<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the fiscal year ended November 29, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from ______ to ______.
For the fiscal year ended November 29, 1998 Commission File No. 1-8044
HUNT CORPORATION
(Registrant)
Pennsylvania 21-0481254
(State of Incorporation) (IRS Employer Identification No.)
One Commerce Square,
2005 Market Street, Philadelphia, PA 19103-7085
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 656-0300
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
<S> <C>
Title of Each Class: Name of Each Exchange on Which Registered:
Common Shares, par value $.10 per share New York Stock Exchange
Rights to Purchase Series A Junior New York Stock Exchange
Participating Preferred Stock
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common shares (its only voting
stock) held by non-affiliates of the registrant as of February 1, 1999 was
approximately $114,000,000. (Reference is made to the final paragraph of Part I
herein for a statement of the assumptions upon which this calculation is based.)
The number of shares of the registrant's common shares outstanding as of
February 1, 1999 was 10,807,340.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's 1999 definitive proxy statement relating to
its scheduled April 1999 Annual Meeting of Shareholders (which proxy statement
is expected to be filed with the Commission not later than 120 days after the
end of the registrant's last fiscal year) are incorporated by reference into
Part III of this report.
1
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Certain statements contained in this report are forward-looking statements. Such
forward-looking statements represent management's assessment based upon
information currently available, but are subject to risks and uncertainties
which could cause actual results to differ materially from those set forth in
the forward-looking statements. These risks and uncertainties include, but are
not limited to, the Company's ability to successfully complete the
implementation, and realize the anticipated growth and other benefits, of its
strategic plan on a timely basis, the effect of, and changes in, worldwide
general economic conditions, technological and other changes affecting the
manufacture of and demand for the Company's products, competitive and other
pressures in the market place, the impact of Year 2000 issues, the outcome of
litigation in which the Company is engaged, and other risks and uncertainties
set forth herein and in the Company's Forms 10-Q and 8-K filings with the
Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS
General
Hunt Corporation and its subsidiaries (herein called the "Company," unless the
context indicates otherwise) are primarily engaged in the manufacture and
distribution of consumer products and graphics products which the Company
markets worldwide.
In April 1997, the Company initiated a new strategy for growth and restructuring
plan (the "strategic plan") designed to restore higher levels of growth and
profitability and to reduce its cost structure. This plan resulted from a
strategic assessment of the Company's business, conducted with the aid of
outside consultants. The restructuring portion of the strategic plan has been
completed, resulting in a significant reduction in the Company's stock keeping
units, rationalization of its manufacturing and warehouse facilities and a major
restructuring of its administrative and marketing and selling functions. This
resulted in cost savings of approximately $17.7 million in fiscal 1998. Although
the Company expects most of these cost savings to continue in future years,
there is no assurance that such savings will be achieved.
In connection with the strategic plan, the Company has repositioned itself for
growth by focusing on two core business areas: Graphics Products, which includes
laminating equipment and supplies for large format digital images, and board
products used for mounting and presenting images; and Consumer Products, which
is a group of select BOSTON, X-ACTO and BIENFANG brand products. In fiscal 1997,
a comprehensive three-year growth plan for the Company's core business areas was
developed which established annual goals of consolidated revenue growth of 10 to
15 percent and earnings growth of 15 to 20 percent into the next century. These
revenue and earnings growth expectations were not achieved in fiscal 1998.
Management believes that the Company suffered from a number of unfavorable
factors during fiscal 1998, particularly during the latter part of the third
quarter and throughout the fourth quarter of fiscal 1998, including the
worldwide economic slowdown, lower sales to key retail customers such as office
products superstores, unfavorable currency exchange fluctuations, higher than
anticipated start-up costs of a new United Kingdom board products manufacturing
facility, and slower acceptance by users of technological changes in the digital
imaging market. At the same time, in fiscal 1998 the Company restructured the
Consumer Products plant facilities, successfully installed integrated computer
systems throughout the Company, introduced new products, bolstered marketing
capabilities with new hires in key positions, and consolidated the graphics and
substrates business areas to enhance focus on growth markets. The Company
intends to continue to analyze cost savings opportunities in all facets of its
operations, but the Company also intends to invest in new product development
and research, especially in the large format digital printing market.
The Company's operating results for fiscal 1997 include the effects of a pretax
charge of $26.8 million (approximately $18.5 million after taxes, or $1.67 per
share on a basic basis and $1.61 per share on a diluted basis) recorded in
conjunction with the implementation of the strategic plan. The charge to
restructuring includes employee severance costs, inventory writedowns and
returns and fixed and intangible asset writedowns, recognition of future lease
obligations, and other related costs. During fiscal 1998, the Company, on a net
basis, reduced by $2.9 million pretax (or $.17 per share after tax on a basic
basis and $.16 per share after tax on a diluted basis) some of its
2
<PAGE>
restructuring reserves. The reserve reduction ($4.1 million pretax, or $.24 per
share after tax on a basic basis and $.23 per share after tax on a diluted
basis) related primarily to lower employee severance costs, inventory returns,
and decisions not to vacate certain leased facilities in connection with the
implementation of the strategic plan during fiscal 1997, partially offset by
additional restructuring charges of $1.2 million pretax (or $.07 per share after
tax on a basic and diluted basis) in connection with the consolidation of the
graphics and substrates business units (principally employee severance costs) in
the fourth quarter of fiscal 1998.
As part of the strategic plan, the Company sold its Lit-Ning Products business
(office supplies), its Hunt Data Products' MediaMate and Calise brand products
(office supplies), and its Speedball brand art products (art supplies) during
fiscal 1997. In addition, in mid-November 1997, the Company sold its Bevis
office furniture business. The latter transaction represented the last major
divestiture in the Company's strategic plan. The Bevis business is presented as
a discontinued operation in the accompanying Consolidated Statements of Income
and Notes to Consolidated Financial Statements.
During fiscal 1998, the Company reduced by $1.4 million pretax (or $.08 per
share after tax on a basic and diluted basis) some of its reserves established
in connection with its 1997 business divestitures ($.7 million pretax, or $.04
per share after tax on a basic and diluted basis) and its 1997 disposal of a
discontinued business ($.7 million pretax, or $.04 per share after tax on a
basic and diluted basis). These latter reserve reductions were principally
related to lower than expected costs associated with accruals (primarily
inventory returns) established at the time of the respective divestiture.
See Item 7 herein and Notes 3 and 4 to Consolidated Financial Statements herein
for further information.
Business Segments
The following table sets forth the Company's net sales from continuing
operations and income from continuing operations by business segment for the
last three fiscal years. The Company changed its business segment reporting in
fiscal 1998 to more accurately reflect its current reporting practices as a
result of the implementation of its strategic plan and consolidation of its
graphics and substrates business units. All prior fiscal year data has been
restated for comparative purposes:
1998 1997 1996
------ ------ ------
Net Sales: (In millions)
Consumer products .................. $107.9 $122.3 $143.1
Graphics products .................. 138.7 137.2 121.4
------ ------ ------
Total .............................. $246.6 $259.5 $264.5
====== ====== ======
Income from continuing operations:*
Consumer products .................. $ 22.5 $ 1.5 $ 17.5
Graphics products .................. 3.2 2.8 12.5
------ ------ ------
Total .............................. $ 25.7 $ 4.3 $ 30.0
====== ====== ======
*Includes a portion of the net reduction for some of the restructuring reserves
of $2.9 million, of which $2.9 million and $(.3) million is reflected in the
consumer products and graphics products amounts, respectively in fiscal year
1998. Also includes a portion of the charge for the strategic plan of $26.8
million, of which $18.2 million and $8.4 million is reflected in the consumer
products and graphics products amounts, respectively, in fiscal 1997. Also
includes a provision for organizational changes and relocation and
consolidation of operations which reduced the consumer products income from
continuing operations by $.4 million in fiscal year 1996. See Items 6 and 7
herein and Note 19 to Consolidated Financial Statements herein for further
information concerning the Company's business segments (including information
concerning identifiable assets).
3
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Consumer Products
The Company has two major classes of consumer products: office supplies and art
supplies. The amounts and percentages of net sales from continuing operations of
these product classes for the last three fiscal years were as follows:
<TABLE>
<CAPTION>
1998 1997* 1996*
----------------- ----------------- -----------------
(Dollars in millions)
Product Class:
<S> <C> <C> <C> <C> <C> <C>
Office supplies ............ $ 73.9 68% $ 78.3 64% $ 96.7 68%
Art supplies ............... 34.0 32% 44.0 36% 46.4 32%
------ --- ------ --- ------ ---
Total ...................... $107.9 100% $122.3 100% $143.1 100%
====== === ====== === ====== ===
</TABLE>
*Restated for comparative purposes.
The Company's consumer office products currently consist of a variety of items
sold under the Company's BOSTON brand, including: manual and electric pencil
sharpeners; paper trimmers; manual and electronic staplers; RAPID(1) manual and
electric staplers; Schwan-STABILO(2) highlighter markers and writing instruments
sold under an exclusive distribution agreement; and other office supplies
products. As part of the strategic plan, the Company divested some of its
consumer products in 1997, including paper punches and shredders. Fiscal years
1997 and 1996 include the sales of its Lit-Ning Products business and its Hunt
Data Products' MediaMate and Calise brand products which were divested in
February 1997. The combined sales of the divested Lit-Ning Products and Hunt
Data Products' MediaMate and Calise brand products for fiscal years 1997
(through the various divestiture dates) and 1996 were $4 million and $22.5
million, respectively.
The Company's art supplies products are used primarily by commercial and amateur
artists, as well as hobbyists and craft enthusiasts, and include: various types
of X-ACTO brand knives and blades; X-ACTO brand tools and kits; CONTE(3)
pastels, crayons and related drawing products, for which the Company is the
exclusive United States and Canadian distributor; commercial and fine art papers
which the Company converts, finishes and sells under its BIENFANG brand name;
and paint markers. In conjunction with the strategic plan, the Company sold its
Speedball brand art products and divested other art supplies products during
fiscal 1997. The sales of the divested Speedball brand art products for fiscal
years 1997 (through the divestiture date) and 1996 were $7.5 million and $8.4
million, respectively.
The Company consistently has sought to expand its consumer products business
through internal product development, the acquisition of distribution rights to
products which complement or extend the Company's established lines, the
acquisition of complementary businesses and broadened distribution. Examples of
new consumer products introductions by the Company in recent years are: stand-up
staplers and battery operated pencil sharpeners sold under a licensing agreement
with The Coca-Cola(4) Company, BOSTON brand electric and battery powered pencil
sharpeners, and paper trimmers, grip and stand-up staplers and the X-Acto X-2000
knife.
The Company's consumer products are sold domestically into the commercial
office, home office and general consumer markets. They are sold and distributed
primarily through large retail outlets, such as office products superstores,
drug and food chain stores, variety stores, discount chains and membership
chains, and through office supply wholesalers and dealers. The consumer market
has increased significantly over the last several years primarily due to the
dramatic growth of office products superstores and discount chains. A more
limited line of products is sold to schools through specialized school supply
distributors.
(1)Trademark of Isaberg AB.
(2)Trademark of Schwan-STABILO Schwanhausser GmbH & Co.
(3)Trademark of Conte S.A.
(4)Trademark of The Coca-Cola Company.
4
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Graphics Products
The Company has two major classes of graphics products: supplies and equipment.
The amounts and percentages of net sales from continuing operations of these
product classes for the last three fiscal years were as follows:
<TABLE>
<CAPTION>
1998 1997* 1996*
----------------- ------------------ -----------------
(Dollars in millions)
Product Class:
<S> <C> <C> <C> <C> <C> <C>
Supplies ............ $110.9 80% $108.1 79% $ 98.2 81%
Equipment ........... 27.8 20% 29.1 21% 23.2 19%
------ --- ------ --- ------ ---
Total ............... $138.7 100% $137.2 100% $121.4 100%
====== === ====== === ====== ===
</TABLE>
*Restated for comparative purposes.
The Company's graphics products are used largely by picture framers, graphic
artists, display designers and photo laboratories, and include a range of board
products consisting of: BIENFANG foam boards (which constitute a significant
portion, although less than 45%, of the supplies product class) and BIENFANG
project display boards; COLORMOUNT and TECHMOUNT brands dry mount adhesive
products; pressure sensitive and heat activated adhesive products sold under the
SEAL brand, as well as under the PRINT GUARD, PRINT MOUNT and GARDIAN brand
names; THERMASHIELD laminating films; an array of mounting and laminating
equipment sold under the IMAGE brand name; and specialty tapes and films
supplied under various private brands.
The Company consistently has sought to expand its graphics business primarily
through acquisitions of complementary businesses and of distribution rights to
complementary products manufactured by others, through internal product
development, and through broadened distribution. Major graphics products
introduced during the last several fiscal years include: MIGHTYCORE, a heavy
duty foam board; a single pass mounting and laminating desk-top laminator;
SINGLE STEP adhesive coated BIENFANG foam board; BIENFANG project display
boards; SHOWTIME portable display products; IMAGE brand large format laminators;
GARDIAN outdoor protective laminates and adhesives; PRINT MOUNT pressure
sensitive adhesives; and THERMASHIELD laminating films.
In 1997, the Company acquired Sallmetall b.v., a Dutch company, whose operations
involve the design and assembly of laminating equipment and related adhesive
film coating manufacturing. This acquisition has further strengthened the
Company's position as a leading global supplier of print finishing systems and
has expanded its capacity in the growing market for wide format short-run
digital imaging. See Note 5 to Consolidated Financial Statements.
BIENFANG foam board has been a particularly important product, as it has allowed
the Company to penetrate the picture framing, sign, display and exhibit markets,
yet it also holds wide appeal to the traditional customer groups in art supply,
hobby/craft and office product markets. The success of foam board has been
attributable, in significant part, to the Company's ability to offer the
end-user a variety of value-added foam board products, such as colored or
adhesive-coated foam board.
Traditionally, the Company's graphics products have been distributed primarily
through wholesalers (framing, photomounting), general consumer-oriented retail
outlets (primarily office products superstores and chain stores) and industrial
concerns (photo labs, screen printers). Over the last several years, however,
consumer-oriented retail outlets have become an increasingly important
distribution channel for the Company's graphics products.
Sales and Marketing
General
The Company has over 8,000 active customers, the ten largest of which accounted
for approximately 34% of its sales in fiscal 1998. Three of these ten largest
customers were office products superstore chains. The largest single customer
accounted for 7% of sales for that year. There is a continuing trend toward
consolidation of wholesalers, dealers and superstores, particularly in the
office products market. This has resulted in an increasing percentage of the
Company's sales being attributable to a smaller number of customers with
increased buying and bargaining power. This increase in bargaining power is
likely to lead to lower selling prices for the Company's office supplies
products and board products sold to office products superstores.
5
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Because most of the Company's sales are made from inventory, the Company
generally operates without a material backlog. The Company's sales generally are
not subject to material seasonal fluctuations. See Note 18 to Consolidated
Financial Statements herein.
Domestic Operations
Domestic marketing of the Company's consumer products and graphics products is
effected principally through three separate sales forces, one each of consumer
products, graphics, and mass market. The combined sales forces are comprised of
over 30 company salespeople and over 150 independent manufacturers'
representatives.
The Company maintains domestic distribution operations in Beacon Falls,
Connecticut and Sun Prairie, Wisconsin for graphics products; and in
Statesville, North Carolina for both consumer and graphics products.
Foreign Operations
The Company distributes its products in more than 60 foreign markets through its
own sales force of eight area sales managers and nine salespersons, and through
over 20 independent sales agents and over 350 distributors.
Sales of consumer products and graphics products represented approximately 59%
and 41%, respectively, of the Company's export sales in fiscal 1998, with BOSTON
brand electrical and mechanical pencil sharpeners, X-ACTO brand knives and
blades, BIENFANG brand paper and foam board products, and SEAL brand pressure
sensitive and heat activated adhesive products accounting for the major portion
of these sales.
Sales from foreign operations in Europe included principally graphics products.
See Note 19 to Consolidated Financial Statements herein for further information
concerning the Company's foreign operations.
The Company maintains distribution operations in Ontario, Canada; Basildon,
England; Raalte, Netherlands; and in Hong Kong.
Foreign operations are subject to the usual risks of doing business abroad,
particularly currency fluctuations and foreign exchange controls, as well as to
general economic conditions. At the present time, the Company is experiencing
some general softness in demand for its products in Asia and Latin America,
primarily, management believes, due to the current economic situation there.
Management is uncertain, at this point, as to the extent that the unsettled
conditions in Asia and Latin America will affect the Company's business in the
future. See Item 7 herein and Note 1 to Consolidated Financial Statements herein
for information concerning hedging.
Manufacturing and Production
The Company's operations include manufacturing and converting of products, as
well as purchasing and assembly of various component parts. Excluding products
for which it acts as a distributor, the vast majority of the Company's sales are
of products which are manufactured, converted or assembled by it. See Item 2
herein for information concerning the Company's major manufacturing facilities.
The Company customarily has more than one source of supply for its critical raw
materials and component parts, and its businesses have not been materially
hindered by shortages or increased prices of such items. The Company anticipates
that the stabilization of costs for its raw materials that were realized during
fiscal 1998 should continue in fiscal 1999. However, there can be no assurance
that this will be the case. See Item 7 herein.
Competition
The Company does not have any single competitor which offers substantially the
same overall lines of either consumer products or graphics products as the
Company. However, competition in a number of areas of the Company's businesses,
such as electric pencil sharpeners, staplers, foam board, and laminating
equipment and supplies, is substantial, and some of the Company's competitors
are larger and have considerably greater financial resources than the Company.
6
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Because of the fragmented nature of the consumer products and graphics products
businesses, the multiple markets served by the Company, and the absence of
published market data, the Company generally is not able to determine with
certainty its relative domestic or foreign market share for its various
products. Nevertheless, the Company believes that it is among the leaders in
domestic markets in a number of its products, including manual and electric
pencil sharpeners; BIENFANG foam board products; laminating equipment; and
X-ACTO brand knives and blades.
The Company considers product performance and brand recognition to be important
competitive factors in its businesses, but competitive pricing and promotional
discounts also have become increasingly important factors, particularly in the
consumer products area.
Trademarks, Patents and Licenses
The Company's business is not dependent, to a material extent, upon any patents.
However, the Company regards its many trademarks as being of substantial value
in the marketing of its various products. The following trademarks, some of
which are mentioned in this report, are owned by the Company: BIENFANG(R),
BOSTON(R), COLORMOUNT(R), CLASSIC STANDUP STAPLER(TM), DELUXE STANDUP
STAPLER(TM), FLOOR GUARD(TM), GARDIAN(R), GRIP STANDUP STAPLER(TM), IMAGE(R),
JET GUARD(TM), MIGHTYCORE(TM), PALM STANDUP STAPLER(TM), PAINTERS(R), PRINT
GUARD(R), PRINT MOUNT(R), SEAL(R), SHOWTIME(R), SINGLE STEP(R), TECHMOUNT(R),
THERMASHIELD(TM), X-2000(R) and X-ACTO(R).
As previously indicated, the Company also has been granted exclusive
distribution rights in designated territories with respect to various products,
including CONTE drawing products; Schwan-STABILO highlighter markers and writing
instruments and RAPID manual and electric stapling machines. The Company's
distribution rights generally are of limited duration (the longest usually not
exceeding approximately seven years) and may be terminated or expire, in certain
cases, with as little as approximately six months notice from the grantor of
such rights. While the Company's business is not dependent upon any of these
distribution rights (no line of such distributed products having accounted for
as much as 3% of the Company's net sales in fiscal 1998), the loss of the right
to market certain products could have an adverse effect on the Company's
profitability.
