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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Hunt Manufacturing Co.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Hunt Manufacturing Co.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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LOGO
HUNT MANUFACTURING CO.
------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on April 16, 1997
------
To Our Shareholders:
The Annual Meeting of Shareholders of Hunt Manufacturing Co. will be held
at 10:00 o'clock a.m. on April 16, 1997, in the Ballroom at the Ritz-Carlton
Hotel, 17th and Chestnut Streets at Liberty Place, Philadelphia,
Pennsylvania, for the following purposes:
1. To elect three directors to serve for a three-year term;
2. To vote on a proposal to approve amendment of the Company's 1993
Stock Option and Stock Grant Plan, including an increase of 1,750,000 in
the number of shares authorized for issuance under the Plan;
3. To vote on a proposal to ratify the appointment of independent
accountants; and
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on February 14,
1997, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting and any adjournments thereof.
All shareholders are cordially invited to attend the meeting in person.
However, whether or not you plan to attend, please promptly sign, date and
mail the enclosed proxy card in the enclosed return envelope which requires
no postage if mailed in the United States. Returning your proxy card does not
deprive you of your right to attend the meeting and vote your shares in
person.
By order of the Board of Directors,
WILLIAM E. CHANDLER, Secretary
March 3, 1997
<PAGE>
HUNT MANUFACTURING CO.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
------
PROXY STATEMENT
------
This proxy statement, which is being sent to shareholders on or about
March 7, 1997, is furnished in connection with the solicitation of proxies by
the Board of Directors of Hunt Manufacturing Co. (the "Company") for use at
the forthcoming Annual Meeting of Shareholders (the "Meeting") to be held on
April 16, 1997, and at any adjournments thereof.
At the close of business on February 14, 1997, the record date for
determination of shareholders entitled to notice of, and to vote at, the
meeting, there were outstanding an aggregate of 10,996,454 of the Company's
Common Shares. Pursuant to the Company's 1990 shareholders' Rights Agreement,
rights to purchase securities of the Company under certain circumstances are
deemed to be attached to outstanding Common Shares.
VOTING AND REVOCABILITY OF PROXIES
Each Common Share outstanding on the record date is entitled to one vote
on all matters to come before the Meeting, except that shareholders have the
right to cumulate their votes in the election of directors. This means that
shareholders may multiply the number of votes to which they are entitled by
the number of directors to be elected, and the whole number of such votes may
be cast for one nominee or distributed among any two or more nominees. If you
wish to cumulate your votes in this manner, you must clearly indicate on your
proxy card your desire to cumulate and how many votes you wish to cast for
each nominee.
In the election of directors, assuming a quorum is present, the three
nominees receiving the highest number of votes cast at the Meeting will be
elected. The affirmative vote of a majority of the votes cast at the meeting
is required for approval of Proposals 2 and 3, assuming a quorum is present
with respect to such matter, and further assuming, with respect to Proposal
2, that the total vote cast represents a majority of the outstanding Common
Shares entitled to vote at the Meeting. Abstentions (except with respect to
Proposal 2) or the specific direction not to cast any vote on a specific
matter, such as broker non-votes, will not constitute the casting of a vote
on such matter.
Your proxy may be revoked at any time prior to its exercise by giving
written notice to the Secretary of the Company, by presenting a duly executed
proxy bearing a later date or by voting in person at the Meeting, but your
mere attendance at the Meeting will not revoke your proxy. Your proxy, when
properly executed, will be voted in accordance with the specific instructions
indicated on your proxy card. Unless contrary instructions are given, your
proxy will be voted FOR the election of the
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three nominees for director, as provided under "Election of Directors" below
(in equal amounts or cumulatively, as the persons voting the proxies may
determine); FOR amendment of the 1993 Stock Option and Stock Grant Plan; FOR
ratification of the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the 1997 fiscal year; and, to the extent
permitted by the rules of the Securities and Exchange Commission, in
accordance with the judgment of the persons voting the proxies upon such
other matters as may come before the Meeting and any adjournments.
1. ELECTION OF DIRECTORS
The Restated Articles of Incorporation and By-laws of the Company provide
that the number of directors shall be eleven, to be divided into three
classes as nearly equal in number as possible. The Board of Directors has
nominated, and recommends the election of, the following three persons to
serve as directors of the Company until the 2000 Annual Meeting or until
their successors are elected and have qualified:
Jack Farber Gordon A. MacInnes
Donald L. Thompson
All the nominees are presently serving as directors of the Company, having
previously been elected by the shareholders of the Company except for Mr.
Thompson, who was elected a director by the Board in 1996. Although the Board
of Directors has no reason to believe any of the nominees will be unable to
serve, if such should occur, your proxy will be voted (unless marked to the
contrary) for such person or persons, if any, as shall be recommended by the
Board of Directors. However, your proxy will not be voted for the election of
more than three directors. Two vacancies currently exist on the Board of
Directors (in the class of 1999). The Board may consider appointing directors
to fill these vacancies at a later date.
The following table sets forth, as of February 1, 1997, certain
information with respect to each nominee for election as a director and each
director whose term of office will continue after the Meeting:
<TABLE>
<CAPTION>
Present
Name, Age and Director Term
Occupation(1) Since Expires
-------------- ------- -------
<S> <C> <C>
Jack Farber, 63 1970 1997
Chairman of the Board and President of CSS Industries,
Inc., a diversified company. Trustee of Pennsylvania Real
Estate Investment Trust.
William F. Hamilton, Ph.D., 57 1986 1998
Landau Professor of Management and Technology, The
Wharton School, University of Pennsylvania. Director of
Centocor Inc., Neose Technologies, Inc., Marlton
Technologies, Inc. and Digital Lightwave, Inc.
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Present
Name, Age and Director Term
Occupation(1) Since Expires
-------------- ------- -------
<S> <C> <C>
Mary R. (Nina) Henderson, 46 1991 1998
President of CPC Specialty Markets Group, an affiliate of
CPC International, Inc., a manufacturer of specialty
foods and non-food products. Director of The Equitable
Companies Incorporated and The Equitable Life Assurance
Society of the United States.
Gordon A. MacInnes, 55(2) 1970 1997
New Jersey State Senator (since 1994) and author.
Chairman of the Board of the Company (1995-96).
Wilson D. McElhinny, 66 1993 1998
Chairman of the Board of IREX Corporation, a specialty
contract company (since 1992). Previously Chairman,
President and Chief Executive Officer (1988-1990), and
Chairman of Executive Committee (1983-1992), of Hamilton
Bank.
Robert H. Rock, D.B.A., 46 1989 1999
President of MLR Holdings, L.L.C., a publishing company
which produces business publications, executive
conferences and community newspapers. Director of R.P.
Scherer Corporation, Alberto-Culver Company and Quaker
Chemical Co.
Roderic H. Ross, 66 1978 1998
Chairman of the Board and Chief Executive Officer of
Keystone State Life Insurance Company. Director of PNC
Bank Corp.
Donald L. Thompson, 55 1996 1997
Chairman, President and Chief Executive Officer of the
Company (since 1996). Previously Group Vice President of
the Office Products Business (1993-96), and Vice
President Sales and Customer Operations North America
(1992-93), of Avery Dennison Corporation
Victoria B. Vallely, 46(2) 1976 1999
Principal of Bartol Capital Management, an investment
advisory company (since 1995).
</TABLE>
- ------
(1) Except as otherwise noted, the named individuals have had the occupations
indicated (other than directorships) for at least five years.
(2) Mr. MacInnes is married to Ms. Vallely's sister. Both Mrs. MacInnes and
Ms. Vallely are daughters of the late George E. Bartol III, a former
Chairman of the Board, Chief Executive Officer and principal shareholder
of the Company.
INFORMATION CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held eight formal meetings during fiscal 1996. The
Company has standing Audit, Compensation, and Nominating Committees of its
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Board of Directors. The Audit Committee members currently are Messrs. Farber,
Hamilton and McElhinny. This Committee makes recommendations to the Board of
Directors concerning the engagement, retention and discharge of independent
accountants, reviews with members of the Company's management and internal
auditors and with the Company's independent accountants the plans and results
of the auditing engagement, the Company's financial statements and the
adequacy of the Company's system of internal accounting controls, and directs
any investigations into matters within the scope of the foregoing duties.
During fiscal 1996, the Audit Committee met two times. The Compensation
Committee currently is composed of Messrs. Rock and Ross and Ms. Henderson.
