== ========
See accompanying notes to consolidated financial statements. F-2 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 3, 1995 and November 27, 1994 (In thousands except share and per share amounts)
ASSETS 1995 1994 ------ ------ Current assets: Cash and cash equivalents $ 15,503 $ 13,807 Accounts receivable, less allowance for doubtful accounts: 1995, $2,305; 1994, $2,510 42,036 41,390 Inventories 36,131 33,550 Deferred income taxes 4,938 5,051 Prepaid expenses and other current assets 1,484 1,520 -------- -------- Total current assets 100,092 95,318 Property, plant and equipment, at cost, less accumulated depreciation and amortization 52,008 49,729 Excess of acquisition cost over net assets acquired, less accumulated amortization 18,204 17,218 Intangible assets, at cost, less accumulated amortization 7,793 8,764 Other assets 4,713 2,356 -------- -------- TOTAL ASSETS $182,810 $173,385 ======== ======== LIABILITIES Current liabilities: Current portion of long-term debt $ 766 $ 1,003 Accounts payable 10,759 9,782 Accrued expenses: Salaries, wages and commissions 5,446 5,742 Income taxes 3,064 4,464 Insurance 2,449 2,430 Compensated absences 1,673 1,741 Other 6,793 5,553 -------- -------- Total current liabilities 30,950 30,715 Long-term debt, less current portion 3,559 3,559 Deferred income taxes 4,520 4,331 Other non-current liabilities 7,588 5,546 STOCKHOLDERS' EQUITY Capital stock: Preferred, $.10 par value, authorized 1,000,000 shares (including 50,000 shares of Series A Junior Participating Preferred); none issued -- -- Common, $.10 par value, authorized 40,000,000 shares; issued: 1995 - 16,152,322 shares; 1994 - 16,130,068 shares 1,615 1,613 Capital in excess of par value 6,434 6,217 Cumulative translation adjustment (983) (639) Retained earnings 131,216 122,518 Less cost of treasury stock: 1995 - 159,159 shares; 1994 - 29,945 shares (2,089) (475) -------- -------- Total stockholders' equity 136,193 129,234 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $182,810 $173,385 ======== ========
See accompanying notes to consolidated financial statements. F-3 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY for the fiscal years 1995, 1994 and 1993 (In thousands except share and per share amounts)
Common Stock Capital Cumulative ------------------ Excess of Translation Retained Issued Treasury Par Value Adjustments Earnings ------ -------- --------- ----------- -------- Balances, November 29, 1992 (issued 16,114,848 shares; treasury 32,926 shares $1,611 $ (430) $6,045 $(1,136) $101,366 Net income 14,928 Cash dividends on common stock ($.35 per share) (5,639) Translation adjustments (359) Purchase of treasury stock (22,200 shares) (308) Exercise of stock options (issued 10,473 shares; treasury 32,875 shares, net of shares received as payment upon exercise) 2 393 113 (367) Issuance of stock grants (treasury 3,617 shares) 46 2 ------ ------- ------ ------- -------- Balances, November 28, 1993 (issued 16,125,321 shares; treasury 18,634 shares) 1,613 (299) 6,158 (1,495) 110,290 Net income 17,992 Cash dividends on common stock ($.36 per share) (5,794) Translation adjustments 856 Purchase of treasury stock (45,600 shares) (728) Exercise of stock options (issued 1,988 shares; treasury 25,925 shares, net of shares received as payment upon exercise) 416 16 25 Issuance of stock grants (issued 2,759 shares; treasury 8,364 shares) 136 43 5 ------ ------- ------ ------- -------- Balances, November 27, 1994 (issued 16,130,068 shares; treasury 29,945 shares) 1,613 (475) 6,217 (639) 122,518 Net income 15,335 Cash dividends on common stock ($.38 per share) (6,081) Translation adjustments (344) Purchase of treasury stock (204,900 shares) (2,853) Exercise of stock options (issued 8,044 shares; treasury 70,580 shares, net of shares received as payment upon exercise) 1 1,168 55 (562) Issuance of stock grants (issued 14,210 shares; treasury 5,106 shares) 1 71 162 6 ------ ------- ------ ------- -------- Balances, December 3, 1995 (issued 16,152,322 shares; treasury 159,159 shares) $1,615 $(2,089) $6,434 $ (983) $131,216 ====== ======= ====== ======= ========
See accompanying notes to consolidated financial statements. F-4 HUNT MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the fiscal years 1995, 1994 and 1993 (In thousands)
1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Net income $15,335 $17,992 $14,928 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,758 8,039 7,664 Provision for inventory obsolescence 1,778 2,083 1,598 Provision for doubtful accounts 916 921 1,022 Cumulative effect of change in accounting for income taxes -- (795) -- Deferred income taxes 410 (1,155) (456) Loss on disposals of property, plant and equipment 184 634 571 Provision (payments) for organizational changes and relocation and consolidation of operations 4,109 (132) (400) Issuance of stock under management incentive bonus and stock grant plans 240 312 48 Changes in operating assets and liabilities, net of acquisition of businesses: Accounts receivable (705) (2,609) (1,023) Inventories (4,332) (7,485) (4,639) Prepaid expenses and other current assets 44 1,124 (922) Accounts payable 529 1,352 2,847 Accrued expenses (2,240) 400 2,009 Other non-current assets and liabilities (1,660) 2,820 (50) ------- ------- ------- Net cash provided by operating activities 23,366 20,797 23,197 ------- ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (9,523) (9,305) (10,339) Acquisition of businesses 2,919 -- (1,051) Other, net (667) (620) 2 ------- ------- ------- Net cash used for investing activities (13,109) (9,925) (11,388) ------- ------- ------- Cash flows from financing activities: Proceeds from long-term debt 930 -- -- Payments of long-term debt, including current maturities (1,167) (1,600) (1,209) Purchases of treasury stock (2,853) (728) (308) Proceeds from exercise of stock options 662 331 211 Dividends paid (6,081) (5,794) (5,639) Other, net (20) (45) (49) ------- ------- ------- Net cash used for financing activities (8,529) (7,836) (6,994) ------- ------- ------- Effect of exchange rate changes on cash and cash equivalents (32) (7) (50) ------- ------- ------- Net increase in cash and cash equivalents 1,696 3,029 4,765 Cash and cash equivalents, beginning of year 13,807 10,778 6,013 ------- ------- ------- Cash and cash equivalents, end of year $15,503 $13,807 $10,778 ======= ======= =======
See accompanying notes to consolidated financial statements. F-5 HUNT MANUFACTURING CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share and per share amounts) ----- 1. Summary of Significant Accounting Policies: ------------------------------------------ Basis of Presentation: --------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. The Company's fiscal year ends on the Sunday nearest the end of November. Fiscal year 1995 ended December 3, 1995; fiscal year 1994 ended November 27, 1994 and fiscal year 1993 ended November 28, 1993. Fiscal year 1995 comprised 53 weeks; fiscal years 1994 and 1993 comprised 52 weeks. Cash Equivalents: ---------------- The Company considers all highly liquid temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Inventories: ----------- Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for over half of the inventories and by the first-in, first-out (FIFO) method for the remainder. The Company uses the FIFO method of inventory valuation for certain acquired businesses because the related products and operations are separate and distinct from the Company's other businesses. Property, Plant and Equipment: ----------------------------- Expenditures for additions and improvements to property, plant and equipment are capitalized, and normal repairs and maintenance are charged to expense as incurred. The related cost and accumulated depreciation of depreciable assets disposed of are eliminated from the accounts, and any profit or loss is reflected in other expense, net. Excess of Acquisition Cost Over Net Assets Acquired and Intangible Assets: ------------------------------------------------------------------ Excess of acquisition cost over net assets acquired relates principally to the Company's acquisitions of X-Acto (1981), Bevis Custom Tables, Inc. (1985), the Graphic Arts Group of Bunzl plc (1990) and Centafoam (1995). The Company's policy is to record an impairment loss against the net unamortized excess of acquisition cost over net assets acquired and net intangible assets in the period when it is determined that the carrying amount of the net assets may not be recoverable. The Company F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 1. Summary of Significant Accounting Policies (continued): ------------------------------------------------------ Excess of Acquisition Cost Over Net Assets Acquired and Intangible Assets (continued): ------------------------------------------------------------------ performs this evaluation on a quarterly basis. This determination includes evaluation of factors such as current market value, future asset utilization, business climate and future net cash flows (undiscounted and without interest) expected to result from the use of the net assets. Depreciation and Amortization: ----------------------------- Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful life of the asset as follows: buildings, 12 to 40 years; machinery and equipment, four to 12 years; and leasehold improvements over the lease term. Depreciation for tax purposes is computed principally using accelerated methods. The excess of acquisition cost over net assets acquired is amortized on a straight-line basis over periods ranging from 20 to 40 years. The costs of intangible assets are amortized on a straight-line basis over their respective estimated useful lives, ranging from five to 30 years. Amortization of assets under capital leases which contain purchase options is provided over the assets' useful lives. Other capital leases are amortized over the terms of the related leases or asset lives, if shorter. Currency Translation: -------------------- The assets and liabilities of subsidiaries having a functional currency other than the U.S. dollar are translated at the fiscal year-end exchange rate, while elements of the income statement are translated at the weighted average exchange rate for the fiscal year. The cumulative translation adjustment is recorded as a separate component of stockholders' equity. Gains and losses on foreign currency transactions are included in the determination of net income and are reflected in other expense, net. Such gains and losses were not material in any of the years presented in the consolidated financial statements. Income Taxes: ------------ Effective November 29, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The adoption of SFAS No. 109 changed the Company's method of accounting for income taxes from the deferral method under Accounting Principles Board Opinion No. 11 to an asset/liability approach. The adoption of F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 1. Summary of Significant Accounting Policies (continued): ------------------------------------------------------ Income Taxes (continued): ------------------------ SFAS No. 109 has been recognized as the effect of a change in accounting principle and increased net income in fiscal 1994 by $795, or $.05 per share. The increase in net income results primarily from adjusting deferred tax balances to current tax rates. Financial statements for fiscal 1993 have not been restated. Hedging: ------- In fiscal year 1995, the Company adopted SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments." Derivative financial instruments are used to hedge risk caused by fluctuating currency. The Company periodically enters into forward exchange contracts to hedge foreign currency transactions for periods generally consistent with its committed exposure. These transactions were not material in any of the years presented in the consolidated financial statements. Cash flows from hedges are classified in the statement of cash flows in the same category as the item being hedged. The Company does not hold or issue financial instruments for trading purposes. Earnings Per Share: ------------------ Earnings per share are calculated based on the weighted average number of common shares outstanding. The effect of outstanding stock options and stock grants is not material and has not been included in the calculation. Employee Benefit Plans: ---------------------- The Company and its subsidiaries have non-contributory, defined benefit pension plans covering the majority of their employees. It is the Company's policy to fund pension contributions in accordance with the requirements of the Employee Retirement Income Security Act of 1974. The benefit formula used to determine pension costs is the final-average-pay method. In fiscal year 1995, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires the accrual of postemployment benefits if the obligation is attributable to employees' services already rendered, employees' rights to those benefits accumulate or vest, payment of the benefits is probable and the amount of the benefits can be reasonably estimated. The adoption of this standard did not have a material effect on the Company's results of operations or financial condition. F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 1. Summary of Significant Accounting Policies (continued): ------------------------------------------------------ Environmental Matters: --------------------- Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are also expensed. The Company records liabilities for environmental costs when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. The liability for future environmental remediation costs is evaluated on a quarterly basis by management. Generally, the timing of these accruals coincides with the earlier of the completion of a feasibility study or the Company's commitment to a plan of action based on the then-known facts. Recoveries of expenditures are recognized as a receivable only when they are estimable and probable. 2. Subsequent Events: ----------------- On December 19, 1995, the Company purchased from Mary F. Bartol an aggregate of 2,150,165 of the Company's common shares for a cash purchase price of $16.32 per share, or $35.1 million in a private transaction. Mrs. Bartol is the widow of George E. Bartol III, the late Chairman of the Board, the mother-in-law of Gordon A. MacInnes, the current Chairman of the Board, and the mother of Victoria B. Vallely, another Director of the Company. On December 21, 1995, the Company commenced a tender offer to purchase up to 3,230,000 of the Company's common shares at a price of $17.00 net per share in cash. The Company purchased 2,954,378 common shares in January 1996 under the terms and subject to conditions of the tender offer. The aggregate purchase price of the common shares and estimated expenses pursuant to the offer was $51.5 million. On December 19, 1995 the Company also obtained a new five-year $125 million bank credit facility, consisting of a revolving credit facility in an amount up to $81.725 million, and an amortizing term loan in the amount of $43.275 million. This new credit facility replaces the revolving credit agreement discussed in Note 8 in effect at December 3, F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 2. Subsequent Events (continued): ----------------------------- 1995. The Company used borrowings of $31.725 million under the revolving credit facility and $43.275 million pursuant to the term loan, together with cash on hand, to fund the purchase of common shares from Mrs. Bartol and common shares pursuant to the tender offer. The balance of the new credit facility will be available for working capital, strategic acquisitions, and general corporate purposes. The revolving credit facility matures on December 31, 2000. The term loan will amortize in twenty quarterly installments, consisting of four installments each of $1.202 million, $1.683 million, $2.404 million, $2.645 million, and $2.885 million, respectively. The first installment is due and payable March 31, 1996, and the last installment is due and payable December 31, 2000. The interest rates under the revolving credit facility (6.14% at January 30,1996) are at a base rate (defined as the higher of (i) the applicable prime rate of the bank and (ii) the federal funds rate plus 50 basis points) or, at the option of the Company, LIBOR plus a margin of between 40 and 72.5 basis points, the margin in each case to be adjusted quarterly based on the Company's leverage ratio (as defined in the new credit facility). The interest rates under the term loan (6.2% at January 30, 1996) are at the base rate or, at the option of the Company, LIBOR plus a margin of between 55 and 87.5 basis points, the margin to be adjusted quarterly based on the Company's leverage ratio. Commitment fees are payable to the bank under the new credit facility with respect to the aggregate amount of the revolving credit facility equal to a rate per annum of 15 basis points, payable quarterly. The Company will also pay to the bank an administration fee equal to $50 per annum. The new credit facility also contains certain representations, warranties, covenants, and conditions, including, but not limited to, requirements that the Company comply with certain financial covenants, including interest coverage, fixed charge coverage and leverage ratios, and maintenance of certain levels of net worth, and also contains limitations on liens, indebtedness, investments, changes in lines of business, acquisitions, transactions with affiliates, and modifications of certain documents. In addition, the new credit facility prohibits dividends and other distributions to shareholders unless a minimum fixed charge coverage ratio is satisfied after giving effect to such dividend or distribution; however, the Company does not presently anticipate that this dividend restriction will require any reduction from the Company's current dividend level. F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 2. Subsequent Events (continued): ----------------------------- The following table sets forth the unaudited pro forma effects on the financial results of the Company of the consummation of the purchase of common shares from Mary F. Bartol and the tender offer and related financing. The summary pro forma income statement data for the year ended December 3, 1995 assumes that the repurchase of common shares by the Company from Mary F. Bartol and the tender offer and the related financing had occurred as of November 28, 1994. The summary pro forma balance sheet data assumes that the repurchase of common shares by the Company from Mary F. Bartol and the tender offer and related financing had occurred as of December 3, 1995. Summary Pro Forma Financial Information (unaudited)