Subsequent to the 1998 fiscal year-end, the Company was notified by
Schwan-STABILO Schwanhausser GmbH & Co of its intent to terminate its exclusive
distribution agreement with the Company effective September 1, 1999. Sales of
Schwan-Stabilo products in fiscal 1998 were less than 10% of the Company's
office supplies products class sales and less than 5% of its total consumer
products sales.
Research and Development
During fiscal 1998, the Company spent approximately $2.5 million on
Company-sponsored research and development, as compared with approximately $3.3
million in fiscal 1997 and $2.9 million in fiscal 1996.
Personnel
As of January 4, 1999, the Company had approximately 1,300 full-time employees.
Environmental Matters
Prior to the Company's acquisition of Seal Products, Inc. ("Seal") from Bunzl
plc in 1990, it was discovered that some hazardous waste materials had been
stored at Seal's premises located in Naugatuck, Connecticut. In compliance with
applicable state law, this environmental condition was reported to the
Connecticut Department of Environmental Protection by Bunzl. Seal, which now is
a subsidiary of the Company, may be partially responsible under law for the
environmental conditions on the premises and any liabilities resulting
therefrom. However, in connection with the Company's acquisition of Seal, Bunzl
agreed to take responsibility for correcting such environmental conditions and
to indemnify Seal and the Company for resulting liabilities, subject to certain
limitations. Bunzl is continuing the process of remediating these environmental
conditions. A substantial portion of the remediation has been completed,
although testing is continuing. Management believes that this contingency will
not have a material effect on the Company's results of operations or financial
condition.
7
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The Company is also involved on a continuing basis in monitoring its compliance
with environmental laws and in making capital and operating improvements
necessary to comply with existing and anticipated environmental requirements.
Despite its efforts, the Company has been cited for occasional violations or
alleged violations of environmental laws or permits and on several occasions has
been named as a potentially responsible party for remediation of sites. Expenses
incurred by the Company to date relating to violations of and compliance with
environmental laws and permits and site remediation have not been material.
While it is impossible to predict with certainty, management currently does not
foresee such expenses in the future as having a material effect on the Company's
business, results of operations or financial condition. See Note 15 to
Consolidated Financial Statements herein.
ITEM 2. PROPERTIES
The Company presently maintains its principal executive offices at One Commerce
Square, 2005 Market Street, Philadelphia, PA 19103 in approximately 56,000
square feet of leased space under a sublease expiring in 2002. The following
table sets forth information with respect to certain of the other facilities of
the Company:
<TABLE>
<CAPTION>
Industry Primary Approximate Owned or
segment function Location size leased
- --------------- ---------------- ------------------ ---------------- -----------
<S> <C> <C> <C> <C>
Graphics Manufacturing Statesville, NC 219,000 sq.ft. (1)
Products & Offices bldg. on
13 acres
Manufacturing, Beacon Falls, CT 66,000 sq. ft. Leased
Distribution, bldg. on (exp. 2007)
& Offices 3 acres
Manufacturing, Basildon, England 64,000 sq. ft. Owned
Distribution, in two bldgs.
& Offices on 3 acres
Manufacturing, Raalte, 90,000 sq. ft. (2)
Distribution, Netherlands in two bldgs.
& Offices on 3 acres
- --------------- ---------------- ------------------ ---------------- -----------
Consumer Manufacturing Statesville, NC 218,000 sq. ft. Owned
Products & Offices bldg. on
and Graphics 16 acres
Products
Distribution Statesville, NC 320,000 sq. ft. Leased
& Offices bldg. (exp. 2005)
Distribution Ontario, Canada 59,000 sq. ft. Leased
& Offices bldg. (exp. 2001)
</TABLE>
(1) A portion of this facility was financed by the issuance of industrial
revenue bonds, due 2004, by the Iredell County Industrial Facilities and
Pollution Control Financing Authority. The Authority retains title to the
property and leases it to the Company for rental payments equal to principal
and interest payments on the books. The Company has the option, subject to
certain conditions, to purchase the property for a nominal consideration
upon payment of the bonds.
(2) One of these buildings is 50% owned by the Company and 50% is leased from a
third party with an expiration date of September 1999. The Company has
entered into an agreement to purchase the leased portion at the expiration
date for 1.4 million Dutch guilders (or approximately $.7 million). The
other building is entirely owned by the Company.
At present, the above facilities generally are believed to be adequately
utilized and suitable for the Company's present needs.
8
<PAGE>
ITEM 3. PENDING LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings involving the
Company or its subsidiaries other than as discussed below. See also Note 15 to
Consolidated Financial Statements herein and Item 1 - "Environmental Matters"
herein.
The Company has been sued for patent infringement with respect to one of its
minor products. After a jury trial, the U.S. District in the Western District of
Wisconsin entered judgment against the Company in this matter and awarded
damages to the plaintiffs in the amount of $3.3 million, plus interest and
costs. The Company and its patent legal counsel believe that the verdict against
the Company was incorrect and that it will be reversed on appeal. Accordingly,
the Company has not recorded any liability in its financial statements
associated with this judgment. However, there can be no assurance that the
Company will prevail in this matter. In the event of an unfavorable final
judgment against the Company, management believes that it will not have a
material impact on the Company's financial position, but it could have a
material effect on quarterly or annual results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year covered by this report.
Additional Information
The following information is
furnished in this Part I pursuant to Instruction 3 to Item 401(b) of Regulation
S-K:
Executive Officers of the Company
Name Age Position
- ----------------------- ----- -----------------------------------
Donald L. Thompson 57 Chairman of the Board,
President and Chief Executive Officer
John W. Carney 55 Vice President, General Manager
Hunt Graphics
William E. Chandler 55 Senior Vice President, Finance;
Chief Financial Officer, and Secretary
Spencer W. O'Meara 52 Executive Vice President
W. Ernest Precious 57 Executive Vice President,
Corporate Development
Eugene A. Stiefel 51 Vice President, Information Services
The executive officers of the Company customarily are elected annually by the
Board of Directors to serve, at the pleasure of the Board, for a period of one
year or until their successors are elected. All of the executive officers of the
Company, except for Mr. Thompson, have served in varying executive capacities
with the Company for over five years.
Mr. Thompson joined the Company and was elected an executive officer in June
1996 after 23 years at Avery Dennison Corporation, where he served in a variety
of positions, the most recent as Group Vice President of the Office Products
business.
--------------------------
For the purposes of calculating the aggregate market value of the common shares
of the Company held by nonaffiliates, as shown on the cover page of this report,
it has been assumed that all the outstanding shares were held by nonaffiliates
except for the shares held by directors and officers of the Company. However,
this should not be deemed to constitute an admission that all directors and
officers of the Company are, in fact, affiliates of the Company, or that there
are not other persons who may be deemed to be affiliates of the Company. Further
information concerning shareholdings of officers, directors and principal
shareholders is included in the Company's definitive proxy statement filed or to
be filed with the Securities and Exchange Commission.
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common shares are traded on the New York Stock Exchange (trading
symbol "HUN"). The following table sets forth the high and low quarterly sales
prices of the Company's common shares during the two most recent fiscal years
(all as reported by The Wall Street Journal):
Fiscal Quarter
1998
----------------------------------------------
First Second Third Fourth
--------- -------- --------- --------
High ............... $23 11/16 $25 3/16 $23 13/16 $16 5/16
Low ................ $21 5/16 $22 5/8 $16 $12 3/8
Fiscal Quarter
1997
----------------------------------------------
First Second Third Fourth
------- ------- ------- ---------
High ................ $18 1/2 $19 1/8 $21 1/4 $23 15/16
Low ................. $16 3/4 $17 1/2 $18 1/2 $20 3/8
See Note 14 to Consolidated Financial Statements herein for information
concerning certain Rights which were distributed by the Company to shareholders
and which currently are deemed to be attached to the Company's common stock.
As of February 1, 1999, there were over 600 record holders of the Company's
common shares, which number does not include shareholders whose shares were held
in nominee name.
During the past two fiscal years, the Company has paid regular quarterly cash
dividends on its common shares at the following rates per share: 1998 - $.1025
per quarter and 1997 - $.095 per quarter. Certain of the Company's credit
agreements contain representations, warranties, covenants and conditions, the
violation of which could result in restrictions on the Company's present and
future ability to pay dividends. There can be no assurance however, as to the
payment or the amount of future dividends, since they depend on the Company's
earnings, financial condition and other factors. See Note 10 to Consolidated
Financial Statements herein.
During fiscal 1998, the Company issued from its Treasury an aggregate of 6,388
unregistered common shares as awards and grants under its non-employee director
compensation plan. Registration of such shares was not required because their
issuance did not involve a "sale" under Section 2(3) of the Securities Act of
1933, or, alternatively, their issuance was exempt pursuant to the private
offering provisions of that Act and the rules thereunder.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table contains selected financial data derived from the Company's
audited Consolidated Financial Statements for each of the last five fiscal
years. This data should be read in conjunction with the Company's Consolidated
Financial Statements (and related notes) appearing elsewhere in this report and
with Item 7 of this report. The following data is on a continuing operations
basis.
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------------
Nov. 29, Nov. 30, Dec. 1, Dec. 3, Nov. 27,
(In millions, except per share data) 1998(1) 1997(2) 1996(3) 1995(4) 1994
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales ................................ $246.6 $259.5 $264.5 $253.6 $236.5
Income (loss) from
continuing operations ................. 11.6 (6.1) 10.5 11.9 15.1
Income (loss) from continuing
operations per common share:
Basic ................................ 1.04 (.55) .91 .74 .93
Diluted .............................. 1.01 (.55) .89 .74 .92
Total assets ............................. 186.9 209.5 175.7 182.8 173.4
Long-term debt ........................... 57.7 54.1 64.6 3.6 3.6
Cash dividends declared per share ........ .41 .38 .38 .38 .36
</TABLE>
(1) In fiscal 1998, the Company, on a net basis, reduced by $1.9 million after
taxes, or $.17 per share on a basic basis and $.16 per share on a diluted
basis, some of its restructuring reserves. In addition, the Company reduced
by $.4 million after taxes, or $.04 per share on a basic and diluted basis,
some of its reserves established in connection with its 1997 business
divestitures (excluding the discontinued business).
(2) In fiscal 1997, the Company recorded a charge for the strategic plan of
approximately $18.5 million after taxes, or $1.67 per share on a basic basis
and $1.61 per share on a diluted basis, and other related costs of $2.2
million after taxes, or $.20 per share on a basic basis and $.19 per share
on a diluted basis, and recorded a net gain on sales of divested businesses
(excluding the discontinued business) of $2.5 million after taxes, or $.23
per share on a basic basis and $.22 per share on a diluted basis.
(3) In fiscal 1996, the Company recorded a charge for anticipated costs related
to the relocation and consolidation of certain manufacturing and
distribution operations to income from continuing operations of
approximately $.3 million after taxes, or $.02 per share on a basic and
diluted basis.
(4) In fiscal 1995, the Company recorded a charge for anticipated costs relating
to organizational changes and relocation and consolidation of operations to
income from operations of approximately $3.5 million after taxes, or $.22
per share on a basic and diluted basis.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this report are forward-looking statements. Such
forward-looking statements represent management's assessment based upon
information currently available, but are subject to risks and uncertainties
which could cause actual results to differ materially from those set forth in
the forward-looking statements. These risks and uncertainties include, but are
not limited to, the Company's ability to successfully complete the
implementation, and realize the anticipated growth and other benefits, of its
strategic plan on a timely basis, the effect of, and changes in, worldwide
general economic conditions, technological and other changes affecting the
manufacture of and demand for the Company's products, competitive and other
pressures in the market place, the impact of Year 2000 issues, the outcome of
litigation in which the Company is engaged, and other risks and uncertainties
set forth herein and in the Company's Forms 10-Q and 8-K filings with the
Securities and Exchange Commission.
Results of Operations
In April 1997, the Company announced its adoption of a new strategy for growth
and restructuring plan (the "strategic plan") designed to restore higher levels
of sales growth and profitability and to reduce its cost structure. This plan
resulted from a strategic assessment of the Company's business conducted in
fiscal 1997 with the aid of outside consultants. The cost reduction portion of
the strategic plan resulted in cost savings of approximately $17.7 million and
$7.3 million in fiscal years 1998 and 1997, respectively. These cost savings
have resulted primarily from a significant reduction of the Company's stock
keeping units, the rationalization of manufacturing and warehouse facilities and
a major restructuring of its administrative and marketing and selling functions.
Although the Company expects most of these cost savings to continue in future
years, there is no assurance that they will be achieved. (See Note 3 to
Consolidated Financial Statements.)
During fiscal 1998, the Company, on a net basis, reduced by $2.9 million
(approximately $1.9 million after taxes, or $.17 per share on a basic basis and
$.16 per share on a diluted basis), a portion of which is included in cost of
sales ($1.4 million pre-tax), some of its restructuring reserves. This reserve
reduction related primarily to lower than expected severance costs ($1.1 million
pre-tax), inventory returns ($1.4 million pre-tax), decisions not to vacate
certain leased facilities ($.6 million pre-tax) and other related costs ($1.0
million pre-tax) in connection with the Company's implementation of its
strategic plan during fiscal 1997, partially offset by additional restructuring
charges in connection with the consolidation of the graphics and substrates
business units in the fourth quarter of fiscal 1998 relating principally to
employee severance costs ($1.2 million pre-tax).
The Company's operating results for fiscal 1997 include the effects of a pre-tax
special charge of $26.8 million (approximately $18.5 million after taxes, or
$1.67 per share on a basic basis and $1.61 per share on a diluted basis)
recorded in conjunction with the implementation of the strategic plan. The
charge to restructuring included employee severance costs ($4.1 million),
inventory writedowns and returns ($8.2 million), fixed and intangible asset
writedowns ($7.9 million), recognition of future lease obligations ($3.3
million), and other related costs. Approximately $3.5 million remains accrued in
the accompanying Consolidated Balance Sheet at November 29, 1998 for cash
related items. The special items impacting earnings for fiscal years 1998 and
1997 are included in the following categories in the accompanying Consolidated
Statements of Income (in millions, except per share data):
<TABLE>
<CAPTION>
1998 1997
---------------------------------- ----------------------------------
Basic Diluted Basic Diluted
Pre-Tax After-Tax After-Tax Pre-Tax After-Tax After-Tax
Dollar Per Share Per Share Dollar Per Share Per Share
Amount Amount Amount Amount Amount Amount
------- ---------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Restructuring and other ..... $(1,534) $(.09) $(.09) $18,627 $1.16 $1.12
Cost of sales ............... (1,351) (.08) (.07) 8,204 .51 .49
------- ----- ----- ------- ----- -----
$(2,885) $(.17) $(.16) $26,831 $1.67 $1.61
======= ===== ===== ======= ===== =====
</TABLE>
During fiscal 1998, the Company reduced by $.7 million ($.4 million after taxes,
or $.04 per share on a basic and diluted basis) some of its reserves in
connection with its 1997 business divestitures. This reduction was principally
related to lower than expected costs associated with accruals, primarily for
inventory returns, established at the time of the respective divestiture. (See
Note 3 to Consolidated Financial Statements.)
12
<PAGE>
In addition, the Company reduced in fiscal 1998 by $.7 million ($.5 million
after taxes, or $.04 per share on a basic and diluted basis) some of its
reserves established in connection with its 1997 disposal of a discontinued
business. This reduction was largely attributable to lower than expected costs
associated with accruals, primarily for accounts receivable and fixed assets,
established at the time of the divestiture. This business divestiture is
presented as a discontinued operation in the accompanying Consolidated
Statements of Income and Notes to Consolidated Financial Statements. (See Note 4
to Consolidated Financial Statements.) The following discussion is on a
continuing operations basis.
As a result of the above divestitures, including the discontinued business, an
aggregate of approximately $100 million of revenue on an annualized basis and
related profit will not be available to the Company going forward. Management
believes a critical part of the strategic plan is to offset these revenue and
earnings losses through increased focus on the Company's graphics products in
the high-growth digital imaging, and sign and display markets, through
leveraging of the Company's brand strength in consumer products, from internal
new product development and through acquisitions. Also, management believes
improved manufacturing processes, rationalization of distribution facilities,
and savings in administrative, marketing and selling support areas will help
offset these losses.
Comparison of Fiscal 1998 vs. 1997
Net Sales. Net sales from continuing operations decreased 5.0% to $246.6 million
in fiscal 1998 from $259.5 million in fiscal 1997 largely due to the
divestitures of the Lit-Ning, Hunt Data Products and Speedball brand products
businesses and, to a lesser extent, to lower sales of other products
rationalized during fiscal 1997. Excluding the divested businesses, net sales of
retained businesses would have increased 3.7% over fiscal 1997. This sales
increase was primarily the result of higher unit volume, particularly from new
products and broader distribution in existing sales channels, partially offset
by lower net selling prices.
The Company changed its business segment reporting in fiscal 1998 to more
accurately reflect its current reporting practices as a result of the
implementation of its strategic plan and consolidation of its graphics and
substrates business units. All prior fiscal year data has been restated for
comparative purposes.
Consumer products sales of $107.9 million for fiscal 1998 decreased 12% from
fiscal 1997 sales of $122.3 million. This decrease was principally attributable
to lower sales of art supplies (down 23%) and office supplies (down 6%) due
largely from lower sales of products targeted for rationalization, to the
divestiture of the Speedball brand art products and to lower sales of X-Acto
brand products. Excluding the divested businesses and products rationalized,
consumer products net sales would have increased 4.8% over fiscal 1997. This
sales increase was attributable primarily to the introduction of new products,
expanded placement of existing products and broader distribution in current
sales channels. Export sales of consumer products decreased 20% in fiscal 1998
as compared to fiscal 1997, primarily due to lower sales in Canada and Latin
America, resulting principally from the decrease in the value of the Canadian
dollar and to general softness in demand as a result of current economic
conditions in Latin America.
Graphics products sales increased 1.1% to $138.7 million in fiscal 1998 from
$137.2 million in fiscal 1997. This sales increase was attributable to higher
sales of supplies products (up 2.6%), partially offset by lower laminating
equipment products sales (down 4.5%). The increase in supplies products was due
principally to higher sales of mounting and laminating supplies to the wide
format digital imaging market, and to higher sales of board products (i.e.
project display board). The decrease in laminating equipment products sales was
due primarily to softness in demand for such products in Asia and Latin America,
and to a lessor extent in the U.S. Export sales of graphics products remained
essentially unchanged in fiscal 1998 from fiscal 1997. Foreign sales of graphics
products also were essentially unchanged in fiscal 1998 from a year ago, with
higher sales of supplies products offset by lower sales of laminating equipment.
Changes in currency exchange rates from year-to-year had an insignificant impact
on foreign sales in fiscal 1998. During the latter part of the third quarter and
throughout the fourth quarter of fiscal 1998, the Company experienced some
general softness in demand for its products in Asia and Latin America, primarily
as a result of the current economic situations there. Management is uncertain as
to the extent that the unsettled conditions in Asia and Latin America or
elsewhere in the world will affect the Company's business in the future.
