<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 3, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8044
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HUNT MANUFACTURING CO.
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(Exact name of registrant as specified in its charter)
Pennsylvania 21-0481254
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Square 2005 Market Street, Philadelphia, PA 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (215) 656-0300
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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As of October 5, 1995 there were outstanding 15,974,538 shares of the
registrant's common stock.
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HUNT MANUFACTURING CO.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
September 3, 1995 and November 27, 1994 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended September 3, 1995
and August 28, 1994 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 3, 1995 and
August 28, 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
</TABLE>
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Part I FINANCIAL INFORMATION Page 3
Item 1 Financial Statements
Hunt Manufacturing Co.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
September 3, November 27,
ASSETS 1995 1994
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,193 $ 13,807
Accounts receivable, less allowance for doubtful
accounts: 1995, $2,537 ; 1994, $2,510 47,582 41,390
Inventories:
Raw materials 13,673 10,501
Work in process 5,735 5,807
Finished goods 20,243 17,242
--------- ---------
Total inventories 39,651 33,550
Deferred income taxes 6,347 5,051
Prepaid expenses and other current assets 1,712 1,520
--------- ---------
Total current assets 98,485 95,318
Property, plant and equipment, at cost, less
accumulated depreciation and amortization:
1995, $49,709; 1994, $46,163 52,150 49,729
Intangible assets, net 25,858 25,982
Other assets 2,953 2,356
--------- ---------
Total assets $ 179,446 $ 173,385
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,015 $ 1,003
Accounts payable 10,964 9,782
Accrued expenses:
Salaries, wages and commissions 4,597 5,742
Income taxes 4,045 4,464
Insurance 2,534 2,430
Compensated absences 1,647 1,741
Other 7,753 5,553
--------- ---------
Total current liabilities 32,555 30,715
Long-term debt, less current portion 3,559 3,559
Deferred income taxes 4,639 4,331
Other non-current liabilities 6,414 5,546
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Total liabilities 47,167 44,151
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Stockholders' equity:
Preferred stock, $.10 par value, authorized 1,000,000
shares (including 50,000 shares of Series A Junior
Participating Preferred); none issued -- --
Common stock, $.10 par value, 40,000,000 shares
authorized; 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 (774) (639)
Retained earnings 127,471 122,518
--------- ---------
134,746 129,709
Less cost of treasury stock:
1995 - 185,792 shares; 1994 - 29,945 shares (2,467) (475)
--------- ---------
Total stockholders' equity 132,279 129,234
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Total liabilities and stockholders' equity $ 179,446 $ 173,385
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Hunt Manufacturing Co.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 3, August 28, September 3, August 28,
1995 1994 1995 1994
(14 weeks) (13 weeks) (40 weeks) (39 weeks)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales $ 86,302 $ 75,765 $ 231,713 $ 209,338
Cost of sales 55,055 46,415 146,738 126,967
------------ ---------- ------------ ----------
Gross profit 31,247 29,350 84,975 82,371
Selling and shipping expenses 15,862 15,294 44,964 43,235
Administrative and general
expenses 8,027 6,782 21,464 20,468
Provision for organizational changes and
relocation and consolidation of operations 1,579 -- 3,697 --
------------ ---------- ------------ ----------
Income from operations 5,779 7,274 14,850 18,668
Interest expense 5 63 58 210
Other expense (income), net 104 296 (403) 376
------------ ---------- ------------ ----------
Income before income taxes and cum-
ulative effect of accounting change 5,670 6,915 15,195 18,082
Provision for income taxes 2,015 2,524 5,258 6,600
------------ ---------- ------------ ----------
Income before cumulative effect of
accounting change 3,655 4,391 9,937 11,482
Cumulative effect of change in
accounting for income taxes -- -- -- 795
------------ ---------- ------------ ----------
Net income $ 3,655 $ 4,391 $ 9,937 $ 12,277
============ ========== ============ ==========
Average shares of common
stock outstanding 15,959 16,087 16,009 16,104
============ ========== ============ ==========
Earnings per common share:
Income before cumulative effect of
accounting change $ 0.23 $ 0.27 $ 0.62 $ 0.71
Cumulative effect of change in
accounting for income taxes -- -- -- 0.05
------------ ---------- ------------ ----------
Net income per common share $ 0.23 $ 0.27 $ 0.62 $ 0.76
============ ========== ============ ==========
Dividends per common share $ 0.095 $ 0.09 $ 0.285 $ 0.27
============ ========== ============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Hunt Manufacturing Co. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
September 3, August 28,
1995 1994
(40 weeks) (39 weeks)
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,937 $ 12,277
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,694 6,371
Cumulative effect of change in accounting for income taxes -- (795)
Deferred income taxes (988) (832)
Loss on disposals of property, plant and equipment 192 160
Provision (payments) for organizational changes and
relocation and consolidation of operations 3,450 (114)
Issuance of stock under management incentive bonus
and stock grant plans 239 184
Changes in operating assets and liabilities, net of
acquisition of business (13,456) (10,689)
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Net cash provided by operating activities 6,068 6,562
------------ -----------
Cash flows from investing activities:
Additions to property, plant and equipment (6,740) (6,080)
Acquisition of business (2,789) --
Other, net (346) (325)
------------ -----------
Net cash used for investing activities (9,875) (6,405)
------------ -----------
Cash flows from financing activities:
Proceeds from long-term debt 930 --
Payments of long-term debt, including current maturities (918) (1,306)
Purchase of treasury stock (2,841) (729)
Proceeds from exercise of stock options 411 160
Dividends paid (4,566) (4,345)
Other, net (47) (40)
------------ -----------
Net cash used for financing activities (7,031) (6,260)
------------ -----------
Effect of exchange rate changes on cash 224 (40)
------------ -----------
Net decrease in cash and cash equivalents (10,614) (6,143)
Cash and cash equivalents, beginning of period 13,807 10,778
------------ -----------
Cash and cash equivalents, end of period $ 3,193 $ 4,635
============ ===========
Supplemental disclosures of cash flow information:
Interest paid $ 310 $ 304
Income taxes paid 6,372 6,459
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Hunt Manufacturing Co.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed consolidated financial statements and related
notes are unaudited; however, in management's opinion all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the financial position at September 3, 1995 and the
results of operations and cash flows for the periods shown have been made.
Such statements are presented in accordance with the requirements of Form
10-Q and do not include all disclosures normally required by generally
accepted accounting principles or those normally made in Form 10-K. Both
the third quarter and first nine months of fiscal 1995 contained one
additional week compared to the same comparable periods of fiscal 1994.