This Committee establishes the salaries of executive officers and makes
recommendations to the Board of Directors regarding the adoption, extension,
amendment and termination of compensation plans in which officers or
directors may participate. It also exercises administrative powers pursuant
to certain of those plans. The Compensation Committee held five formal
meetings during fiscal 1996. The members of the Nominating Committee
currently are Messrs. Farber, MacInnes and Rock and Ms. Vallely. The purpose
of this Committee, which held one meeting during fiscal 1996, is to identify
and recommend to the Board qualified individuals to serve as directors of the
Company. The Nominating Committee has not determined whether it will consider
nominees recommended by shareholders.
The Board of Directors also has an Executive Committee whose current
members are Messrs. MacInnes, Farber, Rock and Thompson. The Executive
Committee generally is empowered, subject to certain limitations, to exercise
the authority of the Board between Board meetings. The Board also, from time
to time, appoints special committees for specific purposes.
During fiscal 1996, all directors attended in person or by conference
telephone at least 75% of the aggregate of the total number of meetings of
the Board of Directors and committees of the Board on which they served.
COMPENSATION OF DIRECTORS
The Company pays annual directors' fees of $10,000, plus $750 for each
Board meeting and $750 ($1,000 for Committee Chairpersons) for each committee
meeting attended, to each of its non-officer directors, other than Mr.
MacInnes during the period he served as Chairman. Mr. MacInnes was appointed
Chairman of the Board in August 1995 and served in that capacity until June
1996 when Mr. Thompson assumed that position. For fiscal 1996 Mr. MacInnes
received compensation of $62,333 which included compensation at a rate of
$100,000 per year for serving as Chairman and the regular non-officer
director fees earned subsequent to his stepping down as Chairman. In
addition, the Company reimburses directors for certain expenses incurred in
attending Board and committee meetings. From time to time, the Company also
compensates non-officer directors for special services but did not do so in
fiscal 1996, except as set forth above with respect to Mr. MacInnes.
The non-officer directors also participate in the 1994 Non-Employee
Directors' Stock Option Plan. Pursuant to this Plan, each of the eight
current non-officer directors on January 26, 1994 received one-time automatic
grants of nonqualified stock
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options to purchase 5,000 Common Shares at an exercise price of $16.875 per
share, which was the fair market value of a Common Share on the date of
grant. Options granted under the Plan extend for a term of ten years (subject
to earlier termination in certain circumstances) and become exercisable at
the rate of 20% per year over five years commencing one year after the date
of grant, subject to acceleration in limited circumstances. No other options
have been granted, or as of February 1, 1997 have been exercised, under the
Plan.
2. APPROVAL OF AMENDMENT OF 1993 STOCK OPTION AND STOCK GRANT PLAN.
At the Meeting, the shareholders also will be asked to approve certain
amendments to the Company's 1993 Stock Option and Stock Grant Plan (the
"Plan") which Plan originally was approved by the shareholders at the
Company's 1993 Annual Meeting. In late 1996 and early 1997, the Company's
Board of Directors unanimously amended the Plan, subject to shareholder
approval, to: (i) increase the number of Common Shares authorized for
issuance under the Plan from its current 1,750,000 shares to 3,500,000 shares
(an increase of 1,750,000 shares), and (ii) limit the aggregate number of
options and/or stock grants that can be granted under the Plan to any one
individual in any one-year period to 300,000 shares (the original Plan had no
such annual limit). The Board of Directors also amended the Plan in some
other minor respects for which shareholder approval is not required and is
not being sought.
As discussed in more detail in the following three paragraphs, the Board
of Directors believes that the 1,750,000 increase in the number of shares
authorized for issuance under the Plan is necessary for the Plan to continue
to fulfill its purpose of assisting the Company in attracting capable
officers and other key management level employees, as well as consultants,
and motivating them, through stock ownership, to promote the best interests
of the Company and its shareholders. The maximum limit on annual grants to
any one person is being added so that options granted under the Plan may
qualify for an exemption from the limitations on the deductibility by the
Company of compensation imposed by Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), but there can be no assurance that
options granted under the Plan will comply with the requirements of that
exemption (see "Federal Income Tax Treatment of Options" below).
As of February 14, 1997, of the 1,750,000 shares originally authorized for
issuance under the Plan, an aggregate of 1,021,938 shares had already been
issued or were subject to outstanding options, leaving only 728,062 shares
available for future options and stock grants under the Plan.
Prior to fiscal 1996, the Company maintained a Long-Term Incentive
Compensation Plan (the "LTIC" Plan) which afforded executive officers and
certain other employees the opportunity to receive cash and Common Shares. In
early fiscal 1996, the Company's Compensation Committee (the "Committee")
determined to revise the Company's overall incentive compensation program, of
which the LTIC Plan was a part, so as to make it more closely aligned with
growth in shareholder value, and, accordingly, terminated the LTIC Plan.
While the Committee is still in the process of
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refining the details of its new incentive compensation program, it has
determined that the long-term component of this program will rely heavily on
stock options and, perhaps, stock grants to be granted under the 1993 Stock
Option and Stock Grant Plan. Further, although the Committee has not made a
final decision as to the number of options which it believes should be
granted under the Plan in fiscal 1997, it currently is anticipated that
options for up to approximately 1,100,000 shares may be granted this year, of
which up to approximately 750,000 may be granted to the six executive
officers of the Company (including Mr. Thompson) in individual amounts not
yet determined. The grant of such amount of options to executive officers and
to certain others this year would be intended to provide a strong incentive
to them to successfully implement the strategic plan for the Company
presently being finalized and would be expected, with certain exceptions, to
be in lieu of any option grants to such persons in fiscal years 1998 and
1999. It is contemplated that most of such options would vest and become
exercisable three years from the date of grant, subject to acceleration in
certain circumstances. The Committee is not presently contemplating making
any stock grants (as opposed to stock options) this year. The closing price
of the shares on the New York Stock Exchange on February 28, 1997 was $17 7/8.
The granting of options in the amounts contemplated by the Committee in
the preceding paragraph would significantly exceed the 728,062 shares
presently available under the Plan. In order to enable grants in such amounts
to be made and to provide for additional shares which would be available
under the Plan in the future, the Board strongly recommends approval of the
amendments to the Plan.
SUMMARY OF THE 1993 PLAN, AS AMENDED
The text of the Plan, as amended, is attached as an Appendix to this proxy
statement. The following description of the Plan is intended merely as a
summary of its principal features and is qualified in its entirety by
reference to the provisions of the Plan itself.
The Plan, as amended, authorizes up to an aggregate of 3,500,000 Common
Shares for the granting of incentive stock options (within the meaning of
Section 422 of the Code), nonqualified stock options and stock grants,
provided that not more than 525,000 shares are available for stock grants,
and options and grants to any one individual in a given one-year period
cannot exceed 300,000 shares. Shares subject to options granted under the
Plan which remain unexercised upon expiration or earlier termination of such
options, and shares which have not vested upon the termination of stock
grants under the Plan, generally will once again become available for the
granting of options and stock grants under the Plan. Authorized but unissued
shares or treasury shares may be issued under the Plan.
The Plan is administered by the Committee which is given considerable
discretion under the Plan. None of the members of the Committee is eligible
to participate in the Plan. The Plan authorizes the Committee to grant
incentive stock options and nonqualified stock options, as well as stock
grants, to officers (including officers who also are directors) and other key
management-level employees of the Company and its subsidiaries. There are 14
officers and approximately 36 other employees currently at a management level
eligible for participation in the Plan, although this number is sub-
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ject to increase or decrease in the future. The Plan also includes
consultants to the Company and its subsidiaries as eligible participants in
order to provide flexibility to the Committee in appropriate situations. It
is not possible to determine the number of consultants potentially eligible
to participate, but the Committee has no present plans to select any
consultants for participation in the Plan.
The exercise price of options granted under the Plan must be at least
equal to the fair market value of the Common Shares on the date of grant.
With respect to incentive stock options granted to any one optionee during
any calendar year, the aggregate market value on the date of grant of the
underlying option shares which first become exercisable during any calendar
year (under the Plan or any other Plan of the Company or related
corporations) may not exceed $100,000.