13
<PAGE>
Gross Profit. The Company's gross profit margin increased to 38.4% of net sales
in fiscal 1998 from 36.3% in fiscal 1997. The increase was primarily the net
result of the $1.4 million special credit and the $8.2 million special charge
recorded in cost of sales in fiscal years 1998 and 1997, respectively, in
connection with the Company's strategic plan previously discussed. Excluding the
effect of these special items, the gross profit percentages for fiscal years
1998 and 1997 would have been 37.9% and 39.4%, respectively. The decrease in
gross profit percentage, before special items, was largely attributable to
inventory reductions in fiscal 1997, which resulted in liquidation of certain
LIFO inventories carried at lower costs prevailing in prior years, start-up
costs incurred in fiscal 1998 related to the Company's new foam board facility
in the United Kingdom, unfavorable overhead absorption as a result of lower than
expected sales, lower net selling prices and changes in customer and product
mix. These higher costs in 1998 were partially offset by the cost saving
initiatives undertaken as part of the implementation of the Company's strategic
plan The gross profit percentages for foreign sales were 22.2% in fiscal 1998
and 26.4% in fiscal 1997 (27.2% excluding the effect of special items). Although
the Company has experienced a stabilization of costs for some of its raw
materials, management is uncertain if these conditions will continue. Management
expects the pressure on selling prices attributable to the growing bargaining
power of the Company's largest customers, such as office products superstores,
to continue into fiscal 1999.
Selling, Shipping, Administrative, and General Expenses. Selling and shipping
expenses increased to 19.5% of net sales in fiscal 1998 from 18.8% in fiscal
1997, principally due to higher freight, promotion and packaging costs,
partially offset by reductions in personnel resulting from implementation of the
Company's strategic plan. Management is pursuing process changes to help
mitigate the higher freight costs.
Administrative and general expenses decreased $4.4 million, or 12.9%, in fiscal
1998 from the previous year. The decrease was largely attributable to lower
management incentive compensation costs ($3.3 million pre-tax), the inclusion in
fiscal 1997 of prior year consulting fees related to the Company's strategic
assessment of its operations ($1.2 million pre-tax) and the capitalization of
costs ($.6 million pre-tax) in fiscal 1998 in connection with the adoption of
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." Such costs were previously
expensed. These decreases were partially offset by higher legal expenses
principally related to patent infringement litigation ($1.1 million pre-tax) in
which the Company is engaged. (See Note 15 to Consolidated Financial
Statements.)
Restructuring and Other. During fiscal 1998, the Company, on a net basis,
reduced by $2.9 million (approximately $1.9 million after taxes, or $.17 per
share on a basic basis and $.16 per share on a diluted basis), a portion of
which is included in cost of sales ($1.4 million pre-tax), some of its
restructuring reserves. This reserve reduction related primarily to lower than
expected employee severance costs ($1.1 million pre-tax), inventory returns
($1.4 million pre-tax), decisions not to vacate certain leased facilities ($.6
million pre-tax) and other related costs ($1.0 million pre-tax) in connection
with the Company's implementation of its strategic plan during fiscal 1997,
partially offset by additional restructuring charges in connection with the
consolidation of the graphics and substrates business units in the fourth
quarter of fiscal 1998 relating principally to employee severance costs ($1.2
million pre-tax).
In addition, during fiscal 1998, the Company reduced by $.7 million ($.4 million
after taxes, or $.04 per share on a basic and diluted basis) some of its
reserves in connection with its 1997 business divestitures. This reduction was
principally related to lower than expected costs associated with accruals,
primarily for inventory returns, established at the time of the respective
divestiture.
During fiscal 1997, the Company recorded pre-tax special charges of $26.8
million (approximately $18.5 million after taxes, or $1.67 per share on a basic
basis and $1.61 per share on a diluted basis) in connection with the Company's
strategic plan previously discussed. Approximately $18.6 million pre-tax (or
$1.16 per share after taxes on a basic basis and $1.12 per share after taxes on
a diluted basis) of the fiscal 1997 special charges are included in
restructuring and other in the accompanying Consolidated Statements of Income.
The cash and non-cash portions of the special charges in fiscal 1997 represent
$10.6 million and $8.0 million, respectively, and include employee severance
costs ($4.1 million), fixed and intangible asset writedowns ($7.9 million),
lease obligations ($3.3 million), and other related costs. In addition, during
fiscal 1997, the Company realized a net gain on business divestitures of $3.7
million pre-tax (or $.23 per share after taxes on a basic basis and $.22 per
share after taxes on a diluted basis), as discussed earlier.
14
<PAGE>
During fiscal 1996, the Company recorded a pre-tax charge of $.4 million, or
$.02 per share after taxes on a basic and diluted basis, relating to the
Company's fiscal 1995 decision to relocate and consolidate certain manufacturing
and distribution operations.
(See Note 3 to Consolidated Financial Statements.)
Interest Expense. Interest expense decreased to $4.3 million in fiscal 1998 from
$4.9 million in fiscal 1997 due to lower average debt borrowings in fiscal 1998.
Interest Income. Interest income increased $2.1 million in fiscal 1998 from
fiscal 1997 due to higher average cash balances as a result of the 1997 business
divestitures discussed above.
Other Income and Expenses. Other income, net, of $.2 million in fiscal 1998
versus other expense, net of $.9 million in fiscal 1997 was due principally to a
forgiveness of a loan at one of the Company's foreign operations during fiscal
1998.
Provision (Benefit) for Income Taxes. The Company's effective tax rate from
continuing operations was 34.4% in fiscal 1998. The Company realized an income
tax benefit of $2.7 million in fiscal 1997 relating to the loss from continuing
operations resulting primarily from the restructuring charge previously
mentioned. The Company's effective tax rate was a 31.0% benefit for fiscal 1997.
(See Note 11 to Consolidated Financial Statements.)
Comparison of Fiscal 1997 vs. 1996
Net Sales. Net sales from continuing operations decreased 1.9% to $259.5 million
in fiscal 1997 from $264.5 million in fiscal 1996 largely due to the
divestitures of the Lit-Ning, Hunt Data Products and Speedball brand art
products businesses and, to a lesser extent, to lower sales of other products
rationalized during fiscal 1997. Excluding the divested businesses, net sales of
retained businesses would have increased 6.2% over fiscal 1996. Net average
selling prices increased 2.2% in fiscal 1997. Excluding the effect of currency
exchange rate changes, net selling price increases would have been 1.4%.
Consumer products sales of $122.3 million for fiscal 1997 decreased 15% from
fiscal 1996 sales of $143.1 million. This decrease was due largely to lower
sales of products targeted for rationalization and to the divestitures of the
Lit-Ning business (office supplies), the Hunt Data Products' MediaMate and
Calise brand products (office supplies) and the Speedball brand art products
(art supplies). Export sales of consumer products decreased 7% in fiscal 1997 as
compared to fiscal 1996, primarily due to lower sales in Canada, resulting
principally from the decrease in the value of the Canadian dollar.
Graphics sales of $137.2 million for fiscal 1997 increased 13% from fiscal 1996
sales of $121.4 million. This increase was primarily due to higher sales of both
mounting and laminating supplies and equipment, which included sales of products
of Sallmetall (acquired near the end of March 1997) and to higher sales of board
products (i.e., foam board). Export sales of graphics products increased 6% in
fiscal 1997 from the prior year. Foreign sales of graphics products increased
31% in fiscal 1997 over fiscal 1996, due largely to higher sales of supplies and
equipment products in Europe, which included the sales of Sallmetall products
and, to a lesser extent, to increases in the value of the British pound
sterling. Excluding the effect of currency exchange rate changes and the sales
of Sallmetall products, foreign sales would have decreased approximately 4% in
fiscal 1997 as compared to fiscal 1996.
Gross Profit. The Company's gross profit margin decreased to 36.3% of net sales
in fiscal 1997 from 38.3% in fiscal 1996. The decrease was primarily the result
of the $8.2 million special charge recorded in cost of sales in fiscal 1997 in
connection with the Company's strategic plan previously discussed. Excluding the
effect of this special charge, the gross profit percentage for fiscal 1997 would
have been 39.4%. The improvement in gross profit percentage, before special
charges, was largely attributable to inventory reductions, which resulted in
liquidation of certain LIFO inventories carried at lower costs prevailing in
prior years ($2.6 million pre-tax), favorable product mix, net selling price
increases, and to some extent, realization of some cost savings stemming from
the strategic plan implementation. The gross profit percentages for foreign
sales were 26.4% (27.2% excluding the effect of special charges) in fiscal 1997
and 26.7% in fiscal 1996.
15
<PAGE>
Selling, Shipping, Administrative, and General Expenses. Selling and shipping
expenses decreased to 18.8% of net sales in fiscal 1997 from 19.4% in fiscal
1996, principally due to lower promotion expenses, lower shipping and
distribution costs and reductions in personnel resulting from implementation of
the Company's strategic plan.
Administrative and general expenses increased $4.1 million, or 13.9%, in fiscal
1997 from the previous year. The increase was largely due to higher consulting
fees primarily related to the Company's strategic assessment of its operations
($1.2 million pre-tax) and to the Sallmetall acquisition.
Restructuring and Other. The Company recorded pre-tax special charges of $26.8
million (approximately $18.5 million after taxes, or $1.67 per share on a basic
basis and $1.61 on a diluted basis) in connection with the Company's strategic
plan previously discussed. Approximately $18.6 million pre-tax, or $1.16 per
share after tax on a basic basis and $1.12 per share on a diluted basis, of the
fiscal 1997 special charges are included in restructuring and other in the
accompanying Consolidated Statements of Income. The cash and non-cash portions
of the special charges in fiscal 1997 represent $10.6 million and $8.0 million,
respectively, and include employee severance costs ($4.1 million), fixed and
intangible asset writedowns ($7.9 million), lease obligations ($3.3 million),
and other related costs. In addition, during fiscal 1997, the Company realized a
net gain on business divestitures of $3.7 million pre-tax, or $.23 per share on
a basic basis and $.22 per share on a diluted basis.
During fiscal 1996, the Company recorded a pre-tax charge of $.4 million, or
$.02 per share after tax on a basic and diluted basis, relating to the Company's
fiscal 1995 decision to relocate and consolidate certain manufacturing and
distribution operations.
Interest Expense. Interest expense increased to $4.9 million in fiscal 1997 from
$4.6 million in fiscal 1996 due to higher average debt borrowings in fiscal
1997.
Interest Income. Interest income increased $.2 million in fiscal 1997 from
fiscal 1996 due to higher average cash balances as a result of the business
divestitures.
Other Income and Expenses. Other expense, net, increased $.9 million in fiscal
1997 from fiscal 1996 due principally to a gain on sale of certain distribution
rights in fiscal 1996.
Provision (Benefit) for Income Taxes. The Company realized an income tax benefit
of $2.7 million in fiscal 1997 relating to the loss from continuing operations
resulting primarily from the restructuring charge previously mentioned. The
Company's effective tax rate was a 31.0% benefit for fiscal 1997 and a 33.7%
provision in fiscal 1996.
Financial Condition
Working capital decreased to $64.6 million at the end of fiscal 1998 from $66.2
million at the end of fiscal 1997. The current ratio improved to 2.8 at the end
of fiscal 1998 from 2.0 at the end of the prior year. The Company's
debt/capitalization percentage was 43% at the end of fiscal 1998 and 1997.
Available cash balances were sufficient during fiscal 1998 to fund additions to
property, plant and equipment of $13.9 million, to make cash payments related to
the strategic plan of $7.4 million, to pay cash dividends of $4.6 million, and
to fund the repurchase of $5.7 million of the Company's common shares.
Current assets decreased to $99.5 million at the end of fiscal 1998 from $130.3
million at the end of fiscal 1997, primarily as a result of lower cash and cash
equivalents, deferred income taxes and accounts receivable, partially offset by
higher inventories. The decrease in cash and cash equivalents was largely due to
income tax payments in connection with the net gains on the 1997 business
divestitures, capital expenditures and payments associated with the strategic
plan. The $4.3 million decrease in deferred income taxes was due primarily to
temporary differences between reporting for financial and income tax purposes in
connection with the restructuring special charges. Accounts receivable decreased
to $31.0 million at the end of fiscal 1998 from $33.6 million at fiscal 1997
year-end as a result of higher sales in the last month of fiscal 1997 compared
to those at the end of fiscal 1998. The increase in inventory from $20.2 million
at fiscal 1997 year-end to $21.6 million at the end of fiscal 1998 was
principally attributable to timing and new products.
Current liabilities of $35.0 million at the end of fiscal 1998 decreased from
$64.1 million at the end of fiscal 1997. This decrease was largely attributable
to the payments of income taxes and reductions in the accruals associated
with the Company's business divestitures and strategic plan.
16
<PAGE>
The Company has a revolving credit agreement for $75 million and a line of
credit agreement for $2.5 million. There was $4.6 million borrowed under these
credit facilities as of November 29, 1998. Management believes that funds
generated from operations, combined with the existing credit facilities, will be
sufficient to meet currently anticipated working capital and other capital and
debt service requirements. (See Note 10 to Consolidated Financial Statements.)
Should the Company require additional funds, management believes that the
Company could obtain them at competitive costs.
Year 2000 Issues
The Year 2000 ("Y2K") issue is the result of computer programs being written
for, or microprocessors using, two digits (rather than four) to define the
applicable year. Company computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in system failures or miscalculations. The Company is currently
working to mitigate the Y2K issue and has established processes for assessing
the risks and associated costs.
The Company has been formally addressing its Y2K issues during the past few
years. These efforts involve assessment, identification of non-compliant
systems, remediation, testing, and verification, including replacing and/or
updating existing systems. The Company has completed the necessary modifications
to most of its critical systems and applications. To date, the project is
proceeding on schedule and is expected to be completed during fiscal 1999.
The Company also has initiated communications with significant suppliers and
customers to identify and coordinate the remediation of any Y2K issues, and is
in the process of determining the Company's vulnerability if these companies
fail to remediate their Y2K issues.
Costs incurred to date in addressing the Y2K issues have not been significant
and are being funded through operating cash flows. The total implementation
costs (relating principally to new hardware and software) capitalized to date
are $5.5 million, which should represent substantially all of the capitalized
costs to be incurred. These costs not only addressed Y2K issues but also
provided for operational efficiencies and costs reductions which will benefit
the Company in the future. The Company continues to evaluate possible future
costs associated with these efforts based on actual experience but does not
currently anticipate that such costs will have a material impact on the
Company's results of operations or financial position.
The Company currently believes that its systems will be fully operational and
will not cause any material disruptions because of Y2K issues, but there can be
no assurance that this will be the case. Further, because of the uncertainties
associated with assessing effect on preparedness of suppliers and customers,
there is a risk of a material adverse effect on the Company's future results of
operations if these constituencies do not correct their Y2K problems, if any, on
a timely basis. The Company plans to continue assessing these risks through
reviews with its major suppliers and customers. Contingency plans will be
developed to deal with any problems which may become known as a result of these
reviews. Contingency plans relating to suppliers and customers, if necessary,
will be developed by the end of fiscal 1999.
European Monetary Union - "Euro"
On January 1, 1999, several member countries of the European Union established
fixed conversion rates between their existing sovereign currencies, and adopted
the Euro as their new common legal currency. As of that date, the Euro trades on
currency exchanges and the participating countries' own currencies ("legacy
currencies") remain legal tender in the participating countries for a transition
period between January 1, 1999 and January 1, 2002.
During the transition period parties can elect to pay for goods and services and
transact business using either the Euro or a legacy currency. Between January 1,
2002 and July 1, 2002, the participating countries will introduce Euro notes and
coins and withdraw all legacy currencies so that these legacy currencies will no
longer be available.
The Euro conversion may affect cross-border competition by creating cross-border
price transparency. The Company has assessed its pricing/marketing strategy in
order to ensure that it remains competitive in a broader European market. The
Company has also assessed its information technology systems to allow for
transactions
17
<PAGE>
to take place in both the legacy currencies and the Euro and the eventual
elimination of the legacy currencies, and has modified certain existing
contracts. The Company's currency risk and risk management for operations in
participating countries may be reduced as the legacy currencies are converted to
the Euro. The Company will continue to evaluate issues involving introduction of
the Euro. Based on current information and the Company's current assessment,
management does not expect that the Euro conversion will have a material adverse
effect on the Company's results of operations, financial condition or cash
flows.
New Accounting Standards
During 1997, the Financial Accounting Standard Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in the financial statements and is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes is
required.
During 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers, and is effective for financial statements for fiscal years beginning
after December 15, 1997. Financial statement disclosures for prior periods are
required to be restated.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132 does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan
assets, and eliminates certain disclosures that are no longer as useful. The
statement also is effective for fiscal years beginning after December 15, 1997,
but earlier application is encouraged.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-5, "Reporting on the
Costs of Start-up Activities." SOP 98-5 provides guidance on the financial
reporting on start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
standard is effective for fiscal years beginning after December 15, 1998.
Earlier application is encouraged.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new procedures for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing standards. The statement is effective for fiscal years
beginning after June 15, 1999, but earlier application is permitted as of the
beginning of any fiscal quarter subsequent to June 15, 1998.
The adoption of SFAS Nos. 130, 131, 132 and 133 and SOP 98-5 are not expected to
have a material impact on the Company's consolidated results of operations,
financial position or cash flows.
Environmental Matters
The Company is involved, on a continuing basis, in monitoring its compliance
with environmental laws and in making capital and operating improvements
necessary to comply with existing and anticipated environmental requirements.
Despite its efforts, the Company has been cited for occasional violations or
alleged violations of environmental laws or permits and on several occasions has
been named a potentially responsible party for the remediation of sites.
Expenses incurred by the Company for all years presented in the accompanying
consolidated financial statements relating to violations of and compliance with
environmental laws and permits and site remediation have not been material.
While it is impossible to predict with certainty, management currently does not
foresee such expenses in the future as having a material effect on the Company's
business, results of operations, or financial condition. (See Note 19 to
Consolidated Financial Statements.)
18
<PAGE>
Item 7A. Quantitative and qualitative Disclosures about market risk
Market Risk
The Company is exposed to various types of market risk in the normal course of
business, including the impact of interest rate changes, foreign currency
exchange rate fluctuations, and changes in corporate tax rates. The Company
employs risk management strategies including the use of derivatives such as
forward exchange contracts. The Company does not hold derivatives for trading
purposes.
It is the Company's policy to enter into forward exchange contracts transactions
only to the extent necessary to achieve the desired objectives of management in
limiting the Company's exposure to the various market risks discussed in Items 1
- - "Sales and Marketing" and 7 herein. However, the Company does not hedge all of
its market risk exposure in a manner that would completely eliminate the impact
of changes in interest rates and foreign exchange rates on the Company's net
income. The Company does not expect that the results of operations or financial
position will be materially affected by these risk management strategies.
Interest Rate Risk Management
See Item 7 herein and Note 10 to Consolidated Financial Statements.