2. The earnings per share are calculated based on the weighted average number
of common shares outstanding. Shares issuable under outstanding stock
option, stock grant and long-term incentive compensation plans are common
stock equivalents, but are not used in computing earnings per share
because the dilutive effect would be less than 3%.
3. 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 deferred method to an asset and liability approach.
The effect of adopting SFAS No. 109 was recognized immediately as the
effect of a change in accounting principle and increased net income in the
first quarter and in the first nine months of fiscal 1994 by $.8 million,
or $.05 per share. The increase in net income resulted primarily from
adjusting deferred tax balances to current tax rates.
4. The pre-tax charge of $1.6 million recorded in the third quarter of fiscal
1995 relates to the relocation and consolidation of certain manufacturing
and distribution operations ($1.3 million) and to additional costs
incurred in connection with the previously announced organizational
changes ($.3 million). This charge reduced third quarter net income by
approximately $1 million, or $.06 per share. For the first nine months of
fiscal 1995, a pre-tax provision, aggregating $3.7 million, was recorded
relating to these charges (approximately $2.4 million after income taxes,
or $.15 per share).
5. In late April 1995, the Company acquired the Centafoam business of
Spicers, Ltd., a division of David S. Smith (Holdings) PLC, for cash
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.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
In the first nine months of fiscal 1995, the Company improved its financial
condition with working capital increasing to $65.9 million at September 3, 1995
from $64.6 million at November 27, 1994. Net cash flows of $6.1 million provided
by operating activities combined with available cash balances were sufficient to
fund additions to property, plant and equipment of $6.7 million, to pay cash
dividends of $4.6 million, to repurchase shares of the Company's common stock
for $2.8 million primarily (as previously authorized and announced) for use in
the Company's various compensation plans, and to fund a portion ($1.9 million)
of the Centafoam acquisition. The Company acquired the Centafoam business from
Spicers Ltd., a division of David S. Smith (Holdings) PLC. The debt to equity
ratio percentage at September 3, 1995 of 3.5% remained unchanged from November
27, 1994 despite additional debt ($.9 million) incurred to partially finance the
Centafoam acquisition.
Current assets increased to $98.5 million at September 3, 1995 from $95.3
million at the end of fiscal 1994 primarily as a result of increases in accounts
receivable and inventories, partially offset by a $10.6 million decrease in
cash, attributable, in part, to the uses of cash mentioned in the discussion of
cash flows above. Accounts receivable increased to $47.6 million at the end of
the third quarter of fiscal 1995 from $41.4 million at the end of fiscal 1994
primarily due to higher sales near the end of the third quarter of fiscal 1995
compared with those near the end of fiscal 1994, as well as to an increase in
promotional sales with extended payment terms. The increase in inventories from
$33.6 million at November 27, 1994 to $39.7 million at September 3, 1995 was
principally attributable to higher inventories held to service increases in
sales of presentation graphics products; additional inventories for new products
and from an acquisition of a business, as well as to customary replenishment of
certain key inventory items in anticipation of fall promotional sales. Inventory
balances were reduced by $3.2 million during the third quarter of fiscal 1995 as
a result of targeted inventory reduction programs which are planned to continue
in the fourth quarter of fiscal 1995.
Current liabilities of $32.6 million at the end of the third quarter of fiscal
1995 increased $1.9 million from $30.7 million at the end of fiscal 1994
primarily as a result of increases in accounts payable and other current
liabilities, partially offset by a decrease in accrued salaries, wages and
commissions. The increase in accounts payable to $11 million at September 3,
1995 from $9.8 million at November 27, 1994 was largely the result of the
inventory increase discussed above. Other accrued liabilities increased $2.2
million principally due to the accrual associated with the provision for
organizational changes and relocation and consolidation of operations discussed
below. The decrease in accrued salaries, wages and commissions was due primarily
to payments of incentive compensation in fiscal 1995 which had been accrued at
the end of fiscal 1994.
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There were no borrowings under the Company's line-of-credit agreements of $45
million at September 3, 1995. Management believes that cash generated from
operations, along with available cash balances and, if necessary, cash available
under its existing credit agreements will be sufficient to meet the Company's
capital expenditure commitments, working capital and other currently anticipated
operational needs. Should the Company require additional funds, management
believes that the Company could obtain them at competitive costs.
Management expects that total 1995 expenditures for additions to property, plant
and equipment to increase capacity and productivity will approximate $8.5
million, of which approximately $6.7 million has been expended through the first
nine months of fiscal 1995.
Results of Operations
The Company's 1995 fiscal year will be comprised of 53 weeks, compared to 52
weeks for fiscal 1994. The third quarter of fiscal 1995 and fiscal 1994
contained 14 weeks and 13 weeks, respectively, while the first nine months of
fiscal 1995 and fiscal 1994 contained 40 weeks and 39 weeks, respectively.
Net Sales
Net sales in the third quarter of fiscal 1995 increased 13.9% to $86.3 million
from $75.8 million in the third quarter of fiscal 1994, while net sales of
$231.7 million for the first nine months of fiscal 1995 grew by $22.4 million,
or 10.7%, compared to the first nine months of fiscal 1994. These increases were
primarily the result of higher unit sales volume. Average selling prices in the
third quarter and the first nine months of fiscal 1995 increased approximately
3.5% and 1.8%, respectively, from those in the third quarter and first nine
months of fiscal 1994. Management believes that although overall selling prices
have increased in fiscal 1995, competitive pressures on selling prices will
continue.
The increases in net sales were led by higher sales of art/craft products which
grew 21.9% to $41.1 million in the third quarter and 19.6% to $109.1 million in
the first nine months of fiscal 1995 compared to the same periods in fiscal
1994. Presentation graphics products continue to make a significant contribution
to sales in the art/craft segment. Sales in this product class grew 30.9% and
26.3% in the third quarter and first nine months of fiscal 1995, respectively,
compared to the same fiscal 1994 periods. These increases were due to a
combination of factors: higher sales in Europe, growth in the digital imaging
market and increases in sales of certain mounting and laminating products (e.g.,
Seal(R) and Image Series(R) mounting and laminating equipment, and Bienfang(R)
brand foam board). Sales of hobby/craft products increased 12.9% and 15.8% in
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the third quarter and first nine months of fiscal 1995, respectively, compared
to the same periods of fiscal 1994. The increases were primarily attributable to
higher sales of Speedball(R) Elegant Writer(R) calligraphy markers, Speedball(R)
Painters(R) markers, and Accent Mats(R) pre-cut framing mats as well as
introduction of new products. Art supplies products sales were essentially flat
in the third quarter and first nine months of fiscal 1995 when compared to the
same periods of fiscal 1994. Export sales of art/craft products grew by 10.9% in
the third quarter and by 6.4% for the first nine months of fiscal 1995. Foreign
sales of art/craft products continue to increase substantially, growing 47.5% in
the third quarter and 30.9% in the first nine months of fiscal 1995 when
compared to the same periods of fiscal 1994. These increases were due primarily
to higher sales of presentation graphics products in Europe, which includes
sales of products of Centafoam (acquired in late April 1995).