Options under the Plan may not extend for more than ten years and become
exercisable in such installments as the Committee may specify, but not
earlier than one year from the date of grant, except in limited
circumstances. Options generally terminate automatically upon the termination
of the optionee's employment, unless such termination is as a result of
death, disability or retirement, in which case options remain exercisable for
specified periods (not exceeding one year) thereafter. The Committee also has
discretion under the Plan to extend the exercise period for up to three
months following other types of terminations of an optionee's employment and,
in certain circumstances, to accelerate the exercisability of all or part of
the unvested portion of an optionee's options upon termination of employment.
Stock grants under the Plan, unlike options, do not have an exercise
price, nor do they require the grantee to pay a cash, or cash-equivalent
consideration for the shares covered by the grant. However, stock grants
under the Plan are subject to a vesting period or periods of between one and
five years from the date of grant, which periods are established by the
Committee in its discretion. The shares subject to the grant then vest in the
grantee upon the expiration of the vesting period or periods, provided the
grantee is still in the employ of the Company or its subsidiaries.
If a grantee's employment with the Company is terminated prior to the
expiration of the vesting period or periods with respect to his or her stock
grant, other than by reason of death, disability or retirement, the unvested
portion of the stock grant terminates, except that the Committee, in its
discretion, may vest all or part of such unvested portion. If a grantee's
employment is terminated by death, disability or retirement, the Plan
provides for proportionate vesting of his or her stock grant, with the
Committee having the discretion to vest all or a portion of the remainder.
Shares are not actually issued to a grantee until such shares have vested
under the grant, but the Plan provides for the payment of an annual cash
bonus to grantees in an amount equal to the cash dividends on shares which
have not yet vested under their stock grants.
Under certain circumstances, the Plan permits the exercise price of
options to be satisfied by the optionee by having the Company withhold shares
issuable pursuant to the options or by delivery to the Company of other
Common Shares or by having a broker deliver to the Company proceeds from a
sale of the Common Shares acquired
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upon exercise. The Plan similarly permits the withholding of shares issuable
upon exercise of nonqualified options or the vesting of stock grants or the
delivery of other Common Shares to satisfy withholding taxes.
Stock grants and, unless otherwise permitted by the Committee, options
granted under the Plan are not transferable other than by will or pursuant to
the laws of descent and distribution.
The number of shares issuable under the Plan and under outstanding options
and grants, as well as the maximum limitations on the number of options and
stock grants, is subject to adjustment in the event of a stock split, stock
dividend or similar change in the capitalization of the Company. The Plan
further provides that, in the event of a merger, consolidation or other
specified corporate transactions, options and stock grants shall be assumed
by the surviving or successor corporation, if any. However, the Plan also
authorizes the Committee to terminate options and stock grants in the event
of such a corporate transaction. The exercise date of any options to be so
terminated may be accelerated by the Committee in its discretion. Any stock
grant to be so terminated will vest proportionately, but the Committee has
the discretion to vest the remainder of such grant, in whole or in part. The
Committee also has the authority under the Plan to accelerate the exercise
date of options and the vesting date of stock grants if it determines that a
change in control of the Company has occurred or is likely to occur.
The Plan became effective on February 7, 1993, and automatically
terminates on February 6, 2003, and no further options or stock grants may be
granted or made under the Plan thereafter. The Plan may be amended, suspended
or terminated at any time by the Board, provided that, without shareholder
approval, no such amendment may: (i) change the class of persons eligible to
participate in the Plan, (ii) increase the maximum number of Common Shares
authorized for issuance under the Plan (otherwise than in connection with
certain changes in capitalization of the Company or in the event of certain
specified corporate transactions), (iii) change the limitations on the price
at which options may be granted, or (iv) extend the duration of the Plan.
FEDERAL INCOME TAX TREATMENT OF OPTIONS
The Company has been advised that, under present federal tax laws and
regulations, the Federal income tax consequences to the Company and to
employees receiving incentive stock options and nonqualified stock options
pursuant to the Plan are as described below.
Upon the grant or exercise of an incentive stock option, no income will be
realized by the optionee for federal income tax purposes (although the excess
of the fair market value of the shares over the exercise price will generally
be included in the optionee's alternative minimum taxable income), and the
Company will not be entitled to any deduction. If the shares received on the
exercise of an incentive stock option are not disposed of within one year
following the date of the transfer of such shares to the optionee, or within
two years following the date of the grant of the option, any profit realized
by the optionee upon the disposition of such shares will be taxed as
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long-term capital gain. In such event, no deduction will be allowed to the
Company. If the shares are disposed of within the aforesaid one year or two
year periods, the excess of the fair market value of the shares on the date
of exercise or, if less, the amount realized on disposition over the exercise
price will generally be taxable as ordinary income to the optionee at the
time of disposition, and the Company will be entitled to a corresponding
deduction at such time, subject, to the extent applicable, to limitations on
deductibility imposed by Section 162(m) of the Code discussed below.
Upon the grant of a nonqualified stock option, no income will be realized
by the optionee for federal income tax purposes. Upon the exercise of such an
option, the amount by which the fair market value of the shares at the time
of exercise exceeds the exercise price will be taxed as ordinary income to
the optionee, and the Company will be entitled to a corresponding deduction
subject, to the extent applicable, to limitations on deductibility imposed by
Section 162(m) of the Code discussed below.
Section 162(m) of the Code disallows tax deductions to public companies
for compensation in excess of $1 million paid or accrued in taxable years
beginning after January 1, 1994 to certain executive officers (generally
consisting of the chief executive officer and the four other highest paid
executive offers), unless such compensation is of a type that qualifies for
exemption from that limitation. One such exemption is for performance based
compensation, which can include stock options (but generally not stock
grants), provided that certain requirements, including administration of the
option plan by "outside directors" and shareholder approval of the plan, are
met. The Board of Directors intends to try to comply with such requirements
with respect to the Plan to the extent reasonably practicable, but there can
be no assurance that the Plan will so comply.
Various additional tax consequences apply to the granting and exercise of
options and to the disposition of shares acquired thereunder, but such
consequences are beyond the scope of this summary.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENTS TO THE PLAN
ARE IN THE BEST INTERESTS OF THE COMPANY AND RECOMMENDS A VOTE FOR APPROVAL
OF SUCH AMENDMENTS.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. served as the Company's independent
accountants for fiscal 1996 and has been selected by the Board of Directors
to serve in the same capacity for fiscal 1997. The shareholders will be asked
to ratify this appointment at the Meeting.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Meeting and will be available to respond to appropriate questions. The
representative will also have the opportunity to make a statement if he or
she desires to do so.
4. OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the Annual Meeting, other than those set forth in the attached Notice and
customary pro-
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cedural matters. However, if any other matters should properly come before
the Meeting or any adjournments thereof, the proxies solicited hereby will be
voted on such matters, to the extent permitted by the rules of the Securities
and Exchange Commission, in accordance with the judgment of the persons
voting such proxies.
ADDITIONAL INFORMATION
COMMON SHARE OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 1, 1997, certain
information concerning the beneficial ownership of Common Shares by: (i) each
person who is known by the Company to be the beneficial owner of more than 5%
of such shares, (ii) each director and nominee for director of the Company,
(iii) each of the executive officers of the Company named in the Summary
Compensation Table appearing later in this proxy statement, and (iv) all
directors and executive officers of the Company as a group. Such information
is based upon information provided to the Company by such persons.
<TABLE>
<CAPTION>
Common Shares
Beneficially Percent
Name of Beneficial Owner Owned(1) of Class(1)
------------------------ -------------- -----------
<S> <C> <C>
Richard J. Bove ...................................... 2,069,766(2) 18.8
3700 Bell Atlantic Towers
Philadelphia, PA 19103
Ariel Capital Management, Inc. ....................... 1,540,900(3) 14.0
307 North Michigan Avenue
Chicago, IL 60601
Jack Farber, director ................................ 11,960(4) *
William F. Hamilton, director ........................ 6,500(4)(5) *
Mary R. (Nina) Henderson, director ................... 3,400(4) *
Gordon A. MacInnes, director ......................... 615,559(4)(6) 5.6
Wilson D. McElhinny, director ........................ 5,500(4) *
Robert H. Rock, director ............................. 3,300(4) *
Roderic H. Ross, director ............................ 9,475(4) *
Donald L. Thompson, director and executive officer ... 7,000 *
Victoria B. Vallely, director ........................ 119,906(4)(7) 1.1
John W. Carney, executive officer .................... 74,124(8) *
William E. Chandler, executive officer ............... 60,736(9) *
Spencer W. O'Meara, executive officer ................ 95,912(10) *
W. Ernest Precious, executive officer ................ 89,015(11) *
All current directors and executive officers as a
group (14 persons) .................................. 1,125,617(12) 10.1
</TABLE>
- ------
*Less than 1%
(1) Except as otherwise indicated, the beneficial ownership of Common Shares
reflected in this proxy statement is based upon sole voting and
dispositive power with respect to such shares. Further, for the purposes
of computing beneficial ownership and the percent of class of an
individual, Common Shares which the individual has the right, upon
exercise of options and in certain other circumstances, to acquire within
60 days, are deemed to be outstanding and beneficially owned by the
individual.