Foreign Exchange Risk Management
See Item 1 - "Sales and Marketing" herein and Note 1 to Consolidated Financial
Statements.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial information listed in the
index appearing under Item 14(a) 1 & 2 herein, together with the reports of the
Company's independent accountants, PricewaterhouseCoopers LLP, thereon, are set
forth below.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
the Board of Directors of
Hunt Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) (1) on page 20 of this Form 10-K present fairly, in
all material respects, the financial position of Hunt Corporation and
subsidiaries (the "Company") at November 29, 1998 and November 30, 1997, and
results of their operations and their cash flows for each of the three years in
the period ended November 29, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, PA 19103
January 28, 1999
F-1
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the fiscal years 1998, 1997 and 1996
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales ....................................................... $ 246,563 $ 259,540 $ 264,457
Cost of sales ................................................... 151,784 165,396 163,175
--------- --------- ---------
Gross profit ................................................. 94,779 94,144 101,282
Selling and shipping expenses ................................... 48,000 48,903 51,191
Administrative and general expenses ............................. 29,458 33,825 29,710
Restructuring and other ......................................... (1,933) 14,973 354
--------- --------- ---------
Income (loss) from operations ................................ 19,254 (3,557) 20,027
Interest expense ................................................ (4,344) (4,920) (4,586)
Interest income ................................................. 2,626 538 301
Other (expense) income, net ..................................... 176 (852) 52
--------- --------- ---------
Income (loss) from continuing operations
before income taxes and extraordinary item ................. 17,712 (8,791) 15,794
Provision (benefit) for income taxes ............................ 6,089 (2,729) 5,321
--------- --------- ---------
Income (loss) from continuing operations
before extraordinary item .................................. 11,623 (6,062) 10,473
Discontinued operations:
Income from discontinued business, net of income taxes
of $2,276 and $2,731 in 1997 and 1996, respectively ........ -- 4,153 4,746
Gain on disposal of discontinued business, net of income taxes
of $260 and $9,031 in 1998 and 1997, respectively .......... 484 15,961 --
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $134 .......................... -- -- (251)
--------- --------- ---------
Net income ................................................. $ 12,107 $ 14,052 $ 14,968
========= ========= =========
Basic earnings (loss) per common share:
Income (loss) from continuing operations ..................... $ 1.04 $ (0.55) $ 0.91
Income from discontinued operations .......................... -- 0.38 0.42
Gain on disposal of discontinued business .................... 0.04 1.44 --
Extraordinary loss on early extinguishment of debt ........... -- -- (0.02)
--------- --------- ---------
Net income per share ....................................... $ 1.08 $ 1.27 $ 1.31
========= ========= =========
Diluted earnings (loss) per common share:
Income (loss) from continuing operations ..................... $ 1.01 $ (0.55) $ 0.89
Income from discontinued operations .......................... -- 0.38 0.41
Gain on disposal of discontinued business .................... 0.04 1.44 --
Extraordinary loss on early extinguishment of debt ........... -- -- (0.02)
--------- --------- ---------
Net income per share ....................................... $ 1.05 $ 1.27 $ 1.28
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 29, 1998 and November 30, 1997
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
1998 1997
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................................... $ 40,724 $ 65,449
Accounts receivable, less allowance for doubtful accounts:
1998 - $1,721; 1997 - $1,842 ..................................................... 31,018 33,565
Inventories ....................................................................... 21,604 20,152
Deferred income taxes ............................................................. 4,769 9,107
Prepaid expenses and other current assets ......................................... 1,402 2,051
--------- ---------
Total current assets ............................................................ 99,517 130,324
Property, plant and equipment, at cost, less accumulated depreciation and amortization 49,917 42,973
Excess of acquisition costs over net assets acquired, less accumulated amortization .. 26,021 26,906
Intangible assets, net ............................................................... 3,660 2,587
Other assets ......................................................................... 7,742 6,732
--------- ---------
Total assets .................................................................... $ 186,857 $ 209,522
========= =========
Liabilities
Current liabilities:
Current portion of debt ........................................................... $ 479 $ 2,203
Accounts payable .................................................................. 12,503 11,120
Accrued expenses:
Salaries, wages and commissions .................................................. 2,302 4,675
Income taxes ..................................................................... 1,930 14,089
Insurance ........................................................................ 2,070 1,891
Compensated absences ............................................................. 2,683 2,116
Restructuring .................................................................... 2,453 9,385
Other ............................................................................ 10,536 18,633
--------- ---------
Total current liabilities ...................................................... 34,956 64,112
Long-term debt, less current portion ................................................. 57,741 54,096
Deferred income taxes ................................................................ 374 3,527
Other non-current liabilities ........................................................ 15,906 13,126
Commitments and contingencies
Stockholders' Equity
Capital Stock:
Preferred, $.10 par value, authorized 1,000,000 shares (including 50,000 shares
of Series A Junior Participating Preferred); none issued ........................ -- --
Common, $.10 par value, authorized 40,000,000 shares;
issued: 1998 and 1997 - 16,152,322 shares ....................................... 1,615 1,615
Capital in excess of par value ....................................................... 6,434 6,434
Minimum pension adjustment ........................................................... (1,545) --
Cumulative translation adjustment .................................................... 446 275
Retained earnings .................................................................... 158,316 151,093
Less cost of treasury stock: 1998 - 5,162,082 shares; 1997 - 4,985,224 shares ..... (87,386) (84,756)
--------- ---------
Total stockholders' equity ...................................................... 77,880 74,661
--------- ---------
Total liabilities and stockholders' equity .................................... $ 186,857 $ 209,522
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the fiscal years 1998, 1997 and 1996
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock Capital in Minimum Cumulative
----------------------- Excess of Pension Translation Retained
Issued Treasury Par Value Adjustment Adjustments Earnings
-------- -------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 3, 1995
(issued 16,152,322 shares;
treasury 159,159 shares) .............. $ 1,615 $ (2,089) $ 6,434 -- $ (983) $131,216
Net income ............................... 14,968
Cash dividends on common stock
($.38 per share) ...................... (4,168)
Translation adjustments .................. 1,877
Purchase of treasury stock
(5,104,543 shares) .................... (86,550)
Exercise of stock options
(treasury 71,190 shares, net of shares
received as payment upon exercise) .... 561 (442)
Issuance of stock grants
(treasury 14,385 shares) .............. 228 13
-------- -------- -------- -------- -------- --------
Balances, December 1, 1996
(issued 16,152,322 shares;
treasury 5,178,127 shares) ............ 1,615 (87,850) 6,434 -- 894 141,587
Net income ............................... 14,052
Cash dividends on common stock
($.38 per share) ...................... (4,204)
Translation adjustments .................. (619)
Exercise of stock options
(treasury 115,473 shares, net of shares
received as payment upon exercise) .... 1,863 (220)
Issuance of stock grants
(treasury 77,430 shares) .............. 1,231 (122)
-------- -------- -------- -------- -------- --------
Balances, November 30, 1997
(issued 16,152,322 shares;
treasury 4,985,224 shares) ............ 1,615 (84,756) 6,434 -- 275 151,093
Net income ............................... 12,107
Cash dividends on common stock
($.41 per share) ...................... (4,604)
Translation adjustments .................. 171
Minimum pension adjustment
(net of taxes of $810) ................ $ (1,545)
Purchase of treasury shares
(371,800 shares) ...................... (5,729)
Exercise of stock options
(treasury 179,433 shares, net of shares
received as payment upon exercise) .... 2,864 (357)
Issuance of stock grants
(treasury 15,509 shares) .............. 235 71
-------- -------- -------- -------- -------- --------
Balances, November 29, 1998
(issued 16,152,322 shares;
treasury 5,162,082 shares) ............ $ 1,615 $(87,386) $ 6,434 $ (1,545) $ 446 $158,316
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the fiscal years 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 12,107 $ 14,052 $ 14,968
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ........................... 8,267 9,085 9,170
Provision for inventory obsolescence .................... 1,526 1,040 2,216
Provision for doubtful accounts ......................... 77 786 655
Extraordinary loss on early extinguishment of debt ...... -- -- 251
Deferred income taxes ................................... 1,991 (5,721) 559
Loss on disposal of property, plant and equipment ....... 251 32 633
Gain on sale of businesses .............................. (1,394) (28,678) --
Provision (payments/credits) for special charges ........ (8,102) 23,781 (1,305)
Issuance of stock under management incentive bonus
and stock grant plans ................................. 312 1,110 241
Changes in operating assets and liabilities,
net of acquisition of businesses:
Accounts receivable ................................. 2,432 11,166 (6,921)
Inventories ......................................... (1,396) 6,631 (1,139)
Prepaid expenses and other current assets ........... 634 540 684
Accounts payable .................................... 1,359 (3,594) 2,257
Accrued expenses .................................... (5,322) 8,623 1,763
Other non-current assets and liabilities ............ (16,338) (652) 1,559
--------- --------- ---------
Net cash provided by (used for) operating activities (3,596) 38,201 25,591
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment .............. (13,853) (11,787) (7,504)
Proceeds from sale of businesses ........................ -- 63,771 --
Acquisition of businesses ............................... -- (13,928) --
Other, net .............................................. 32 355 (684)
--------- --------- ---------
Net cash provided by (used for) investing activities (13,821) 38,411 (8,188)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt ................ 7,272 13,326 127,404
Reduction of payments of long-term debt,
including current maturities .......................... (5,500) (27,325) (67,170)
Book overdrafts ......................................... (1,281) 3,755 --
Purchases of treasury stock ............................. (5,729) -- (86,550)
Payments of debt issuance costs ......................... -- -- (1,134)
Proceeds from exercise of stock options ................. 2,507 1,643 119
Dividends paid .......................................... (4,604) (4,204) (4,168)
Other, net .............................................. -- (66) (36)
--------- --------- ---------
Net cash used for financing activities ............ (7,335) (12,871) (31,535)
--------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents 27 180 157
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ....... (24,725) 63,921 (13,975)
Cash and cash equivalents, beginning of year ............... 65,449 1,528 15,503
--------- --------- ---------
Cash and cash equivalents, end of year ..................... $ 40,724 $ 65,449 $ 1,528
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
1. Summary of Significant Accounting Policies:
Basis of Presentation:
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Significant intercompany
accounts and transactions have been eliminated. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The Company's fiscal year ends on the Sunday nearest the end of
November. Fiscal year 1998 ended November 29, 1998; fiscal year 1997 ended
November 30, 1997; fiscal year 1996 ended December 1, 1996.
As a result of the Company's sale of its Bevis office furniture business in
fiscal 1997, the Bevis operation is reflected as a discontinued operation in the
accompanying Consolidated Statements of Income and certain prior year amounts
have been reclassified to reflect discontinued operations as described in Note 4
to the Consolidated Financial Statements.
Cash and Cash Equivalents:
The Company considers all highly liquid temporary cash investments purchased
with a maturity of three months or less to be cash equivalents. The Company's
cash management program utilizes zero balance accounts. Accordingly, all book
overdraft balances have been reclassified to other accrued liabilities in the
accompanying Consolidated Balance Sheets and amounted to $2.5 million at
November 29, 1998 and $3.8 million at November 30, 1997.
Revenue Recognition:
Revenue is recognized when products are shipped and title has passed to the
customer.
Inventories:
Inventories are valued at the lower of cost or market. Cost is determined by the
last-in, first-out ("LIFO") method for 51% of the inventories in 1998 and 1997.
Cost of the remaining inventories is determined using the first-in, first-out
("FIFO") method. The Company uses the FIFO method of inventory valuation for
certain businesses because the related products and operations are separate and
distinct from the Company's other businesses.
Property, Plant and Equipment:
Expenditures for additions and improvements to property, plant and equipment are
capitalized, and normal repairs and maintenance are charged to expense as
incurred. The related cost and accumulated depreciation of depreciable assets
disposed of are eliminated from the accounts, and any profit or loss is
reflected in other expense, net. Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If the sum of the expected future undiscounted cash
flows is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the asset.
Excess of Acquisition Cost Over Net Assets Acquired and Other Intangible Assets:
Excess of acquisition cost over net assets acquired relates principally to the
Company's acquisitions of X-Acto (1981), the Graphic Arts Group of Bunzl plc
(1990), Centafoam (1995) and Sallmetall (1997). The Company's policy is to
record an impairment loss against the net unamortized excess of acquisition cost
over net assets acquired and net other intangible assets in the period when it
is determined that the carrying amount of the net assets may not be recoverable.
This determination includes evaluation of factors such as current market value,
future asset utilization, business climate and future net cash flows
(undiscounted and without interest) expected to result from the use of the net
assets.
F-6
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued):
Depreciation and Amortization:
Depreciation for financial reporting purposes is computed using the
straight-line method over the estimated useful life of the asset as follows:
buildings, 12 to 40 years; machinery and equipment, 3 to 12 years; and leasehold
improvements over the lease term. Depreciation for tax purposes is computed
principally using accelerated methods. The excess of acquisition cost over net
assets acquired is amortized on a straight-line basis over periods ranging from
20 to 40 years. The costs of other intangible assets are amortized on a
straight-line basis over their respective estimated useful lives, ranging from
five to 30 years. Amortization of assets under capital leases that contain
purchase options is provided over the assets' useful lives. Other capital leases
are amortized over the terms of the related leases or asset lives, if shorter.
Currency Translation:
The assets and liabilities of subsidiaries having a functional currency other
than the U.S. dollar are translated at the fiscal year-end exchange rate, while
elements of the income statement are translated at the weighted average exchange
rate for the fiscal year. The cumulative translation adjustment is recorded as a
separate component of stockholders' equity. Gains and losses on foreign currency
transactions are included in the determination of net income and are reflected
in other expense, net. Such gains and losses were not material in any of the
years presented in the consolidated financial statements.
Income Taxes:
Income tax expense (benefit) is based on pre-tax financial accounting income
(loss). Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax basis of assets and
liabilities and their reported amounts.
Hedging:
Derivative financial instruments are used to hedge risk caused by fluctuating
currency. The Company periodically enters into forward exchange contracts to
hedge foreign currency transactions for periods generally consistent with its
committed exposure. These transactions were not material in any of the years
presented in the consolidated financial statements. As of November 29, 1998,
there were no forward exchange contracts outstanding. Cash flows from hedges are
classified in the consolidated statements of cash flows in the same category as
the item being hedged. The Company does not hold or issue financial instruments
for trading purposes.
Earnings (Loss) Per Share:
During fiscal 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 sets forth
guidance on the presentation of earnings per share ("EPS") and requires dual
presentation of basic and diluted EPS on the face of the income statement. Basic
EPS is computed by dividing net earnings (loss) by the weighted average of
common shares outstanding during the year. Diluted EPS reflects the potential
dilution of securities that could share in earnings, including stock options.
The Company restated all prior years' per share amounts presented in these
Consolidated Financial Statements and Notes according to SFAS No. 128. A
reconciliation of weighted average common shares outstanding to weighted average
of common shares outstanding assuming dilution is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Average common shares outstanding - basic ............... 11,220 11,079 11,462
Add: common equivalent shares representing shares
issuable upon exercise of stock options and stock
grants (antidilutive in 1997) ........................... 336 -- 215
------ ------ ------
Average common shares and dilutive securities outstanding 11,556 11,079 11,677
====== ====== ======
</TABLE>
F-7
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
1. Summary of Significant Accounting Policies (Continued):
Employee Benefit Plans:
The Company and its subsidiaries have non-contributory, defined benefit pension
plans covering the majority of their employees. It is the Company's policy to
fund pension contributions in accordance with the requirements of the Employee
Retirement Income Security Act of 1974. The benefit formula used to determine
pension costs is the final-average-pay method.
Stock-Based Compensation Plans:
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB"), and related interpretations in accounting
for its stock-based compensation. The Financial Accounting Standards Board
("FASB") issued SFAS No. 123, "Accounting for Stock-Based Compensation," which
was effective in fiscal 1997. SFAS No. 123 provides the option either to
continue the Company's current method of accounting for stock-based compensation
or to adopt the fair value method of accounting. The Company elected to continue
accounting for stock-based compensation under APB No. 25.
Environmental Matters:
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are also expensed. The Company records liabilities for
environmental costs when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. The liability for future
environmental remediation costs is evaluated on a quarterly basis by management.
Generally, the timing of these accruals coincides with the earlier of the
completion of a feasibility study or the Company's commitment to a plan of
action based on the then-known facts. Recoveries of expenditures are recognized
as a receivable only when they are estimable and probable.
2. New Accounting Standards:
During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components in the financial statements and is effective for
fiscal years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
During 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers,
and is effective for financial statements for fiscal years beginning after
December 15, 1997. Financial statement disclosures for prior periods are
required to be restated.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132 does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan
assets, and eliminates certain disclosures that are no longer useful. The
statement also is effective for fiscal years beginning after December 15, 1997,
but earlier application is encouraged.
F-8
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
2. New Accounting Standards (Continued):
In April 1998, The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 provides
guidance on the financial reporting on start-up costs and organization costs. It
requires costs of start-up activities and organization costs to be expensed as
incurred. The standard is effective for fiscal years beginning after December
15, 1998. Earlier application is encouraged.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new procedures for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing standards. The statement is effective for fiscal years
beginning after June 15, 1999, but earlier application is permitted as of the
beginning of any fiscal quarter subsequent to June 15, 1998. The adoption of
SFAS Nos. 130, 131, 132 and 133 and SOP 98-5 are not expected to have a material
impact on the Company's consolidated results of operations, financial position
or cash flows.
3. Restructuring and Other:
Restructuring and other for fiscal years 1998, 1997, and 1996 consist of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Restructuring ................................... $ (1,534) $ 18,627 $ 354
Net gain on divestitures ........................ (650) (3,686) --
Loss on disposal of property, plant and equipment 251 32 --
-------- -------- --------
$ (1,933) $ 14,973 $ 354
======== ======== ========
</TABLE>
During fiscal 1998, the Company on a net basis reduced by $2.9 million
(approximately $1.9 million after taxes, or $.17 per share on a basic basis and
$.16 per share on a diluted basis), a portion of which is included in cost of
sales ($1.4 million pre-tax), some of its restructuring reserves. This reserve
reduction related primarily to lower than expected employee severance costs
($1.1 million pre-tax), inventory returns ($1.4 million pre-tax), decisions not
to vacate certain leased facilities ($.6 million pre-tax) and other related
costs ($1.0 million pre-tax) in connection with the Company's implementation of
its strategic plan during fiscal 1997, partially offset by additional
restructuring charges in connection with the consolidation of the graphics and
substrates business units in the fourth quarter of fiscal 1998 relating
principally to employee severance costs ($1.2 million pre-tax).
During fiscal 1997, the Company announced the adoption of a new strategy for
growth and restructuring plan (the "strategic plan") designed to restore higher
levels of sales growth and profitability and to reduce its cost structure. The
cost reduction phase of the plan included a significant reduction of the
Company's stock keeping units ("SKUs") and a major restructuring of its
administrative and marketing and selling functions. In conjunction with the
implementation of the strategic plan, the Company recorded pre-tax charges to
earnings of approximately $26.8 million (approximately $18.5 million after
taxes, or $1.67 per share on a basic basis and $1.61 per share on a diluted
basis) in fiscal 1997. The amount is included in the accompanying Consolidated
Statements of Income as follows: $18.6 million in restructuring and other as
summarized below and $8.2 million to cost of sales related principally to
inventory writedowns and returns from the reduction in SKUs. The charge to
restructuring and other included employee severance costs ($4.1 million), fixed
and intangible asset writedowns ($7.9 million), recognition of future lease
obligations ($3.3 million), and other related costs.
During fiscal 1996, the Company recorded a pre-tax charge aggregating $.4
million (approximately $.3 million after taxes, or $.02 per share on a basic and
diluted basis) as a provision for costs relating to the relocation and
consolidation of two of its facilities to Statesville, North Carolina.