Office products sales increased 7.5% to $45.2 million in the third quarter and
3.8% to $122.7 million in the first nine months of fiscal 1995 compared to the
same fiscal 1994 periods. Sales of office furniture products were up 22.2% and
20.3% and desktop accessories and supplies products were up 8.3% and 6.6%, while
mechanical and electromechanical products were down 1.7% and 7.6% in the third
quarter and first nine months of fiscal 1995, respectively, compared with the
same periods of fiscal 1994. The sales growth in office furniture products was
due primarily to higher sales of Bevis(R) brand products, particularly folding
tables, computer-related furniture, conference tables and screen panels. The
sales increase in desktop accessories and supplies products was the result of
higher sales of MediaMate(R) brand products and Schwan-STABILO(R) highlighter
products, partially offset by lower sales of Lit-Ning(R) brand metal paper
organizers. The sales decrease in mechanical and electromechanical products was
largely due to lower sales of Boston(R) brand products, particularly pencil
sharpeners, manual staplers, paper punches and office machines. The decrease in
mechanical and electromechanical sales is 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. Management is uncertain if the decrease in demand for mechanical
and electromechanical products will continue into fiscal 1996. Export sales of
office products were essentially flat for the third quarter and first nine
months of fiscal 1995 when compared to the same periods of fiscal 1994 primarily
due to higher sales in Canada offset by lower sales to the Far East, Europe and
Latin America.
Gross Profit
The Company's gross profit margin decreased to 36.2% of net sales in the third
quarter of fiscal 1995 from 38.7% in the third quarter of fiscal 1994 and
decreased to 36.7% in the first nine months of fiscal 1995 from 39.3% in the
first nine months of fiscal 1994. These decreases were primarily the result of
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changes in product sales mix (i.e., higher sales of lower margin products, such
as presentation graphics and office furniture products), higher raw material
costs and lower sales and production volume of Boston(R) brand products. Higher
costs for commodities, such as wood, styrene plastics, polyester and packaging
materials, had the greatest impact on raw material cost increases. The Company
is beginning to realize the positive effects of its recent 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 increasing in 1995.
Selling, Shipping, Administrative and General Expenses
Selling and shipping expenses decreased to 18.4% of net sales for the third
quarter of fiscal 1995 from 20.2% in the third quarter of fiscal 1994 and
decreased to 19.4% in the first nine months of fiscal 1995 from 20.7% in the
first nine months of fiscal 1994. The lower rates were largely due to cost
reduction initiatives which have resulted in lower commissions and
transportation costs.
Administrative and general expenses increased 18.4%, or $1.2 million, in the
third quarter and increased 4.9%, or $1 million in the first nine months of
fiscal 1995 as compared to the prior year expense levels for the same periods.
The increases were due to several factors, the most significant of which was
that the third quarter and first nine months of fiscal 1995 contained one
additional week. Higher provisions for bad debts and fees for professional
services also caused a portion of the increase.
Provision for Organizational Changes and Relocation and
Consolidation of Operations
In the third quarter of fiscal 1995, the Company recorded a pre-tax charge of
$1.6 million as a provision for costs relating to the Company's decision to
relocate and consolidate certain manufacturing and distribution operations ($1.3
million) and for additional costs incurred in connection with the previously
announced organizational changes ($.3 million). This charge reduced third
quarter net income by approximately $1 million, or $.06 per share. For the first
nine months of fiscal 1995, a pre-tax provision aggregating $3.7 million was
recorded relating to these charges (approximately $2.4 million after income
taxes, or $.15 per share). It is anticipated that the total pre-tax charge
associated with the relocation and consolidation of operations and
organizational changes will range from $4.7 million to $5.3 million, or from
$.19 to $.21 per share. The remaining portion of these charges will be
recognized in the Company's fourth quarter of fiscal 1995 and the first quarter
of fiscal 1996.
Interest Expense
Interest expense decreased to $5,000 for the third quarter of fiscal 1995 from
$63,000 in the third quarter of fiscal 1994 and decreased to $58,000 in the
first nine months of fiscal 1995 from $210,000 in the first nine months of
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fiscal 1994. These decreases were due primarily to higher capitalized interest
in the fiscal 1995 period related to additions to property, plant and equipment.
Other Expense (Income), Net
Other income, net in the first nine months of fiscal 1995 was due to a recovery
of previously written-off machinery and equipment, as well as to greater
currency exchange gains and higher interest income resulting from higher
interest rates.
Provision for Income Taxes
The effective tax rate decreased to 35.5% in the third quarter of fiscal 1995
from the 36.5% in the third quarter of fiscal 1994 and for the first nine months
of fiscal 1995 decreased to 34.6% from 36.5% for the first nine months of fiscal
1994. The first nine months decrease was principally a result of a reversal of
valuation allowances relating to tax net operating loss carryforwards from the
European operations which was recorded in the second quarter of fiscal 1995.
Accounting Change
In the first fiscal quarter of 1994, the Company adopted the provisions of SFAS
No. 109, "Accounting for Income Taxes," the cumulative effect of which increased
net income by $.8 million, or $.05 per share, for the first nine months of
fiscal 1994.
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Item 6 -Exhibits and Reports on Form 8-K
(a) Exhibits
10. Transition Agreement dated June 13, 1995 between the Company and
Ronald J. Naples
11. Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the fiscal
quarter to which this report relates.
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SIGNATURES
Pursuant to the requirements 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.
Date October 16, 1995 By /s/ William E. Chandler
-------------------------- ---------------------------
William E. Chandler
Senior Vice President, Finance
(Principal Financial and Accounting
Officer)
Date October 16, 1995 By /s/ Robert B. Fritsch
-------------------------- ------------------------
Robert B. Fritsch
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit 10 - Transition Agreement dated June 13, 1995 between the Company and
Ronald J. Naples
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
<PAGE>
Exhibit 10
TRANSITION AGREEMENT
This Transition Agreement (the "Agreement") is entered into this
13th day of June, 1995, between HUNT MANUFACTURING CO., a Pennsylvania
corporation (the "Company"), and RONALD J. NAPLES ("Naples").