10
<PAGE>
(2) Represents shares held by Mr. Bove as successor and sole trustee under four
irrevocable trusts established by the late George E. Bartol III (a former
Chairman of the Board, Chief Executive Officer and principal shareholder of
the Company) for the benefit of Mr. Bartol's four adult daughters.
(3) According to information supplied by Ariel: the reported shareholdings
include 1,422,500 shares as to which Ariel has sole voting power and 23,800
shares as to which Ariel has shared voting power; Ariel is a registered
investment adviser; and all shares held by it are owned by its investment
advisory clients, none of whom, to the knowledge of Ariel, owns more than
5% of the Company's Common Shares.
(4) Includes 3,000 shares which the named individual has the right to acquire
by exercise of stock options under the 1994 Non-Employee Directors' Stock
Option Plan.
(5) Includes 3,500 shares held jointly with his wife.
(6) Includes 532,293 shares as to which Mr. MacInnes has shared voting and
dispositive power as co-trustee (with Katherine B. Lunt) of an irrevocable
trust established by the late George E. Bartol III for the benefit of his
grandchildren, and 74,529 shares held by Mr. MacInnes as custodian for his
children. Does not include 159,840 shares beneficially owned by Mr.
MacInnes' wife, the beneficial ownership of which shares is disclaimed by
Mr. MacInnes. Mrs. Lunt and Mrs. MacInnes are daughters of the late George
E. Bartol III.
(7) Does not include an aggregate of 23,301 shares beneficially owned by her
husband directly or as trustee or custodian for their children, the
beneficial ownership of which shares is disclaimed by Ms. Vallely.
(8) Includes 58,335 shares which Mr. Carney has the right to acquire by
exercise of stock options.
(9) Includes 42,252 shares which Mr. Chandler has the right to acquire by
exercise of stock options.
(10) Includes 79,702 shares which Mr. O'Meara has the right to acquire by
exercise of stock options.
(11) Includes 73,702 shares which Mr. Precious has the right to acquire by
exercise of stock options.
(12) Includes an aggregate of 308,995 shares which certain directors and
current executive officers have the right to acquire by exercise of
stock options. Excludes shares the beneficial ownership of which is
disclaimed in the notes above.
------
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed of
three outside directors, none of whom has ever been an employee of the
Company or any of its subsidiaries. The Committee makes recommendations to
the full Board of Directors regarding the adoption, extension, amendment, and
termination of the Company's compensation plans and also administers certain
of these plans. The Committee also reviews in conjunction with the Company's
Chairman, President and Chief Executive Officer (the "CEO") the performance
of other executive officers and establishes the salaries of the CEO and other
executive officers. The Committee has provided the following report on
executive compensation:
The actions of the Committee were significantly impacted in fiscal 1996 by
the retirement of Robert B. Fritsch as President and Chief Executive Officer
and the hiring and appointment of Donald L. Thompson as Chairman, President
and Chief Executive Officer. Mr. Thompson's employment agreement is described
later in this proxy statement under the caption, "Employment and Severance
Agreements and Arrangements." The compensation payable to Mr. Thompson under
his employment agreement was determined by negotiation between the
Compensation Committee and Mr. Thompson, taking into consideration, among
other things, his particular qualifications for the position, the
compensation levels of other Chairmen, Presidents and CEOs and his actual and
potential compensation from his then current employer. (See the Summary
Compensation Table herein for information concerning Mr. Fritsch's
compensation arrangements.)
The Committee has been guided by the following executive compensation
philosophy of the Company:
1. Align the interests of shareholders and management through a
compensation program that provides a substantial proportion of executive
officers' total compensation in the form of Company shares and options.
2. Make a significant portion of total compensation for executive
officers contingent upon the attainment of demanding performance goals
that support growth in the Company's share value over time.
3. Balance the objectives of short-term earnings increases and
investment in the long-term financial health of the Company with an
incentive compensation program that rewards improved profit performance
with annual cash bonuses and stimulates a long-term perspective with
awards that are earned over a number of years.
4. Enable the Company to attract and retain superior management by
providing a very competitive total compensation package.
Executive compensation consists primarily of three components: base
salary, incentive compensation, and stock options/stock grants.
12
<PAGE>
BASE SALARY
The Company's policy generally has been to set base salaries for each
executive officer position at a level up to the seventy-fifth percentile when
compared to compensation survey data available for equivalent positions with
other industrial, bonus-paying employers. The Company uses compensation
studies, surveys and outside consultants to monitor the Company's competitive
executive compensation position and to recommend salary ranges and
compensation changes to the Committee. These studies may include but are not
limited to the peer group of companies used for the Shareholder Return
Performance Graph herein. The base salaries of executive officers other than
the CEO are set by the Compensation Committee with input from the CEO.
The performance reviews of the executive officers other than the CEO are
conducted by the CEO, and the results of such reviews are reported to the
Committee by the CEO. The performance of the CEO is reviewed by the
Compensation Committee and the Board of Directors. The Committee adjusts
executive officers' salaries with input from the CEO based on the quality of
their individual performance and the relationship of their salary to their
established salary range. Merit increases in the form of a one-time payment
(as distinct from the annual bonuses) are granted under certain
circumstances.
The base salary of the CEO presently is set at $450,000 per year, subject
to adjustment, by his employment agreement. Adjustments to the base salary of
the CEO are governed by the same factors as other executive officers but also
specifically take into account the Company's current financial performance
(as measured by earnings, balance sheet strength, and overall financial
soundness) and the extent to which the CEO is successful in establishing a
vision and strategic plan for the Company and implementing that plan over
time. The Committee also considers the CEO's leadership in setting high
standards for financial performance, motivating management colleagues, and
representing the Company and its values to internal and external
constituencies. These factors are largely subjective in nature and are not
specifically weighted.
INCENTIVE COMPENSATION
The Company's incentive compensation program as in effect during fiscal
1996 had only an annual component. Under the annual program, the Committee
approved goals at the beginning of each year for the annual period. Annual
bonuses were based on achievement of a specific operating profit (profit
before taxes) threshold which was established with references to the
Company's prior year's results and management's budget for the current year.
The maximum potential annual bonus award for executive officers for fiscal
1996 was 40% to 50% of base salary, depending on the executive's position.
For fiscal 1996, an annual bonus of up to 24% of base salary was earned and
paid to all executive officers (other than the CEO, Mr. Thompson), resulting
from an increase in profit before tax over the prior year (excluding the
provision for organizational changes and relocation and consolidation of
operations) of 5.5%. Mr. Thompson was paid a fixed minimum bonus of $300,000
for fiscal 1996 pursuant to his employment agreement.
13
<PAGE>
Up until fiscal 1996, the Company's executive compensation program also
included a long-term (three-year) component. The purpose of the long-term
component in the past was to give incentives to executive officers to strive
for sustained Company financial performance and to encourage balance in
long-term and short-term decision making. Through grants by the Committee of
performance units and performance shares under the Company's 1988 Long-Term
Incentive Compensation Plan (the "LTIC Plan"), executives were afforded the
opportunity to earn cash and Company stock depending upon the extent to which
return-on-capital-employed and earnings-per-share goals were met over a
three-year performance period. Depending on the executive's position, the
full award that could have been earned was 30% to 70% of base salary measured
at the beginning of the performance period. The long- term compensation
earned in any fiscal year was dependent upon performance for the full
trailing three-year period.