Pro forma Pro forma As reported adjustment as adjusted ----------- ---------- ----------- Income statement: Net income $ 15,335 $(3,227)(a) $ 12,108 Net income per share .96 .14 (b) 1.10 Balance sheet: Working capital $ 69,142 $(16,754)(c) $ 52,388 Total assets 182,810 (11,070)(c) 171,740 Total long-term debt 4,325 75,000 (c) 79,325 Shareholders' equity 136,193 (86,070)(c) 50,123
(a) Net increases, net of corresponding tax effects, in interest expense relating to the utilized portion of the new $125 million credit facility, as well as amortization of fees incurred in connection with the placement of the new credit facility and administrative fees associated therewith. F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 2. Subsequent Events (continued): ----------------------------- (b) Per share data adjusted to reflect the adjustments described in notes (a) and (c). Pro forma average number of shares outstanding during the year ended December 3, 1995 was 10,996,000. (c) Reflects the purchase of the Mary F. Bartol shares and the shares pursuant to the tender offer and related borrowings under the new credit facility. 3. Provision for Organizational Changes and Relocation and Consolidation of Operations: --------------------------------------------------------------------- During fiscal 1995, the Company recorded a pre-tax charge aggregating $5.3 million (approximately $3.5 million after income taxes, or $.22 per share) as a provision for costs relating to organizational changes and relocation and consolidation of certain manufacturing and distribution operations. The pre-tax charge was comprised of $2.4 million for costs expected to be incurred in connection with organizational changes being made to more effectively align the Company's organization with its markets including the resignation and planned replacement of the Company's former Chairman and Chief Executive Officer, and $2.9 million for anticipated costs relating to the relocation and consolidation of its Hunt Data Products manufacturing and distribution operations located in Nuevo Laredo, Mexico, and Laredo, Texas, with its manufacturing facilities in Statesville, North Carolina, and the move of the distribution operations of its Lit-Ning business from Florence, Kentucky, to Statesville. The relocation and consolidation of operations is expected to reduce costs and improve product quality and distribution performance. The provision included recognition of future lease obligations, write-off of property, plant, and equipment, relocation costs, employee severance costs, and other related costs. Approximately $2.2 million of this provision is included in liabilities as of December 3, 1995 which principally relates to future severance related payments. It is anticipated that the total pre-tax charge associated with the relocation and consolidation of operations and organizational changes will range from $6.1 million to $7.1 million, or from $.25 to $.32 per share. The remaining portion of these charges (ranging from $.03 to $.10 per share) is expected to be incurred during fiscal 1996. 4. Business Acquisition: -------------------- On April 29, 1995, the Company acquired the Centafoam business of Spicers, Ltd., a division of David S. Smith (Holdings) PLC, for cash F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 4. Business Acquisition (continued): -------------------------------- consideration and related costs aggregating approximately $2.8 million. Centafoam, whose facilities are located in the United Kingdom, manufactures and markets a line of styrene-based foam board products. Pro forma information is not presented as this acquisition had no material effect on the Company's results of operations or financial condition for fiscal years 1995 or 1994. 5. Inventories: ----------- The classification of inventories at the end of fiscal years 1995 and 1994 is as follows: 1995 1994 ------- ------- Finished goods $18,118 $17,242 Work in process 5,452 5,807 Raw materials 12,561 10,501 ------- ------- $36,131 $33,550 ======= ======= Inventories determined under the LIFO method were $18,446 and $17,276 at December 3, 1995 and November 27, 1994, respectively. The current replacement cost for these inventories exceeded the LIFO cost by $6,226 and $5,881 at December 3, 1995 and November 27, 1994, respectively. Inventory quantities were reduced in fiscal years 1995, 1994 and 1993 resulting in a liquidation of certain LIFO inventories carried at lower costs prevailing in prior years. The effect of these reductions was to increase net income by $115, or $.01 per share, $315, or $.02 per share and $101, or $.01 per share, in fiscal years 1995, 1994 and 1993, respectively. 6. Property, Plant and Equipment: ----------------------------- Property, plant and equipment at the end of fiscal years 1995 and 1994 is as follows: F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 6. Property, Plant and Equipment (continued): -----------------------------------------
1995 1994 ---- ---- Land and land improvements $ 3,823 $ 3,859 Buildings 17,655 17,683 Machinery and equipment 70,874 66,708 Leasehold improvements 907 661 Construction in progress 6,860 6,981 --------- ------- 100,119 95,892 Less accumulated depreciation and amortization 48,111 46,163 ------- ------- $ 52,008 $49,729 ======= ======
Depreciation expense was $6,669, $6,001, and $5,649 for fiscal years 1995, 1994 and 1993, respectively. 7. Excess of Acquisition Cost Over Net Assets Acquired and Intangible Assets: ------------------------------------------------------------------ Excess of acquisition cost over net assets acquired at the end of fiscal years 1995 and 1994 is as follows:
1995 1994 ---- ---- Excess of acquisition cost over net assets acquired $ 21,902 $20,298 Less accumulated amortization 3,698 3,080 -------- -------- $ 18,204 $17,218 ======== ========
Intangible assets at the end of fiscal years 1995 and 1994 are as follows:
1995 1994 ---- ---- Covenants not to compete $ 11,646 $11,648 Customer lists 1,510 1,510 Patents 1,533 1,533 Trademarks 1,411 1,418 Licensing agreements 1,154 1,154 Other 2,137 1,829 -------- ------- 19,391 19,092 Less accumulated amortization 11,598 10,328 -------- ------- $ 7,793 $ 8,764 ======== =======
F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 7. Excess of Acquisition Cost Over Net Assets Acquired (continued): --------------------------------------------------------------- New Accounting Standard: ----------------------- SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," requires changes in accounting and reporting for impairments of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used, and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 is effective for fiscal years beginning after December 15, 1995. Accordingly, the Company will adopt SFAS No. 121 when required. Management does not believe the adoption of SFAS No. 121 will have a material effect on its results of operations or financial condition. 8. Debt: ---- Credit Agreements and Lines of Credit: ------------------------------------- At December 3, 1995, the Company had revolving credit agreements with three banks that provide for unsecured borrowings up to $45 million. There were no borrowings under these agreements at December 3, 1995 or November 27, 1994. On December 19, 1995, the Company entered into a new five-year $125 million credit facility, consisting of a revolving credit facility in an amount up to $81.725 million, and an amortizing term loan in the amount of $43.275 million. This new credit facility agreement replaced the revolving credit agreements discussed above which were in effect at December 3, 1995. (See Note 2.) Long-Term Debt: -------------- Long-term debt at the end of fiscal years 1995 and 1994 is as follows:
1995 1994 ---- ---- Term loan -- $ 938 Line of credit (a) $ 766 -- Capitalized lease obligation (See Note13) 2,000 2,000 Industrial development revenue bond (b) 1,559 1,559 Industrial development revenue bond -- 65 ------- ------- 4,325 4,562 Less current portion 766 1,003 ------- ------- $ 3,559 $ 3,559 ======= =======
F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 8. Debt (continued): --------------- Long-Term Debt (continued): ------------------------- (a) This line of credit is payable in April 1996. The interest is at a floating rate based on LIBOR (7.4375% at December 3, 1995). (b) This industrial development revenue bond has a maturity date of June 15, 1999. The interest rate (5.6875% at December 3, 1995) is 65% of the lending bank's average daily prime rate. The terms of certain financing agreements in effect at December 3, 1995 (but since terminated) contain, among other provisions, requirements for maintaining certain working capital and other financial ratios and restrictions on incurring additional indebtedness and obligate the Company to equally and ratably collateralize the indebtedness under such agreements if the Company grants or assumes certain liens on its assets. Under the most restrictive covenants, dividends and purchases of capital stock of the Company may not exceed, on a cumulative basis, $2 million plus cumulative net income of the Company at any time during the period beginning November 30, 1987. As of December 3, 1995, $73 million was available to the Company under this provision for future cash dividends and future purchases of its own capital stock. The capitalized lease obligation is collateralized by the property, plant and equipment described in Note 13. There are no maturities of long-term debt, including the capitalized lease, for two fiscal years subsequent to December 1, 1996 on debt in effect as of that date. In fiscal 1999 there will be an aggregate maturity of $1,559. (See Note 2 for other maturities.) 9. Income Taxes: ------------ Income before provision for income taxes consists of the following:
1995 1994 1993 ---- ---- ---- Domestic $19,999 $24,935 $21,758 Foreign 3,646 2,146 2,280 ------- ------- ------- $23,645 $27,081 $24,038 ======= ======= =======
F-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 9. Income Taxes (continued): ------------------------ The provision for income taxes consists of the following: 1995 1994 1993 ---- ---- ---- Currently payable: Federal $ 7,084 $ 9,863 $ 8,406 State 707 1,009 877 Foreign 109 167 283 -------- -------- -------- 7,900 11,039 9,566 Deferred 410 (1,155) (456) -------- -------- -------- $ 8,310 $ 9,884 $ 9,110 ======== ======== ======== The following is a reconciliation of the statutory federal income tax rate with the Company's effective income tax rate:
1995 1994 1993 ---- ---- ---- Statutory federal rate 35.0% 35.0% 34.9% State income taxes, net of federal tax benefit 1.8 2.1 2.2 Tax benefit of loss carryforwards of foreign subsidiaries (2.3) (.4) -- Other, net .6 (.2) .8 ---- ---- ---- Effective tax rate 35.1% 36.5% 37.9% ==== ==== ====
Effective November 29, 1993, the Company adopted SFAS No. 109. (See Note 1.) F-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 9. Income Taxes (continued): ------------------------ The significant components of deferred tax assets and liabilities at December 3, 1995 and November 27, 1994 consist of:
1995 1994 -------------------------- -------------------------- Assets Liabilities Assets Liabilities ------ ----------- ------ ----------- Inventories $ 2,138 -- $ 2,609 -- Accrued expenses 3,277 $ 499 2,705 $ 443 Allowance for doubtful accounts 746 -- 901 -- Net operating loss carryforwards-foreign 207 -- 821 -- Pensions 1,014 441 766 271 Net operating loss carryforwards-states 347 -- 313 -- Depreciation and amortization 759 6,701 497 6,044 ------- ------- ------- ------- 8,488 7,641 8,612 6,758 Valuation allowance (429) -- (1,134) -- ------- ------- ------- ------- $ 8,059 $ 7,641 $ 7,478 $ 6,758 ======= ======= ======= =======
As of December 3, 1995, the Company had foreign net operating loss carry-forwards of approximately $600 which may be carried forward indefinitely, approximately $300 of which were acquired in connection with business acquisitions. To the extent that net operating loss carryforwards acquired in connection with business acquisitions are utilized in the future and the associated valuation allowance reduced, the tax benefit thereof will be allocated to reduce excess of acquisition cost over net assets acquired related to the acquisition. The valuation allowance of approximately $400 relates to net operating losses which are uncertain as to realizability as of December 3, 1995. The net change in the total valuation allowance for the year ended December 3, 1995 was a decrease of approximately $700. The Company has recognized approximately $130 of deferred tax assets relating to the likely future utilization of net operating losses. Of this amount, approximately $100 relates to net operating losses acquired in connection with business acquisitions. F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 9. Income Taxes (continued): ------------------------ Deferred income taxes at November 28, 1993 relate to the following timing differences between amounts reported for financial accounting and income tax purposes: Depreciation $ 53 Provision for relocation and consolidation of operations 61 Other, net (570) ----- $(456) ===== 10. Employee Benefit Plans: ---------------------- Pension Plans: ------------- Net pension costs for fiscal years 1995, 1994 and 1993 consist of the following:
1995 1994 1993 ---- ---- ---- Service cost-benefits earned during the period $ 1,901 $ 2,049 $ 1,580 Interest cost on projected benefit obligation 2,387 2,155 1,852 Actual return on plan assets (4,749) (1,031) (1,863) Net amortization and deferral 2,643 (759) 107 ------- ------- ------- Net pension costs $ 2,182 $ 2,414 $ 1,676 ======= ======= =======
Net amortization and deferral consists of the deferral of the excess of actual return on assets over estimated return and amortization of the net unrecognized transition asset on a straight-line basis, principally over 15 years. F-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 10. Employee Benefit Plans (continued): ---------------------------------- Pension Plans (continued): ------------------------- The funded status of the Company's pension plans at September 30, 1995 and 1994 (dates of actuarial valuations) is as follows:
1995 1994 ------------------------- ------------------------- Overfunded Underfunded Overfunded Underfunded ---------- ----------- ---------- ----------- Plan assets at fair value $ 32,192 $ 728 $ 26,227 $ 643 -------- -------- -------- -------- Actuarial present value of benefit obligations: Vested 23,324 2,429 18,434 1,715 Non-vested 79 390 67 185 -------- -------- -------- -------- Accumulated benefit obligation 23,403 2,819 18,501 1,900 Effect of increase in compensation 8,634 1,396 7,999 818 -------- -------- -------- -------- Projected benefit obligation 32,037 4,215 26,500 2,718 -------- -------- -------- -------- Projected benefit obligation less than (in excess of) plan assets 155 (3,487) (273) (2,075) Unrecognized net (gain) loss 123 816 (7) 89 Unrecognized transition asset (1,457) (16) (1,668) (19) Unrecognized prior service cost 495 1,344 754 1,102 Minimum liability adjustment -- (763) -- (355) -------- -------- -------- -------- Pension liability $ (684) $ (2,106) $ (1,194) $ (1,258) ======== ======== ======== ========
Pension costs are determined using the assumptions as of the beginning of the year. The funded status is determined using the assumptions as of the date of the actuarial valuation and is deemed overfunded or underfunded based on a comparison of the plan assets at fair value with the accumulated benefit obligation. Plan assets consist principally of common stock and U.S. Government and corporate obligations. F-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 10. Employee Benefit Plans (continued): ---------------------------------- Pension Plans (continued): ------------------------- Significant assumptions as of the dates of actuarial valuations include:
1995 1994 1993 ----- ---- ---- Discount rate 7.50% 8.00% 7.00% Rate of increase in compensation levels 6.00% 6.00% 6.00% Expected long-term rate of return on plan assets 7.50% 7.50% 7.50%