F-9
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
3. Restructuring and Other (Continued):
The following table sets forth the details and the cumulative activity in the
various accruals and reserves associated with the above restructuring plans in
the Consolidated Balance Sheets from December 2, 1996 to November 29, 1998:
<TABLE>
<CAPTION>
Balance at Balance at
December 2, Current Cash Non-Cash November 30,
1996 Provision Credits Reductions Activity 1997
---------- --------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Inventory ....... -- $ 9,055 -- $ (499) $ (4,037) $ 4,519
Lease obligations -- 3,336 -- (77) -- 3,259
Severance ....... $ 1,057 4,195 -- (2,189) -- 3,063
Fixed assets .... -- 4,521 -- -- (3,963) 558
Other ........... 148 5,724 -- (1,424) (2,365) 2,083
-------- -------- -------- -------- -------- --------
Total ........... $ 1,205 $ 26,831 $-- $ (4,189) $(10,365) $ 13,482
======== ======== ======== ======== ======== ========
Balance at Balance at
December 1, Current Cash Non-Cash November 29,
1997 Provision Credits Reductions Activity 1998
---------- --------- -------- ---------- -------- ------------
Inventory ....... $ 4,519 $ 88 $ (1,351) $ (1,148) $ (1,708) $ 400
Lease obligations 3,259 26 (599) (638) (175) 1,873
Severance ....... 3,063 1,103 (1,403) (2,041) -- 722
Fixed assets .... 558 10 (531) -- 198 235
Other ........... 2,083 18 (246) (1,390) 22 487
-------- -------- -------- -------- -------- --------
Total ........... $ 13,482 $ 1,245 $ (4,130) $ (5,217) $ (1,663) $ 3,717
======== ======== ======== ======== ======== ========
</TABLE>
During fiscal 1998, the Company reduced by $.7 million ($.4 million after taxes,
or $.04 per share on a basic and diluted basis) some of its reserves in
connection with its 1997 business divestitures. This reduction was principally
related to lower than expected costs associated with accruals, primarily for
inventory returns, established at the time of the respective divestiture.
In connection with the Company's strategic plan, during fiscal 1997 the Company
sold its Lit-Ning business, its Hunt Data Products' MediaMate and Calise brand
products, and its Speedball brand products. The combined sales of these business
units were $11.5 million and $30.9 million in fiscal 1997 (through the various
divestiture dates) and 1996 respectively. The divestitures of these businesses
resulted in a net pre-tax gain of $3.7 million (approximately $2.5 million after
taxes, or $.23 per share on a basic basis and $.22 per share on a diluted
basis).
4. Discontinued Operations:
In mid-November 1997, the Company sold its Bevis office furniture business for
approximately $45.1 million. The Company recorded an after-tax gain of $16.0
million (or $1.44 per share on a basic basis and $1.39 per share on a diluted
basis) on the sale. Included in the after-tax gain on the sale of Bevis is
income from operations of $.5 million representing the period October 7, 1997
(measurement date) to November 13, 1997 (disposal date). Bevis had sales of
approximately $52.5 million in fiscal 1997 (through the date of divestiture),
and $62.2 million in fiscal 1996. During fiscal 1998, the Company reduced by $.7
million pretax ($.5 million after taxes, or $.04 per share on a basic and
diluted basis) some of its accruals established in connection with the
divestiture due to the favorable resolution of certain contingent liabilities
established at the time of divestiture.
F-10
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
In fiscal 1997, the Bevis operation was accounted for as a discontinued
operation, and accordingly, was segregated in the accompanying Consolidated
Statements of Income and prior years were reclassified to conform to this
presentation. However, the Consolidated Balance Sheet and Consolidated
Statements of Cash Flow were not reclassified in fiscal 1997.
5. Business Acquisitions:
During 1997, the Company acquired all of the outstanding stock of Sallmetall
b.v., a Dutch company, for approximately $14 million and the assumption of debt
of approximately $6 million. Sallmetall's operations involve the design and
assembly of laminating equipment and related adhesive film coating
manufacturing. Sallmetall had sales of approximately $21 million for its fiscal
year ended December 31, 1996. The acquisition was accounted for under the
purchase method of accounting and was financed with borrowings under an existing
credit facility and from internal cash generation. The excess of purchase price
over the fair value of the net assets acquired was approximately $14 million,
which is being amortized on a straight line basis over 20 years. Pro forma
information is not presented, as this acquisition had no material effect on the
Company's results of operations or financial condition for any of the years
presented.
6. Private Stock Purchase and Tender Offer:
In mid-December 1995, the Company purchased from Mary F. Bartol an aggregate of
2,150,165 of the Company's common shares for a cash purchase price of $16.32 per
share, or $35.1 million, in a private transaction. Mrs. Bartol is the widow of
George E. Bartol III, the late Chairman of the Board, the mother-in-law of
Gordon A. MacInnes, the then Chairman of the Board, and the mother of Victoria
B. Vallely, another Director of the Company. The Company then commenced a tender
offer to purchase up to 3,230,000 of the Company's common shares at a price of
$17.00 net per share in cash. The Company purchased 2,954,378 common shares in
January 1996 under the terms and subject to conditions of the tender offer. The
aggregate purchase price of the common shares and estimated expenses pursuant to
the tender offer was $51.5 million.
In connection with these transactions, the Company entered into certain credit
facilities and debt agreements that are discussed in detail in Note 10.
7. Inventories:
The classification of inventories at the end of fiscal years 1998 and 1997 is as
follows:
1998 1997
------- -------
Finished goods .......................... $10,704 $ 9,962
Work in process ......................... 3,033 2,845
Raw materials ........................... 7,867 7,345
------- -------
$21,604 $20,152
======= =======
Inventories determined under the LIFO method were $14,444 and $14,102 at
November 29, 1998 and November 30, 1997, respectively. The current replacement
cost for these inventories exceeded the LIFO cost by $4,273 and $4,648 at
November 29, 1998 and November 30, 1997, respectively.
Inventory quantities were reduced in fiscal years 1998, 1997, and 1996,
resulting in a liquidation of LIFO inventories carried at lower costs prevailing
in prior years. The effect of these reductions was to increase net income by
$110, or $.01 per share on a basic and a diluted basis, $1,782, or $.16 per
share on a basic basis and $.15 per share on a diluted basis, and $109, or $.01
per share on a basic and a diluted basis, in fiscal years 1998, 1997 and 1996,
respectively.
F-11
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
8. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at the end of fiscal years 1998 and 1997 is as
follows:
1998 1997
------- -------
Land and land improvements ............................. $ 2,584 $ 2,622
Buildings .............................................. 15,254 12,837
Machinery and equipment ................................ 65,867 60,107
Leasehold improvements ................................. 1,296 1,135
Construction in progress ............................... 2,734 5,010
------- -------
87,735 81,711
Less accumulated depreciation and amortization ......... 37,818 38,738
------- -------
$49,917 $42,973
======= =======
Depreciation expense was $6,769, $6,258, and $5,941 for fiscal years 1998, 1997
and 1996, respectively.
9. EXCESS OF ACQUISITION COST OVER NET ASSETS ACQUIRED AND OTHER INTANGIBLE
ASSETS:
Excess of acquisition cost over net assets acquired at the end of fiscal years
1998 and 1997 is as follows:
1998 1997
------- -------
Excess of acquisition cost over net assets acquired .... $31,454 $31,076
Less accumulated amortization .......................... 5,433 4,170
------- -------
$26,021 $26,906
======= =======
Other intangible assets at the end of fiscal years 1998 and 1997 are as follows:
1998 1997
------ ------
Covenants not to compete ....................... $2,823 $2,823
Patents ........................................ 1,530 1,530
Trademarks ..................................... 1,209 1,215
Licensing agreements ........................... 492 492
Other .......................................... 3,303 2,103
------ ------
9,357 8,163
Less accumulated amortization .................. 5,697 5,576
------ ------
$3,660 $2,587
====== ======
10. DEBT:
At November 29, 1998, the Company had a revolving credit agreement that provides
for unsecured borrowings up to $75 million, which expires December 31, 2000. The
Company also has a line of credit agreement that provides for unsecured
borrowings up to $2.5 million. There were borrowings of $4.6 million under the
revolving credit agreement at November 29, 1998.
During the first quarter of fiscal 1996, the Company obtained a $125 million
bank credit facility, consisting of a revolving credit facility in an amount up
to $81.725 million, and an amortizing term loan in the amount of $43.275
million. The Company used borrowings of $75 million under this credit facility,
together with cash on hand, to fund the shares repurchased from Mary F. Bartol
and in the tender offer. See Note 6.
F-12
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
10. DEBT (Continued):
During the second half of fiscal 1996, the Company placed $50 million of senior
notes with several insurance companies. The proceeds of this transaction were
used to repay the outstanding balance of the amortizing term loan referred to
above and to reduce the outstanding balance on the revolving credit facility. In
addition, the terms of the credit facility were revised, among other things, to
reduce the amount of funds available under the facility from $81.725 million to
$75 million; to modify certain limitations, covenants, borrowings and facility
fee margins; and to provide for additional borrowing options.
The costs associated with these financing activities are amortized over the life
of each of the respective instruments and charged to interest expense. The
charge to interest expense with respect to this amortization was $140 in fiscal
years 1998 and 1997.
Debt at the end of fiscal years 1998 and 1997 was as follows:
1998 1997
------- -------
Senior notes (a) ............................... $50,000 $50,000
Revolving credit facility (b) .................. 4,571 --
Capitalized lease obligations .................. 2,024 2,095
Bank loans (c) ................................. 1,129 1,561
Mortgage ....................................... 474 483
Governmental development loan .................. 22 573
Bank overdrafts (d) ............................ -- 1,587
------- -------
58,220 56,299
Less current portion (e) ....................... 479 2,203
------- -------
Long-term portion .............................. $57,741 $54,096
======= =======
(a)The senior notes are payable in ten annual payments of $5 million beginning
August 1, 2002 and bear interest at a rate of 7.86%.
(b)The revolving credit facility allows for borrowings of up to $75 million. The
interest rates under this facility (between 3.72% and 8.05% dependent on the
currency borrowed during fiscal 1998) are, at the option of the Company, one
of the following: a base rate (defined as the higher of (i) the applicable
prime rate of the bank and (ii) the federal funds rate plus 50 basis points);
LIBOR plus a margin of between 27.5 and 50.0 basis points, the margin in each
case to be adjusted quarterly based on the Company's leverage ratio (as
defined in the credit facility); a competitive bid rate based on a
competitive bid made by a competitive bid lender; or a quoted rate offered by
a swingline lender. The weighted average interest rate was 5.73% at November
29, 1998.
(c)The interest rate on the bank loans range between 6.20% and 8.10% and have an
average term of 2.2 years. The weighted average interest rate was 7.01% and
7.03% at November 29, 1998 and November 30, 1997, respectively.
(d)The bank overdrafts for the Company's foreign operations carry an interest
rate of 5%.
(e)The weighted average interest rate was 6.95% and 5.54% at November 29, 1998
and November 30, 1997, respectively.
F-13
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except and per share amounts)
10. DEBT (Continued):
The senior notes and revolving credit facility contain certain representations,
warranties, covenants and conditions, including, but not limited to,
requirements that the Company comply with certain financial covenants, including
interest coverage, fixed charge coverage and leverage ratios, and maintenance of
certain levels of net worth, and also contain limitations on liens,
indebtedness, investments, changes in lines of business, acquisitions,
transactions with affiliates and modifications of certain documents. Under the
most restrictive covenant, the Company is required to maintain a minimum net
cash flow of 1.3 times interest expense and scheduled debt payments. Net cash
flow generation is defined as net income (net of unusual items) plus
consolidated interest expense, taxes, depreciation and amortization less capital
expenditures, dividends, and treasury stock purchases. During fiscal 1998, the
Company received a waiver with regards to the above covenant to purchase up to
$25 million of the Company's common shares prior to the December 31, 2000
termination date of the revolving credit agreement. As of November 29, 1998 the
Company had excess net cash flow of $1.8 million available under this covenant.
This covenant and others may restrict the Company's ability to pay dividends.
As a result of the Company's issuance of the senior notes and the use of the
proceeds to pay down debt in fiscal 1996 referred to above, the Company recorded
an after-tax loss of $.3 million, or $.02 per share on a basic and a diluted
basis, for the early extinguishment of debt, which has been reflected in the
accompanying Consolidated Statements of Income as an extraordinary item.
The capitalized lease obligations are collateralized by the property, plant and
equipment described in Note 15.
Aggregate annual maturities for all long-term debt, including the capitalized
leases, for each of the four fiscal years subsequent to November 28, 1999 are as
follows:
2000 $ 359 2002 $5,164
2001 $4,842 2003 $5,077
11. INCOME TAXES:
Income (loss) from continuing operations before provision (benefit) for income
taxes consists of the following:
1998 1997 1996
------- -------- -------
Domestic ................... $16,832 $(10,774) $11,545
Foreign .................... 880 1,983 4,249
------- -------- -------
$17,712 $ (8,791) $15,794
======= ======== =======
The provision (benefit) for income taxes from continuing operations consists of
the following:
1998 1997 1996
------ ------- ------
Currently payable:
Federal ................... $4,911 $ 94 $3,968
State ..................... 247 661 176
Foreign ................... 44 345 711
------ ------- ------
5,202 1,100 4,855
Deferred .................. 887 (3,829) 466
------ ------- ------
$6,089 $(2,729) $5,321
====== ======= ======
F-14
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except and per share amounts)
11. INCOME TAXES (Continued):
The following is a reconciliation of the statutory federal income tax rate with
the Company's effective income tax rate from continuing operations:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate .................................. 35.0% (35.0)% 35.0%
State income taxes, net of federal tax benefit .......... .9 1.8 2.4
Amortization of assets not deductible ................... 2.3 3.9 1.4
Tax benefit of loss carryforwards of foreign subsidiaries -- -- (.4)
Resolution of certain prior years' tax exposures ........ (4.2) (3.6) (4.0)
Other, net .............................................. .4 1.9 (.7)
---- ----- ----
Effective tax rate from continuing operations ........... 34.4% (31.0)% 33.7%
==== ===== ====
</TABLE>
The significant components of deferred tax assets and liabilities at
November 29, 1998 and November 30, 1997 consist of:
1997 consist of:
<TABLE>
<CAPTION>
1998 1997
------------------------ -------------------------
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Inventories .............................. $1,097 -- $ 1,699 --
Accrued expenses ......................... 3,802 $ 178 9,776 $ 199
Allowance for doubtful accounts .......... 99 -- -- --
Net operating loss carryforwards - foreign 440 -- 232 --
Pensions ................................. 3,328 -- 1,660 373
Minimum pension liability adjustment ..... 810 -- -- --
Net operating loss carryforwards - states 35 -- 220 --
Depreciation and amortization ............ -- 4,947 49 7,032
------ ------ ------- ------
9,611 5,125 13,636 7,604
Valuation allowance ...................... (91) -- (452) --
------ ------ ------- ------
$9,520 $5,125 $13,184 $7,604
====== ====== ======= ======
</TABLE>
Included in the above table for November 29, 1998 and November 30, 1997 are
deferred tax assets of $398 and $2,071, respectively, relating to retained
contingencies for the discontinued operation.
As of November 29, 1998, the Company had foreign net operating loss
carryforwards of approximately $1,608 that may be carried forward indefinitely.
The valuation allowance of approximately $91 relates to net operating losses for
which realization is not more likely than not as of November 29, 1998. The net
change in the total valuation allowance for the year ended November 29, 1998 was
a decrease of approximately $361 due to utilization and recognition of tax net
operating loss carryforwards.
F-15
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
12. EMPLOYEE BENEFIT PLANS:
Pension Plans:
Net pension costs for fiscal years 1998, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- -------
<S> <C> <C> <C>
Service cost-- benefits earned during the period $ 2,251 $ 2,349 $ 2,206
Interest cost on projected benefit obligation .. 3,408 3,206 2,695
Actual return on plan assets ................... 708 (10,461) (4,598)
Net amortization and deferral .................. (5,314) 7,345 2,102
Net curtailment gain ........................... -- (732) --
------- -------- -------
Net pension costs .............................. $ 1,053 $ 1,707 $ 2,405
======= ======== =======
</TABLE>
During fiscal 1997, the Company realized a net curtailment gain of $732
resulting from its business divestitures of which $914 of the net gain is
included in the gain on disposal of discontinued business.
Net amortization and deferral consists of the deferral of the excess of actual
return on assets over estimated return and amortization of the net unrecognized
transition asset on a straight-line basis, principally over 15 years.
The funded status of the Company's pension plans at September 30, 1998 and 1997
(dates of actuarial valuations) was as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
Over- Under- Over- Under-
Funded Funded Funded Funded
------- ------- ------- -------
<S> <C> <C> <C> <C>
Plan assets at fair value ..................... $40,662 $ 5,875 $48,100 $ 494
------- ------- ------- -------
Actuarial present value of benefit obligations:
Vested ..................................... 32,459 11,920 30,256 4,494
Non-vested ................................. 447 579 373 275
------- ------- ------- -------
Accumulated benefit obligation ................ 32,906 12,499 30,629 4,769
Effect of increase in compensation ............ 8,538 2,531 10,410 790
------- ------- ------- -------
Projected benefit obligation .................. 41,444 15,030 41,039 5,559
------- ------- ------- -------
Projected benefit obligation less than
(in excess of) plan assets ................. (782) (9,155) 7,061 (5,065)
Unrecognized net (gain) loss .................. 196 4,967 (8,133) 1,900
Unrecognized transition (asset) obligation .... (884) 74 (1,005) (21)
Unrecognized prior service cost ............... 186 1,131 242 925
Minimum liability adjustment .................. -- (3,587) -- (2,028)
------- ------- ------- -------
Pension liability ............................. $(1,284) $(6,570) $(1,835) $(4,289)
======= ======= ======= =======
</TABLE>
Pension costs are determined using the assumptions as of the beginning of the
year. The funded status is determined using the assumptions as of the date of
the actuarial valuation and is deemed overfunded or underfunded based on a
comparison of the plan assets at fair value with the accumulated benefit
obligation. The Company's foreign pension plan is underfunded in fiscal 1998 and
overfunded in fiscal 1997. Plan assets consist principally of common stock and
U.S. Government and corporate obligations.
F-16
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
12. EMPLOYEE BENEFIT PLANS (Continued):
Significant assumptions as of the dates of actuarial valuations include:
1998 1997 1996
---- ---- ----
Discount rate .................................. 7.35% 7.75% 7.50%
Rate of increase in compensation levels ........ 5.00% 6.00% 6.00%
Expected long-term rate of return on plan assets 9.00% 8.50% 7.50%
The Company recognizes a minimum pension liability for underfunded plans. The
minimum liability is equal to the excess of the accumulated benefit obligation
over plan assets. A corresponding amount is recognized as either an intangible
asset, to the extent of previously unrecognized prior service cost and
previously unrecognized transition obligation, or a reduction of shareholders'
equity. The Company recorded an additional non-current liability of $3,587, an
intangible asset of $1,231, and a reduction in shareholders' equity (net of
income taxes) of $1,545 at November 29, 1998.
Effective with the September 30, 1998 valuation date, the discount rate and
expected long-term rate of return on assets were revised to reflect current
market conditions. These changes had no impact on fiscal 1998 net pension costs
and are not expected to have a material effect on fiscal 1999 pension costs.
Supplemental Executive Benefits Plan:
The Company has a nonqualified, Supplemental Executive Benefits Plan that
constitutes a significant portion of the underfunded status above and covers all
officers. Expenses of $1,001, $698, and $421 in fiscal years 1998, 1997 and
1996, respectively, relating to this plan were actuarially determined and are
included in the pension costs described above. Contributions to the elective
salary deferral feature of the plan by the Company were $51, $45 and $36 for
fiscal years 1998, 1997 and 1996, respectively.
Employee Savings Plan:
The Company has a defined contribution 401(k) plan available to a majority of
its employees in the United States. For participating employees, the Company
matches 25 cents for each dollar contributed up to a maximum of 6% of pre-tax
compensation, subject to limitations of the plan and the Internal Revenue Code.