In early 1996, the Committee decided to terminate the LTIC Plan and to
revise the incentive compensation program to more closely align it with
growth in shareholder value. The new incentive compensation program has not
yet been finalized. However, as a result of the termination of the LTIC Plan
the Company's executive officers received during fiscal 1996 prorated
performance shares and performance unit awards earned under that Plan through
fiscal 1995 for the 1994-1996 performance period. For the shortened 1994-1996
performance period, the long-term compensation earned was equal to 48% of the
full cash amount and 56% of the maximum amount of shares which could have
been earned. This was based on a two-year average return on capital employed
of 19.6% and extrapolated three-year cumulative earnings per share from
continuing operations of $3.20. This represented a decrease from the three-
year performance period ending at the end of fiscal 1995 when the long-term
compensation earned was equal to 51% of the full cash amount and 57% of the
maximum amount of shares which could have been earned. The decrease was due
primarily to a reduction in the Company's 1995 return-on-capital-employed to
18.3 percent which was largely attributable to the 1995 provision for
consolidation of operations of $2.9 million. (The 1995 provision for
organizational changes of $2.4 million was excluded from the
return-on-capital-employed and extrapolated three-year cumulative earnings
per share from continuing operations calculations for the two-year
performance period ending at the end of fiscal 1995.)
STOCK OPTIONS/STOCK GRANTS
The Company's 1993 Stock Option and Stock Grant Plan provides for grants
by the Compensation Committee of incentive and/or non-qualified stock
options, as well as grants of stock, to executive officers and others, thus
tying a portion of executive compensation directly to the performance of the
Company stock. The exercise price of the stock options under the Plan (and
predecessor option plans) may not be less than 100% of the fair market value
of the Company's stock on the date of grant. Stock options become exercisable
at least one year (usual practice has been two years) from the date of grant,
subject to possible acceleration in certain circumstances, and usually expire
ten years following the date of grant. Executive officers typically have been
granted stock options each year for a number of shares, the market value of
14
<PAGE>
which shares on the date of grant has been in a range of 80% to 120% of the
executive officer's base salary. Stock options at the general level of 100%
of executive officers' base salaries were granted for fiscal 1996. However,
from time to time in the past the Committee has granted several years' worth
of options in one year in lieu of grants in future years, and the Committee
is considering doing so again in fiscal 1997 as part of its intention to have
a greater portion of executive officers' total compensation be based on stock
options. (See Proposal 2 in this proxy statement.)
February 12, 1997
Compensation Committee:
Robert H. Rock, Chairman
Mary R. (Nina) Henderson
Roderic H. Ross
15
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the annual
and long- term compensation paid or accrued to or for: (i) the Company's
Chief Executive Officer and (ii) the Company's most highly compensated other
executive officers whose total annual salary and bonus exceeded $100,000
(collectively, the "Named Officers") for services rendered to the Company and
its subsidiaries during fiscal years 1996, 1995, and 1994:
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------
Other
Annual
Name and Bonus Compen-
Principal Position Year Salary (1) sation
------------------------------------- ------ ------------ ------------ -------------
($) ($) ($)
------------ ------------ -------------
<S> <C> <C> <C> <C>
Donald L. Thompson(6) 1996 225,000(7) 300,000(7) 125,054(7)
Chairman of the Board,
President and Chief Executive Officer
Robert B. Fritsch(6) 1996 450,000 299,712(8)
Former President and 1995 250,000 87,500 250,000(10)
Chief Executive Officer 1994 236,875 61,550
William E. Chandler 1996 214,492 51,466
Senior Vice President, 1995 201,917 62,100
Finance and Secretary 1994 193,000 48,994
Spencer W. O'Meara 1996 239,023 59,431
Executive Vice President 1995 207,604 65,490
and General Manager 1994 179,327 44,230
W. Ernest Precious 1996 205,233 51,987
Executive Vice President 1995 178,400 53,520
and General Manager 1994 162,200 39,934
John W. Carney 1996 146,813 31,465
Vice President, Human 1995 132,629 40,500
Resources and Strategic Planning 1994 116,592 31,267
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------------------------
Awards Payouts
---------------------------- ---------
Restricted Securities All Other
Stock Underlying LTIP Compen-
Name and Awards Options/ Payouts sation
Principal Position (2) SARs (3) (4) (5)
------------------------------------- ------------ ------------ --------- -----------
($) (#) ($) ($)
------------ ------------ --------- -----------
<S> <C> <C> <C> <C>
Donald L. Thompson(6) 350,000(7) 2,813
Chairman of the Board,
President and Chief Executive Officer
Robert B. Fritsch(6) 50,925 44,521 11,961(9)
Former President and 34,000 67,223 2,250
Chief Executive Officer 34,000 58,985 2,250
William E. Chandler 18,145 26,278 4,707
Senior Vice President, 177,000 26,200 43,082 4,193
Finance and Secretary 26,200 45,434 2,250
Spencer W. O'Meara 24,829 20,469 4,972
Executive Vice President 177,000 22,500 29,968 4,112
and General Manager 22,500 29,048 2,250
W. Ernest Precious 19,417 17,554 4,025
Executive Vice President 177,000 22,500 26,974 3,004
and General Manager 22,500 25,390 2,250
John W. Carney 12,127 11,523 3,076
Vice President, Human 177,000 16,500 18,846 3,060
Resources and Strategic Planning 16,500 19,422 1,886
</TABLE>
- ------
(1) Includes annual bonuses awarded under the Company's incentive
compensation program for the respective fiscal years unless otherwise
indicated.
(2) Represents the fair market value (based on the closing sales price of
the Company's Common Shares on the date of grant) of stock grants for
12,000 Common Shares awarded in fiscal 1995 to each of Messrs. Chandler,
O'Meara, Precious, and Carney under the 1993 Stock Option and Stock
Grant Plan. The fair market value of 12,000 Common Shares as of December
1, 1996 was $211,500. The stock grants vested in full in early 1997. A
cash bonus, equivalent to the amount of all dividends on the unvested
shares under these stock grants was paid during the vesting period.
(3) Represents shares underlying stock options unless otherwise indicated.
(4) Includes cash and Common Shares, valued using the share price on the
date of vesting, paid in respect of performance units and performance
shares awarded under the Company's 1988 Long-Term Incentive Compensation
Plan for the performance periods 1994-1996, 1993-1995, and 1992-1994.
(5) Includes contributions made by the Company under its Savings Plan and
premiums paid by the Company for group term life insurance coverage.
Does not
16
<PAGE>
include contributions made by the Company with respect to the Pension
Plan or, except for matching contributions, to the Supplemental
Executive Benefits Plan (see "Pension Plans" herein).
(6) On June 1, 1996, Mr. Thompson succeeded Mr. Fritsch as President and
Chief Executive Officer of the Company and subsequently was elected
Chairman. Mr. Fritsch continued in a transitional role at full pay until
the end of the year when he retired.
(7) Mr. Thompson's salary has been prorated for the portion of the year that
he was employed by the Company. The bonus of $300,000 paid to Mr.
Thompson represents the minimum annual incentive pay for the 1996 fiscal
year under the terms of his Employment Agreement. (See "Employment and
Severance Agreements and Arrangements" herein.) The other annual
compensation includes reimbursement of $81,902 of relocation expenses
and $43,152 of related taxes. The securities underlying Mr. Thompson's
options and SARs include 175,000 shares underlying options, as well as
175,000 shares of phantom stock (SARs), both granted on June 1, 1996,
the date Mr. Thompson's employment with the Company commenced. The SARs
vest at a rate of 25% per year commencing December 1, 1996. (See the
Option/SAR Grants in Fiscal 1996 Table and the footnotes thereto below.)
(8) Includes $240,000 paid to Mr. Fritsch in lieu of any prorated bonus
under the annual incentive compensation program and $59,712 in unused
vacation time which was paid to Mr. Fritsch upon his retirement.
(9) Represents the value of a Company owned vehicle, the title of which was
transferred to Mr. Fritsch upon his retirement.
(10) In connection with his elevation to the position of Chief Executive
Officer in April 1995, Mr. Fritsch received a one-time cash payment of
$250,000 in fiscal 1995.