Supplemental Executive Benefits Plan: ------------------------------------ The Company has instituted a nonqualified, Supplemental Executive Benefits (retirement) Plan covering all officers. Expenses of $505, $394 and $331 in fiscal years 1995, 1994 and 1993, respectively, relating to this plan were actuarially determined and are included in the pension costs described above. In 1994 the Company added an elective salary deferral feature to this plan. Contributions to this portion of the plan by the Company were $32 for fiscal 1995. Employee Savings Plan: --------------------- The Company has a defined contribution 401(k) plan available to a majority of its employees in the United States. For participating employees, the Company matches 25 cents for each dollar contributed up to a maximum of 6% of pre-tax compensation, subject to limitations of the plan and the Internal Revenue Code. Contributions to the 401(k) plan by the Company were $433, $407 and $379 for fiscal years 1995, 1994 and 1993, respectively. F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 11. Stock Option, Stock Grant and Long-Term Incentive Compensation Plans: -------------------------------------------------------------- In 1993 the Company adopted the 1993 Stock Option and Stock Grant Plan which replaced the expired 1983 Stock Option and Stock Grant Plan. The 1993 plan authorizes the issuance of up to 1,750,000 common shares, of which up to 525,000 may be issued in the form of stock grants. The terms of the 1993 plan are essentially similar to the terms of the 1983 plan described below. The Company's 1983 Stock Option and Stock Grant Plan and the 1978 Stock Option Plan expired by their terms in February 1993 and November 1988, respectively, and, while incentive stock options granted under them remain outstanding, no further options may be granted under these two plans. Under the 1983 plan, common shares were authorized for the granting of incentive stock options, nonqualified stock options and stock grants to key employees, provided that stock grants may be made for no more than 373,125 common shares. The option price of options granted under the plan may not be less than the market value of the shares at the date granted. Options may be granted for terms of between two and ten years and generally become exercisable not less than one year following the date of grant. Stock grants under the 1983 plan are subject to a vesting period or periods of between one and five years from the date of grant. Common shares are not actually issued to a grantee until such shares have vested under the plan. The plan also provides for the payment of an annual cash bonus to recipients of stock grants in an amount equal to the cash dividends which would have been received had the shares not yet vested under the grant been actually held by the recipients. Under the 1978 plan, options for 632,813 common shares were authorized for the granting of options to key employees at option prices not less than the market value of the common shares at the date of grant. Options granted under this plan have terms of not more than ten years and generally become exercisable not less than one year following the date of grant. Payment upon exercise of stock options under the 1993, 1983 and 1978 plans may be by cash and/or by the Company's common stock in an amount equivalent to the market value of the stock at the date exercised. F-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 11. Stock Option, Stock Grant and Long-Term Incentive (continued): ------------------------------------------------------------- A summary of options under the Company's stock option plans is as follows:
1993 Plan 1983 Plan --------- --------- 1995 1994 1995 1994 ---- ---- ---- ---- Outstanding, beginning of year 363,400 -- 730,003 779,004 Options granted 317,300 388,100 -- -- Options exercised (at an average price per share of $9.55 and $12.49, respectively) -- -- (89,561) (31,501) Options expired -- -- -- -- Options terminated (45,900) (24,700) (8,600) (17,500) ---------- ---------- ---------- ---------- Outstanding, end of year 634,800 363,400 631,842 730,003 ========== ========== ========== ========== Average option price per share $ 15.05 $ 15.79 $ 13.95 $ 13.44 Outstanding exercisable options, end of year -- -- 631,842 596,803 Shares reserved for future stock options and grants 1,115,200 1,386,600 -- --
In 1993 there were 102,282 and 855 options exercised at an average price of $10.47 and $6.22 under the 1983 and 1978 plans, respectively. At the end of both 1995 and 1994 there remained 2,638 outstanding exercisable options at an average option price per share of $10.58 relating to the 1978 plan. The Company's 1988 Long-Term Incentive Compensation Plan provides for the granting to management-level employees of long-term incentive awards, which are payable in cash and/or by the Company's common stock at the end of a designated performance period of from two to five years, based upon the degree of attainment of pre-established performance standards during the performance period. A maximum of 180,000 shares are authorized for issuance under this plan. As of the end of fiscal 1995, an aggregate of 85,122 shares had been earned under this plan (19,114, 17,042 and 13,394 shares in fiscal years 1995, 1994 and 1993, respectively, and 35,572 shares in all previous years), and an aggregate of 41,558 shares were subject to outstanding unvested grants. There is no stated limitation on the aggregate amount of cash payable under this plan, but the maximum amount (in cash and/or shares) which may be paid to F-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 11. Stock Option, Stock Grant and Long-Term Incentive (continued): ------------------------------------------------------------- a participant under all long-term incentive awards under the plan with respect to the same performance period may not exceed 125% of the participant's base salary in effect at the time the award initially was made. The charges to administrative and general expenses relating to this plan were $186, $532 and $563 in fiscal years 1995, 1994 and 1993, respectively. In fiscal 1994, the Company adopted the 1994 Non-Employee Directors' Stock Option Plan authorizing the granting of up to an aggregate of 90,000 common shares to non-officer directors of the Company. Options to purchase an aggregate of 45,000 common shares at $16.875 per share were automatically granted in January 1994 in equal amounts to each of the non-officer directors of the Company. Options granted under this plan extend for a term of ten years and become exercisable at the rate of 20% per year over five years commencing one year after the date of grant. No other options have been granted and as of December 3, 1995 no options have been exercised. Other Grants: ------------ During 1995 the Company made stock grants in the amount of 84,759 common shares to certain officers and other employees. By their terms, these grants will vest at varying times during 1997. The charge to administrative and general expense with respect to these grants was $310 in fiscal year 1995. New Accounting Standard: ----------------------- SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based upon fair value or, alternatively, permits them to continue to apply the existing accounting rules contained in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). Companies choosing not to adopt the expense recognition provisions of SFAS No. 123 are required to disclose pro forma net income and earnings per share data as if such provisions had been applied. The Company anticipates continuing to account for stock-based compensation in accordance with APB No. 25 and therefore the adoption of SFAS No. 123 will not have an impact on the Company's financial position or results of operations. 12. Shareholders' Rights Plan: ------------------------- In 1990 the Company adopted a Shareholders' Rights Agreement and declared a dividend of one right (a "Right") for each outstanding share of the Company's common shares held of record as of the close of business on August 22, 1990. F-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 12. Shareholders' Rights Plan (continued): ------------------------------------- The Rights initially are deemed to be attached to the common shares and detach and become exercisable only if (with certain exceptions and limitations) a person or group attempts to obtain beneficial ownership of 15% or more of the Company's common shares or is determined to be an "adverse person" by the Board of Directors of the Company. Each Right, if and when it becomes exercisable, initially will entitle holders of the Rights to purchase one one-thousandth of a share of Junior Participating Preferred Shares (Series A, of which 50,000 shares currently are authorized for issuance) for $60, subject to adjustment. The Rights will convert into the right to purchase common shares or other securities or property of the Company or an acquiring company in certain other potential or actual takeover situations. The Rights are redeemable by the Company at $.01 per Right in certain circumstances and expire, unless earlier exercised or redeemed, on December 31, 2000. 13. Commitments and Contingencies: ----------------------------- Leases: ------ The capitalized lease obligation (see Note 8) represents the amount payable under a lease which is, in substance, an installment purchase. Property, plant and equipment includes the following assets under a capital lease: 1995 1994 ---- ---- Land $ 314 $ 314 Buildings 2,632 2,632 Machinery and equipment 1,009 1,009 Accumulated depreciation (2,853) (2,746) ------- ------- $ 1,102 $ 1,209 ======= ======= The Company has the option to purchase the above assets at any time during the term of the lease for amounts sufficient to redeem and retire the underlying lessor debt obligation. The capitalized lease obligation has one principal payment at maturity on June 15, 2004. The minimum rental commitments under all noncancellable leases as of December 3, 1995 are as follows: F-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 13. Commitments and Contingencies (continued): ---------------------------------------- Leases (continued): ------------------ Fiscal Operating Period Leases ------ --------- 1996 $ 3,744 1997 3,145 1998 2,701 1999 2,646 2000 2,636 Thereafter 8,248 ------- Minimum lease payments $23,120 Rent expense, including related real estate taxes charged to operations, amounted to $4,637, $3,912 and $4,217 for fiscal years 1995, 1994 and 1993, respectively. Contingencies: ------------- The Company has employment/severance (change in control) agreements with its officers under which severance payments and benefits would become payable in the event of specified terminations of employment following a change in control (as defined) of the Company. The Company also has a termination policy applicable to other employees which provides severance payments and benefits in the event of certain terminations of employment. In the event of a change in control of the Company and subsequent termination of all employees, the maximum contingent severance liability would have been approximately $16.6 million at December 3, 1995. Prior to the acquisition of the Graphic Arts Group by the Company from Bunzl plc in May 1990, it was discovered that some hazardous waste materials had been stored on the premises of one of the Graphic Arts Group companies, Seal, located in Naugatuck, Connecticut. In compliance with applicable state law, this environmental condition was reported to the Connecticut Department of Environmental Protection by Bunzl. Seal, which is now a subsidiary of the Company, may be partially responsible under law for the environmental conditions on the premises and any liabilities resulting therefrom. However, in connection with the Company's acquisition of Seal, Bunzl agreed to take responsibility for correcting such environmental conditions and, for a period of seven years, to indemnify Seal and the Company for such resulting liabilities, subject to certain limitations. Management believes that this contingency will not have a material effect on the Company's results of operations or financial condition. F-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 13. Commitments and Contingencies (continued): ----------------------------------------- Contingencies (continued): ------------------------- The Company is also involved on a continuing basis in monitoring its compliance with environmental laws and in making capital and operating improvements necessary to comply with existing and anticipated environmental requirements. Despite its efforts, the Company has been cited for occasional violations or alleged violations of environmental laws or permits and on several occasions has been named as a potentially responsible party for the remediation of sites. Expenses incurred by the Company to date relating to violations of and compliance with environmental laws and permits and site remediation have not been material. While it is impossible to predict with certainty, management currently does not foresee such expense in the future as having a material effect on the Company's business, results of operations or financial condition. There are other contingent liabilities with respect to product warranties, legal proceedings and other matters occurring in the normal course of business. In the opinion of management, all such matters are adequately covered by insurance or by accruals, and if not so covered, are without merit or are of such kind, or involve such amounts, as would not have significant effect on the financial condition or results of operations of the Company, if disposed of unfavorably. 14. Research and Development: ------------------------ Research and development expenses were approximately $1,705, $1,606 and $1,657 in fiscal years 1995, 1994 and 1993, respectively. 15. Cash Flow Information: --------------------- Cash payments for interest and income taxes (net of refunds) were as follows: 1995 1994 1993 ---- ---- ---- Interest paid $ 282 $ 408 $ 580 Income taxes 8,941 9,481 8,761 Excluded from the Consolidated Statements of Cash Flows are the effects of certain non-cash investing and financing activities relating to certain acquisitions as follows: 1995 1994 1993 ---- ---- ---- Fair value of assets acquired $3,863 -- $1,512 Liabilities assumed or created 944 -- 461 F-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 16. Quarterly Financial Data (unaudited): ------------------------------------ Results of operations for each of the quarters during fiscal years 1995 and 1994 are as follows:
1995 ---- First Second Third Fourth Total ----- ------ ----- ------ ----- Net sales $ 70,530 $ 74,881 $ 86,302 $ 82,168 $313,881 Gross profit 25,642 28,086 31,247 32,186 117,161 Net income 3,347 2,934 3,655 5,399 15,335 Net income per share .21 .18 .23 .34 .96
1994 ---- First Second Third Fourth Total ----- ------ ----- ------ ----- Net sales $ 64,550 $ 69,023 $ 75,765 $ 78,865 $288,203 Gross profit 25,155 27,866 29,350 30,905 113,276 Net income 3,798 4,088 4,391 5,715 17,992 Net income per share .24 .25 .27 .36 1.12
The second, third and fourth quarters of fiscal 1995 results include charges to net income of approximately $1.4 million, or $.09 per share; $1.0 million, or $.06 per share; and $1.1 million, or $.07 per share, respectively, relating to the provision for organizational changes and relocation and consolidation of operations as described in Note 3. The third quarter of fiscal years 1995 and 1994 contained 14 weeks and 13 weeks, respectively. The first quarter of fiscal 1994 results include the cumulative effect of a change in accounting for income taxes (adoption of SFAS No. 109) which increased net income by $.8 million, or $.05 per share. 17. Industry Segment Information: ---------------------------- The Company operates in two industry segments, Office Products and Art/Craft Products. Total export sales aggregated $20,559 in fiscal 1995, $21,235 in fiscal 1994 and $21,580 in fiscal 1993, of which $12,921, $11,844 and $11,619 in fiscal years 1995, 1994 and 1993, respectively, were made in Canada. Operating profits include all revenues and expenses of the reportable segment except for general corporate expenses, interest expense, interest income, other expenses, other income and income taxes. Identifiable assets are those assets used in the operations of each business segment. F-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 17. Industry Segment Information (continued): ---------------------------------------- Corporate assets include cash and miscellaneous other assets not identifiable with any particular segment. Capital additions include amounts related to acquisitions.
Office Art/Craft Corp. Fiscal Year 1995 Products Products Assets Consolidated ---------------- -------- --------- ------ ------------- Net sales $ 163,378 $ 150,503 $ 313,881 ========= ========= ========= Operating profit * $ 6,966 $ 21,678 $ 28,644 ========= ========= General corporate (5,081) Interest expense (109) Interest income 571 Other expense, net (380) --------- Income before income taxes $ 23,645 ========= Identifiable assets $ 78,272 $ 77,310 $ 27,228 $ 182,810 ========= ========= ========= ========= Capital additions ** $ 5,619 $ 3,550 $ 1,473 $ 10,642 ========= ========= ========= ========= Depreciation and amortization $ 4,494 $ 3,676 $ 588 $ 8,758 ========= ========= ========= =========
* Includes the provision for organizational changes and relocation and consolidation of operations which reduced the office products operating profit by $4.1 million and art/craft products operating profit by $1.2 million. ** Includes $1.1 million of capital additions relating to business acquisitions. F-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 17. Industry Segment Information (continued): ---------------------------------------
Office Art/Craft Corp. Fiscal Year 1994 Products Products Assets Consolidated ---------------- -------- --------- ------ ------------- Net sales $160,307 $127,896 $288,203 ======== ======== ======== Operating profit $ 12,172 $ 21,211 $ 33,383 ======== ======== General corporate (6,017) Interest expense (85) Interest income 342 Other expense, net (542) -------- Income before income taxes $ 27,081 ======== Identifiable assets $ 80,218 $ 70,362 $ 22,805 $173,385 ======== ======== ======== ======== Capital additions $ 5,923 $ 3,109 $ 273 $ 9,305 ========= ======== ======== ======== Depreciation and amortization $ 4,123 $ 3,286 $ 630 $ 8,039 ======== ======== ======== ======== Office Art/Craft Corp. Fiscal Year 1993 Products Products Assets Consolidated ---------------- -------- --------- ------ ------------- Net sales $142,462 $113,688 $256,150 ======== ======= ======== Operating profit $ 11,411 $ 18,832 $ 30,243 ======== ======== General corporate (5,682) Interest expense (242) Interest income 190 Other expense, net (471) -------- Income before income taxes $ 24,038 ======== Identifiable assets $ 74,098 $ 67,619 $ 14,600 $156,317 ======== ======== ======= ======== Capital additions $ 5,559 $ 4,082 $ 698 $ 10,339 ======== ======== ========= ======== Depreciation and amortization $ 3,898 $ 3,234 $ 532 $ 7,664 ======== ======== ========= ========
F-30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 17. Industry Segment Information (continued): ---------------------------------------- The Company's operations by geographical areas for fiscal years 1995, 1994 and 1993 are presented below. Intercompany sales to affiliates represent products which are transferred between geographic areas on a basis intended to reflect as nearly as possible the market value of the products.