Contributions to the 401(k) plan by the Company were $379, $437 and $426 for
fiscal years 1998, 1997 and 1996, respectively.
13. STOCK-BASED COMPENSATION PLANS:
The 1993 Stock Option and Stock Grant Plan, which replaced the expired 1983
Stock Option and Stock Grant Plan, authorizes the issuance of up to 3,500,000
common shares (of which an additional 1,750,000 common shares were authorized
through a plan amendment in fiscal 1997) for the granting of incentive stock
options, nonqualified stock options and stock grants to key employees. A maximum
of 525,000 common shares under the 1993 plan may be issued in the form of stock
grants. The limit of the aggregate number of options and/or stock grants that
can be granted to any one individual in any one-year period is 300,000 shares.
The option price of options granted under the plan may not be less than the
market value of the shares at the date granted. Options may be granted for terms
of between two and ten years and generally become exercisable not less than one
year following the date of grant. Stock grants under the 1993 plan are subject
to a vesting period or periods of between one and five years from the date of
grant. Common shares subject to a stock grant are not actually issued to a
grantee until such shares have vested under the plan. The plan also provides for
the payment of an annual cash bonus to grantees of stock grants in an amount
equal to the cash dividends which would have been received had the shares not
yet vested under the grant been actually held by the grantees.
F-17
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
13. STOCK-BASED COMPENSATION PLANS (Continued):
The Company's 1983 Stock Option and Stock Grant Plan expired by its terms in
February 1993 and, while incentive stock options granted under that plan remain
outstanding, no further options may be granted under the plan. The terms of the
1983 plan are essentially similar to the terms of the 1993 plan described above.
Payment upon exercise of stock options under the 1993 and 1983 plans may be by
cash and/or by the Company's common stock in an amount equivalent to the market
value of the stock at the date exercised.
A summary of options under the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
1993 Plan 1983 Plan
------------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996
--------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year .. 2,080,729 994,723 634,800 252,335 355,606 631,842
Options granted ....... 143,920 1,160,456 364,923 -- -- --
Options exercised (at
an average price
per share of $14.88,
$15.27, $15.63,
$14.17, $14.31,
and $12.74,
respectively) ...... (120,000) (38,900) (5,000) (80,102) (100,671) (256,236)
Options expired ....... -- -- -- -- -- --
Options terminated .... (191,622) (35,550) -- (1,300) (2,600) (20,000)
---------- ---------- -------- -------- -------- ---------
Outstanding,
end of year ........ 1,913,027 2,080,779 994,723 170,933 252,335 355,606
---------- ---------- -------- -------- -------- ---------
Average option price
per share .......... $ 18.85 $ 17.04 $ 15.56 $ 15.11 $ 14.53 $ 14.49
Outstanding
exercisable options,
end of year ........ 691,785 546,314 159,900 170,933 252,335 355,606
Shares reserved for
future stock options
and grants ......... 1,195,901 1,339,821 750,277 -- -- --
</TABLE>
The following table summarizes information about options outstanding at November
29, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 11/29/98 Life Price at 11/29/98 Price
- --------------- ----------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$11.63 - $15.81 ......... 511,033 5.1 years $14.54 463,745 $14.57
$16.38 - $16.88 ......... 391,473 7.2 years $16.52 370,473 $16.50
$18.63 - $24.84 ......... 1,181,454 8.4 years $19.25 28,500 $19.94
--------- -------
$11.63 - $21.13 ......... 2,083,960 7.3 years $17.58 862,718 $15.58
</TABLE>
F-18
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
13. STOCK-BASED COMPENSATION PLANS (Continued):
The Company's 1988 Long-Term Incentive Compensation Plan provided for the
granting to management-level employees of long-term incentive awards, payable in
cash and/or by the Company's common stock at the end of a designated performance
period of from two to five years, based upon the degree of attainment of
pre-established performance standards during the performance period. A maximum
of 180,000 shares were authorized for issuance under this plan. This plan was
terminated during fiscal 1996.
As of the end of fiscal 1998, an aggregate of 105,389 shares had been earned
under this plan (8,050 and 12,217 shares in fiscal years 1997 and 1996,
respectively, and 85,122 shares in all previous years). There are no outstanding
unvested grants remaining. The charges (credits) to administrative and general
expenses relating to this plan were $(25) and $84 in fiscal years 1997 and 1996,
respectively.
The Company adopted the 1994 Non-Employee Directors' Stock Option Plan
authorizing the granting of up to an aggregate of 90,000 common shares to
non-officer directors of the Company. Options to purchase an aggregate of 45,000
common shares at $16.875 per share were automatically granted in January 1994 in
equal amounts to each of the non-officer directors of the Company. Options
granted under this plan extend for a term of ten years and become exercisable at
the rate of 20% per year over five years commencing one year after the date of
grant. During fiscal 1998 and 1997, 5,000 common shares were separately granted
to two newly elected non-officer directors at exercise prices of $14.25 and
$18.6875 per share, respectively. As of November 29, 1998, only 3,000 options
had been exercised under this plan.
Other Grants:
The Company has a long-term incentive compensation agreement with Donald L.
Thompson, Chairman of the Board and Chief Executive Officer, who joined the
Company in fiscal 1996. Among the provisions of this agreement is a so-called
"Phantom Stock Plan." Under this plan, Mr. Thompson earns the right to the cash
value of a total of 175,000 shares of the Company's common stock in the
following installments, provided that he is employed by the Company on each of
the dates shown: 25% on December 1, 1996, 25% on December 1, 1997, 25% on
December 1, 1998 and 25% on December 1, 1999. The charges (credits) to
administrative and general expenses with respect to this plan were $(802),
$1,431 and $1,621 in fiscal years 1998, 1997 and 1996, respectively.
During 1997, the Company adopted the Non-Employee Director Compensation Plan for
non-officer directors of the Company. The plan includes a compensation package
for the Company's non-officer directors that provides for basic directors' fees
to be paid in a combination of cash and the Company's common shares. In
addition, the plan provides for annual grants of nonqualified stock options to
purchase 2,000 Company common shares at the fair market value of such common
shares on the date of the grant. These options vest after two years (subject to
possible acceleration) and extend for 10 years (subject to possible earlier
termination). During fiscal 1998 and fiscal 1997, 2,000 and 1,000 common shares,
respectively, were issued to each of the nine then eligible non-officer
directors pursuant to this plan. As of November 29, 1998, no options had been
exercised.
F-19
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
13. STOCK-BASED COMPENSATION PLANS (Continued):
The Company has adopted the disclosure requirements of SFAS No. 123 "Accounting
for Stock-Based Compensation," and as permitted under SFAS No. 123, applies APB
No. 25 and related interpretations in accounting for its stock option plans, and
accordingly does not record compensation costs. If the Company had elected,
beginning in fiscal 1996, to recognize compensation cost based on fair value of
the options granted at grant date as prescribed by SFAS No. 123, earnings (loss)
and earnings (loss) per share would have approximated the pro forma amounts
shown below:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
Earnings (loss):
<S> <C> <C> <C>
As reported:
Income (loss) from continuing operations .................... $11,623 $(6,062) $10,473
Net income .................................................. $12,107 $14,052 $14,968
Pro forma:
Income (loss) from continuing operations .................... $10,461 $(7,397) $ 9,901
Net income .................................................. $10,945 $12,717 $14,396
Basic earnings (loss) per share:
As reported:
Income (loss) from continuing operations .................... $ 1.04 $ (.55) $ .91
Net income .................................................. $ 1.08 $ 1.27 $ 1.31
Pro forma:
Income (loss) from continuing operations .................... $ .93 $ (.65) $ .86
Net income .................................................. $ .98 $ 1.10 $ 1.26
Diluted earnings (loss) per share :
As reported:
Income (loss) from continuing operations .................... $ 1.01 $ (.55) $ .89
Net income .................................................. $ 1.05 $ 1.27 $ 1.28
Pro forma:
Income (loss) from continuing operations .................... $ .91 $ (.65) $ .84
Net income .................................................. $ .95 $ 1.10 $ 1.23
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Expected dividend yield ................................. 2.40% 2.27% 2.38%
Risk-free interest rate ................................. 5.31% 6.50% 5.88%
Expected volatility ..................................... 26.10% 24.50% 25.50%
Expected life (in years) ................................ 4.1 4.30 5.50
</TABLE>
The weighted average estimated fair values of employee stock options granted
during fiscal 1998, 1997 and 1996 were $5.46, $4.56 and $4.66 per share,
respectively. The pro forma disclosures are not likely to be representative of
the effects on earnings and earnings per common share in future years, because
they do not take into consideration pro forma compensation expense related to
grants made prior to the Company's fiscal year 1996.
F-20
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except and per share amounts)
14. SHAREHOLDERS' RIGHTS PLAN:
In 1990, the Company adopted a Shareholders' Rights Agreement and declared a
dividend of one right (a "Right") for each outstanding share of the Company's
common shares held of record as of the close of business on August 22, 1990. The
Rights initially are deemed to be attached to the common shares and detach and
become exercisable only if (with certain exceptions and limitations) a person or
group attempts to obtain beneficial ownership of 15% or more of the Company's
common shares or is determined to be an "adverse person" by the Board of
Directors of the Company. Each Right, if and when it becomes exercisable,
initially will entitle holders of the Rights to purchase one one-thousandth of a
share of Junior Participating Preferred Shares (Series A, of which 50,000 shares
currently are authorized for issuance) for $60, subject to adjustment. The
Rights will convert into the right to purchase common shares or other securities
or property of the Company or an acquiring company in certain other potential or
actual takeover situations. The Rights are redeemable by the Company at $.01 per
Right in certain circumstances and expire, unless earlier exercised or redeemed,
on December 31, 2000.
15. COMMITMENTS AND CONTINGENCIES:
Leases:
The capitalized lease obligations (see Note 10) represent amounts payable under
leases that are, in substance, installment purchases. Property, plant and
equipment includes the following assets under capital leases:
1998 1997
------- -------
Land ................................................... $ 152 $ 152
Buildings .............................................. 1,356 1,356
Machinery and equipment ................................ 814 814
Accumulated amortization ............................... (2,150) (2,098)
------- ------
$ 172 $ 224
======= ======
The Company has the option to purchase the above assets at any time during the
terms of the leases for amounts sufficient to redeem and retire the underlying
lessor debt obligations. The capitalized lease obligations have various
principal payments that mature no later than June 15, 2004.
The minimum rental commitments under all noncancellable leases as of November
29, 1998 are as follows:
Operating
Fiscal Period Leases
- ------------- ---------
1999 ................................................ $ 4,760
2000 ................................................ 4,440
2001 ................................................ 3,273
2002 ................................................ 2,944
2003 ................................................ 2,080
Thereafter .......................................... 12,725
-------
Minimum lease payments .............................. $30,222
=======
Rent expense, including related real estate taxes charged to operations,
amounted to $4,818, $5,254, and $4,850 for fiscal years 1998, 1997, and 1996,
respectively.
F-21
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
15. COMMITMENTS AND CONTINGENCIES (Continued):
Contingencies:
The Company has employment/severance (change in control) agreements with its
officers under which severance payments and benefits would become payable in the
event of specified terminations of employment following a change in control (as
defined) of the Company. The Company also has a termination policy applicable to
employees which provides severance payments and benefits in the event of certain
terminations of employment. In the event of a change in control of the Company
and subsequent termination of all employees, the maximum contingent severance
liability would have been approximately $16.7 million at November 29, 1998.
Prior to the acquisition of the Graphic Arts Group by the Company from Bunzl plc
in May 1990, it was discovered that some hazardous waste materials had been
stored on the premises of one of the Graphic Arts Group companies, Seal, located
in Naugatuck, Connecticut. In compliance with applicable state law, this
environmental condition was reported to the Connecticut Department of
Environmental Protection by Bunzl. Seal, which is now a subsidiary of the
Company, may be partially responsible under law for the environmental conditions
on the premises and any liabilities resulting therefrom. However, in connection
with the Company's acquisition of Seal, Bunzl agreed to take responsibility for
correcting such environmental conditions and to indemnify Seal and the Company
for resulting liabilities, subject to certain limitations. Management believes
that this contingency will not have a material effect on the Company's results
of operations or financial condition.
The Company is also involved on a continuing basis in monitoring its compliance
with environmental laws and in making capital and operating improvements
necessary to comply with existing and anticipated environmental requirements.
Despite its efforts, the Company has been cited for occasional violations or
alleged violations of environmental laws or permits and on several occasions has
been named as a potentially responsible party for the remediation of sites.
Expenses incurred by the Company to date relating to violations of and
compliance with environmental laws and permits and site remediation have not
been material. While it is impossible to predict with certainty, management
currently does not foresee such expense in the future as having a material
effect on the Company's business, results of operations or financial condition.
The Company has been sued for patent infringement with respect to one of its
minor products. After a jury trial, the U.S. District Court in the Western
District of Wisconsin entered judgment against the Company in this matter and
awarded damages to the plaintiffs in the amount of $3.3 million, plus interest
and costs. The Company and its patent legal counsel believe that the verdict
against the Company was incorrect and that it will be reversed on appeal.
Accordingly, the Company has not recorded any liability in its financial
statements associated with this judgment. However, there can be no assurance
that the Company will prevail in this matter. In the event of an unfavorable
final judgment against the Company, management believes that it will not have a
material impact on the Company's financial position, but it could have a
material effect on quarterly or annual results of operations.
There are other contingent liabilities with respect to product warranties, legal
proceedings and other matters occurring in the normal course of business. In the
opinion of management, all such matters are adequately covered by insurance or
by accruals, and if not so covered, are without merit or are of such kind, or
involve such amounts, as would not have significant effect on the financial
condition or results of operations of the Company, if disposed of unfavorably.
16. RESEARCH AND DEVELOPMENT:
Research and development expenses were approximately $2,501, $3,284, and $2,865
in fiscal years 1998, 1997 and 1996, respectively.
F-22
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
17. CASH FLOW INFORMATION:
Cash payments for interest and income taxes (net of refunds) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Interest paid (net of amounts capitalized of $376, $139,
and $336 in fiscal 1998, 1997, and 1996, respectively) .... $ 4,644 $5,000 $3,500
Income taxes ................................................. 16,249 3,386 6,653
</TABLE>
Excluded from the accompanying Consolidated Statements of Cash Flows are the
effects of certain non-cash investing and financing activities as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ------- ------
<S> <C> <C> <C>
Fair value of assets acquired ......................... -- $11,667 --
Liabilities assumed or created ........................ -- 11,719 --
Value of common shares received as payment
upon exercise of stock options ..................... $414 444 $3,227
</TABLE>
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
Quarterly financial data for each of the quarters during fiscal years 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998
--------------------------------------------
First Second Third Fourth
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ............................................ $61,265 $62,381 $61,236 $61,681
Gross profit ......................................... 23,683 24,617 23,242 23,237
Income from continuing operations .................... 3,313 4,840 2,818 652
Income from discontinued operations .................. -- -- -- --
Gain on sale of discontinued operations .............. -- -- 484 --
------- ------- ------- -------
Net income ........................................... 3,313 4,840 3,302 652
Basic earnings per common share:
Income from continuing operations ................. $ .30 $ .43 $ .25 $ .06
Income from discontinued operations -- -- -- --
Gain on sale of discontinued operations -- -- .04 --
------- ------- ------- -------
Net income per share ................................. $ .30 $ .43 $ .29 $ .06
======= ======= ======= =======
Diluted earnings per common share:
Income from continuing operations ................. $ .28 $ .41 $ .24 $ .06
Income from discontinued operations ............... -- -- -- --
Gain on sale of discontinued operations ........... -- -- .04 --
------- ------- ------- -------
Net income per share ................................. $ .28 $ .41 $ .28 $ .06
======= ======= ======= =======
</TABLE>
F-23
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
18. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued):
<TABLE>
<CAPTION>
1997
First Second Third Fourth
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ............................................. $61,404 $62,373 $67,210 $68,553
Gross profit .......................................... 23,263 20,045 25,968 24,868
Income (loss) from continuing operations .............. 1,290 (7,959) 1,893 (1,286)
Income from discontinued operations ................... 1,109 965 1,611 468
Gain on sale of discontinued operations ............... -- -- -- 15,961
------- ------- ------- -------
Net income (loss) ..................................... 2,399 (6,994) 3,504 15,143
Basic earnings (loss) per common share:
Income (loss) from continuing operations ........... $ .12 $ (.73) $ .17 $ (.10)
Income from discontinued operations ................ .10 .09 .15 .04
Gain on sale of discontinued operations ............ -- -- -- 1.43
------- ------- ------- -------
Net income (loss) per share ........................... $ .22 $ (.64) $ .32 $ 1.37
======= ======= ======= =======
Diluted earnings (loss) per common share:
Income (loss) from continuing operations ........... $ .11 $ (.73) $ .16 $ (.11)
Income from discontinued operations ................ .10 .09 .14 .04
Gain on sale of discontinued operations ............ -- -- -- 1.37
------- ------- ------- -------
Net income (loss) per share ........................... $ .21 $ (.64) $ .30 $ 1.30
======= ======= ======= =======
</TABLE>
The sums of the quarterly income (loss) per share data is not the same as income
(loss) per share for the year due to changes in the number of average
outstanding shares and to antidilution (in fiscal 1997).
The second quarter of fiscal 1998 net income includes pre-tax credits of $2.0
million (or $.11 per share after taxes on a basic and diluted basis), and the
fourth quarter of fiscal 1998 net income includes pre-tax credits of $.7 million
(or $.04 per share after taxes on a basic and diluted basis) relating to the net
reduction to some of its reserves established in connection with the
implementation of the strategic plan during fiscal 1997. (See Note 3). Also in
fiscal 1998, the Company reduced by $.7 million (or $.04 per share after taxes
on a basic and diluted basis) some of its reserves established in connection
with its 1997 business divestitures of which $.4 million pre-tax (or $.02 per
share after taxes on a basic and diluted basis) is included in the second
quarter, and $.3 million pre-tax (or $.01 per share after taxes on a basic and
diluted basis) is included in the third quarter. The Company also reduced by $.7
million (or $.04 per share after taxes on a basic and diluted basis) some of its
reserves established in connection with its 1997 disposal of a discontinued
business. See Note 3.
The second quarter of fiscal 1997 net loss includes pre-tax charges of $16.7
million (or $.93 per share after taxes on a basic basis and $.90 per share on a
diluted basis), the third quarter of fiscal 1997 net income includes pre-tax
charges of $.4 million (or $.02 per share after taxes on a basic and diluted
basis), and the fourth quarter of fiscal 1997 net income includes pre-tax
charges of $9.7 million (or $.71 per share after taxes on a basic basis and $.69
per share on a diluted basis) relating to the implementation of the strategic
plan as described in Note 3. Also in fiscal 1997, the Company divested
businesses which resulted in a net pre-tax gain of $3.7 million, of which $.5
million (or $.04 per share on a basic and diluted basis) is included in the
first quarter and $3.2 million (or $.20 per share on a basic basis and $.19 per
share on a diluted basis) is included in the fourth quarter. See Note 3.