STOCK OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
The following table sets forth certain information concerning stock
options and SARs granted to and exercised by the Named Officers during fiscal
1996 and unexercised stock options held by them at the end of fiscal 1996:
OPTION/SAR GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates Alternative
of Stock Price to (f) and (g)
Appreciation Option Grant
Individual Grants for SAR Term Date Value
- ------------------------------------------------------------------------------------ ---------------------- --------------
(a) (b) (c) (d) (e) (f) (g) (f)
Number of
Securities Percentage Market Option
Underlying of Total Price Grant
Options/ Options/SARs Exercise at Date
SARs Granted to or Base Grant Present
Granted(2) Employees Price Date Expiration 5%(3) 10%(3) Value(4)
Name(1) # in Fiscal 1996 ($/S) ($/Sh) Date ($) ($) ($)
- ------------------- ----------- -------------- ------- --------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald L. Thompson 175,000(5) 100% 0.00 16.38 (5) 4,620,000 7,287,000
175,000(5) 48% 16.38 16.38 05/31/06 911,750
Robert B. Fritsch 50,925 14% 16.56 16.56 02/14/06 245,968
William E. Chandler 18,145 5% 16.56 16.56 02/14/06 87,640
Spencer W. O'Meara 24,829 7% 16.56 16.56 02/14/06 119,924
W. Ernest Precious 19,417 5% 16.56 16.56 02/14/06 93,784
John W. Carney 12,127 3% 16.56 16.56 02/14/06 58,573
</TABLE>
- ------
(1) See the Summary Compensation Table for titles of the individual Named
Officers.
17
<PAGE>
(2) Except for the 175,000 shares of phantom stock (SARs) granted to Mr.
Thompson (see footnote (5) below), the number of shares in this column
represent shares underlying stock options granted under the 1993 Stock
Option and Stock Grant Plan. Mr. Thompson's options were granted on June
1, 1996 at fair market value and become exercisable one year after the
date of grant, subject to possible acceleration in certain events. All
other options were granted on February 14, 1996 at fair market value and
become exercisable in essentially equal amounts two years after the date
of grant, subject to possible acceleration in certain events.
(3) Represents the potential realizable value of Mr. Thompson's phantom
stock/SARs, assuming the market price of the underlying shares
appreciates at the assumed annual rates until Mr. Thompson reaches the
age of 65 (approximately 10 years). (See footnote (5) below.)
(4) Based on the modified Black-Scholes extended binomial option valuation
model adapted for use in valuing executive stock options. The estimated
value under this model assumes: (i) an expected option term of six years,
which represents the assumed average period from grant date of option to
their exercise date, (ii) an interest rate that represents the interest
rate on a U.S. Treasury bond with a maturity date corresponding to that
of the adjusted option term, (iii) volatility calculated using monthly
stock prices for the ten years prior to the grant date, and (iv)
dividends at a rate of 2.07% based on the average dividends paid over the
ten-year period prior to the grant date. The actual value, if any, an
executive may realize will depend on the excess of the stock price over
the exercise price on the date the option is exercised, so that there is
no assurance the value realized will be at or near the value estimated by
the model.
(5) Represents 175,000 shares of phantom stock/SARs granted to Mr. Thompson
on June 1, 1996 pursuant to the terms of his employment agreement. (See
"Employment and Severance Agreements and Arrangements" herein.) These
phantom shares/SARs vest at the rate of 25% per year commencing December
1, 1996. Upon his separation from the Company, Mr. Thompson will be
entitled to receive, in monthly installments with interest, an aggregate
amount equal to the number of such phantom shares/SARs as shall have
vested, multipled by the per share price of the Company's Common Shares
as of the end of the month prior to his separation from the Company, plus
an amount equal to the dividends which would have accrued on an
equivalent number of Common Shares prior to his separation, minus any
such dividend equivalent amounts as may previously have been distributed
to him.
18
<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN FISCAL 1996
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Shares Value Options/SARs at FY-End at FY-End(4)
Acquired on Realized -------------------------------- --------------------------------
Name(1) Exercise(2) (3) Exercisable Unexercisable Exercisable Unexercisable
(#) ($) (#) (#) ($) ($)
------------------- ------------- ---------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Thompson 43,750(5) 131,250(5) 771,094 2,313,281
Donald L. Thompson 175,000 218,750
Robert B. Fritsch 75,977 301,987 41,300 101,925 54,492 204,898
William E. Chandler 26,100 57,445 85,447 135,476
Spencer W. O'Meara 2,000 9,565 72,935 58,579 255,645 126,168
W. Ernest Precious 4,212 25,725 66,685 53,167 235,684 120,418
John W. Carney 77 380 57,318 36,877 203,885 86,062
</TABLE>
- ------
(1) See the Summary Compensation Table for titles of the individual Named
Officers.
(2) All options reflected in this table were granted at fair market value
under the Company's 1978 Stock Option Plan or its 1983 or 1993 Plans.
(3) The value realized in the case of options is calculated by subtracting
the exercise price from the fair market value of the shares underlying
the options as of the exercise date.
(4) The value in the case of options is calculated by subtracting the
exercise price from the fair market value of the securities underlying
the options at December 1, 1996. There is no exercise price for Mr.
Thompson's phantom stock/SARs.
(5) Represents phantom stock/SARs granted to Mr. Thompson under his
Employment Agreement. See the Summary Compensation Table and the
Option/SAR Grants Table and the footnotes thereto herein for further
information concerning such phantom stock/SARs.
19
<PAGE>
PENSION PLANS
The following table sets forth the estimated annual retirement benefits
payable under the Company's Pension Plan and the retirement benefits portion
of the Supplemental Executive Benefits Plan (the "Supplemental Plan") to
participants in both Plans, assuming they retired at age 65 in fiscal 1997
with the indicated levels of compensation and years of benefit service:
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------------------------------------------
Remun-
eration 10 15 20 25 30 35 40 or More
---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 55,000 $ 60,000 $ 60,000
150,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 82,500 $ 90,000 $ 90,000
200,000 $ 40,000 $ 60,000 $ 80,000 $100,000 $110,000 $120,000 $120,000
250,000 $ 50,000 $ 75,000 $100,000 $125,000 $137,500 $150,000 $150,000
300,000 $ 60,000 $ 90,000 $120,000 $150,000 $165,000 $180,000 $180,000
350,000 $ 70,000 $105,000 $140,000 $175,000 $192,500 $210,000 $210,000
400,000 $ 80,000 $120,000 $160,000 $200,000 $220,000 $240,000 $240,000
450,000 $ 90,000 $135,000 $180,000 $225,000 $247,500 $270,000 $270,000
500,000 $100,000 $150,000 $200,000 $250,000 $275,000 $300,000 $300,000
550,000 $110,000 $165,000 $220,000 $275,000 $302,500 $330,000 $330,000
600,000 $120,000 $180,000 $240,000 $300,000 $350,000 $360,000 $360,000
</TABLE>
- ------
(1) For the 1996 Plan year, amounts of benefits in the above table exceeding
$120,000 could not be paid under the Pension Plan but would be paid
pursuant to the retirement benefits portion of the Supplemental Plan.
As used in the above table, the term, "Remuneration" means covered
compensation (as defined below) averaged over a participant's highest five
consecutive calendar years out of the last ten calendar years of employment.
Covered compensation essentially means wages or salary, bonus, salary
reductions elected under the Company's Savings Plan, and any cash awards
under the Company's Long-Term Incentive Compensation Plan (which terminated
in 1996), except that, for the purposes of determining Remuneration under the
Pension Plan, but not the Supplemental Plan, only covered compensation not in
excess of limitations imposed by the Internal Revenue Code ($150,000 for the
1996 Plan year) may be taken into account. The covered compensation of the
Named Officers for fiscal 1996 was as follows: Mr. Thompson -- $650,053; Mr.
Fritsch -- $794,233; Mr. Chandler -- $292,236; Mr. O'Meara -- $318,923; Mr.
Precious -- $274,774; and Mr. Carney -- $189,801.
The approximate present years of benefit service for the Named Officers
are as follows: Mr. Thompson -- 1 year; Mr. Fritsch -- 28 years; Mr. Chandler
- -- 4 years; Mr. O'Meara -- 17 years; Mr. Precious -- 19 years; and Mr. Carney
- -- 12 years. For purposes of calculating benefits, a participant may not be
credited with more than 40 years of service under the Pension Plan or 35
years of service under the retirement benefits portion of the Supplemental
Plan.
Retirement benefits shown in the above table have been computed on a
single-life annuity basis and are not subject to any deduction for Social
Security or other offset amount.