Adjustments and Fiscal Year 1995 North America Europe Corporate Eliminations Consolidated ---------------- ------------- ------ --------- ------------ ------------ Net sales: Customers $285,313 $ 28,568 -- $313,881 Intercompany 8,866 3,257 $(12,123) -- -------- -------- -------- -------- Total $294,179 $ 31,825 $(12,123) $313,881 ======== ======== ======== ======== Operating profit $ 26,622 $ 2,022 -- $ 28,644 ======== ======== ======== ======== Identifiable assets $131,496 $ 24,086 $ 27,228 -- $182,810 ======== ======== ======== ======== ======== Adjustments and Fiscal Year 1994 North America Europe Corporate Eliminations Consolidated ---------------- ------------- ------ --------- ------------ ------------ Net sales: Customers $268,710 $ 19,493 -- $288,203 Intercompany 5,060 2,154 $ (7,214) -- -------- -------- -------- -------- Total $273,770 $ 21,647 $ (7,214) $288,203 ======== ======== ======== ======== Operating profit $ 32,648 $ 735 -- $ 33,383 ======== ======== ======== ======== Identifiable assets $131,310 $ 19,270 $ 22,805 -- $173,385 ======== ======== ======== ======== ========
F-31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 17. Industry Segment Information (continued): ----------------------------------------
Adjustments and Fiscal Year 1993 North America Europe Corporate Eliminations Consolidated ---------------- ------------- ------ --------- ------------ ------------ Net sales: Customers $241,059 $ 15,091 -- $256,150 Intercompany 2,941 1,640 $ (4,581) -- -------- -------- -------- -------- Total $244,000 $ 16,731 $ (4,581) $256,150 ======== ======== ======== ======== Operating profit $ 30,203 $ 40 -- $ 30,243 ======== ======== ======== ======== Identifiable assets $124,841 $ 16,876 $ 14,600 -- $156,317 ======== ======== ======== ======== ========
18. Financial Instruments: --------------------- Off-Balance Sheet Risk: ---------------------- Letters of credit are issued by the Company during the ordinary course of business through major domestic banks as required by certain vendor contracts. As of December 3, 1995 and November 27, 1994, the Company had outstanding letters of credit for $400 and $216, respectively. Concentrations of Credit Risk: ----------------------------- Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments ($13.7 million and $11.7 million at December 3, 1995 and November 27, 1994, respectively) with quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. The Company provides credit, in the normal course of business, to a large number of distributors and retailers and generally does not require collateral or other security to support customer receivables. Management believes that concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base, their dispersion across many different industries and geographies with no single customer accounting for more than 10% of net sales; however, the Company's ten largest customers account for approximately 37% and 32% of accounts receivable at December 3, 1995 and November 27, 1994, respectively. The Company F-32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (In thousands except share and per share amounts) ------ 18. Financial Instruments (continued): --------------------------------- performs ongoing credit evaluations of its customers, maintains allowances for potential credit losses and carries credit insurance coverage for most of its large customer accounts. Fair Value: ---------- The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents - ------------------------- The carrying amount approximates fair value because of the short maturity of these instruments. Debt (excluding capital lease obligation) - ---------------------------------------- The fair value of the Company's debt is estimated based on the current rates offered to the Company for debt of the same remaining maturities. The estimated fair values of the Company's financial instruments at December 3, 1995 and November 27, 1994 are as follows:
1995 1994 --------------------------- ------------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ------ Cash and cash equivalents $15,503 $15,503 $13,807 $13,807 Debt (excluding capital lease obligation) 2,325 2,303 2,561 2,523
Debt and Equity Securities: -------------------------- In fiscal 1995 the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires changes in accounting and reporting for certain investments in debt and equity securities. The adoption of this standard had no effect on the Company's results of operations or financial condition. F-33 SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS for the fiscal years 1995, 1994 and 1993 (in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions --------- Balance at Charged to Charged to Balance at Beginning Costs and Other End of Classification Of Period Expenses Accounts Deductions Period -------------- ---------- ---------- ---------- ---------- ----------- 1995: ----- Allowance for doubtful accounts $2,510 $ 916 $ -- $1,121(A) $2,305 ====== ====== ==== ====== ====== Reserve for customer returns and deductions $1,267 $ 735 $ -- $ 281(C) $1,721 ====== ====== ==== ====== ====== Reserve for inventory obsolescence $3,530 $1,778 $ -- $2,887(D) $2,421 ====== ====== ==== ====== ====== 1994: ----- Allowance for doubtful accounts $2,643 $ 921 $ -- $1,054(A) $2,510 ====== ====== ==== ====== ====== Reserve for customer returns and deductions(B) $ 702 $1,539 $ -- $ 974(C) $1,267 ====== ====== ==== ====== ====== Reserve for inventory obsolescence $2,236 $2,083 $ -- $ 789(E) $3,530 ====== ====== ==== ====== ====== 1993: ----- Allowance for doubtful accounts $2,587 $1,022 $ 3 $ 969(A) $2,643 ====== ====== ==== ====== ====== Reserve for inventory obsolescence $1,655 $1,598 $ -- $1,017(E) $2,236 ====== ====== ==== ====== ======
(A) Doubtful accounts written off, net of collection expenses. (B) These reserves were not significant in years prior to 1994. (C) Primarily credits issued to customers. (D) Largely the result of programs in effect during 1995 to dispose of fully reserved obsolete inventory. Amount is net of recoveries. (E) Primarily a result of disposals of obsolete inventory in the normal course of business, net of recoveries. SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HUNT MANUFACTURING CO. Dated: February 28, 1996 By:/s/ Robert B. Fritsch --------------------- Robert B. Fritsch President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on behalf of the registrant and in the capacities and on the dates indicated: /s/ Robert B. Fritsch February 28, 1996 - -------------------------- Robert B. Fritsch President and Chief Executive Officer /s/ William E. Chandler February 28, 1996 - -------------------------- William E. Chandler Senior Vice President, Finance (Principal Financial and Accounting Officer) /s/ Vincent G. Bell, Jr. February 28, 1996 - ------------------------- Vincent G. Bell, Jr. Director /s/ Jack Farber - ------------------------ February 28, 1996 Jack Farber Director /s/ William F. Hamilton, Ph.D. February 28, 1996 - ------------------------------ William F. Hamilton, Ph.D. Director /s/ Mary R. Henderson February 28, 1996 - ------------------------ Mary R. (Nina) Henderson Director /s/ Gordon A. MacInnes, Jr. February 28, 1996 - --------------------------- Gordon A. MacInnes, Jr. Director /s/ Wilson D. McElhinny February 28, 1996 - ------------------------ Wilson D. McElhinny Director /s/ Robert H. Rock February 28, 1996 - ------------------------ Robert H. Rock Director - ------------------------ Roderic H. Ross Director /s/ Victoria B. Vallely February 28, 1996 - ------------------------ Victoria B. Vallely Director EXHIBIT INDEX (Exhibits being filed with this Form 10-K) (4) Instruments defining rights of security holders, including indentures: (a)(2) Amendment dated as of February 1, 1996 to Credit Agreement dated December 19, 1995 between the Company and NationsBank, N.A. (a)(3) Amendment dated as of February 26, 1996 to Credit Agreement. (10) Material contracts: (c) 1983 Stock Option and Stock Grant Plan, as amended, of the Company. (d) 1993 Stock Option and Stock Grant Plan of the Company, as amended. (f) Form of Stock Grant Agreement between the Company and Messrs. Carney, Chandler, O'Meara and Precious. (j)(2) List of executive officers who are parties to Change in Control Agreement. (m) Employment-Severance arrangements with Robert B. Fritsch. (11) Statement re: computation of per share earnings. (23) Consent of Coopers & Lybrand L.L.P. to incorporation by reference, in Registration Statement No.s 33-70660, 33-25947, 33-6359, 2-83144, 33-57105 and 33-57103 on Form S-8, of their report on the consolidated financial statements and schedules included in this report. (27) Financial Data Schedule. EX-4.(A)(2) 2 CREDIT AGREEMENT EXHIBIT (4)(a)(2) February 1, 1996 Hunt Manufacturing Co. One Commerce Square 2005 Market Street Philadelphia, PA 19103-7085 RE: Credit Agreement dated as of December 19, 1995 (the "Credit Agreement") among Hunt Manufacturing Co. (the "Borrower"), the Guarantors party thereto and NationsBank, N.A., as the sole Lender and as Agent ("NationsBank") Gentlemen: Reference is made to the Credit Agreement described above. All of the defined terms in the Credit Agreement are incorporated herein by reference. NationsBank agrees with the Borrower and the Subsidiary Guarantors to amend the Credit Agreement in the following respects: 1. Section 7.11(a) to the Credit Agreement is amended in its entirety to read as follows: 7.11 Financial Covenants. (a) Consolidated Net Worth. Consolidated Net Worth at all times shall be no less than $115,000,000, reduced on and after the date of the Stock Repurchase by the amount of the reduction (not to exceed $93,000,000), as determined in accordance with GAAP, in the net worth of the Borrower and its consolidated Subsidiaries resulting from the Stock Repurchase and increased on a cumulative basis by (i) as of the last day of each fiscal year commencing with the last day of fiscal year 1996 by an amount equal to the greater of (A) $0 or (B) 50% of the excess of (1) Consolidated Net Income for the fiscal year then ended over (2) dividends and other distributions to shareholders by the Borrower and its consolidated Subsidiaries for the fiscal year then ended and (ii) upon the consummation of any Equity Transaction on or after the Closing Date, an amount equal to 85% of the Net Proceeds of such Equity Transaction. 2. Section 8.4(c) to the Credit Agreement is amended in its entirety to read as follows: 8.4 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower will not, nor will it permit any of its Subsidiaries to: * * * * * (c) except as otherwise permitted by Section 8.4(a) and subject to the terms of Section 8.8, acquire all or any portion of the capital stock or securities of any other Person or purchase, lease or otherwise acquire (in a single transaction or a series of related transactions) all or any substantial part of the Property of any other Person if after giving effect on a Pro Forma Basis to such transaction, the Consolidated Leverage Ratio shall not be greater than 3.00 to 1.00. 3. Section 11.3(b) to the Credit Agreement is amended in its entirety to read as follows: 11.3 Benefit of Agreement. * * * * * (b) Assignments. Each Lender may assign all or a portion of its rights and obligations hereunder pursuant to an assignment agreement substantially in the form of Schedule 11.3(b) to one or more Eligible Assignees, provided that any such assignment shall be in a minimum aggregate amount of $5,000,000 of the Commitments and in integral multiples of $1,000,000 above such amount. Any assignment hereunder shall be effective upon delivery to the Agent of written notice of the assignment together with a transfer fee of $3,500 payable to the Agent for its own account. The assigning Lender will give prompt notice to the Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. Along such lines the Borrower agrees that upon notice of any such assignment and surrender of the appropriate Note or Notes, it will promptly provide to the assigning Lender and to the assignee separate promissory notes in the amount of their respective interests substantially in the form of the original Note (but with notation thereon that it is given in substitution for and replacement of the original Note or any replacement notes thereof). By executing and delivering an assignment agreement in accordance with this Section 11.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of any Credit Party or the performance or observance by any Credit Party of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. All references in the Credit Agreement and the other Credit Documents to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended hereby. NationsBank and the Borrower hereby agree that the foregoing amendments shall be effectuated by inserting appropriate replacement pages into the Credit Agreement as originally executed. Except as modified hereby, all of the terms and provisions of the Credit Agreement and the other Credit Documents shall remain in full force and effect. This letter agreement shall be governed by and construed in accordance with the laws of the State of North Carolina. This letter agreement may be executed in one or more counterparts, each of which constitute an original, and all of which taken together shall constitute a single document. Sincerely, NATIONSBANK, N.A., By: --------------------------------- Name: ------------------------------- Title: ------------------------------ [Signatures Continued] Read and agreed to this 1st day of February, 1996 HUNT MANUFACTURING CO. By____________________________ Title_________________________ Read and consented to this 1st day of February, 1996 BEVIS CUSTOM FURNITURE, INC. By____________________________ Title_________________________ HUNT DATA PRODUCTS, INC. By____________________________ Title_________________________ HUNT HOLDINGS, INC. By____________________________ Title_________________________ HUNT X-ACTO, INC. By____________________________ Title_________________________ SEAL PRODUCTS, INC. By____________________________ Title_________________________ EX-4.(A)(3) 3 CREDIT AGREEMENT EXHIBIT (4)(a)(3) February 26, 1996 Hunt Manufacturing Co. One Commerce Square 2005 Market Street Philadelphia, PA 19103-7085 RE: Credit Agreement dated as of December 19, 1995 (the "Credit Agreement") among Hunt Manufacturing Co. (the "Borrower"), the Guarantors party thereto and NationsBank, N.A., as the sole Lender and as Agent ("NationsBank") Gentlemen: Reference is made to the Credit Agreement described above. All of the defined terms in the Credit Agreement are incorporated herein by reference. NationsBank agrees with the Borrower and the Subsidiary Guarantors to amend the Credit Agreement in the following respects: 1. The definition of "Excess Sale Event" in Section 1.1 of the Credit Agreement is amended in its entirety to read as follows: "Excess Sale Event" means, with respect to any sale of assets made pursuant to the terms of Section 8.4(b)(v), the failure of the Borrower to apply (or cause its applicable Subsidiary to apply) an amount equal to the Net Proceeds of such asset sale to the purchase, acquisition or construction of Alternative Assets during the Application Period for such asset sale as contemplated by the terms of Section 8.4(b)(v)(B)(1). 2. Section 3.12(a) of the Credit Agreement is amended in its entirety to read as follows: 3.12 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) Loans. Each Loan, each payment or prepayment of principal of any Loan or reimbursement obligations arising from drawings under Letters of Credit, each payment of interest on the Loans or reimbursement obligations arising from drawings under Letters of Credit, each payment of Facility Fees, each payment of the Standby Letter of Credit Fee, each payment of the Trade Letter of Credit Fee, each reduction of the Revolving Committed Amount and/or Term Loan Committed Amount and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans and Participation Interests. 3. Section 7.13(b) of the Credit Agreement is amended in its entirety to read as follows: 7.13 Ownership of Subsidiaries; Limitation of Foreign Operations. * * * * * (b)(i) The Borrower and its Domestic Subsidiaries shall own at all times at least 75% of Consolidated Total Assets and (ii) as of each Calculation Date, the portion attributable to the Borrower and its Domestic Subsidiaries of Consolidated Net Income for the four quarter then ended shall be at least 75% of Consolidated Net Income for such period; provided, however, that the parties hereto hereby agree that, at such time, if any, as the Foreign Subsidiaries of the Borrower shall have obtained bank financing for their working capital and general corporate needs in such amounts, on such terms (including without limitation intercreditor arrangements between the provider(s) of such financing and the Lenders) and from such lenders as shall be satisfactory to the Required Lenders in their sole reasonable discretion, the Credit Parties and the Lenders shall enter into an agreement amending this Credit Agreement to eliminate this Section 7.13(b). 4. Section 8.4(c) of the Credit Agreement is amended in its entirety to read as follows: 8.4 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower will not, nor will it permit any of its Subsidiaries to: (c) except as otherwise permitted by Section 8.4(a) and subject to the terms of Section 8.8, acquire all or any portion of the capital stock or securities of any other Person or purchase, lease or otherwise acquire (in a single transaction or a series of related transactions) all or any substantial part of the Property of any other Person if after giving effect on a Pro Forma Basis to such transaction, the Consolidated Leverage Ratio would be greater than 3.00 to 1.00. 5. Section 8.6 of the Credit Agreement is amended in its entirety to read as follows: 8.6 Restricted Payments. The Borrower will not, nor will it permit any of its Subsidiaries to, directly or indirectly declare, order, make or set apart any sum for or pay any Restricted Payment, except (i) to make (A) dividends payable solely in the same class of capital stock of such Person and (B) other Restricted Payments payable solely in common stock of such Person, (ii) to make dividends or other distributions payable to the Borrower (directly or indirectly through Subsidiaries of the Borrower), (iii) as permitted by Section 8.7 and (iv) other Restricted Payments made by the Borrower, provided that, after giving effect to any such Restricted Payment on a pro forma basis (determined by calculating the Consolidated Fixed Charge Coverage Ratio for the four quarter period ended as of the last day of the most recent fiscal quarter with respect to which the Agent shall have received the Required Financial Information, except that Restricted Payments included in such calculation shall be the Restricted Payment proposed to be made and all other Restricted Payments during the then current fiscal quarter of the Borrower plus all Restricted Payments for the three quarters ending as of the last day of the most recent fiscal quarter), no Default or Event of Default would exist hereunder. 6. Section 9.1(c)(i) of the Credit Agreement is amended in its entirety to read as follows: 9.1 Events of Default. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): * * * * * (c) Covenants. Any Credit Party shall (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.9, 7.11, 7.12, 7.13 or 8.1 through 8.14, inclusive, or All references in the Credit Agreement and the other Credit Documents to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended hereby. NationsBank and the Borrower hereby agree that the foregoing amendments shall be effectuated by inserting appropriate replacement pages into the Credit Agreement as originally executed. Except as modified hereby, all of the terms and provisions of the Credit Agreement and the other Credit Documents shall remain in full force and effect. This letter agreement shall be governed by and construed in accordance with the laws of the State of North Carolina. This letter agreement may be executed in one or more counterparts, each of which constitute an original, and all of which taken together shall constitute a single document. Sincerely, NATIONSBANK, N.A., By: --------------------------------- Name: ------------------------------- Title: ------------------------------ [Signatures Continued] Read and agreed to this 26th day of February, 1996 HUNT MANUFACTURING CO. By:____________________________ Title:_________________________ Read and consented to this 26th day of February, 1996 BEVIS CUSTOM FURNITURE, INC. By:____________________________ Title:_________________________ HUNT DATA PRODUCTS, INC. By:____________________________ Title:_________________________ HUNT HOLDINGS, INC. By:____________________________ Title:_________________________ HUNT X-ACTO, INC. By:____________________________ Title:_________________________ SEAL PRODUCTS, INC. By:____________________________ Title:_________________________ EX-10.