F-24
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
18. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued):
The fourth quarter of fiscal 1998 net income includes higher inventory
obsolescence expense versus fiscal 1997 of approximately $.4 million (or $.03
per share on a basic and diluted basis). In addition, liquidations of LIFO
inventories during fiscal 1998 reduced expenses in the fourth quarter by $167,
or $.01 per share after taxes on a basic and diluted basis. Liquidations of LIFO
inventories during fiscal 1997 reduced expenses in the first, second, third and
fourth quarters by $300, or $.02 per share after taxes on a basic and diluted
basis, $459, or $.02 per share after taxes on a basic and diluted basis, $380,
or $.02 per share after taxes on a basic and diluted basis, and $1,444, or $.09
per share after taxes on a basic and diluted basis, respectively. See Note 7.
The fourth quarter of fiscal 1998 net income also includes higher marketing and
selling expenses (principally due to timing of promotional and packaging
development related costs) and higher administrative and general expenses
(relating to consulting fees) than the other quarters of fiscal 1998.
During the fourth quarter of fiscal 1997, the Company adjusted its effective tax
rate relating to the loss from continuing operations from a 40% benefit in the
first nine months of fiscal 1997 to a 31% benefit for the full year due
primarily to the restructuring charge previously described. The effect of this
adjustment in the fourth quarter was an increase in the loss from continuing
operations of $411, or $(.04) per share after taxes on a basic and diluted
basis. See Notes 3 and 11.
Quarterly net sales and gross profit amounts exclude net sales and gross profit
of the Company's Bevis operation, which the Company classified as discontinued
operations during the fourth quarter of fiscal 1997. Net sales and gross profit
of Bevis for the fiscal 1997 quarters ended March 2, June 1, August 31, and
November 30 were $15.2 million and $5.1 million, $13.0 million and $4.6 million,
$13.9 million and $5.4 million, and $10.5 million and $3.8 million,
respectively.
19. INDUSTRY SEGMENT INFORMATION:
The Company changed its business segment reporting in fiscal 1998 to more
accurately reflect its current reporting practices as a result of the
implementation of its strategic plan and consolidation of its graphics and
substrates business units. All prior fiscal year data has been restated for
comparative purposes.
The Company now operates in two industry segments, consumer products and
graphics products. Total export sales aggregated $20,375 in fiscal 1998, $23,347
in fiscal 1997, and $23,303 in fiscal 1996, of which $12,645, $14,419, and
$14,913 in fiscal years 1998, 1997 and 1996, respectively, were made in Canada.
Income (loss) from operations include all revenues and expenses of the
reportable segment except for interest expense, interest income, other expenses,
other income and income taxes.
Net sales, operating profits, and depreciation and amortization are on a
continuing operation basis.
Identifiable assets are those assets used in the operations of each business
segment. The consumer products amounts include discontinued operation assets of
$26,456 in fiscal 1996.
Corporate assets include cash and miscellaneous other assets not identifiable
with any particular segment. Capital additions include amounts related to
acquisitions.
F-25
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
19. Industry Segment Information (Continued):
<TABLE>
<CAPTION>
Consumer Graphics
Fiscal Year 1998 Products Products Corporate Consolidated
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Net sales ....................... $ 107,893 $ 138,670 $ 246,563
========= ========= =========
Income from operations* ......... $ 22,546 $ 3,221 $ (6,513) $ 19,254
========= ========= =========
Interest expense ................ (4,344)
Interest income ................. 2,626
Other income, net ............... 176
---------
Income from continuing operations
before income taxes .......... $ 17,712
=========
Identifiable assets ............. $ 33,555 $ 98,297 $ 55,005 $ 186,857
========= ========= ========= =========
Capital additions ............... $ 4,357 $ 9,211 $ 285 $ 13,853
========= ========= ========= =========
Depreciation and amortization ... $ 2,661 $ 5,241 $ 365 $ 8,267
========= ========= ========= =========
</TABLE>
*Includes the net credit for restructuring reserve reductions of $2.9 million of
which a credit of $2.9 million, a charge of $.3 million and a credit of $.3
million is reflected in the consumer products, graphics products and corporate
amounts, respectively. Also included in the corporate amount is the net gain on
sales of divested businesses of $.7 million.
<TABLE>
<CAPTION>
Consumer Graphics
Fiscal Year 1997 Products Products Corporate Consolidated
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Net sales ....................... $ 122,311 $ 137,229 $ 259,540
========= ========= =========
Income (loss) from operations* .. $ 1,470 $ 2,758 $ (7,785) $ (3,557)
========= ========= =========
Interest expense ................ (4,920)
Interest income ................. 538
Other expense, net .............. (852)
---------
Loss from continuing operations
before income taxes .......... $ (8,791)
=========
Identifiable assets ............. $ 36,764 $ 90,563 $ 82,195 $ 209,522
========= ========= ========= =========
Capital additions** ............. $ 6,022 $ 9,308 $ 97 $ 15,427
========= ========= ========= =========
Depreciation and amortization ... $ 4,295 $ 3,166 $ 379 $ 7,840
========= ========= ========= =========
</TABLE>
*Includes the charge for the strategic plan of $26.8 million of which $18.2
million, $8.4 million and $.2 million is reflected in the consumer products,
graphics products and corporate amounts, respectively. Also included in the
corporate amount is the net gain on sales of divested businesses of $3.7
million.
**Includes $3.6 million of capital additions relating to business acquisition.
F-26
<PAGE>
#
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
19. Industry Segment Information (Continued):
<TABLE>
<CAPTION>
Consumer Graphics
Fiscal Year 1996 Products Products Corporate Consolidated
- ---------------- --------- --------- --------- ------------
<S> <C> <C> <C> <C>
Net sales ....................... $ 143,040 $ 121,417 $ 264,457
========= ========= =========
Income from operations* ......... $ 17,445 $ 12,533 $ (9,951) $ 20,027
========= ========= =========
Interest expense ................ (4,586)
Interest income ................. 301
Other income, net ............... 52
---------
Income from continuing operations
before income taxes .......... $ 15,794
=========
Identifiable assets ............. $ 94,621 $ 67,974 $ 13,079 $ 175,674
========= ========= ========= =========
Capital additions ............... $ 5,667 $ 1,754 $ 83 $ 7,504
========= ========= ========= =========
Depreciation and amortization ... $ 5,023 $ 2,423 $ 523 $ 7,969
========= ========= ========= =========
</TABLE>
*Includes the provision for organizational changes and relocation and
consolidation of operations which reduced the consumer products income
from operations by $.4 million.
The Company's operations by geographical areas for fiscal years 1998, 1997 and
1996 are presented below. Intercompany sales to affiliates represent products
that are transferred between geographic areas on a basis intended to reflect as
nearly as possible the market value of the products. North America identifiable
assets include discontinued operation assets of $26,456 in fiscal 1996.
<TABLE>
<CAPTION>
Europe Adjustments
North and and
Fiscal Year 1998 America Other Corporate Eliminations Consolidated
- ---------------- ------- ----- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
Customers ...... $ 205,213 $ 41,350 $ 246,563
Intercompany ... 8,012 6,137 $ (14,149) --
--------- --------- --------- ---------
Total ............. $ 213,225 $ 47,487 $ (14,149) $ 246,563
========= ========= ========= =========
Income (loss)
from operations* $ 26,313 $ (546) $ (6,513) $ 19,254
========= ========= ========= =========
Identifiable assets $ 81,750 $ 50,102 $ 55,005 $ 186,857
========= ========= ========= =========
</TABLE>
*Includes the net credit for restructuring reserve reductions of $2.9 million of
which a credit of $2.7 million, a charge of $.1 million and a credit of $.3
million is reflected in the North America, Europe and other and corporate
amounts, respectively.
F-27
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
19. Industry Segment Information (Continued):
<TABLE>
<CAPTION>
Europe Adjustments
North and and
Fiscal Year 1997 America Other Corporate Eliminations Consolidated
- ---------------- ------- ----- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
Customers ...... $ 214,597 $ 44,943 $ 259,540
Intercompany ... 6,734 5,981 $ (12,715) --
--------- --------- --------- ---------
Total ............. $ 221,331 $ 50,924 $ (12,715) $ 259,540
========= ========= ========= =========
Income (loss)
from operations* $ 3,208 $ 1,020 $ (7,785) $ (3,557)
========= ========= ========= =========
Identifiable assets $ 77,561 $ 49,766 $ 82,195 $ 209,522
========= ========= ========= =========
</TABLE>
*Includes the charge for the strategic plan of $26.8 million of which $24.3
million, $2.3 million and $.2 million is reflected in the North America, Europe
and other and corporate amounts, respectively.
<TABLE>
<CAPTION>
Europe Adjustments
North and and
Fiscal Year 1996 America Other Corporate Eliminations Consolidated
- ---------------- ------- ----- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
Customers ...... $ 230,031 $ 34,426 $ 264,457
Intercompany ... 7,111 3,369 $ (10,480) --
--------- --------- --------- ---------
Total ............. $ 237,142 $ 37,795 $ (10,480) $ 264,457
========= ========= ========= =========
Income (loss)
from operations* $ 27,323 $ 2,655 $ (9,951) $ 20,027
========= ========= ========= =========
Identifiable assets $ 134,982 $ 27,613 $ 13,079 $ 175,674
========= ========= ========= =========
</TABLE>
*Includes the charge for the relocation and consolidation of certain
manufacturing and distribution operations of $.4 million, which is reflected in
the North American amounts.
20. Financial Instruments:
Off-Balance Sheet Risk:
Letters of credit are issued by the Company during the ordinary course of
business through major domestic banks as required by certain vendor contracts.
As of November 29, 1998 and November 30, 1997, the Company had outstanding
letters of credit for $145 and $219, respectively.
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments ($37.3 million
and $62.6 million at November 29, 1998 and November 30, 1997, respectively) with
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution.
F-28
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except share and per share amounts)
20. Financial Instruments (Continued):
The Company provides credit, in the normal course of business, to a large number
of distributors and retailers and generally does not require collateral or other
security to support customer receivables. Management believes that
concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, their
dispersion across many different industries and geographies with no single
customer accounting for more than 10% of net sales. However, the Company's ten
largest customers accounted for approximately 27% of accounts receivable at
November 29, 1998 and November 30, 1997. The Company performs on-going credit
evaluations of its customers, maintains allowances for potential credit losses
and carries credit insurance coverage for most of its large customer accounts.
Fair Value:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and cash equivalents - The carrying amount approximates fair value because
of the short maturity of these instruments.
Debt (excluding capital lease obligations) - The fair value of the Company's
debt is estimated based on the current rates offered to the Company for debt of
the same remaining maturities.
The estimated fair values of the Company's financial instruments at November 29,
1998 and November 30, 1997 are as follows:
1998 1997
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
Cash and cash equivalents $40,724 $40,724 $65,449 $65,449
Debt (excluding capital
lease obligations) ... $56,196 $59,677 $54,204 $57,963
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and
the Board of Directors of
Hunt Corporation:
Our audits of the consolidated financial statements of Hunt Corporation and
subsidiaries referred to in our report dated January 28, 1999 appearing in Item
14(a)(1) on page 20 of this Form 10-K also included an audit of the financial
statement schedule listed in Item 14(a)(2) on page 20 of this Form 10-K. In our
opinion, the financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
Philadelphia, PA 19103
January 28, 1999
F-30
<PAGE>
HUNT CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
for the fiscal years 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Column C
Column A Column B Additions Column D Column E
- -------------- --------- ----------------------- ---------- ---------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Classification of Period Expenses Accounts Deductions of Period
- -------------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Allowance for doubtful accounts $1,842 $ 77 $ -- $ 198(A) $1,721
====== ====== ==== ====== ======
Reserve for customer returns and deductions $1,017 $ 92 $ -- $ 49(B) $1,060
====== ====== ==== ====== ======
Reserve for inventory obsolescence $1,189 $1,526 $ -- $ 283(C) $2,432
====== ====== ==== ====== ======
1997:
Allowance for doubtful accounts $1,809 $ 786 $185(D) $ 938(A) $1,842
====== ====== ==== ====== ======
Reserve for customer returns and deductions $1,173 $ -- $126(D) $ 282(B) $1,017
====== ====== ==== ====== ======
Reserve for inventory obsolescence $2,229 $ 601 $227(D) $1,868(C) $1,189
====== ====== ==== ====== ======
1996:
Allowance for doubtful accounts $2,305 $ 655 $ -- $1,151(A) $1,809
====== ====== ==== ====== ======
Reserve for customer returns and deductions $1,860 $ 180 $ -- $ 867(B) $1,173
====== ====== ==== ====== ======
Reserve for inventory obsolescence $2,421 $2,216 $ -- $2,408(C) $2,229
====== ====== ==== ====== ======
</TABLE>
(A) Doubtful accounts written off, net of collection expenses.
(B) Primarily credits issued to customers.
(C) Largely the result of programs to dispose of fully reserved obsolete
inventory. Amount is net of recoveries.
(D) Primarily due to the acquisition of Sallmetall.
F-31
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Incorporated by Reference
The information called for by Item 10, "Directors and Executive Officers of the
Registrant" (other than the information concerning executive officers set forth
after Item 4 herein); Item 11, "Executive Compensation"; Item 12, "Security
Ownership of Certain Beneficial Owners and Management"; and Item 13, "Certain
Relationships and Related Transactions" is incorporated herein by reference to
the following sections of the Company's definitive proxy statement for its
Annual Meeting of Shareholders scheduled to be held April 21, 1999, which
definitive proxy statement is expected to be filed with the Commission not later
than 120 days after the end of the fiscal year to which this report relates:
Form 10-K Item No. Proxy Statement Section
- ------------------ -----------------------
Item 10 ............Proposal 1. "ELECTION OF DIRECTORS"; "ADDITIONAL INFORMATION
- Section 16(a) Beneficial Ownership Reporting Compliance"
Item 11 ............Proposal 1. "ELECTION OF DIRECTORS - Compensation of
Directors"; "ADDITIONAL INFORMATION - Executive
Compensation" (not including "Compensation Committee Report
on Executive Compensation")
Item 12 ............"ADDITIONAL INFORMATION - Common Share Ownership by Certain
Beneficial Owners and Management"
Item 13 ............"ADDITIONAL INFORMATION - Certain Relationships and Related
Transactions"
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of the Report
1. Financial Statements: Pages
-----
Report of Independent Accountants F-1
Consolidated Statements of Income
for the fiscal years 1998, 1997 and 1996 F-2
Consolidated Balance Sheets,
November 29, 1998 and November 30, 1997 F-3
Consolidated Statements of Stockholders' Equity
for the fiscal years 1998, 1997 and 1996 F-4
Consolidated Statements of Cash Flows
for the fiscal years 1998, 1997, and 1996 F-5
Notes to Consolidated Financial Statements F-6-F-29
2. Financial Statement Schedule:
Report of Independent Accountants on Financial Statement Schedule F-30
Schedule II. Valuation and Qualifying Accounts
for the fiscal years 1998, 1997 and 1996 F-31
All other schedules not listed above have been omitted, since they are not
applicable or are not required, or because the required information is
included in the consolidated financial statements or notes thereto.
Individual financial statements of the Company have been omitted, since
the Company is primarily an operating company and any subsidiary companies
included in the consolidated financial statements are directly or
indirectly wholly-owned and are not indebted to any person, other than the
parent or the consolidated subsidiaries, in an amount which is material in
relation to total consolidated assets at the date of the latest balance
sheet filed, except indebtedness incurred in the ordinary course of
business which is not overdue and which matures in one year.
20
<PAGE>
3. Exhibits:
(2) Plans of acquisition and disposition:
(a) Share Purchase Agreement dated as of March 28, 1997 by and among
Seal Products Subsidiary, Inc. and the various shareholders of
Sallmetall B. V. (incorp. by ref. to Ex. 2 to Form 8-K as of March
28, 1997).
(b) Asset Purchase Agreement dated October 6, 1997 by and among HON
Industries, Inc., AHC, Inc., the Company, and Bevis Custom
Furniture, Inc. (incorp. by ref. to Ex. 2 to Form 8-K as of
November 13, 1997).
(3) Articles of incorporation and bylaws:
(a) Restated Articles of Incorporation, as amended (composite)
(incorp. by ref. to Ex. 3(a) to fiscal 1997 Form 10-K) (reference
also is made to Exhibit 4(c) below for the Designation of Powers,
Preferences, Rights and Qualifications of Preferred Stock).
(b) By-laws, as amended (incorp. by ref. to Ex. 3(b) to Form 10-Q for
quarter ended May 28, 1995).
(4) Instruments defining rights of security holders, including
indentures:*
(a) Note Purchase Agreement dated as of August 1, 1996 between the
Company and several insurance companies (incorp. by ref. to Form
10-Q for quarter ended September 1, 1996).
(b) (1) Second Amendment and Restatement of Credit Agreement dated as
of February 20, 1997 between the Company and NationsBank, N. A.
and other lenders (filed herewith), and (2) Third Amendment dated
as of April 24, 1998 to Credit Agreement (filed herewith).
(c) (1) Rights Agreement dated as of August 8, 1990 (including as
Exhibit A thereto the Designation of Powers, Preferences, Rights
and Qualifications of Preferred Stock), between the Company and
Mellon Bank (East), N. A., as original Rights Agent (incorp. by
ref. to Ex. 4.1 to August 1990 Form 8-K); and (2) Assignment and
Assumption Agreement dated December 2, 1991, with American Stock
Transfer and Trust Company, as successor Rights Agent (incorp. by
ref. to Ex. 4(d) to fiscal 1991 Form 10-K).
Miscellaneous long-term debt instruments and credit facility
agreements of the Company, under which the underlying authorized
debt is equal to less than 10% of the total assets of the Company
and its subsidiaries on a consolidated basis, may not be filed as
exhibits to this report. The Company agrees to furnish to the
Commission, upon request, copies of any such unfiled instruments.
(10) Material contracts:
(a) Lease Agreement dated June 1, 1979 and First Supplemental Lease
Agreement dated as of July 31, 1994 between the Iredell County
Industrial Facilities and Pollution Control Financing Authority
and the Company (incorp. by ref. to Ex. 10(a) to fiscal 1994 Form
10-K).
(b) 1983 Stock Option and Stock Grant Plan, as amended, of the Company
(incorp. by ref. to Ex. 10(b) to fiscal 1996 Form 10-K).**
(c) 1993 Stock Option and Stock Grant Plan of the Company, as amended
(incorp. by ref. to Ex. 10 to Form 10-Q for quarter ended June 1,
1997).**
(d) 1994 Non-Employee Directors' Stock Option Plan (incorp. by ref. to
Ex. 10(f) to fiscal 1993 Form 10-K).**
(e) 1997 Non-Employee Director Compensation Plan (incorp. by ref. to
Ex. 10(f) to fiscal 1997 Form 10-K).**
(f) (1) Form of Change in Control Agreement between the Company and
various officers of the Company (incorp. by ref. to Ex. 10(I) to
fiscal 1994 Form 10-K)** and (2) list of executive officers who
are parties (incorp. by ref. to Ex. 10(h) to fiscal 1996 Form
10-K).**
21
<PAGE>
(g) (1) Form of Supplemental Executive Benefits Plan of the Company,
effective January 1, 1997 (filed herewith), and (2) form of
related Amended and Restated Trust Agreement, effective January 1,
1997 (filed herewith).**
(h) Employment Agreement, dated as of April 8, 1996, between the
Company and Donald L. Thompson (incorp. by ref. to Ex. 10 to Form
10-Q for quarter ended June 2, 1996).**
(21) Subsidiaries (filed incorp. by reference to Ex. 11 to 1997 Form 10-K).
(23) Consent of PricewaterhouseCoopers LLP to incorporation by reference in
Registration Statements Nos. 33-70660, 33-25947, 33-6359, 2-83144,
33-57105, and 33-57103 on Form S-8 of their report on the consolidated
financial statements and schedule included in this report (filed
herewith).