20
<PAGE>
The Pension Plan generally covers employees (including executive officers
but excluding certain non-resident aliens) who are not covered by a
collective bargaining agreement. The Supplemental Plan, provides supplemental
benefits only to executive officers and other officers. The Supplemental Plan
has an elective salary deferral feature with a Company matching contribution
of 25% of an officer's elective deferral but not to exceed 6% of the
officer's compensation. The Company made matching contributions to this
portion of the Supplemental Plan for executive officers of $24,460 in fiscal
1996.
EMPLOYMENT AND SEVERANCE AGREEMENTS AND ARRANGEMENTS
In connection with his hiring as Chairman, President and Chief Executive
Officer by the Company in 1996, Donald L. Thompson and the Company entered
into an employment agreement for an initial term ending May 31, 1998 and
continuing thereafter from year to year until Mr. Thompson reaches the age of
65 or until earlier terminated by either party. The agreement provides for an
initial annual base salary of $450,000 (subject to periodic review and
possible increase by the Compensation Committee), plus an annual incentive
bonus under the Company's incentive compensation program of up to a maximum
of 70% of base salary, but not to be less than $300,000 for fiscal 1996 and
$225,000 for fiscal 1997. Pursuant to the agreement, Mr. Thompson was granted
at the time his employment commenced: (i) stock options under the Company's
1993 Stock Option and Stock Grant Plan for 175,000 Common Shares, and (ii)
175,000 shares of phantom stock. He also is entitled to receive additional
annual option grants of a value of up to 2 1/2 % of his base salary under
some circumstances. The agreement also provides for reimbursement of Mr.
Thompson, on an after tax basis, for various moving and relocation expenses
in connection with his move from California to Pennsylvania and entitles him
to participate in most of the Company's benefit plans and programs for
executives. (See the Summary Compensation and Option/SAR Grants in Fiscal
1996 Tables above for further information concerning Mr. Thompson's
compensation and benefits.)
In the event of termination of his employment with the Company, Mr.
Thompson's entitlement to severance compensation and benefits varies
depending upon the circumstances and timing of such termination. If his
employment were terminated by reason of his death or disability, by the
Company without cause, or by him because of a material reduction in his
authority or duties, he would be entitled under the agreement to continuation
of his base salary, bonus and benefits for periods of from six months to two
years following termination of employment, and there would be acceleration of
the vesting of certain of his benefits, including his phantom stock. Should
there be a change in control of the Company (as defined in the agreement) and
a termination of his employment within two years thereafter, his entitlement
to severance compensation and benefits under the agreement would be
essentially as provided in the change in control agreements with other
executive officers discussed in the following paragraph, except that: (i) his
severance allowance generally would be equal to 2.99 times his recent annual
cash compensation; (ii) his life and health insurance plans and certain other
benefits would continue for up to three years; and (iii) in the event of a
change in control occurring prior to June 1, 1998, he would be entitled to
additional payments sufficient, on an after tax basis, to pay any excise tax
imposed on such severance payments.
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<PAGE>
Since 1990 the Company has had change in control agreements with executive
officers, as well as with other officers and certain key employees. These
agreements currently extend through December 31, 1999. Under the agreements
with executive officers, in the event of a change in control (as defined in
the agreements) of the Company, the agreements would become effective and
would provide for the executive officers' continued employment by the
Company, generally for a period of two years following the change in control
and generally at not less than their recent compensation and benefit levels.
If within such two-year period an executive officer's employment is
terminated by the Company without cause or if such executive officer resigns
in certain specified circumstances, then the executive officer generally is
entitled to the payment of a severance allowance equal to approximately twice
his or her recent annual cash compensation level (including cash amounts
earned under incentive compensation plans) and to the continuation of life
and health insurance plans and certain other benefits for up to two years
following such termination of employment. Mr. Thompson does not have a
separate change in control agreement, but his employment agreement contains
similar provisions, as described in the preceding paragraph.
The Company also has an additional severance agreement with William E.
Chandler, Senior Vice President, Finance and Chief Financial Officer of the
Company. Under the terms of this agreement the Company is obligated to pay
Mr. Chandler severance equivalent to up to two years' base compensation if he
is terminated within varying periods up to five years from his date of hire
(September 1992) as a result of top management turnover or for any other
reason other than his death, disability, voluntary resignation or discharge
for cause. In the event of a termination of Mr. Chandler's employment, which
is covered under the terms of the change in control agreement described in
the preceding paragraph, the terms of that agreement would supersede the
severance arrangement described in this paragraph.
Upon his retirement from the Company, Robert B. Fritsch agreed to provide
consulting services to the Company from January 1, 1997 through December 31,
1997 for a monthly fee of $3,333. (See also the Summary Compensation Table
and the footnotes thereto above.)
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SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares for fiscal years 1992 through 1996 the yearly
change in the cumulative total return to holders of Common Shares of the
Company with the cumulative total return of the Standard & Poor's Composite
- -- 500 Index (the "S&P 500") and of an index of peer group companies selected
by the Company (the "Peer Group").
250 |-------------------------------------------------------------------|
| #|
| |
225 |------------------------------------------------------------------@|
| |
| |
200 |-------------------------------------------------------------------|
D | # |
O | |
L 175 |-------------------------------------------------------------------|
L | |
A | |
R 150 |------------------------------------------------------@------------|
S | # # *|
| @ @ |
125 |-------------------------------------------------------------------|
| # |
| @ * * |
100 |*#@---------*---------------------------*--------------------------|
| |
| |
75 |------------|-------------|-------------|-------------|------------|
1991 1992 1993 1994 1995 1996
FISCAL YEAR
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hunt Manufacturing Co. * $100 $ 95.69 $109.42 $103.04 $110.37 $132.94
S&P 500 Index # $100 $118,47 $130.44 $131.80 $180.54 $230.84
Peer Group Index @ $100 $106.33 $126.21 $126.26 $154.87 $201.23
- ----------------------------------------------------------------------------------------------
</TABLE>
The Company elected to use the Peer Group Index rather than a published
industry or line of business index because the Company is not aware of any
such published index which it believes is as appropriate for comparative
cumulative total return purposes. The Peer Group consists of 20 publicly-held
companies of various sizes.(1) Although none of these Peer Group companies is
directly comparable with the Company in terms of all businesses engaged in,
there are similarities in respect of certain products offered, specific lines
of business and/or channels of distribution. For the purposes of the Peer
Group Index, the Peer Group companies including the Company
- ------
(1) The Peer Group consists of Acme United Corporation; American Business
Products Inc.; Aspen Imaging International Inc.; Avery Dennison
Corporation; Bush Industries Inc.; A.T. Cross Company; Dixon Ticonderoga
Company; Duplex Products Inc.; Ennis Business Forms Inc.; General Binding
Corporation; Herman Miller Inc.; HON Industries; Moore Corporation
Limited; Nashua Corporation; Paris Business Forms Inc.; S L Industries
Inc.; Shelby Williams Industries Inc.; Tab Products Co.; Virco Mfg.
Corporation; and Zero Corporation.
23
<PAGE>
have been weighted based upon their relative market capitalizations. In
calculating the value of a given index, the returns of the individual Peer
Group companies and the Company are weighted according to their market
capitalization as of the beginning of each period for which a return is
indicated. In future years, the Company may utilize another published index,
rather than the Peer Group Index, if an appropriate published index can be
found.
The above graph assumes that the value of the investment in Hunt
Manufacturing Co., the S&P Composite--500 Index companies and the Peer Group
Index companies was $100 on November 30, 1991, and that all dividends were
reinvested. The performance as reported above provides no assurances that
this performance will continue in the future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As previously reported, on December 19, 1995, the Company purchased from
Mary F. Bartol an aggregate of 2,150,165 of the Company's Common Shares (the
"MFB Shares") constituting approximately 13% of the Common Shares then
outstanding, for a cash purchase price of $16.32 per share, an aggregate of
$35,090,692 (the "MFB Purchase"). Approximately $35 million of the funds for
the MFB Purchase were borrowed by the Company from NationsBank, N.A. pursuant
to a new credit facility. Mrs. Bartol is the widow of George E. Bartol III,
the late Chairman of the Board of the Company, the mother-in-law of Gordon A.
MacInnes, the then Chairman of the Board, and the mother of Victoria B.