(C) 4 1983 STOCK OPTION AND STOCK GRANT PLAN EXHIBIT (10)(c) As Amended and Restated through November 30, 1995 HUNT MANUFACTURING CO. 1983 STOCK OPTION AND STOCK GRANT PLAN 1. Purpose. The 1983 Stock Option and Stock Grant Plan (the "Plan") is designed to enable Hunt Manufacturing Co. (the "Company") and its subsidiaries to attract and retain capable officers and key management level employees and to provide an inducement to such personnel to promote the best interests of the Company and its subsidiaries by enabling and encouraging them, through the grant of incentive and nonqualified stock options ("Options") and/or stock ("Stock Grants") to acquire stock in the Company. As used in the Plan, the term "incentive stock options" means options which, at the time such options are granted under the Plan, qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). The term "nonqualified stock options" means options which, at the time such options are granted, do not qualify as incentive stock options. The term "subsidiary" means any corporation which, at the time an Option is granted or Stock Grant is made under the Plan, qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" contained in Section 424(f) of the Code, or any similar provision hereafter enacted, except that such term shall not include any corporation which is classified as a foreign corporation pursuant to Section 7701 of the Code. 2. Administration. The Plan shall be administered by the Company's Compensation Committee (the "Committee") which shall consist of not less than three directors of the Company who shall be appointed by, and shall serve at the pleasure of, the Company's Board of Directors (the "Board"). Each member of the Committee, while serving as such, shall be deemed to be acting in his/her capacity as a director of the Company. Except to the extent otherwise permitted under Section 16(b) of the Securities Exchange Act of 1934 and the rules and regulations thereunder, no member of the Committee shall be, at the time of service on the Committee hereunder, or shall have been at any time within one year prior thereto, eligible to receive equity securities (within the meaning of 17 CFR ss. 240.16a-1(d)) under the Plan or any other plan of the Company or any of its affiliates. The Committee shall have full authority to construe and interpret the Plan, and, subject to the provisions of the Plan: to establish, amend and rescind appropriate rules and regulations relating to the Plan, to take such action as may be appropriate and/or necessary to insure the continued qualification of any incentive stock options granted under the Plan, to select the persons to whom Options will be granted and/or Stock Grants made under the Plan, to grant Options and make Stock Grants and set the date of grant and other terms and conditions thereof, to make recommendations to the Board, and to take all such steps and make all such determinations in connection with the Plan and the Options and stock granted hereunder as it may deem necessary or advisable. All such rules, regulations, determinations and interpretations of the Committee shall be final, conclusive and binding on all persons. 3. Stock Subject to the Plan. Subject to the provisions of Section 8 hereof, up to an aggregate maximum of 1,348,125 of the Company's Common Shares, par value $.10 per share ("Shares") shall be authorized for the grant of Options and/or Stock Grants under the Plan, provided that, of such amount, not more than 373,125 Shares shall be available for Stock Grants. Shares issuable under the Plan may be authorized but unissued Shares or reacquired Shares, as the Board shall determine. If any Option granted under the Plan expires or otherwise terminates, in whole or in part, without having been exercised, or if any Stock Grant hereunder is terminated, in whole or in part, the Shares subject to the unexercised portion of such Option and the unvested Shares covered by such Stock Grant shall be available for the granting of Options and Stock Grants under the Plan as fully as if such Shares had never been subject to an Option or a Stock Grant. 4. Eligibility. Those persons eligible to participate in the Plan shall be the officers and other key management level employees of the Company and any of its subsidiaries ("Eligible Employees"), including directors who are also officers or key management level employees of the Company or any of its subsidiaries. Incentive stock options, nonqualified stock options or Shares, or a combination thereof, may be granted under the Plan to an Eligible Employee. In making any determination as to whether a given employee shall receive a grant under the Plan, and in determining the size and nature of any such grant, the Committee shall take into account the duties of such employee, his/her past, present and potential contributions to the success of the Company and its subsidiaries -2- and such other factors as the Committee shall deem relevant in accomplishing the purposes of the Plan. 5. Grants, Terms and Conditions of Options. From time to time until the expiration or earlier termination of the Plan, the Committee may grant to Eligible Employees ("Optionees") under the Plan such incentive and/or nonqualified stock options as it determines are warranted; provided, however, that grants of incentive and nonqualified options shall be separate and not in tandem. Options granted pursuant to the Plan shall be in such form as the Committee, from time to time, shall approve, and shall be subject to the following terms and conditions: (a) Price. Except as provided in Subsection (k), the price per Share under each Option granted under the Plan shall be determined and fixed by the Committee in its discretion but shall not be less than the higher of one hundred percent (100%) of the Fair Market Value of the Shares, or the par value thereof, on the date of grant of such Option. As used in the Plan, the term "Fair Market Value" shall mean: (i) if the principal market for the Shares is a registered securities exchange, the mean between the highest and lowest quoted selling prices of such Shares on the date of grant, or, if there are no such reported sales on that date, then on the last previous date (within a reasonable period prior to the date of grant) on which there were such reported sales; or (ii) such other method of determining fair market value as shall be authorized by the Code, or the rules or regulations thereunder, and adopted by the Committee. (b) Term. Subject to earlier termination as provided in Subsections (c) through (g) below and in Section 8 hereof, and except as otherwise provided in Subsection (k) below, the term of each Option shall not be less than two (2) nor more than ten (10) years from the date of grant. (c) Exercise and Payment. Options shall be exercisable in such installments and on such dates, not less than one (1) year from the date of grant, as the Committee may specify. Except as otherwise expressly provided in the Plan, Options shall only be exercisable by an Optionee while he/she remains in the employment of the Company or a subsidiary. Any Option Shares, the right to the purchase of which has accrued, may be purchased at any time up to the expiration or termination of the Option. Options may be exercised, in whole or in part, from time to time, by giving written notice of exercise to the Company at its principal office, specifying the number of Shares to be purchased and accompanied by payment in full of the aggregate purchase price for such Shares. Only full shares shall be issued and any fractional share which might otherwise be issuable upon exercise of an Option granted hereunder shall be forfeited. The purchase price shall be payable: (i) in cash or its equivalent; (ii) if the -3- Committee, in its discretion, permits, in whole or in part through the surrender or delivery of Shares previously acquired by the Optionee (provided that if such Shares are statutory option stock, as defined in Section 424(c)(3) of the Code, such Shares have been held by the Optionee for a period not less than the holding period described in Section 422(a)(1) or 423(a)(1) of the Code, as applicable); (iii) if the Committee, in its discretion, permits, in whole or in part through the surrender or delivery of Shares newly acquired by the Optionee upon exercise of such Option (which surrender or delivery shall constitute a disqualifying disposition in the case of an Option which is an incentive stock option); or (iv) if and to the extent the Committee, in its discretion, permits, by delivering a properly executed notice of exercise of the Option to the Company and a broker, with irrevocable instructions to the broker promptly to deliver to the Company the amount of sale or loan proceeds necessary to pay the exercise price of the Option (the sale of Shares pursuant to such instructions shall constitute a disqualifying disposition in the case of an Option which is an incentive stock option). In the event such purchase price is paid, in whole or in part, with Shares, the portion of the purchase price so paid shall be equal to the Fair Market Value, on the date of exercise of the Option, of the Shares surrendered or delivered in payment of such purchase price. (d) Termination of Optionee's Employment. If an Optionee's employment by the Company and its subsidiaries is terminated by either party for any reason, with or without cause, other than by reason of death, disability, or retirement (as provided in Subsections (e), (f) and (g) hereof) prior to the expiration date of his/her Option, such Option shall terminate immediately upon such termination of employment, provided that the Committee, in its discretion, may extend the period for exercise following any such termination of employment, to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of such termination, for up to three (3) months, but not beyond the expiration date of such Option. Notwithstanding the foregoing, in the event an Optionee's employment is terminated as contemplated in this Subsection and Options held by him/her have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's termination of employment. For the purposes of the Plan, a leave of absence of one (1) year or less which has been expressly approved by the Board shall not be deemed to constitute a termination of employment. A leave of absence for longer than one (1) year shall be deemed to constitute a termination of employment, unless the Committee otherwise determines. -4- (e) Death of Optionee. If an Optionee's employment is terminated by reason of his/her death prior to the expiration of his/her Option, or if an Optionee shall die following his/her termination of employment but prior to the expiration date of his/her Option or expiration of the period determined under Subsection (d), (f) or (g) hereof, if earlier, such Option may be exercised, by the Optionee's estate, personal representative or beneficiary who acquired the right to exercise such Option by bequest or inheritance or by reason of the death of the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of his/her death, at any time prior to the earlier of (i) one (1) year following the date of the Optionee's death, or (ii) the expiration date of such Option (which, in the case of death following a termination of employment pursuant to Subsection (d), (f) or (g) hereof, shall be deemed to mean the expiration of the exercise period determined thereunder). Notwithstanding the foregoing, in the event that an Optionee's employment is terminated by his/her death and Options held by him/her have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one (1) year at the time of the Optionee's death. (f) Disability of Optionee. If an Optionee shall become permanently and totally disabled (within the meaning of Section 22(e)(3) of the Code) during his/her employment and his/her employment with the Company and its subsidiaries is terminated as a consequence of such disability prior to the expiration date of his/her Option, such Option may be exercised by the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of such termination of employment, at any time prior to the earlier of (i) one (1) year following the date of the Optionee's termination of employment, or (ii) the expiration date of such Option. Notwithstanding the foregoing, if at the time of termination of an Optionee's employment due to disability, Options held by such Optionee have not yet become exercisable in accordance with their terms, the Committee, in its discretion may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one (1) year at the time of the Optionee's termination of employment. (g) Retirement of Optionee. If an Optionee retires in accordance with the retirement policy of the Company, or with the express consent of the Board, prior to the expiration date of his/her Option, such Option may be exercised by the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of his/her retirement, at any time prior to the earlier of (i) three (3) months after the date of retirement or (ii) the expiration date -5- specified in such Option. Notwithstanding the foregoing, the Committee may, in its discretion, (x) extend the period for exercise following an Optionee's retirement for up to nine (9) additional months, but not beyond the expiration date of such Option, despite the fact that such an extension would prevent an Option from qualifying as an incentive stock option under the Code and/or (y) in the event that any Options held by a retiring Optionee have not yet become exercisable in accordance with their terms, allow all or a part of such Options to be exercised pursuant to this Subsection provided that such Options have been outstanding for at least one year at the time of the Optionee's retirement. (h) Transferability. No Option shall be assignable or transferable by an Optionee otherwise than by will or by the laws of descent and distribution. (i) Rights as a Stockholder. An Optionee shall have no rights as a stockholder with respect to any Shares covered by his/her Option until the issuance of a stock certificate to him/her representing such Shares. (j) Sequential Exercise of Incentive Stock Options. No incentive stock option granted under the Plan prior to January 1, 1987, shall be exercisable while there is outstanding (within the meaning of Section 422A(c)(7) of the Code as in effect prior to January 1, 1987) any other incentive stock option which was granted before the granting of such incentive stock option to the same Optionee to purchase Shares, or to purchase stock in a corporation which (as the time of granting of such incentive stock option) was a Related Corporation or to purchase stock in a predecessor corporation of the Company or a Related Corporation. As used in the Plan, the term "Related Corporation" shall mean a subsidiary or a corporate parent of the Company as defined in Section 424 of the Code. (k) Ten Percent Shareholder. Notwithstanding any other provision of the Plan, if an Eligible Employee owns more than ten percent (10%) of the total combined voting power of all shares of stock of the Company or of a Related Corporation at the time an incentive stock option is granted to such Eligible Employee, the incentive stock option price shall not be less than one hundred ten percent (110%) of the Fair Market Value of the optioned Shares on the date the incentive stock option is granted, and such incentive stock option by its terms shall not be exercisable after the expiration of five (5) years from the date the incentive stock option is granted. (l) Annual Limit on Grant of Incentive Stock Options. Effective for options granted after December 31, 1986, the aggregate Fair Market Value (determined as of the time an incentive stock option is granted) of the Shares with respect to which incentive stock options are exercisable for the -6- first time during any calendar year (under this Plan and any other incentive stock option plan of the Company or a Related Corporation) shall not exceed one hundred thousand dollars ($100,000). (m) Use of Shares to Satisfy Tax Obligation. When an Optionee is required to pay to the Company or a Related Corporation an amount required to be withheld under applicable federal, state or local income tax or similar laws in connection with exercise of nonqualified stock options under the Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit the Optionee to satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares (or by returning to the Company previously held Shares), which shares shall be valued, for this purpose, at their Fair Market Value on the date of exercise of the nonqualified stock option (or, if later, the date on which the Optionee recognizes ordinary income with respect to such exercise); provided, however, that with respect to Optionees who are subject to Section 16(b) of the Exchange Act, any such amount of taxes required to be withheld automatically shall be satisfied by withholding Shares. If Shares acquired by exercise of an incentive stock option are used for such purpose, and if the holding period requirements of Section 422(a)(1) of the Code have not been met with respect to such Shares, the use of such Shares to satisfy the withholding obligation will be a disqualifying disposition of such Shares. (n) Option Agreement and Further Conditions. Each Optionee shall enter into, and be bound by the terms of, a stock option agreement (the "Option Agreement") which shall include or incorporate by reference the terms of the Option and the Plan and which shall contain such other terms, conditions and restrictions not inconsistent with the Plan (or, in the case of incentive stock options, the provisions of Section 422(b) of the Code) as the Committee shall determine. Without limiting the generality of the foregoing, the Committee, in its discretion, may impose further conditions upon the exercisability of Options, and restrictions on transferability and repurchase rights with respect to Shares issued upon exercise of Options. 