BACKGROUND
Naples currently is serving as Chairman of the Board of the Company
and has served the Company in varying executive capacities for over 19 years,
most recently as Chief Executive Officer of the Company. The parties now wish by
this Agreement to set forth the terms of Naples's transition out of the Company.
THEREFORE, in consideration of the mutual obligations and
agreements contained herein and intending to be legally bound, the Company and
Naples hereby agree as follows:
1. Resignation; Continued Employment/Consultancy.
(a) Resignation. Naples resigned all of his positions as an officer of the
Company and its subsidiaries on April 19, 1995, and shall resign as Chairman of
the Board and director of the Company and its subsidiaries not later than July
19, 1995.
(b) Employment and Consultancy. Naples currently is continuing as a
non-executive employee of the Company and its subsidiary, Hunt Management
Company, Inc., and shall continue in that capacity until: (i) July 19, 1998;
(ii) Naples's commencement of other employment (as defined in Section 4(a)
hereof); (iii) Naples's death; or (iv) Naples's discharge for "Cause," whichever
shall first occur. (Where applicable, the term "Company" shall also include Hunt
Management Company, Inc., Naples's employer.)
In the event of termination of Naples's employment pursuant to
clause (ii) of this subsection (b), Naples shall continue as a consultant to the
Company until July 19, 1998, or until his earlier termination for Cause or
death.
For purposes of this Agreement, "Cause" shall mean: (1) Naples's
willful and material breach of this Agreement (including, without limitation,
the provisions of Section 6 hereof); or (2) Naples's dishonesty, fraud, willful
malfeasance, gross negligence or other gross misconduct relating to the
performance of Naples's employment or consultancy hereunder which is materially
injurious to the Company. Such "Cause" shall be determined by a resolution
approved by at least two-thirds of the Directors of the Company after having
afforded Naples the opportunity to appear before the Board of Directors of the
Company and present his position.
The Company shall give Naples not less than 60 days prior written
notice of any intended termination of Naples's employment with or consultancy to
the Company hereunder for Cause, with termination to occur no earlier than the
expiration of such 60-day period. Such notice shall specify the grounds for
such intended termination, and the Company shall only be entitled to terminate
Naples for Cause if Naples shall have failed to remedy such Cause within said
60-day notice period. Naples shall give the Company not less than 15 days prior
written notice of any proposed resignation by him as an employee of or
consultant to the Company.
(c) Duties. During the term of his employment and consultancy hereunder, Naples
shall perform such services for the Company and its subsidiaries as may
reasonably be assigned to him, from time to time, by the Chairman (if other than
Naples), the Vice Chairman, the Chief Executive Officer or the President of the
Company (each an "Authorized Officer"). Such duties may include, without
limitation, the following:
<PAGE>
(i) advising, consulting and assisting in transition matters
relating to the transfer of responsibilities to a
successor Chief Executive Officer;
(ii) reviewing the Company's quarterly and annual reports, and
offering comments for improving the Company's performance
as reflected on such reports;
(iii) advising and consulting with respect to strategic
opportunities;
(iv) advising, consulting and assisting in the development of
business opportunities and the maintenance of customer
relations.
Unless expressly authorized by the Company's Board of Directors,
Chairman of the Board (if other than Naples) or Chief Executive Officer, Naples
shall not have, and shall not hold himself out as having, any authority to make
any representations on behalf of the Company nor to execute any agreements on
behalf of the Company or otherwise to bind the Company to any obligation to
third parties.
During the term of his employment hereunder, Naples shall not be
required to spend more than 90 hours per month, and during the term of any
consultancy hereunder not more than 45 hours per month, on the performance of
his duties. Naples shall record the time spent by him on the duties assigned by
an Authorized Officer and shall submit a statement of such time to the Chairman
of the Company promptly after the end of each month. Further, such duties may be
performed via telephone and/or by written communication and shall not require
Naples's presence at the Company's facilities or his travel outside of the
greater Philadelphia area unless otherwise mutually agreed by the parties. The
Company shall reimburse Naples in accordance with the Company's normal
reimbursement policies for all authorized, reasonable and documented expenses
incurred by him in the performance of his duties hereunder.
2. Compensation; Benefits; etc..
(a) Salary. Up through July 19, 1995, the Company shall continue to
pay Naples his present salary of $400,000 per year. Commencing July 20, 1995 the
Company, subject to Section 4 hereof, shall pay Naples a salary at the rate of
$565,000 per year for the three-year period ended July 19, 1998. Naples's salary
shall be paid to him in accordance with the Company's normal payroll practices
and schedule, less applicable withholding and deductions, and shall be sent to
him at such address as he shall specify in writing to the Company from time
to time.
(b) Annual Bonus. The Company shall pay Naples a pro rata bonus, if
any, earned for fiscal year 1995 under the Company's annual bonus program based
upon service through April 30, 1995, but Naples shall not be entitled to any
bonus with respect to any period after April 30, 1995. Such pro rata bonus, if
earned, shall be paid at such time as other executives of the Company receive
their annual bonuses for fiscal 1995, and shall be based upon the Company's
profits before taxes per share as determined under the Annual Bonus Plan for the
executives of the Company.
(c) Long-Term Incentive Compensation Plan. Naples's unvested awards
under the Company's Long-Term Incentive Compensation Plan (the "LTIC Plan")
shall be proportionately vested through April 30, 1995 and shall be paid to
Naples as and when provided in the LTIC Plan. These include awards under the
LTIC Plan for the FY 93-95 performance period and the FY 94-96 performance
period. With respect to the FY 93-95 performance period, Naples shall be
entitled to 28/36 of a full award, and with respect to the FY 94-96 performance
period, Naples shall be entitled to 16/36 of a full award. Naples shall not be
entitled to participate in the LTIC Plan with respect to any period after April
30, 1995.
<PAGE>
(d) Benefits. Up through July 19, 1995, Naples shall continue his
present participation in Company benefit plans and programs except as otherwise
expressly provided in this Agreement. Subsequent to July 19, 1995, Naples shall
continue to participate in the Company benefit plans and programs listed in
Schedule 2(d) hereto as and to the extent specified in such Schedule; however,
he shall not participate in any other benefit plans and programs of the Company
including, without limitation, those listed in Paragraph V of Schedule 2(d).