Vallely, another director of the Company. The per share purchase price of
$16.32 paid by the Company for the MFB Shares was determined by negotiation
between representatives of the Company and Mrs. Bartol and was considered and
unanimously approved by a Special Committee (consisting entirely of seven
outside directors not related to Mrs. Bartol) of the Board of Directors of
the Company. Subsequently, on December 21, 1995, the Company commenced a
tender offer to purchase up to an additional 3,230,000 of its Common Shares
at $17 per share, pursuant to which an aggregate of 2,954,378 shares were
tendered to and purchased by the Company. The Board received a written
opinion from Alex. Brown & Sons, Incorporated to the effect that, based upon
the procedures followed, factors considered and assumptions made by Alex,
Brown as set forth in the opinion, the MFB Purchase was fair to the Company
and its shareholders other than Mrs. Bartol and that the consideration
offered by the Company in the tender offer was fair, from a financial point
of view, to the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, as well as persons beneficially
owning more than 10% of the Company's Common Shares and certain other holders
of such shares (collectively, "Covered Persons") to file with the Securities
and Exchange Commission and the New York Stock Exchange, within specified
time periods, initial reports of ownership, and subsequent reports of changes
in ownership, of Common Shares and other equity securities of the Company.
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<PAGE>
Based solely upon the Company's review of copies of such reports furnished
to it and upon representations of Covered Persons that no other reports were
required, to the Company's knowledge all of the Section 16(a) filing
requirements applicable to Covered Persons were complied with on a timely
basis in fiscal 1996.
SOLICITATION OF PROXIES
The cost of soliciting the proxies will be paid by the Company. Directors,
officers and employees of the Company may solicit proxies in person, or by
mail, telephone or telegraph, but no such person will be specially
compensated for such services. The Company will request banks, brokers and
other nominees to forward proxy materials to beneficial owners of stock held
of record by them and will reimburse them for their reasonable out-of-pocket
expenses in so doing.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
the 1998 Annual Meeting, shareholders' proposals to take action at such
meeting must comply with applicable Securities and Exchange Commission rules
and regulations, must be directed to the Secretary of the Company at its
offices set forth on page 1 of this proxy statement, and must be received by
the Company not later than November 17, 1997.
MISCELLANEOUS
A copy of the Company's 1996 Annual Report to Shareholders previously was
mailed to shareholders but is not to be regarded as proxy solicitation
material.
The Company, upon request, will furnish to record and beneficial holders
of its Common Shares, free of charge, a copy of its Annual Report on Form
10-K (including financial statements and schedules but without exhibits) for
fiscal 1996. Copies of exhibits to the Form 10-K also will be furnished upon
request and the payment of a reasonable fee. All requests should be directed
to the Secretary of the Company at the offices of the Company set forth on
page 1 of this proxy statement.
By order of the Board of Directors,
WILLIAM E. CHANDLER, Secretary
March 3, 1997
25
<PAGE>
APPENDIX
HUNT MANUFACTURING CO.
1993 STOCK OPTION AND STOCK GRANT PLAN, AS AMENDED
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 all other options granted under the Plan.
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 non-employee
directors (within the meaning of Rule 16b-3(b)(3) under the Securities
Exchange Act of 1934 (the "Exchange Act"), or any successor thereto) who are
also outside directors (within the meaning of Treas. Reg. Section
1.162-27(e)(3), or any successor thereto) 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.
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.
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3. Stock Subject to the Plan.
Subject to the provisions of Section 8, up to an aggregate maximum of
3,500,000 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, however, that, of such amount, not more than
525,000 Shares shall be available for Stock Grants, and further provided,
that, no Eligible Employee (as hereinafter defined) or Consultant (as defined
below) shall receive Options and/or Stock Grants for more than 300,000 Shares
over any one-year period. 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; provided, however, that:
(a) If an Option is cancelled or if a Stock Grant is terminated, the
Shares subject to the unexercised portion of such Option and/or the
unvested Shares covered by such Stock Grant shall continue to be counted
against the maximum number of Shares specified above which may be awarded
to an Eligible Employee or Consultant during the one-year period in which
the Option or Stock Grant was originally awarded, and
(b) If the exercise price of an Option is reduced after the date of
grant, the transaction shall be treated as a cancellation of the original
Option and the grant of a new Option for purposes of such maximum.
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 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
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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 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);
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(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 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
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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 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.
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Notwithstanding the foregoing, the Committee may, in its discretion,
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 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 intended to be an incentive stock option
shall be assignable or transferable by an Optionee otherwise than by will
or by the laws of descent and distribution. Unless otherwise permitted by
the Committee, all other Options shall not be assignable or transferable
by an Optionee otherwise than by will or by the laws of descent and
distribution.
A transferred Option shall continue to be subject to the same terms and
conditions as were applicable to such Option immediately prior to
transfer, and the Optionee shall remain subject to tax withholding under
Section 5(l) with respect to such Option. The events of termination of
employment of Section 5 shall also continue to be applied with respect to
the original Optionee, following which events the transferred Option shall
be exercisable by the transferee only to the extent, and for the periods
specified in, Sections 5(c), (d), (e), (f) and (g).
(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, 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 Com-
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mittee 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). 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.
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.
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(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
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 dis-
A-8
<PAGE>
cretion 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). 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 and the maximum
number of Shares with respect to which Options and/or Stock Grants may be
awarded to any Eligible Employee or Consultant under the Plan, both 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.
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
A-9
<PAGE>
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 outstanding shares
of the Company is, either in person or by proxy, present and voting on the
action:
(a) The class of individuals eligible to receive Options or Stock
Grants shall not be changed;
(b) 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;
(c) The limitations on the price at which Options may be granted shall
not be changed; and
(d) The duration of the Plan, as specified in Section 12, shall not be
extended.
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<PAGE>
Notwithstanding the foregoing, 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 became effective on February 7, 1993. 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.
A-11
<PAGE>
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, 1996, to vest in three annual increments of 10,000 Shares each
on February 10, 1997, 1998, and 1999, respectively, and if the Grantee, while
still an employee of the Company, should die on August 10, 1997, the number
of Shares vested would be 22,465, calculated as follows:
1. The 10,000 Share increment scheduled to vest on February 10, 1997,
would already have vested in full.
2. The 10,000 Share increment scheduled to vest on February 10, 1998,
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, 1999,
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).
A-12
<PAGE>
HUNT MANUFACTURING CO.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - APRIL 16, 1997
The undersigned hereby appoint(s) Donald L. Thompson and William E.
Chandler, or any of them, with full power of substitution, proxies to vote,
as designated on the reverse side of this proxy card, all the Common Shares of
Hunt Manufacturing Co. held of record by the undersigned on February 14, 1997,
at the Annual Meeting of Shareholders to be held on April 16, 1997, and at any
adjournments thereof.
(Continued, and to be dated and signed, on other side)
<PAGE>
----- Please mark your
A X votes as in this example.
----- example.
AUTHORITY GRANTED
to vote for all nominees
(except as marked to the AUTHORITY
contrary below) WITHHELD
(1) ELECTION / / / / Nominees: Jack Farber
OF Gordon A. Macinnes
DIRECTORS Donald L. Thompson
If you wish to withhold authority to vote for one
or more but less than all of the nominees named at
right, or to cumulate your votes for any such
nominee(s), so indicate on the line provided below.
- ---------------------------------------------------
FOR AGAINST ABSTAIN
(2) Approval of amendment of the 1993 Stock / / / / / /
Option and Stock Grant Plan, including an
increase of 1,750,000 in the number of shares
authorized for issuance under Plan;
(3) Ratification of the appointment of Coopers & / / / / / /
Lybrand L.L.P. as the independent accountants
of the Company for fiscal 1997;
(4) and, to the extent permitted by the Rules of the Securities and Exchange
Commission, upon such other matters as may properly come before the meeting
and any adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no contrary direction is made, this proxy will
be voted FOR the nominee listed in Item 1 at left (in equal amounts or
cumulatively, as the proxies may determine) or, if any such nominee(s) should
be unable to serve, for such other person(s) as may be recommended by the
Board of Directors; FOR the proposals set forth in Items 2 and 3 and in
accordance with the proxies' best judgment upon other matters properly coming
before the meeting and any adjournments thereof.
SIGNATURE DATED , 1997 SIGNATURE DATED , 1997
------------ ------ ----------- ------
(SIGNATURE IF HELD JOINTLY)
NOTE: Please date and sign exactly as your name appears herein. In case of
joint holders, each should sign. If the signer is a corporation or
partnership, sign in full the corporate or partnership name by an authorized
officer or partner. When signing as attorney, executor, trustee, officer,
partner etc. give full title.