6. Terms and Conditions of Stock Grants. From time to time until the expiration or earlier termination of the Plan, the Committee may make such Stock Grants under the Plan to Eligible Employees ("Grantees") as it determines are warranted. Stock Grants shall be subject to the following terms and conditions: (a) Vesting Period. The Committee shall establish one or more vesting periods ("Vesting Periods") with respect to the Shares covered by a Stock Grant. The length of such Vesting Period shall be within the discretion of the Committee, except that (subject to Subsection (c) below and Section 8 -7- hereof) such period or periods shall not be less than one (1) year nor more than five (5) years from the date of grant. Subject to the provisions of this Section 6, Shares subject to a Stock Grant shall vest in the Grantee upon the expiration of the Vesting Period with respect to such Shares. (b) Bonus Payment. For so long as a Grantee's Stock Grant remains outstanding and unvested, the Company shall pay to the Grantee a cash bonus equal to the dividends which the Grantee would have received from the Company had he/she actually held the Shares represented by the unvested portion of his/her Stock Grant. Such payments shall be made within sixty (60) days following the end of each fiscal quarter of the Company with respect to any dividends which may have been paid by the Company on its Shares during such quarter, and will constitute wages subject to withholding for Federal income tax purposes. (c) Termination. (i) Death, Disability or Retirement. If, prior to the expiration of the Vesting Period with respect to Shares subject to a Stock Grant ("Unvested Shares"), a Grantee's employment with the Company and its subsidiaries is terminated by reason of his/her death, or by reason of his/her disability or retirement (as provided in Sections 5(f) and (g) hereof, respectively), then in each such case there shall immediately be vested in the Grantee, or in his/her beneficiary or estate, that number of full Shares that bears the same ratio to all the Grantee's Unvested Shares having the same Vesting Period as the number of the days which have elapsed from the date of the original Stock Grant of such Shares to the date of such termination of the Grantee's employment bears to the total number of days in the Vesting Period with respect to such Shares. [An example of the operation of the preceding sentence is set forth in the Appendix to the Plan.] The remainder of the Grantee's Stock Grant not vested pursuant to the preceding sentence immediately shall terminate, except that the Committee, if it determines that the circumstances warrant, may direct that all or a portion of such remaining Unvested Shares also be vested in the Grantee, subject to such further terms and conditions, if any, as the Committee may determine. (ii) Other Terminations of Employment. If a Grantee's employment is terminated for any reason other than his/her death, disability or retirement as aforesaid, the unvested portion of the Grantee's Stock Grant immediately shall terminate, except that the Committee, if it determines that the circumstances warrant, may direct that all or a portion of the Grantee's Unvested Shares be vested in the Grantee, subject to such further terms and conditions, if any, as the Committee may determine. (d) Delivery of Certificates. Upon the vesting of a Stock Grant, the Company promptly shall issue certificates representing the vested -8- Shares to the Grantee or to his/her beneficiary or estate. Only full shares shall be issued, and any fractional shares which might otherwise be issuable pursuant to a Stock Grant shall be forfeited. (e) Transferability. No Stock Grant shall be assignable or transferable by a Grantee otherwise than by will or by the laws of descent and distribution. (f) Rights as a Stockholder. A Grantee shall have no rights as a stockholder with respect to any Shares covered by a Stock Grant until the issuance of a stock certificate to him/her representing such Shares. (g) Use of Shares to Satisfy Tax Obligation. When a Grantee is required to pay the Company or a Related Corporation an amount required to be withheld under applicable federal, state or local income tax or similar laws in connection with the vesting of a Stock Grant under this Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit the Grantee to satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares (or by returning to the Company previously held Shares), which Shares shall be valued, for this purpose, at their Fair Market Value on the date of vesting of the Stock Grant (or, if later, the date on which the Grantee recognizes ordinary income with respect to such Stock Grant); provided, however, that with respect to Grantees who are subject to Section 16(b) of the Exchange Act, any such amount of taxes required to be withheld automatically shall be satisfied by withholding Shares. If Shares acquired by the exercise of an incentive stock option are used for such purpose, and if the holding period requirements of Section 422(a)(1) of the Code have not been met with respect to such Shares, the use of such Shares to satisfy the withholding obligation will be a disqualifying disposition of such Shares. (h) Stock Grant Agreement. Each Grantee shall enter into, and be bound by the terms of, a Stock Grant Agreement (the "Stock Grant Agreement") which shall include or incorporate by reference the terms of the Stock Grant and of the Plan and which shall contain such other terms, conditions and restrictions not inconsistent with the Plan as the Committee shall determine. 7. Listing and Registration of Shares. Each Option and each Stock Grant under the Plan shall be subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the Shares covered thereby upon any securities exchange or under the laws of any jurisdiction, or the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option, the making of such Stock Grant or the purchase or vesting of Shares thereunder, -9- then no such Option may be exercised in whole or in part and no certificate representing Shares shall be issued pursuant to such Stock Grant unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, on conditions acceptable to the Board. Each Optionee and Grantee, or his/her legal representative or beneficiaries, also may be required to give satisfactory assurance that Shares purchased upon exercise of an Option or received pursuant to a Stock Grant are being acquired for investment and not with a view to distribution, and certificates representing such Shares may be legended accordingly. 8. Adjustment Upon Changes in Capitalization, Mergers and Other Events. The number of Shares which may be issued under the Plan, as stated in Section 3 hereof, and the number of Shares issuable upon exercise of outstanding Options (as well as the exercise price per Share under such outstanding Options) or issuable upon vesting of outstanding Stock Grants shall be adjusted, as may be determined appropriate by the Committee (which determination shall be subject to ratification by the Board), to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of the Company. In the event the Company is liquidated or a corporate transaction described in Section 424(a) of the Code and the Treasury Regulations issued thereunder (including, for example, a merger, consolidation, acquisition of property or stock, separation or reorganization) occurs, each outstanding Option and Stock Grant shall be assumed by the surviving or successor corporation, if any; provided, however, that the Committee, in its discretion, may terminate all or a portion of the outstanding Options and/or Stock Grants if it determines that such termination would be in the best interests of the Company. If the Committee decides to terminate an outstanding Option by reason of such liquidation or corporate transaction, the Committee shall give the holder thereof not less than twenty-one (21) days' prior notice of any such termination, and such outstanding Option may be exercised up to, and including, the date immediately preceding such termination, if the Option has not otherwise expired, and if it is then exercisable under the Option Agreement. With respect to any Option which has not yet become exercisable, the Committee also, in its discretion, may allow an Optionee to exercise such Option in whole or in part (if it has not otherwise terminated or expired). If the Committee decides to terminate an outstanding Stock Grant by reason of such liquidation or corporate transaction, the Stock Grant shall vest on such termination date to the same extent as is provided in the first sentence of Section 6(c)(i) hereof. The Committee, in its discretion, also immediately may vest all or a portion of the remaining unvested Shares under any Stock Grant which is to be so determined. -10- The Committee further, in its discretion, may change the number of Shares issuable upon exercise of outstanding Options (as well as the exercise price per Share under such outstanding Options) and Shares covered by outstanding Stock Grants to reflect any such corporate transaction, provided, in the case of an incentive stock option, that any such change is made in accordance with Section 424(a) of the Code and is excluded from the definition of "modification" under Section 424(h) of the Code. Notwithstanding any other provisions of the Plan, the Committee, in its discretion, may accelerate, in whole or in part, the date on which Options become exercisable and/or the vesting of any Stock Grant in the event that the Committee determines that a change in control of the Company has occurred or is likely to occur. 9. Amendment or Discontinuance of the Plan. The Board, from time to time, may suspend or discontinue the Plan or amend it, and the Committee may amend any outstanding Options and Stock Grants, in any respect whatsoever; provided, however, that, without the approval of the holders of at least a majority of the outstanding Shares of the Company: (i) the class of individuals eligible to receive Options or Stock Grants shall not be changed, (ii) the maximum number of Shares with respect to which grants may be made under the Plan shall not be increased otherwise than as permitted under Section 8 hereof, (iii) the limitations on the price at which Options may be granted shall not be changed, and (iv) the duration of the Plan, as specified in Section 12 hereof, shall not be extended; and provided further, that no such suspension, discontinuance, or amendment shall impair the rights of any holder of an outstanding Option or Stock Grant without the consent of such holder. 10. Absence of Rights. The recommendation or selection of an Eligible Employee as a recipient of an Option or a Stock Grant under the Plan shall not entitle such person to any Option or Stock Grant unless and until the grant actually has been made by appropriate action of the Committee; and any such grant is subject to the provisions of the Plan. Further, the granting of an Option or the making of a Stock Grant to a person shall not entitle that person to continued employment by the Company or its subsidiaries, and the Company shall have the absolute right, in its discretion, to retire such person in accordance with its retirement policies or otherwise to terminate his/her employment, whether or not such termination may result in a partial or total termination of his/her Option or of his/her Stock Grant. -11- 11. Application of Funds. The funds received by the Company upon the exercise of Options and otherwise under the Plan shall be used for general corporate purposes. 12. Effective Date and Duration. The Plan became effective on February 7, 1983. Unless earlier terminated as provided in the Plan, the Plan shall terminate at 12:00 midnight on February 6, 1993, and no Options or Stock Grants shall be granted or made thereafter. However, termination of the Plan shall not affect any Options or Stock Grants theretofore granted or made, which Options and Stock Grants shall remain in effect in accordance with their terms and the terms of the Plan. -12- APPENDIX Accelerated Vesting Pursuant to Section 6(c) of the Plan ---------------------------- Example: If a Stock Grant of 30,000 shares is made to a Grantee on February 10, 1983 to vest in three annual increments of 10,000 Shares each on February 10, 1984, 1985 and 1986, respectively, and if the Grantee, while still an employee of the Company, should die on August 10, 1984, the number of Shares vested would be 22,474, calculated as follows: 1. The 10,000 Share increment scheduled to vest on February 10, 1984, would already have vested in full. 2. The 10,000 Share increment scheduled to vest on February 10, 1985 would vest automatically as to 7,483 Shares (i.e., out of the total Vesting Period of 731 days with respect to such Shares, 547 days would have elapsed; 547/731 = .748290 x 10,000 Shares). 3. The 10,000 Share increment scheduled to vest on February 10, 1986 would vest automatically as to 4,991 Shares (i.e., out of the total Vesting Period of 1,096 days with respect to such Shares 547 days would have elapsed; 547/1,096 = .499088 x 10,000 Shares = 4,991 Shares). -13- EX-10.(D) 5 1993 STOCK OPTION AND STOCK GRANT PLAN EXHIBIT (10)(d) As Amended and Restated through November 30, 1995 HUNT MANUFACTURING CO. 1993 STOCK OPTION AND STOCK GRANT PLAN -------------------------------------- 1. Purpose. The 1993 Stock Option and Stock Grant Plan (the "Plan") is designed to enable Hunt Manufacturing Co. (the "Company") and its subsidiaries to attract and retain capable officers and key management level employees and to provide an inducement to such personnel to promote the best interests of the Company and its subsidiaries by enabling and encouraging them, through the grant of incentive and nonqualified stock options ("Options") and/or stock ("Stock Grants") to acquire stock in the Company. As used in the Plan, the term "incentive stock options" means options which, at the time such options are granted under the Plan, qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and are designated as incentive stock options in the Option Agreement (as hereinafter defined). The term "nonqualified stock options" means options which, at the time such options are granted, do not qualify as incentive stock options and are designated as nonqualified stock options in the Option Agreement. The term "subsidiary" means any corporation which, at the time an Option is granted or Stock Grant is made under the Plan, qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" contained in Section 424(f) of the Code, or any similar provision hereafter enacted, except that such term shall not include any corporation which is classified as a foreign corporation pursuant to Section 7701 of the Code. 2. Administration. The Plan shall be administered by the Company's Compensation Committee (the "Committee") which shall consist of not less than three directors of the Company who shall be appointed by, and shall serve at the pleasure of, the Company's Board of Directors (the "Board"). Each member of the Committee, while serving as such, shall be deemed to be acting in his/her capacity as a director of the Company. Except to the extent otherwise permitted under Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations thereunder, no member of the Committee shall be, at the time of service on the Committee hereunder, or shall have been at any time within one year prior thereto, eligible to receive equity securities (within the meaning of Rule 16a-1(d) under the Exchange Act) under the Plan or any other plan of the Company or any of its affiliates. The Committee shall have full authority to construe and interpret the Plan and, subject to the provisions of the Plan: to establish, amend, and rescind appropriate rules and regulations relating to the Plan; to take such action as may be appropriate or necessary to insure the continued qualification of any incentive stock options granted under the Plan; to select the persons to whom Options will be granted and/or Stock Grants made under the Plan; to grant Options and make Stock Grants and set the date of grant and other terms and conditions thereof; to make recommendations to the Board; and to take all such steps and make all such determinations in connection with the Plan and the Options granted and the Stock Grants made hereunder as it may deem necessary or advisable. All such rules, regulations, determinations, and interpretations of the Committee shall be final, conclusive, and binding on all persons. 3. Stock Subject to the Plan. Subject to the provisions of Section 8, up to an aggregate maximum of 1,750,000 of the Company's Common Shares, par value $.10 per share ("Shares"), shall be authorized for the grant of Options and/or Stock Grants under the Plan, provided that, of such amount, not more than 525,000 Shares shall be available for Stock Grants. Shares issuable under the Plan may be authorized but unissued Shares or reacquired Shares, as the Board shall determine. If any Option granted under the Plan expires or otherwise terminates, in whole or in part, without having been exercised, or if any Stock Grant hereunder is terminated, in whole or in part, the Shares subject to the unexercised portion of such Option and the unvested Shares covered by such Stock Grant shall be available for the granting of Options and Stock Grants under the Plan as fully as if such Shares had never been subject to an Option or a Stock Grant. 4. Eligibility. Those persons eligible to participate in the Plan shall be the officers and other key management level employees of the Company and any of its subsidiaries ("Eligible Employees"), including directors who are also officers or key management level employees of the Company or any of its subsidiaries. Independent consultants who perform consulting services for the Company and any of its subsidiaries ("Consultants") shall also be eligible to participate. Incentive stock options, nonqualified stock options, or Shares, or a combination thereof, may be granted under the Plan to an Eligible Employee, and nonqualified -2- stock options and Shares, or a combination thereof, but not incentive stock options, may be granted under the Plan to a Consultant. In making any determination as to whether a given employee or Consultant shall receive a grant under the Plan, and in determining the size and nature of any such grant, the Committee shall take into account the duties of such employee or Consultant, his/her past, present, and potential contributions to the success of the Company and its subsidiaries, and such other factors as the Committee shall deem relevant in accomplishing the purposes of the Plan. 5. Grants, Terms and Conditions of Options. From time to time until the expiration or earlier termination of the Plan, the Committee may grant to Eligible Employees and/or Consultants ("Optionees") under the Plan such incentive and/or nonqualified stock options as it determines are warranted; provided, however, that grants of incentive and nonqualified options shall be separate and not in tandem; and provided further that incentive stock options shall not be granted to Consultants. Options granted pursuant to the Plan shall be in such form as the Committee, from time to time, shall approve, and shall be subject to the following terms and conditions: (a) Price. Except as provided in Subsection (j), the price per Share under each Option granted under the Plan shall be determined and fixed by the Committee in its discretion but shall not be less than the higher of 100 percent of the Fair Market Value of the Shares or the par value thereof on the date of grant of such Option. As used in the Plan, the term "Fair Market Value" shall mean: (i) if the principal market for the Shares is a registered securities exchange, the mean between the highest and lowest quoted selling prices of such Shares on the date of grant, or, if there are no such reported sales on that date, then on the last previous date (within a reasonable period prior to the date of grant) on which there were such reported sales; or (ii) such other method of determining fair market value as shall be authorized by the Code, or the rules or regulations thereunder, and adopted by the Committee. (b) Term. Subject to earlier termination as provided in Subsections (c) through (g) and in Section 8, and except as otherwise provided in Subsection (j), the term of each Option shall not be less than two nor more than ten years from the date of grant. (c) Exercise and Payment. Options shall be exercisable in such installments and on such dates, not less than one year from the date of grant, as the Committee may specify. Except as otherwise expressly provided in the Plan, Options shall be exercisable by an Optionee only while he/she remains in the employment of the -3- Company or a subsidiary. Any Option Shares, the right to the purchase of which has accrued, may be purchased at any time up to the expiration or termination of the Option. Options may be exercised, in whole or in part, from time to time, by giving written notice of exercise to the Company at its principal office, specifying the number of Shares to be purchased and accompanied by payment in full of the aggregate purchase price for such Shares. Only full shares shall be issued, and any fractional share which might otherwise be issuable upon exercise of an Option granted hereunder shall be forfeited. The purchase price of Option Shares shall be payable: (i) in cash or its equivalent; (ii) if the Committee, in its discretion, permits, in whole or in part through the surrender or delivery of Shares previously acquired by the Optionee (provided that if such Shares are statutory option stock, as defined in Section 424(c)(3) of the Code, such Shares have been held by the Optionee for a period which is not less than the holding period described in Section 422(a)(1) or 423(a)(1) of the Code, as applicable); (iii) if and to the extent the Committee, in its discretion, permits, in whole or in part through the surrender or delivery of Shares newly acquired by the Optionee upon exercise of such Option (which surrender or delivery shall constitute a disqualifying disposition in the case of an Option which is an incentive stock option); or (iv) if and to the extent the Committee, in its discretion, permits, by delivering a properly executed notice of exercise of the Option to the Company and a broker, with irrevocable instructions to the broker promptly to deliver to the Company the amount of sale or loan proceeds necessary to pay the exercise price of the Option (the sale of Shares pursuant to such instructions shall constitute a disqualifying disposition in the case of an Option which is an incentive stock