(e) Automobile; Perquisites; etc. On or about August 1, 1995, the
Company shall transfer to Naples title to the 1993 Buick Roadmaster Estate
automobile presently leased by the Company for him and to the cellular telephone
affixed to the automobile. Such transfer shall be without cost to Naples except
for any withholding taxes and licensing and registration fees as may be
required, and, on the date of such transfer, Naples shall return to the Company
all Company credit cards issued by gasoline companies. Naples agrees to accept
such automobile in its then condition and shall thereafter be responsible for
such automobile, its maintenance and the securing of all insurance thereon and
for the cost of operation of the cellular telephone located in such automobile.
Naples further agrees to indemnify and hold the Company harmless against any
liability or obligation with respect to such automobile or its use following
such transfer of title.
Any items of Company-owned equipment, as well as Company credit
cards furnished by the Company to Naples for his use, shall be returned to the
Company (if not previously returned) on the date of his resignation as Chairman
of the Board and director of the Company, unless otherwise expressly agreed by
the Company.
The Company shall continue to furnish to Naples the other
perquisites listed on Schedule 2(e) hereto through December 31, 1995, or until
the earlier termination of Naples's employment hereunder; however, he shall not
be entitled to any perquisites not listed on or expressly excluded by Schedule
2(e).
3. Certain Additional Payments.
(a) Vacating of Office; Allowance; etc.. Naples shall vacate his
office at the Company not later than July 20, 1995. The Company shall pay Naples
$6,000 if he vacates his office by May 15, 1995 or $4,000 if he vacates said
office after May 15, 1995 but by June 15, 1995. Further, the Company shall pay
Naples $4,167 per month for the 12 calendar months following the month in which
he vacates his office and $2,084 per month for the succeeding 12 calendar months
as an allowance for rent, secretarial help and/or outplacement services. Any
payments required under the first sentence of this subsection (a) shall be made
on or before the 10th day of the month following the month Naples vacates his
office, and the monthly payments required by the second sentence of this
subsection (a) shall be payable on or before the 10th day of each month
commencing with the month following the month in which he vacates his office.
(b) Legal Fees. The Company shall pay Naples's legal fees, up to a
maximum aggregate of $10,000, incurred by him in connection with the negotiation
and implementation of this Agreement. Such payment shall be made promptly by the
Company upon receipt of reasonable documentation of such fees.
4. Termination of Employment; Conversion to Consultancy;
Mitigation; Effects.
(a) Other Employment. Naples shall be under no obligation to seek
or accept other employment during the period ending July 19, 1998. If Naples
does commence other employment, as defined in this subsection (a), during such
period, his employment by the Company, his entitlement to participate in the
Company's benefit plans and programs (except as otherwise expressly provided in
such plans and programs or in Schedule 2(d) hereto or by applicable law), and
his entitlement to the payments set forth in Section 3(a) hereof shall terminate
concurrently with commencing such other employment, but Naples shall continue as
a consultant to the Company, and the Company shall continue to pay him the
<PAGE>
salary specified in Section 2(a) hereof ("Salary") through July 19, 1998 or
until his earlier death or termination of his consultancy for Cause. Naples
shall be deemed to have commenced other employment if (i) he becomes actively
involved on a substantially full-time basis in any business as a general partner
in a partnership, or (ii) he is employed (whether as an employee or as an
independent contractor) on a substantially full-time basis by any other entity,
not more than 30% of which is owned by Naples and/or members of his family, for
a period of more than eight weeks in any calendar quarter, in which case
Naples's other employment shall be considered to have commenced on the first day
following such eight-week period. (A "substantially full-time basis" shall mean
employment on a basis which requires Naples to spend three days a week or more
of his normal working time in such other activity. Naples's "family" shall mean
his parents, his siblings and their spouses, his children and their spouses, and
Naples's spouse and her parents and siblings.) Naples shall notify the Company
not later than the day such partnership initially commences and, in the case of
employment, shall provide preliminary notice on the date such employment
commences and confirmatory notice on the completion of the eighth week of such
employment. Naples shall cease to be an employee of the Company on the first day
following such eight-week period.
(b) Mitigation. Notwithstanding subsection (a) above, during the
year commencing July 20, 1997 and ending July 19, 1998 (the "mitigation year"),
the Salary or consulting fees to which Naples shall be entitled hereunder shall
be reduced by the amount of compensation earned by Naples from other employment
(as defined above) during such mitigation year. Compensation earned by Naples
during the mitigation year from any such other employment shall be deemed to
include compensation or other earned income reported on IRS Form W-2,
Schedule K-1, or Form 1099, for the calendar years 1997 and 1998, subject
to the following guidelines: any bonus received by Naples with respect to the
1997 or 1998 calendar years shall be prorated, on a monthly basis, throughout
such calendar years; any amounts attributable to the grant or exercise of stock
options or currently nontaxable benefits shall be excluded; nonqualified
deferred compensation shall be included, when earned, if such deferred amounts
are not subject to a substantial risk of forfeiture, and shall be excluded if
subject to a substantial risk of forfeiture; and any amounts attributable to
grants of restricted stock shall be included on the date of grant without
regard to the date or dates on which the restrictions on such stock lapse. The
parties shall cooperate with one another in good faith to determine the amount
of such reduction in Salary or consulting fees and the method of effecting same.
(c) Death. If Naples's employment or consultancy hereunder shall be
terminated prior to July 20, 1998 due to his death, Naples's entitlement to
participate in the Company's benefit plans and programs (except as otherwise
expressly provided in such plans and programs or in Schedule 2(d) hereto or by
applicable law) and his entitlement to the payments set forth in Section 3(a)
hereof immediately shall terminate (if not previously terminated), but the
Company shall continue to pay Naples's Salary through July 19, 1998 to his
estate.
(d) Cause. If Naples's employment or consultancy hereunder shall be
terminated prior to July 19, 1998 for "Cause", his entitlement to participation
in the Company's benefit plans and programs and his entitlement to the payments
set forth in Section 3(a) hereof shall immediately terminate as and to the
extent provided in subsection (c) above, and Naples shall not be entitled to
Salary with respect to any period subsequent to the termination of his
employment or consultancy.
(e) Disability. If Naples becomes disabled, as defined in the
Company's Group Long-Term Disability Plan, while employed by or acting as a
consultant hereunder to the Company, Naples's entitlement to participate in the
Company's benefit plans thereafter shall be determined as expressly provided by
the terms of the applicable plans and as provided under the terms of this
Agreement, but the Company shall continue to pay to Naples his Salary through
July 19, 1998, except that such Salary shall be reduced by the amount of any
disability payments which may be payable to Naples under the Company's
disability plans with respect to the period from the date of Naples's disability
through July 19, 1998.