option). In the event such purchase price is paid, in whole or in part, with Shares, the portion of the purchase price so paid shall be equal to the Fair Market Value, on the date of exercise of the Option, of the Shares surrendered or delivered in payment of such purchase price. (d) Termination of Optionee's Employment. If an Optionee's employment by the Company and its subsidiaries is terminated prior to the expiration date of his/her Option by either party for any reason, with or without cause, other than by reason of death, disability, or retirement (as provided in Subsections (e), (f), and (g)), such Option shall terminate immediately upon such termination of employment, provided that the Committee, in its discretion, may extend the period for exercise following any such termination of employment, to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of such termination, for up to three months, but not beyond the expiration date of such Option. Notwithstanding the foregoing, in the event an Optionee's employment is -4- terminated as contemplated in this Subsection and Options held by him/her have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's termination of employment. For purposes of the Plan, a leave of absence of one year or less which has been expressly approved by the Board shall not be deemed to constitute a termination of employment. A leave of absence longer than one year shall be deemed to constitute a termination of employment, unless the Committee determines otherwise. For purposes of this Section 5, an Optionee who is a Consultant shall be deemed to have terminated employment if such person's consulting relationship with the Company and its subsidiaries is terminated. (e) Death of Optionee. If an Optionee's employment is terminated (within the meaning of Subsection (d)) by reason of his/her death prior to the expiration of his/her Option, or if an Optionee shall die following his/her termination of employment but prior to the expiration date of his/her Option or expiration of the period determined under Subsection (d), (f), or (g), if earlier, such Option may be exercised, by the Optionee's estate, personal representative, or beneficiary who acquired the right to exercise such Option by bequest or inheritance or by reason of the death of the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of his/her death, at any time prior to the earlier of (i) one year following the date of the Optionee's death, or (ii) the expiration date of such Option (which, in the case of death following a termination of employment pursuant to Subsection (d), (f), or (g), shall be deemed to mean the expiration of the exercise period determined thereunder). Notwithstanding the foregoing, in the event that an Optionee's employment is terminated by his/her death and Options held by him/her have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's death. (f) Disability of Optionee. If an Optionee shall become permanently and totally disabled (within the meaning of Section 22(e)(3) of the Code) and his/her employment with the Company and its subsidiaries is terminated (within the meaning of Subsection (d)) as a consequence of such disability prior to the expiration date of his/her Option, such Option may be exercised by the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to -5- which the Optionee could have exercised it on the date of such termination of employment, at any time prior to the earlier of (i) one year following the date of the Optionee's termination of employment, or (ii) the expiration date of such Option. Notwithstanding the foregoing, if at the time of termination of an Optionee's employment due to disability, Options held by such Optionee have not yet become exercisable in accordance with their terms, the Committee, in its discretion, may allow all or a part of such Options to be exercised pursuant to this Subsection, provided that such Options have been outstanding for at least one year at the time of the Optionee's termination of employment. (g) Retirement of Optionee. If an Optionee retires in accordance with the retirement policy of the Company, or with the express consent of the Board, prior to the expiration date of his/her Option, such Option may be exercised by the Optionee, in whole or in part, but only to the extent of the number of Shares with respect to which the Optionee could have exercised it on the date of his/her retirement, at any time prior to the earlier of (i) three months after the date of retirement, or (ii) the expiration date specified in such Option. Notwithstanding the foregoing, the Committee may, in its discretion, (x) extend the period for exercise following an Optionee's retirement for up to nine additional months, but not beyond the expiration date of such Option, despite the fact that such an extension would prevent an Option from qualifying as an incentive stock option under the Code and/or (y) in the event that any Options held by a retiring Optionee have not yet become exercisable in accordance with their terms, allow all or a part of such Options to be exercised pursuant to this Subsection provided that such Options have been outstanding for at least one year at the time of the Optionee's retirement. (h) Transferability. No Option shall be assignable or transferable by an Optionee otherwise than by will or by the laws of descent and distribution. (i) Rights as a Stockholder. An Optionee shall have no rights as a stockholder with respect to any Shares covered by his/her Option until the issuance of a stock certificate to him/her representing such Shares. (j) Ten Percent Shareholder. Notwithstanding any other provision of the Plan, if an Eligible Employee owns more than ten percent of the total combined voting power of all shares of stock of the Company or of a Related Corporation at the time an incentive stock option is granted to such Eligible Employee, the incentive stock option price shall not be less than 110 percent of the Fair Market Value of the optioned Shares on the date the incentive stock option is granted, -6- and such incentive stock option by its terms shall not be exercisable after the expiration of five years from the date the incentive stock option is granted. As used in this Plan, the term "Related Corporation" shall mean a subsidiary or a corporate parent of the Company as defined in Section 424 of the Code. (k) Annual Limit on Grant of Incentive Stock Options. The aggregate Fair Market Value (determined as of the time an incentive stock option is granted) of the Shares with respect to which incentive stock options are exercisable for the first time during any calendar year (under this Plan and any other incentive stock option plan of the Company or a Related Corporation) shall not exceed $100,000. (l) Use of Shares to Satisfy Tax Obligation. When an Optionee is required to pay to the Company or a Related Corporation an amount required to be withheld under applicable Federal, state, or local income tax or similar laws in connection with the exercise of nonqualified stock options under the Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit the Optionee to satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares (or by returning to the Company previously held Shares), which shares shall be valued, for this purpose, at their Fair Market Value on the date of exercise of the nonqualified stock option (or, if later, the date on which the Optionee recognizes ordinary income with respect to such exercise); provided, however, that with respect to Optionees who are subject to Section 16(b) of the Exchange Act, any such amount of taxes required to be withheld automatically shall be satisfied by withholding Shares. If Shares acquired by exercise of an incentive stock option are used for such purpose, and if the holding period requirements of Section 422(a)(1) of the Code have not been met with respect to such Shares, the use of such Shares to satisfy the withholding obligation will be a disqualifying disposition of such Shares. (m) Option Agreement and Further Conditions. Each Optionee shall enter into, and be bound by the terms of, a stock option agreement (the "Option Agreement") which shall include or incorporate by reference the terms of the Option and the Plan and which shall contain such other terms, conditions, and restrictions not inconsistent with the Plan (or, in the case of incentive stock options, the provisions of Section 422(b) of the Code) as the Committee shall determine. Without limiting the generality of the foregoing, the Committee, in its discretion, may impose further conditions upon the exercisability of Options, and restrictions on transferability and repurchase rights with respect to Shares issued upon exercise of Options. -7- 6. Terms and Conditions of Stock Grants. From time to time until the expiration or earlier termination of the Plan, the Committee may make such Stock Grants under the Plan to Eligible Employees and/or Consultants ("Grantees") as it determines are warranted. Stock Grants shall be subject to the following terms and conditions: (a) Vesting Period. The Committee shall establish one or more vesting periods ("Vesting Periods") with respect to the Shares covered by a Stock Grant. The length of such Vesting Period shall be within the discretion of the Committee, except that (subject to Subsection (c) and Section 8) such period or periods shall not be less than one year nor more than five years from the date of grant. Subject to the provisions of this Section 6, Shares subject to a Stock Grant shall vest in the Grantee upon the expiration of the Vesting Period with respect to such Shares. (b) Bonus Payment. For so long as a Grantee's Stock Grant remains outstanding and unvested, the Company shall pay to the Grantee a cash bonus equal to the dividends which the Grantee would have received from the Company had he/she actually held the Shares represented by the unvested portion of his/her Stock Grant. Such payments shall be made within 60 days following the end of each fiscal quarter of the Company with respect to any dividends which may have been paid by the Company on its Shares during such quarter, and will constitute wages subject to withholding for Federal income tax purposes. (c) Termination. (i) Death, Disability, or Retirement. If, prior to the expiration of the Vesting Period with respect to Shares subject to a Stock Grant ("Unvested Shares"), a Grantee's employment with the Company and its subsidiaries is terminated by reason of his/her death, or by reason of his/her disability or retirement (as provided in Sections 5(f) and (g), respectively), then in each such case there shall immediately be vested in the Grantee, or in his/her beneficiary or estate, that number of full Shares that bears the same ratio to all the Grantee's Unvested Shares having the same Vesting Period as the number of the days which have elapsed from the date of the original Stock Grant of such Shares to the date of such termination of the Grantee's employment bears to the total number of days in the Vesting Period with respect to such Shares. [An example of the operation of the preceding sentence is set forth in the Appendix to the Plan.] The remainder of the Grantee's Stock Grant not vested pursuant to the preceding sentence shall -8- immediately terminate, except that the Committee, if it determines that the circumstances warrant, may direct that all or a portion of such remaining Unvested Shares also be vested in the Grantee, subject to such further terms and conditions, if any, as the Committee may determine. For purposes of this Section 6, a Grantee who is a Consultant shall be deemed to have terminated employment if such person's consulting relationship with the Company and its subsidiaries is terminated. (ii) Other Terminations of Employment. If a Grantee's employment is terminated (within the meaning of Paragraph (i)) for any reason other than his/her death, disability, or retirement as aforesaid, the unvested portion of the Grantee's Stock Grant shall immediately terminate, except that the Committee, if it determines that the circumstances warrant, may direct that all or a portion of the Grantee's Unvested Shares be vested in the Grantee, subject to such further terms and conditions, if any, as the Committee may determine. (d) Delivery of Certificates. Upon the vesting of a Stock Grant, the Company shall promptly issue certificates representing the vested Shares to the Grantee or to his/her beneficiary or estate. Only full shares shall be issued, and any fractional shares which might otherwise be issuable pursuant to a Stock Grant shall be forfeited. (e) Transferability. No Stock Grant shall be assignable or transferable by a Grantee otherwise than by will or by the laws of descent and distribution. (f) Rights as a Stockholder. A Grantee shall have no rights as a stockholder with respect to any Shares covered by a Stock Grant until the issuance of a stock certificate to him/her representing such Shares. (g) Use of Shares to Satisfy Tax Obligation. When a Grantee is required to pay the Company or a Related Corporation an amount required to be withheld under applicable Federal, state, or local income tax or similar laws in connection with the vesting of a Stock Grant under this Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit the Grantee to satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares (or by returning to the Company previously held Shares), which Shares shall be valued, for this purpose, at their Fair Market Value on the date of vesting of the Stock Grant (or, if later, the date on which the Grantee recognizes ordinary income with respect to such Stock Grant); provided, however, that with respect to Grantees who are subject to Section 16(b) of the Exchange Act, any such amount -9- of taxes required to be withheld automatically shall be satisfied by withholding Shares. If Shares acquired by exercise of an incentive stock option are used for such purpose, and if the holding period requirements of Section 422(a)(1) of the Code have not been met with respect to such Shares, the use of such Shares to satisfy the withholding obligation will be a disqualifying disposition of such Shares. (h) Stock Grant Agreement. Each Grantee shall enter into, and be bound by the terms of, a Stock Grant Agreement (the "Stock Grant Agreement") which shall include or incorporate by reference the terms of the Stock Grant and of the Plan and which shall contain such other terms, conditions, and restrictions not inconsistent with the Plan as the Committee shall determine. 7. Listing and Registration of Shares. Each Option and each Stock Grant under the Plan shall be subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the Shares covered thereby upon any securities exchange or under the laws of any jurisdiction, or the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option, the making of such Stock Grant, or the purchase or vesting of Shares thereunder, then no such Option may be exercised in whole or in part, and no certificate representing Shares shall be issued pursuant to such Stock Grant, unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained, on conditions acceptable to the Board. Each Optionee and Grantee, or his/her legal representative or beneficiaries, also may be required to give satisfactory assurance that Shares purchased upon exercise of an Option or received pursuant to a Stock Grant are being acquired for investment and not with a view to distribution, and certificates representing such Shares may be legended accordingly. 8. Adjustment Upon Changes in Capitalization, Mergers, and Other Events. The number of Shares which may be issued under the Plan, as stated in Section 3, and the number of Shares issuable upon exercise of outstanding Options (as well as the exercise price per Share under such outstanding Options) or issuable upon vesting of outstanding Stock Grants shall be adjusted, as may be determined appropriate by the Committee (which determination shall be subject to ratification by the Board), to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of the Company. -10- In the event the Company is liquidated or a corporate transaction described in Section 424(a) of the Code and the Treasury Regulations issued thereunder (including, for example, a merger, consolidation, acquisition of property or stock, separation, or reorganization) occurs, each outstanding Option and Stock Grant shall be assumed by the surviving or successor corporation, if any; provided, however, that the Committee, in its discretion, may terminate all or a portion of the outstanding Options and/or Stock Grants if it determines that such termination would be in the best interests of the Company. If the Committee decides to terminate an outstanding Option by reason of such liquidation or corporate transaction, the Committee shall give the holder thereof not less than 21 days' prior notice of any such termination, and such outstanding Option may be exercised up to, and including, the date immediately preceding such termination, if the Option has not otherwise expired, and if it is then exercisable under the Option Agreement. With respect to any Option which has not yet become exercisable, the Committee also, in its discretion, may allow an Optionee to exercise such Option, in whole or in part (if it has not otherwise terminated or expired). If the Committee decides to terminate an outstanding Stock Grant by reason of such liquidation or corporate transaction, the Stock Grant shall vest on such termination date to the same extent as is provided in the first sentence of Section 6(c)(i). The Committee, in its discretion, may also immediately vest all or a portion of the remaining unvested Shares under any Stock Grant which is to be so determined. The Committee, in its discretion, may also change the number of Shares issuable upon exercise of outstanding Options (as well as the exercise price per Share under such outstanding Options) and Shares covered by outstanding Stock Grants to reflect any such corporate transaction, provided, in the case of an incentive stock option, that any such change is made in accordance with Section 424(a) of the Code and is excluded from the definition of "modification" under Section 424(h) of the Code. Notwithstanding any other provisions of the Plan, the Committee, in its discretion, may accelerate, in whole or in part, the date on which Options become exercisable and/or the vesting of any Stock Grant in the event that the Committee determines that a change in control of the Company has occurred or is likely to occur. 9. Amendment or Discontinuance of the Plan. The Board, from time to time, may suspend or discontinue the Plan or amend it, and the Committee may amend any outstanding Options and Stock Grants, in any respect whatsoever; provided, however, that, without the approval of the holders of at least a majority of the votes cast at a duly held stockholders' meeting at which a quorum representing a majority of the -11- outstanding shares of the Company is, either in person or by proxy, present and voting on the action: (i) the class of individuals eligible to receive Options or Stock Grants shall not be changed; (ii) the maximum number of Shares with respect to which grants may be made under the Plan shall not be increased otherwise than as permitted under Section 8; (iii) the limitations on the price at which Options may be granted shall not be changed; and (iv) the duration of the Plan, as specified in Section 12, shall not be extended; and provided further, that no such suspension, discontinuance, or amendment shall impair the rights of any holder of an outstanding Option or Stock Grant without the consent of such holder. 10. Absence of Rights. The recommendation or selection of an Eligible Employee or Consultant as a recipient of an Option or a Stock Grant under the Plan shall not entitle such person to any Option or Stock Grant unless and until the grant actually has been made by appropriate action of the Committee; and any such grant is subject to the provisions of the Plan. Further, the granting of an Option or the making of a Stock Grant to a person shall not entitle that person to continued employment by the Company or its subsidiaries, and the Company shall have the absolute right, in its discretion, to retire such person in accordance with its retirement policies or otherwise to terminate his/her employment, whether or not such termination may result in a partial or total termination of his/her Option or of his/her Stock Grant. 11. Application of Funds. The funds received by the Company upon the exercise of Options and otherwise under the Plan shall be used for general corporate purposes. 12. Effective Date and Duration. The Plan shall become effective on February 7, 1993; provided, however, that if the Plan is not approved by the holders of at least a majority of the votes cast at a duly held stockholders' meeting at which a quorum representing a majority of the outstanding shares of the Company is, either in person or by proxy, present and entitled to vote on the Plan, prior to February 7, 1994, the Plan and all Options and Stock Grants granted or made hereunder shall be null and void. Unless earlier terminated as provided in the Plan, the Plan shall terminate at 12:00 midnight on February 6, 2003, and no Options or Stock Grants shall be granted or made thereafter. However, termination of the Plan shall not affect any Options or Stock Grants theretofore granted or made, which Options and Stock Grants shall remain in effect in accordance with their terms and the terms of the Plan. -12- APPENDIX Accelerated Vesting Pursuant to Section 6(c) of the Plan ---------------------------- Example: If a Stock Grant of 30,000 shares is made to a Grantee on February 10, 1993, to vest in three annual increments of 10,000 Shares each on February 10, 1994, 1995, and 1996, respectively, and if the Grantee, while still an employee of the Company, should die on August 10, 1994, the number of Shares vested would be 22,465, calculated as follows: 1. The 10,000 Share increment scheduled to vest on February 10, 1994, would already have vested in full. 2. The 10,000 Share increment scheduled to vest on February 10, 1995, would vest automatically as to 7,479 Shares (i.e., out of the total Vesting Period of 730 days with respect to such Shares, 546 days would have elapsed; 546/730 = .747945 x 10,000 Shares = 7,479 Shares). 3. The 10,000 Share increment scheduled to vest on February 10, 1996, would vest automatically as to 4,986 Shares (i.e., out of the total Vesting Period of 1,095 days with respect to such Shares 546 days would have elapsed; 546/1,095 = .498630 x 10,000 Shares = 4,986 Shares). EX-10.(F) 6 STOCK GRANT AGREEMENT EXHIBIT (10)(f) HUNT MANUFACTURING CO. 1993 STOCK OPTION AND STOCK GRANT PLAN STOCK GRANT AGREEMENT This Stock Grant Agreement is made this ____ day of ____________ 1995, pursuant to the HUNT MANUFACTURING CO. 1993 STOCK OPTION AND STOCK GRANT PLAN, between HUNT MANUFACTURING CO. (the "Company") and _______________________ (the "Employee"), an officer or other key management level employee of the Company. W I T N E S S E T H: WHEREAS, the Compensation Committee of the Company's Board of Directors (the "Committee"), by appropriate action, has, on [April 17 for Messrs. Carney, O'Meara and Precious; June 27 for Mr. Chandler], 1995 (the "Date of Grant"), made a grant to Employee (the "Grant") of Common Shares of the Company ("Common Shares") under the HUNT MANUFACTURING CO. 1993 STOCK OPTION AND STOCK GRANT PLAN on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the parties hereto, intending to be legally bound hereunder, agree as follows: 1. Incorporation of Plan. The Grant is subject to all of the terms and conditions of the HUNT MANUFACTURING CO. 1993 STOCK OPTION AND STOCK GRANT PLAN, as said Plan may be amended from time to time (the "Plan"), which terms and conditions are incorporated herein by reference, made a part hereof, and shall control in the event of any conflict with any other terms of this Agreement. A copy of the present form of the Plan is attached hereto as Exhibit A and incorporated herein by reference. 2. The Grant. The Grant is for an aggregate of 12,000 Common Shares. 3. Vesting. (a) Date of Vesting. The Common Shares subject to this Grant shall vest in full as of the earliest of (1) one year after the date on which the Board of Directors of the Company (the "Board") elects a permanent (as opposed to acting) Chief Executive Officer to succeed Robert B. Fritsch, (2) one year after the date on which a "Change in Control" (as defined below) occurs, or (3) January 31, 1997, provided that Employee is then still employed by the Company or by any "Related Corporation" (as defined below). Such Common Shares shall also vest in full upon the earlier termination of Employee's employment with the Company and all Related Corporations for any reason other than resignation without the express consent of the Board or "Cause" (as defined below). Notwithstanding the foregoing, the Committee, if it determines that the circumstances warrant, may accelerate the date of vesting of all or a portion of the Common Shares which are not vested, subject to such further conditions, if any, as the Committee may determine. (b) Definitions. For purposes of this Section, the following words and phrases shall have the following meanings: (1) "Cause" shall mean the Employee's: (i) willful and material breach of the duties, responsibilities, and obligations of Employee's position with the Company; (ii) dishonesty, fraud, willful malfeasance, gross negligence or other gross misconduct which is materially injurious to the Company; or (iii) conviction of or plea of guilty to a felony; such Cause to be determined, in each case, by a resolution approved by at least two-thirds of the Directors of the Company after having afforded the Employee a reasonable opportunity to appear before the Board and present his position. (2) "Related Corporation" shall mean a subsidiary or a corporate parent of the Company as defined in section 424 of the Internal Revenue Code of 1986, as amended (the "Code"). (3) "Change in Control" shall mean: (i) any person (a "Person"), as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than (A) the Company and/or its wholly-owned subsidiaries, (B) any ESOP or other employee benefit plan of the Company, and any trustee or other fiduciary in such capacity holding securities under such plan, (C) any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company or (D) the Employee or any group of Persons of which he voluntarily is a part), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, or such lesser percentage of voting power, but not less than 15%, as the Board shall determine; provided, however that a Change in Control shall not be deemed to have occurred -2- under the provisions of this subsection (i) by reason of the beneficial ownership of voting securities by members of the Bartol Family (as defined below) unless and until the beneficial ownership of all members of the Bartol Family (including any other individuals or entities who or which, together with any member or members of the Bartol Family, are deemed under Sections 13(d) or 14(d) of the Exchange Act to constitute a single Person) exceeds 50% of the combined voting power of the Company's then outstanding securities; (ii) during any two-year period beginning after October 1, 1994, Directors of the Company in office at the beginning of such period plus any new Director (other than a Director designated by a Person who has entered into an agreement with the Company to effect a transaction within the purview of subsections (i) or (iii) hereof) whose election by the Board, or whose nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, shall cease for any reason to constitute at least a majority of the Board; or (iii) the Company's shareholders or the Board shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which the Company's voting common shares (the "Voting Shares") would be converted into cash, securities and/or other property, other than a merger of the Company in which holders of Voting Shares immediately prior to the merger have the same proportionate ownership of common shares of the surviving corporation immediately after the merger as they had in the Voting Shares immediately before, (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets or earning power of the Company, or (C) the liquidation or dissolution of the Company. As used in this Agreement, "members of the Bartol Family" shall mean the wife, children and descendants of such children of the late George E. Bartol, III, their respective spouses and estates, any trusts or partnerships primarily for the benefit of any of the foregoing and the administrators, executors, trustees and partners of any such estates, trusts or partnerships. Whether a Change in Control has occurred shall be determined by the Committee, as it is constituted on the day preceding the date of the Change in Control. 4. Delivery of Share Certificates. Upon the vesting of the Grant, the Company shall promptly issue certificates representing the vested Common Shares to the Employee or to his Beneficiary in accordance with Section 6(d) of the Plan. Only full Common Shares shall be issued, and any fractional Common Shares which might otherwise be issuable pursuant to the Grant shall be forfeited. Such -3- Common Shares shall be legended with reference to restrictions on transfer of the Common Shares to the extent the Company may require pursuant to Section 7 of the Plan. 5. Non-Transferability of Grant. The Grant shall not be assignable or transferable by the Employee other than by will or by the laws of descent and distribution as provided in Section 6(e) of the Plan. 6. Designation of Beneficiary. The Employee shall have the right to designate a Beneficiary or Beneficiaries to receive any Common Shares which may become vested upon the Employee's death. The Employee must designate such Beneficiary on the form furnished by the Company. The Employee may, at any time, change his designation of Beneficiary by completing a new form, but a designation of Beneficiary shall remain in effect until such new form is received by the Company. If no properly designated Beneficiary survives the Employee, the Employee's estate shall be the Beneficiary. 7. Rights as a Shareholder; Cash Bonus. (a) No Rights as Shareholder until Common Shares Issued. The Employee shall have no rights as a shareholder with respect to any Common Shares covered by the Grant until the issuance of a stock certificate to him representing such Common Shares. (b) Cash Bonus. Notwithstanding Section 7(a), however, for so long as an Employee's Grant remains outstanding and unvested, the Company shall, to the extent provided in Section 6(b) of the Plan, pay to the Employee a cash bonus equal to the dividends which the Employee would have received from the Company had he actually held the Common Shares represented by the unvested portion of his Grant. Such payments shall be made within 60 days following the end of each fiscal quarter of the Company with respect to any dividends which may have been paid by the Company on its Common Shares during such quarter, and will constitute wages subject to withholding for Federal income tax purposes. 8. Capital Adjustments, Corporate Transactions. The number of Common Shares awarded under this Agreement shall be adjusted to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of the Company. In the event of certain types of corporate transactions, the Grant may be terminated, accelerated or otherwise modified by the Committee as provided in Section 8 of the Plan. 9. Withholding of Taxes. The obligation of the Company to deliver Common Shares hereunder shall be subject to compliance with applicable Federal, state and local income tax and employment tax and similar tax withholding requirements. To meet this obligation, the Company may withhold the amount necessary from the Employee's salary from the Company. The Employee, however, subject to the discretion of the Committee, and subject to such additional withholding rules ("Withholding Rules") as shall be adopted by the Company, may be permitted by the Committee to satisfy such withholding taxes, in whole or in part, by electing to have the Company withhold (or by returning to the Company previously held Common Shares) Common Shares, which Common Shares shall be -4- valued, for this purpose, at their fair market value on the date on which the value of such Common Shares is required to be included in income by the Employee under section 83 of the Code (the "Determination Date"), provided, however, that if Employee is subject to section 16(b) of the Securities Exchange Act of 1934, any such amount of taxes required to be withheld automatically shall be satisfied by withholding Common Shares. Such election must be made on or before the Determination Date and must be in compliance with and subject to any Withholding Rules. 10. Termination of Employment. Subject to, and except as otherwise provided in, Section 3 of this Agreement, if Employee's employment is terminated by the Company and all Related Corporations, the Grant shall be subject to Section 6(c) of the Plan. 11. Other Benefits. The issuance of the Common Shares subject to this Grant to Employee shall be in addition to any other benefits or amounts the Employee may be entitled to under (a) any Company plans, policies, or procedures, or (b) any Change in Control Agreement the Employee has entered into with the Company. 12. Amendment. No provisions of this Agreement may be modified or amended unless such modification or amendment is agreed to in a written instrument signed by the Employee and such officer or officers as may be specifically designated by the Company to sign on its behalf. 13. Absence of Rights. Notwithstanding any provisions of this Agreement or the Plan, the Company shall have the right, subject to the provisions of any employment contract the Employee and the Company have entered into, in its discretion, to retire the Employee at any time pursuant to its retirement rules or otherwise to terminate his employment at any time for any reason whatsoever. 14. Headings. The Section and Subsection headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In the event of a conflict between a heading and the content of a Section or Subsection, the content of the Section or Subsection shall control. 15. Severability. If any clause, phrase, provision or portion of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable under any applicable law, such event shall not affect or render invalid or unenforceable any other provision of this Agreement and shall not affect the application of any clause, provision, or portion hereof to other persons or circumstances. 16. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, executors, and administrators. 17. Notice. Any notice or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if hand delivered or sent by registered or certified mail, postage prepaid: if to the Company, at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103, Attention: The -5- Corporate Secretary; and if to Employee, at the address specified after his name on the signature page hereof, or to such other address or addresses as either such party may specify to the other in writing. 18. Entire Agreement. This Agreement sets forth the entire understanding of the parties and supersedes all prior agreements, arrangements, and communications, whether oral or written, pertaining to the subject matter hereof. 19. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, this Stock Grant Agreement has been executed as of the date first above written. Attest: HUNT MANUFACTURING CO. [SEAL] By: ___________________________________ _______________________ Witness: EMPLOYEE _______________________ _______________________________________ Signature Signature _______________________________________ _______________________________________ _______________________________________ Address of Employee (for the giving of notice) -6- EX-10.(J)(2) 7 EXECUTIVE OFFICERS EXHIBIT (10)(j)(2) The Company has Change in Control Agreements in essentially the form incorporated by reference in Exhibit 10(j)(1) (with the indicated variations on pp. 7, 8 and 9) with various of its officers, including the following executive officers: Executive Officers ------------------ John W. Carney Vice President, Human Resources/Strategic Planning William E. Chandler Senior Vice President, Finance (Chief Financial Officer) and Secretary Robert B. Fritsch President and Chief Executive Officer Spencer W. O'Meara Executive Vice President and General Manager W. Ernest Precious Executive Vice President and General Manager Eugene A. Stiefel Vice President, Information Services EX-10.(M) 8 EMPLOYMENT-SEVERANCE AGREEMENT EXHIBIT (10)(m) Employment-Severance Arrangement with Robert B. Fritsch In January 1996, the Company and Robert B. Fritsch agreed that Mr. Fritsch will continue to serve as President and Chief Executive Officer of the Company until September 30, 1996 or until a new Chief Executive Officer is employed, whichever comes first. Under the terms of this arrangement, Mr. Fritsch's salary was increased to $450,000 annually effective December 1, 1995; a special bonus award of $112,000 was paid to Mr. Fritsch in January 1996; and Mr. Fritsch will receive a payment of up to $240,000 the day the new Chief Executive Officer begins employment with the Company. This latter payment will be in lieu of any 1996 pro-rated bonus based on the annual incentive plan. Under certain circumstances, Mr. Fritsch has agreed to continue as President and Chief Executive Officer through December 31, 1996, in which case he would be entitled to receive the greater of the up to $240,000 payment referred to above or his pro rated portion of the 1996 annual bonus. Mr. Fritsch also has agreed to serve in a transitional role for up to seven months after a new President and Chief Executive Officer takes over, during which period Mr. Fritsch will continue to receive his salary and certain benefits. Upon retirement, Mr. Fritsch will also receive title to his company automobile. EX-11 9 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 Computation of Per Share Earnings (In thousands except per share amounts)
December 3, November 27, November 28, 1995 1994 1993 ----------- ------------ ------------ Income before cumulative effect of accounting change $15,335 $17,197 $14,928 Cumulative effect of change in accounting for income taxes -- 795 -- ------- ------- ------- Net income $15,335 $17,992 $14,928 ======= ======= ======= Primary per share earnings - -------------------------- Average number of common shares outstanding 16,003 16,102 16,107 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 161 194 146 ------- ------- ------- Average shares used to calculate primary per share earnings 16,164 16,296 16,253 ======= ======= ======= Primary per share earnings before change in accounting for income taxes $0.95 $1.06 $0.92 Cumulative effect of change in accounting for income taxes -- 0.05 -- ------- ------- ------- Net primary per share earnings $0.95 $1.11 $0.92 ======= ======= ======= Fully diluted per share earnings - -------------------------------- Average number of common shares outstanding 16,003 16,102 16,107 Add - common equivalent shares representing shares issuable upon exercise of stock options and stock grants 172 216 167 ------- ------- ------- Average shares used to calculate fully diluted per share earnings 16,175 16,318 16,274 ======= ======= ======= Fully diluted per share earnings before change in accounting for income taxes $0.95 $1.05 $0.92 Cumulative effect of change in accounting for income taxes -- 0.05 -- ------- ------- ------- Net fully diluted per share earnings $0.95 $1.10 $0.92 ======= ======= =======
EX-23 10 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Registration Statements Number 33-57103, Number 33-57105, Number 33-70660, Number 33-25947, Number 33-6359 and Number 2-83144 on Form S-8 dated December 28, 1994, December 28, 1994, October 21, 1993, December 7, 1988, June 29, 1986 and April 8, 1983, respectively, of our report, which includes an explanatory paragraph regarding a change in the Company's method of accounting for income taxes, dated January 15, 1996, except as to the information presented in Notes 2 and 8, for which the date is January 30, 1996 on our audits of the consolidated financial statements and the financial statement schedule of Hunt Manufacturing Co. and Subsidiaries (Company) as of December 3, 1995 and November 27, 1994 and for each of the three years in the period ended December 3, 1995 which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania February 29, 1996 EX-27 11 FINANCIAL DATA SCHEDULE
5 0000049146 HUNT MANUFACTURING CO. 1,000 U.S. DOLLARS 12-MOS DEC-03-1995 NOV-28-1994 DEC-03-1995 .00001 15,503 0 44,341 (2,305) 36,131 100,092 100,119 (48,111) 182,810 30,950 3,559 0 0 1,615 134,578 182,810 313,881 313,881 196,720 196,720 93,062 916 (462) 23,645 8,310 15,335 0 0 0 15,335 0.95 0.95
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