<PAGE>
5. Repayment of Indebtedness.
Naples currently has outstanding loans from the Company, in the
aggregate principal amount of $533,871, made pursuant to the terms of a Loan and
Security Agreement, as last amended on April 20, 1988, which loans are
represented by Promissory Notes. Subject to Naples's right to prepay them in
whole or in part at any time without penalty, the currently outstanding
Promissory Notes shall remain outstanding in accordance with their current
terms. Naples shall repay such Promissory Notes in full not later than the
earliest of: (a) September 17, 1998, (b) 60 days following termination of his
employment and any consultancy hereunder if such termination occurs prior to
July 19, 1998, or (c) the date such Notes become due and payable in accordance
with their respective terms.
6. Certain Covenants of Naples.
(a) Confidentiality. Naples shall hold in a fiduciary capacity for the benefit
of the Company and its subsidiaries all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries and their
respective businesses which shall have been or shall be obtained by Naples
during his prior or future employment by or consultancy with the Company or any
of its subsidiaries and which shall not have become public knowledge (other than
by acts by Naples or his representatives in violation of this Agreement). For a
period of three years following the termination of Naples's employment with or
consultancy to the Company and its subsidiaries for any reason, Naples shall
not, without prior written consent of the Company, use for his own benefit or
communicate or divulge to anyone other than the Company and those designated by
it any such information, knowledge or data.
(b) Noncompetition. Naples agrees that prior to July 20, 1998 he shall not: (i)
directly or indirectly, anywhere in the world, manufacture, produce, sell or
market, or cause or assist any other person or entity to manufacture, produce,
sell or market any product, in direct competition with any product which was
being sold or marketed by the Company or any of its subsidiaries at April 19,
1995, or which as of that date the Company was planning to market and sell, or
(ii) be an employee, officer, director, partner, or trustee of, or be the
beneficial owner of more than 5% of the outstanding common stock of or
equivalent equity interest in, any person or entity that is engaged in any such
activities. However, this subsection (b) shall not restrict Naples from becoming
an employee of another entity which is engaged as part of its business in any
such competing activities, provided that Naples reasonably can demonstrate to
the Company that his position and activities with such other entity do not
involve, to any material extent, such competing activities, and provided further
that Naples continues strictly to abide by the provisions of subsections (a) and
(c) of this Section 6.
(c) Noninducement. Naples agrees that prior to July 20, 1998, he will not,
directly or indirectly, take any action to induce any supplier or customer of
the Company or any of its subsidiaries to cease doing business, or to reduce the
amount of its business, with the Company or any of its subsidiaries, or to
solicit any person in the employ of the Company or any of its subsidiaries to
terminate such employment and become employed elsewhere.
(d) Equitable Relief. Naples acknowledges that the covenants contained in
subsections (a), (b) and (c) above are reasonable and necessary for the
protection of the Company's legitimate interests. However, in the event that the
duration and/or scope of any such covenant are finally determined by any court
or arbitration panel of applicable jurisdiction to be of such length or breadth
as to render the covenant unenforceable, the duration and/or scope of such
covenant shall be reduced to such length and/or breadth as shall render such
covenant enforceable. Notwithstanding the provisions of Section 10 hereof, the
Company shall be entitled to seek equitable remedies, including injunctive
relief, in any court of applicable jurisdiction in the event of any breach or
threatened breach by Naples of the covenants contained in subsection (a) above
(but no such equitable judicial remedy shall be available for a breach of
subsections (b) and (c) above).
<PAGE>
(e) Damages. In the event that it is determined by a court or arbitration
panel pursuant to Sections 6(d) or 10 hereof, respectively, that Naples has
materially and willfully violated the provisions of Section 6(a), (b) or (c)
hereof, the court or arbitration panel may award damages to the Company;
provided, however, that such damages, in the case of a violation of Section 6(b)
hereof, shall not exceed the amount of the compensation and the cost to the
Company of the benefits received by Naples under this Agreement during the
period that the violation existed, plus interest thereon. In no event shall an
asserted violation of the provisions of Section 6(a), (b) or (c) hereof
constitute a basis for deferring or withholding any compensation or benefits
otherwise payable to Naples under this Agreement unless and until the existence
of a material and willful violation is determined by a court or by arbitration
pursuant to Sections 6(d) or 10 hereof, respectively.
7. Cooperation in Litigation.
During the period of his employment and consultancy hereunder and
for two years thereafter, Naples, upon reasonable notice, shall furnish such
information and proper assistance to the Company as may reasonably be required
in connection with any litigation or administrative proceedings or
investigations in which the Company may be or become involved.
8. Indemnification.
To the extent not in contravention of applicable law, the Company
shall provide to Naples with respect to periods prior hereto and with respect to
such future periods as he remains an employee of or a consultant to the Company
hereunder the same rights to indemnification and advances of expenses as Naples
presently has under the By-laws of the Company.
9. Mutual Release.
The Compensation and benefits provided for in this Agreement
constitute the entire compensation and benefits which Naples shall be entitled
to receive. Further, the parties concurrently herewith shall execute the Mutual
Release attached hereto as Appendix I.
10. Arbitration.
Except as otherwise provided in Section 6(d) hereof, any
controversy or claim arising out of or relating to this Agreement or the breach
hereof which cannot promptly be resolved by the parties shall be promptly
submitted to and settled exclusively by arbitration in the City of Philadelphia,
Pennsylvania, in accordance with the laws of the Commonwealth of Pennsylvania by
three arbitrators, one of whom shall be appointed by the Company, one by Naples
and the third of whom shall be appointed by the first two arbitrators. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Section 10. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
11. Knowing and Voluntary Agreement.
Naples acknowledges that he has carefully read and fully
understands all of the provisions and effects of this Agreement, that he has
received the assistance and advice of legal counsel of his choice in connection
herewith and through the negotiation hereof, that he knowingly and voluntarily,
of his own free will without any duress, being fully informed and after due
deliberation accepts the terms hereof, and that the Company has provided him
with no less than twenty-one days to consider this Agreement before executing
it.
12. Effective Date; Notices.
This Agreement will become effective on the date first above
written, provided that it has not been rescinded by Naples by his written notice
to the Company within a period of seven days after such date.
<PAGE>
Any notices, requests, demands and other communications provided
for by this Agreement shall be sufficient if in writing and if hand delivered or
if sent by registered or certified mail, if to Naples, at the last address he
has filed in writing with the Company or, if to the Company, to the attention of
the Chief Executive Officer at the Company's then principal executive offices.
Notices, requests, etc. shall be effective when actually received by the
addressee or at such address.
13. Assignment and Benefit.
(a) Nonassignable by Naples. This Agreement is personal to Naples
and shall not be assignable by Naples by operation of law or otherwise, without
prior written consent of the Company otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by Naples's heirs and legal representatives.
(b) Assignment by Company. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns,
including without limitation, any subsidiary of the Company to which the Company
may assign any of its rights hereunder; provided, however, that no assignment of
this Agreement by the Company, by operation of law or otherwise, shall relieve
it of its obligations hereunder, except an assignment of this Agreement to and
its assumption by, a successor pursuant to subsection (c) below.
(c) Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation operation of law
or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place, but, irrespective of any such assignment
or assumption, this Agreement shall inure to the benefit of and be binding upon
such a successor. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid.
14. Governing Law.
The provisions of this Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without reference
to principles of conflicts of laws.
15. Entire Agreement.
This Agreement represents the entire agreement and understanding of
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, including, without limitation, the Change in
Control Agreement dated as of December 30, 1994, and ss.4.10 of the Company's
SERP. This Agreement may not be altered or amended except by an agreement in
writing signed by or on behalf of the party to be bound.
16. No Waiver.
The failure to insist upon strict compliance with any provision of
this Agreement by any party shall not be deemed to be a waiver of any future
noncompliance with such provision or of noncompliance with any other provision.
17. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, Naples has hereunto set his hand and, pursuant
to the authorization from its duly authorized Compensation Committee of the
Board of Directors of the Company, the Company has caused these presents to be
executed in its name and on its behalf by its duly authorized officers all as of
the day and year first above written.
/s/ Ivy Peterson /s/ Ronald J. Naples
- ----------------------------- ---------------------------
Witness Ronald J. Naples
ATTEST: HUNT MANUFACTURING CO.
/s/ William E. Chandler By /s/ John W. Carney
- ----------------------------- ---------------------------
Secretary Its V.P.- H.R.
--------------------------
Approved on behalf of the
Compensation Committee of the
Board of Directors of Hunt
Manufacturing Co., being
authorized so to do:
By /s/ Robert H. Rock
------------------------------
Chairman
Compensation Committee
Date June 13, 1995
--------------------------
<PAGE>
SCHEDULE 2(d) to
TRANSITION AGREEMENT
BENEFITS
I. Stock Options.
Naples shall no longer be eligible to receive new grants of options
or new stock grants under the Company's existing or future stock option or grant
plans.
Naples currently holds stock options under the Company's 1983 and
1993 Stock Option Plans as follows: 1983 Plan - 192,621 shares and 1993 Plan -
109,000 shares. Except as provided below, as long as Naples remains an employee
of the Company or any of its subsidiaries, such options shall remain outstanding
and continue to vest, expire etc. in accordance with the terms of the governing
option plans.
Upon termination (otherwise than for Cause) of Naples's employment
under the Agreement, any of his then outstanding options under the 1983 Plan
which have been outstanding for at least one year immediately shall become
exercisable in full, and such options (together with any of his non-accelerated
options under the 1983 Plan to the extent they were exercisable at the time of
termination of Naples's employment) shall remain exercisable for three months
(or one year if termination of employment is due to death or disability) or
until their earlier expiration or termination under the terms of the 1983 Plan.
Upon termination (otherwise than for Cause) of Naples's employment
or consultancy under the Agreement, whichever is later, any of his then
outstanding options under the 1993 Plan shall be accelerated and remain
exercisable in the same manner as is provided in the preceding paragraph with
respect to options under the 1983 Plan.
Upon termination of Naples's employment or consultancy for Cause,
there shall be no acceleration of Naples's options under the 1983 or 1993 Plans,
but otherwise the treatment of such options shall be as provided in the
preceding two paragraphs.
In the event of a "corporate transaction" involving the Company (as
provided in Section 8 of the 1983 and 1993 Plans) if the Compensation Committee
determines to terminate any of Naples's options outstanding under those Plans as
authorized thereunder, the options to be so terminated shall immediately become
exercisable in full. Further, if the Compensation Committee pursuant to Section
8 of the 1983 and/or 1993 Plans accelerates the exercisability of any options
outstanding under the 1983 and 1993 Plans, the Committee shall simultaneously
accelerate the exercisability of all of Naples's options then outstanding under
the 1983 and 1993 Plans.
Except as expressly otherwise provided above, Naples's stock
options shall remain subject to the provisions of the applicable option plans
and option agreements thereunder.
<PAGE>
II. Pension Plan and Savings Plan.
Naples shall continue to participate in the Hunt Manufacturing Co.
Pension Plan (the "Pension Plan") and the Hunt Manufacturing Co. Savings Plan
(the "Savings Plan") under and subject to the terms of such Plans, including
applicable service requirements. Naples shall not be eligible for Basic and
Matching Contributions under the Savings Plan.
III. Supplemental Executive Benefits Plan.
Naples shall continue to participate in the Hunt Manufacturing Co.
Supplemental Executive Benefits Plan (the "Supplemental Executive Benefits
Plan"), which provides supplemental retirement benefits, life insurance
benefits, and salary deferral benefits (including matching employer
contributions), subject to and in accordance with the terms of the Supplemental
Executive Benefits Plan, provided that Naples may continue to make salary
deferrals (without matching employer contributions) with respect to consulting
payments. Life insurance benefits for Naples under the Supplemental Executive
Retirement Plan shall continue until July 19, 1997, or, if later, until the
termination of his employment with the Company. The Supplemental Executive
Benefits Plan, as amended, provides that any participant who retires after age
52 with at least 20 years of service shall be able to commence receiving
payments under Article IV thereof at such time. Such payments shall be
actuarially reduced in accordance with the terms of the Supplemental Executive
Benefits Plan, as thus amended.
The Supplemental Executive Benefits Plan, as amended, also provides
that for purposes of calculating his benefit under Article IV thereof, Naples
shall be credited with years of service from July 20, 1995 through July 19, 1998
and compensation during such time at the rate of $565,000 per year (without
regard to any mitigation pursuant to Section 4(b) of the Agreement during the
period from July 20, 1997 through July 19, 1998). The Supplemental Executive
Benefits Plan, as amended, further provides that Naples shall have the ability
to elect to take ownership of certain life insurance policies held by the Trust
under the Plan for benefits pursuant to salary deferrals and matching employer
contributions, in lieu of receiving such benefits under the Supplemental
Executive Benefits Plan.
The Company has provided Naples with an estimate of his
supplemental retirement benefits under the Supplemental Executive Benefits Plan.
Such estimate is attached hereto as Appendix II. The calculations on Appendix II
are merely an estimate based on the assumptions contained therein. As stated in
the exhibit, Naples's compensation for computing benefits for calendar year 1995
shall include any pro rata bonuses for 1995.
The Supplemental Executive Benefits Plan shall be amended to
provide that the cash value of any separate insurance contracts purchased on
Naples's life pursuant to the normal operation of the Plan and grantor trust
(the "Trust") created thereunder shall be used solely for the payment of
benefits under the Plan to Naples (to the extent such cash value does not exceed
the Company's obligation to Naples under the Plan). Upon Naples's termination of
employment, a separate subfund shall be established within the Trust for such
contracts. The Company agrees to pay the premiums on such contracts as they come
due, until June 1, 1998, and expects to continue to make contributions to the
Trust thereafter in accordance with the normal funding procedures of the Plan.
<PAGE>
Notwithstanding the foregoing, the proceeds of any death benefit
received pursuant to such contracts may be used for any purpose under the Plan
and Trust. Naples shall have only the rights of a general, unsecured creditor
against the Company for any distributions due under the Plan and Trust, and
shall not have any property interest in such insurance contracts or any other
assets of the Plan and Trust.
IV. Other Benefit Plans and Programs for Which Naples is Eligible.
While his employment with the Company continues, Naples shall be
eligible to participate in the Company's Group Life and Medical Plans, Selected
Medical Benefits Plan, Flexible Benefits Plan, Group Long-Term Disability Plan,
Short-Term Disability Plan, Preferred Professional Long-Term Disability Plan,
Business Travel Accident Insurance Plan, Employee Assistance Program, and Family
Resource Service Program in accordance with the terms of such Plans and
Programs, and any amendments or modifications thereof, so long as such Plans and
Programs remain in effect at the Company. During the consultancy, Naples shall
be eligible for Business Travel Accident Insurance coverage while travelling on
authorized Company business.
V. Other Benefit Plans and Programs for Which Naples is Not Eligible.
Naples shall not be eligible for any severance or termination
benefits under any Company plans, policies, or procedures providing for such
benefits, including, but not limited to, the Hunt Manufacturing Co. Officers'
Severance Plan and the Hunt Manufacturing Co. Non-Officer Severance Plan, and
any predecessor or successor plan. Naples shall not be eligible for
participation in or benefits under the Company's Employee Stock Purchase Plan,
Universal Life Insurance Plan, Tuition Reimbursement Program, Matching Gift
Program, or Foundation Scholarship Program. Naples shall also not be entitled to
any benefits to which he may have been entitled to under his Change in Control
Agreement with the Company. Naples shall cease accruing vacation time as of July
19, 1995 and shall not be entitled to any payments for unused vacation time at
any time during or after his employment with the Company.
<PAGE>
SCHEDULE 2(e)
to
TRANSITION AGREEMENT
PERQUISITES
I. Company Physical.
Naples shall be entitled to an annual Company provided physical
examination at the Ben Franklin Clinic, in accordance with the availability of
such a physical examination for other employees of the Company.
II. Tax Preparation.
Naples shall be entitled to tax preparation services on the same
terms and conditions as he was entitled to while an executive and director of
the Company.
III. Lunch Club.
Naples shall be entitled to Company provided membership in a lunch
club on the same terms and conditions as Naples was entitled to while employed
as an executive and director of the Company.
IV. Financial Planning.
The Company does not provide financial planning assistance to any
employees, and Naples shall not be entitled to any such assistance.
V. Automobile and Cellular Telephone
Prior to transfer of title, Naples shall be entitled to use of a
Company-owned or leased automobile and cellular telephone, subject to taxability
for personal use. Upon the transfer of title, the Company will cease to provide
an automobile to Naples, but Naples may be reimbursed for all authorized,
reasonable and documented expenses incurred by him for the use of the automobile
in the performance of his duties for the Company.
<PAGE>
Exhibit 11
Computation of Per Share Earnings
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- --------------------------
Sep 3, 1995 Aug 28, 1994 Sep 3, 1995 Aug 28, 1994
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Income before cumulative effect of
accounting change $ 3,655 $ 4,391 $ 9,937 $11,482
Cumulative effect of change in
accounting for income taxes -- -- -- 795
------- ------- ------- -------
Net income $ 3,655 $ 4,391 $ 9,937 $12,277
======= ======= ======= =======
Primary per share earnings
- --------------------------
Average number of common shares
outstanding 15,959 16,087 16,009 16,104
Add - common equivalent shares
representing shares issuable
upon exercise of stock options
and stock grants 187 177 123 196
------- ------- ------- -------
Average shares used to calculate
primary per share earnings 16,146 16,264 16,132 16,300
======= ======= ======= =======
Primary per share earnings before
change in accounting for income
taxes $ 0.23 $ 0.27 $ 0.62 $ 0.70
======= ======= ======= =======
Cumulative effect of change in
accounting for income taxes -- -- -- 0.05
------- ------- ------- -------
Net primary per share earnings $ 0.23 $ 0.27 $ 0.62 $ 0.75
======= ======= ======= =======
Fully diluted per share earnings
- --------------------------------
Average number of common shares
outstanding 15,959 16,087 16,009 16,104
Add - common equivalent shares
representing shares issuable
upon exercise of stock options
and stock grants 187 181 137 209
------- ------- ------- -------
Average shares used to calculate
fully diluted per share earnings 16,146 16,268 16,146 16,313
======= ======= ======= =======
Fully diluted per share earnings
before change in accounting for
income taxes $ 0.23 $ 0.27 $ 0.62 $ 0.70
======= ======= ======= =======
Cumulative effect of change in
accounting for income taxes -- -- -- 0.05
------- ------- ------- -------
Net fully diluted per share earnings $ 0.23 $ 0.27 $ 0.62 $ 0.75
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000049146
<NAME> HUNT MANUFACTURING CO.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-03-1995
<PERIOD-START> NOV-28-1994
<PERIOD-END> SEP-03-1995
<EXCHANGE-RATE> .00001
<CASH> 3,193
<SECURITIES> 0
<RECEIVABLES> 50,119
<ALLOWANCES> (2,537)
<INVENTORY> 39,651
<CURRENT-ASSETS> 98,485
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<DEPRECIATION> (49,709)
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<COMMON> 1,615
0
0
<OTHER-SE> 130,664
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<SALES> 231,713
<TOTAL-REVENUES> 231,713
<CGS> 146,738
<TOTAL-COSTS> 146,738
<OTHER-EXPENSES> 69,119
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<INTEREST-EXPENSE> 58
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<INCOME-TAX> 5,258
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<EXTRAORDINARY> 0
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<NET-INCOME> 9,937
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