(27) Financial Data Schedule (filed herewith).
*Reference also is made to (1) Articles 5th, 6th, 7th, and 8th of the Company's
composite Articles of Incorporation (ex. 3(a) to this report) and (2) to
Sections 1, 7, and 8 of the Company's By-laws (Ex. 3(b) to this report).
**Indicates a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year covered by this report.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HUNT CORPORATION
Dated: February 22, 1999 By: \s\ Donald L. Thompson
---------------------------
Donald L. Thompson
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on behalf of the registrant and in the capacities and on
the dates indicated:
\s\ Donald L. Thompson February 22, 1999
-------------------------------------
Donald L. Thompson
Chairman, President and
Chief Executive Officer
\s\ William E. Chandler February 22, 1999
-------------------------------------
William E. Chandler
Senior Vice President,
Finance (Principal Financial Officer)
\s\ John Fanelli III February 22, 1999
-------------------------------------
John Fanelli III
Vice President, Corporate Controller
(Principal Accounting Officer)
\s\ Donald Belcher February 22, 1999
-------------------------------------
Donald Belcher
Director
\s\ Jack Farber February 22, 1999
-------------------------------------
Jack Farber
Director
\s\ William F. Hamilton February 22, 1999
-------------------------------------
William F. Hamilton
Director
\s\ Mary R. Henderson February 22, 1999
-------------------------------------
Mary R. (Nina) Henderson
Director
\s\ Gordon A. MacInnes February 22, 1999
-------------------------------------
Gordon A. MacInnes
Director
\s\ Wilson D. McElhinny February 22, 1999
-------------------------------------
Wilson D. McElhinny
Director
\s\ Robert H. Rock February 22, 1999
-------------------------------------
Robert H. Rock
Director
\s\ Roderic H. Ross February 22, 1999
-------------------------------------
Roderic H. Ross
Director
\s\ Malcolm J. Thompson February 22, 1999
-------------------------------------
Malcolm J. Thompson
Director
\s\ Victoria B. Vallely February 22, 1999
-------------------------------------
Victoria B. Vallely
Director
23
<PAGE>
EXHIBIT INDEX
-------------
(of Exhibits filed herewith)
(4)(b)(1) Second Amendment and Restatement of Credit Agreement
(4)(b)(2) Third Amendment to Credit Agreement
(10)(g)(1) Form of Supplemental Executive Benefits Plan
(10)(g)(2) Form of Related Amended and Restated Trust Agreement
(23) Consent of PricewaterhouseCoopers LLP
(27) Financial Data Schedule
<PAGE>
SECOND AMENDMENT AND RESTATEMENT
OF
CREDIT AGREEMENT
Dated as of February 20, 1997
among
HUNT MANUFACTURING CO.
and
HUNT EUROPE LIMITED,
as Borrowers,
THE SUBSIDIARIES
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
AND
NATIONSBANK, N.A.,
as Agent
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS ...................................................... 1
1.1 Definitions ..................................................... 1
1.2 Computation of Time Periods ..................................... 28
1.3 Accounting Terms ................................................ 29
SECTION 2 CREDIT FACILITIES ................................................ 29
2.1 Revolving Loans ................................................. 29
2 2 Domestic Letter of Credit Subfacility ........................... 31
2.3 Competitive Loan Subfacility .................................... 36
2 4 Swingline Loan Subfacility ...................................... 39
2.5 Foreign Currency Loan Subfacility ............................... 42
2.6 Foreign Letter of Credit Subfacility ............................ 43
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES ................... 49
3.1 Default Rate .................................................... 49
3.2 Extension and Conversion ........................................ 49
3.3 Prepayments ..................................................... 50
3.4 Termination and Reduction of Revolving Committed Amount ......... 52
3.5 Fees ............................................................ 53
3.6 Capital Adequacy ................................................ 54
3.7 Unavailability .................................................. 54
3.8 Illegality ...................................................... 55
3.9 Requirements of Law ............................................. 56
3.10 Taxes ........................................................... 57
3.11 Indemnity ....................................................... 60
3.12 Pro Rata Treatment .............................................. 61
3.13 Sharing of Payments ............................................. 62
3.14 Payments, Computations, Etc. .................................... 62
3.15 Mandatory Assignment ............................................ 64
SECTION 4 GUARANTY ......................................................... 64
4.1 The Guarantee ................................................... 64
4.2 Obligations Unconditional ....................................... 65
4.3 Reinstatement ................................................... 66
4.4 Certain Additional Waivers ...................................... 66
4.5 Remedies ........................................................ 66
4.6 Rights of Contribution .......................................... 67
4.7 Continuing Guarantee ............................................ 67
-i-
<PAGE>
SECTION 5 CONDITIONS
5.1 Closing Conditions .............................................. 68
5.2 Conditions to all Extensions of Credit .......................... 68
SECTION 6 REPRESENTATIONS AND WARRANTIES ................................... 70
6.1 Financial Condition ............................................. 70
6.2 No Change ....................................................... 71
6.3 Organization; Existence; Compliance with Law .................... 71
6.4 Power; Authorization; Enforceable Obligations ................... 71
6.5 No Legal Bar .................................................... 72
6.6 No Material Litigation .......................................... 72
6.7 No Default ...................................................... 72
6.8 Ownership of Property; Liens .................................... 72
6.9 Intellectual Property ........................................... 72
6.10 No Burdensome Restrictions ...................................... 73
6.11 Taxes ........................................................... 73
6.12 ERISA ........................................................... 73
6.13 Governmental Regulations, Etc. .................................. 75
6.14 Subsidiaries .................................................... 76
6.15 Purpose of Loans and Letters of Credit .......................... 76
6.16 Environmental Matters ........................................... 76
SECTION 7 AFFIRMATIVE COVENANTS ............................................ 77
7.1 Information Covenants ........................................... 77
7.2 Preservation of Existence and Franchises ........................ 80
7.3 Books and Record ................................................ 80
7.4 Compliance with Law ............................................. 80
7.5 Payment of Taxes and Other Indebtedness ......................... 81
7.6 Insurance ....................................................... 81
7.7 Maintenance of Property ......................................... 81
7.8 Performance of Obligations ...................................... 81
7.9 Use of Proceeds ................................................. 81
7.10 Audits/Inspections .............................................. 82
7.11 Financial Covenants ............................................. 82
7.12 Additional Credit Parties ....................................... 84
7.13 Ownership of Subsidiaries ....................................... 85
SECTION 8 NEGATIVE COVENANTS ............................................... 85
8.1 Indebtedness .................................................... 85
8.3 Nature of Business .............................................. 87
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc. ......... 87
8.5 Advances, Investments, Loans, etc. .............................. 88
8.6 Restricted Payments ............................................. 88
-ii-
<PAGE>
8.7 Prepayments of Indebtedness, etc. ............................... 88
8.8 Transactions with Affiliates .................................... 89
8.9 Fiscal Year ..................................................... 89
8.10 Limitation on Restrictions on Subsidiary Dividends
and Other Distributions, etc. .................................. 89
8.11 Issuance and Sale of Subsidiary Stock ........................... 89
8.12 Sale Leasebacks ................................................. 89
8.13 No Further Negative Pledges ..................................... 90
8.14 Operating Lease Obligations ..................................... 90
SECTION 9 EVENTS OF DEFAULT ................................................ 90
9.1 Events of Default ............................................... 90
9.2 Acceleration; Remedies .......................................... 93
SECTION 10 AGENCY PROVISIONS ............................................... 94
10.1 Appointment ..................................................... 94
10.2 Delegation of Duties ............................................ 94
10.3 Exculpatory Provisions .......................................... 94
10.4 Reliance on Communications ...................................... 95
10.5 Notice of Default ............................................... 95
10.6 Non-Reliance on Agent and Other Lenders ......................... 96
10.7 Indemnification ................................................. 96
10.8 Agent in its Individual Capacity ................................ 97
10.9 Successor Agent ................................................. 97
SECTION 11 MISCELLANEOUS ................................................... 97
11.1 Notices ......................................................... 97
11.2 Right of Set-Off ................................................ 99
11.3 Benefit of Agreement ............................................ 99
11.4 No Waiver; Remedies Cumulative .................................. 102
11.5 Payment of Expenses, etc ........................................ 102
11.6 Amendments, Waivers and Consents ................................ 102
11.7 Counterparts .................................................... 103
11.8 Headings ........................................................ 103
11.9 Survival of Indemnification ..................................... 103
11.10 Governing Law; Submission to Jurisdiction;
Venue; Arbitration ............................................. 103
11.11 Severability .................................................... 105
11.12 Entirely ........................................................ 105
11.13 Survival of Representations and Warranties ...................... 105
11.14 Binding Effect; Termination of Credit Agreement; etc ............ 105
11.15 Judgment Currency ............................................... 106
11.16 Confidentiality ................................................. 107
11.17 Source of Funds ................................................. 107
-iii-
<PAGE>
SCHEDULES*
Schedule 1.1A Existing Letters of Credit
Schedule 1.1B Calculation of MLA Cost
Schedule 1.1C Form of Notice of Borrowing
Schedule 1.1D Form of Notice of Extension/Conversion
Schedule 1.1E Investments
Schedule 1.1F Liens
Schedule 2.1(a) Lenders
Schedule 2.1(e) Form of Revolving Note
Schedule 2.3(b)-l Form of Competitive Bid Request
Schedule 2.3(b)-2 Form of Notice of Receipt of Competitive Bid Request
Schedule 2.3(c) Form of Competitive Bid
Schedule 2.3(e) Form of Competitive Bid Accept/Reject Letter
Schedule 2.3(i) Form of Competitive Note
Schedule 2.4(d) Form of Swingline Note
Schedule 2.5(e) Form of Foreign Currency Note
Schedule 5.1(e) Form of English Counsel Opinion
Schedule 6.4 Required Consents, Authorizations, Notices and Filings
Schedule 6.9 Intellectual Property
Schedule 6.12 ERISA Disclosures
Schedule 6.14 Subsidiaries
Schedule 6.16 Environmental Disclosures
Schedule 7.1(c) Form of Officer's Compliance Certificate
Schedule 7.12 Form of Joinder Agreement
Schedule 8.1 Indebtedness
Schedule 11.3 Form of Assignment and Acceptance
* Certain schedules are omitted. The Company agrees to furnish supplementally
any omitted schedules upon request.
-iv-
<PAGE>
SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
THIS SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT dated as of
February 20, 1997 (the "Amendment"), is by and among HUNT MANUFACTURING CO., a
Pennsylvania corporation ("Hunt"), HUNT EUROPE LIMITED, a U.K. corporation
("Hunt Europe each of Hunt and Hunt Europe hereinafter may be referred to as a
"Borrower" or, collectively, as the "Borrowers"), the subsidiaries of Hunt
identified on the signature pages hereto and such other subsidiaries of Hunt as
may from time to time become a party hereto (the "Guarantors"), the several
lenders identified on the signature pages hereto and such other lenders as may
from time to time become a party hereto (the "Lenders") and NATIONSBANK, N.A.,
as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, Hunt, the Guarantors. the Lenders and the Agent entered into
that certain Credit Agreement dated as of December 19, 1995 (as previously
amended, the "Existing Credit Agreement");
WHEREAS, the parties to the Existing Credit Agreement have agreed upon
a second amendment to the Existing Credit Agreement and for ease of reference
have agreed to set forth the entire agreement evidenced by the Existing Credit
Agreement, the amendment to the Existing Credit Agreement dated as of August 1,
1996 and such second amendment in this Amendment as a single document;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Amendment, the following terms shall have the meanings
specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a Guarantor
after the Closing Date by execution of a Joinder Agreement.
"Affiliate" means, with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person or (ii) directly or indirectly owning or holding
five percent (5%) or more of the equity interest in such Person. For purposes of
this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" shall have the meaning assigned to such term in the heading
hereof.
"Agent's Fee Letter" means that certain letter agreement, dated as of
December 19, 1995, between the Agent and Hunt, as amended, modified,
supplemented or replaced from time to time.
"Agent's Fees" shall have the meaning assigned to such term in Section
3.5(c).
"Alternative Asset " means, in connection with any proposed Asset Sale
pursuant to the terms of Section 8.4(b)(v)(B), assets (including stock or other
equity interests acquired in a transaction contemplated by and permitted under
Section 8.4(c) and whether new additional or replacement assets but exclusive of
assets acquired in the course of regular upkeep and maintenance) which are
similar in nature, purpose or business line to other assets owned or leased by
Hunt and/or its Subsidiaries prior to or at the time of the acquisition of such
assets and useful in the conduct of the business of Hunt and its Subsidiaries
as permitted to be conducted pursuant to Section 8.3.
"Amendment Effective Date" means February 20, 1997.
"Applicable Margin" means, for purposes of calculating the applicable
interest rate for any day for any Eurodollar Loan or the applicable rate of the
Facility Fee for any day for purposes of Section 3.5(a) or the applicable rate
of the Standby Letter of Credit Fee for any day for purposes of Section
3.5(b)(i), the appropriate applicable margin corresponding to the Consolidated
Leverage Ratio in effect as of the most recent Calculation Date:
2
<PAGE>
================================================================================
Applicable Applicable
Consolidated Margin for Applicable Margin for
Pricing Leverage Eurodollar Margin for Standby Letter
Level Ratio Loans Facility Fee of Credit Fee
- --------------------------------------------------------------------------------
I Equal to or less 27.5 bps 10.0 bps 27.5 bps
than 2.00 to 1.00
- --------------------------------------------------------------------------------
II Greater than 2.00 35.0 bps 15.0 bps 35.0 bps
to 1.00 but equal
to or less than
2.50 to 1.00
- --------------------------------------------------------------------------------
III Greater than 2.50 42.5 bps 20.0 bps 42.5 bps
to 1.00 but equal
to or less than
3.00 to 1.00
- --------------------------------------------------------------------------------
IV Greater than 3.00 50.0 bps 25.0 bps 50.0 bps
to 1.00
================================================================================
Determination of the appropriate Applicable Margins based on the Consolidated
Leverage Ratio shall be made as of each Calculation Date. The Consolidated
Leverage Ratio in effect as of a Calculation Date shall establish the Applicable
Margins that shall be effective as of the date designated by the Agent as the
Applicable Margin Change Date. The Agent shall determine the Applicable Margins
as of each Calculation Date and shall promptly notify the Borrowers and the
Lenders of the Applicable Margins so determined and of the Applicable Margin
Change Date. Such determinations by the Agent of the Applicable Margins shall be
conclusive absent demonstrable error.
"Applicable Margin Change Date" means, with respect to any Calculation
Date, a date designated by the Agent that is not more than five (5) Business
Days after the date pursuant to the terms of Section 7.1(a) or (b), as
applicable, that the Required Financial Information for such Calculation Date is
required to be delivered to the Agent and the Lenders.
"Application Period" shall have the meaning assigned to such term in
Section 8.4(b)(v)(B)(I).
"Asset Sale" means any sale, lease, transfer or other disposition
(including any such transaction effected by way of merger, amalgamation or
consolidation) by Hunt or any of its Subsidiaries subsequent to the Closing Date
of any asset (including stock in Subsidiaries of Hunt), including without
limitation any sale leaseback transaction (whether or not involving a Capital
Lease), but excluding (a) the sale of inventory in the ordinary course of
business for fair consideration, (b) the sale or disposition of machinery and
equipment no longer used or useful in the conduct of such Person's business, (c)
the sale of any asset having a book value of less than $100,000, (d) the Fresno
Asset Sale and (e) any Equity Transaction.
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<PAGE>
"Attributed Principal Amount" means, on any day, with respect to any
Permitted Receivables Financing entered into by Hunt, the aggregate amount (with
respect to any such transaction, the "Invested Amount") paid to, or borrowed by,
such Person as of such date under such Permitted Receivables Financing, minus
the aggregate amount received by the applicable Receivables Financier and
applied to the reduction of the Invested Amount under such Permitted Receivables
Financing.
"Available Reinvestment Amount" means, at any time, the aggregate
amount of the Excess Sale Proceeds of all asset sales made pursuant to Section
8.4(b)(v) with respect to which the related Application Period has not yet
expired, provided that such Excess Sale Proceeds (i) have not been applied to
the purchase, acquisition or construction of Alternative Assets as contemplated
by Section 8.4(b)(v)(B)(I) and (ii) have been applied to prepay the Loans as
contemplated by Section 8.4(b)(v)(B)(2) and Section 3.3(b)(iii).
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Bankruptcy Event" means, with respect to any Person, the occurrence of
any of the following with respect to such Person: (i) a court or governmental
agency having jurisdiction in the premises shall enter a decree or order for
relief in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or after the Closing Date in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for any substantial part of
its Property or ordering the winding up or liquidation of its affairs; or (ii)
there shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or after the Closing
Date in effect, or any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and such involuntary case or other
case, proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of sixty (60) consecutive days; or (iii) such Person shall
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or after the Closing Date in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent to the
appointment or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the benefit
of creditors; or (iv) such Person shall be unable to, or shall admit in writing
its inability to, pay its debts generally as they become due.
4
<PAGE>
"Bartol Family" means the wife, children and descendants of such
children of the late George E. Bartol III, their respective spouses and estates,
any trusts primarily for the benefit of any of the foregoing and the
administrators, executors and trustees of any such estates or trusts.
"Base Rate" means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of
(a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime
Rate in effect on such day. If for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable after due inquiry to ascertain the Federal Funds Rate for any reason,
including the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms of the Credit Agreement, the Base Rate shall be
determined without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist. Any
change in the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the Prime Rate
or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate determined
by reference to the Base Rate.
"Bevis" means Bevis Custom Furniture, Inc., an Alabama corporation and
a Wholly Owned Subsidiary of Hunt.
"Borrower" or "Borrowers" means the Persons identified as such in the
heading hereof, together with any successors and permitted assigns.
"Borrowers' Obligations" means, collectively, the Hunt Obligations and
the Hunt Europe Obligations.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina are authorized or
required by law to close, except that, (i) when used in connection with a
Revolving Loan that is a Eurodollar Loan, such day shall also be a day on which
dealings between banks are carried on in U.S. dollar deposits in London, England
and New York, New York and (ii) when used in connection with a Foreign Currency
Loan or a Foreign Letter of Credit, such day shall also be a day on which
dealings in Pounds Sterling are being carried on between banks in London,
England.
"Calculation Date" means the last day of each fiscal quarter of Hunt.
"Capital Lease" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP is accounted for as a capital lease on the balance sheet of
that Person.
5
<PAGE>
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (b) U.S. dollar denominated
time deposits and certificates of deposit of (i) any Lender, (ii) any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case
with maturities of not more than 270 days from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or
better by S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within six months of the date of acquisition, (d) repurchase agreements
entered into by a Person with a bank or trust company (including any of the
Lenders) or recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America in which such Person shall have a perfected first priority
security interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of the
repurchase obligations, (e) obligations of any State of the United States or any
political subdivision thereof, the interest with respect to which is exempt from
federal income taxation under Section 103 of the Code, having a long term rating
of at least AA-3 or AA- by Moody's or S&P, respectively, and maturing within
three years from the date of acquisition thereof, (f) Investments in municipal
auction preferred stock (i) rated AAA (or the equivalent thereof) or better by
S&P or AAA (or the equivalent thereof) or better by Moody's and (ii) with
dividends that reset at least once every 365 days and (g) Investments,
classified in accordance with GAAP as current assets, in money market investment
programs registered under the Investment Company Act of 1940, as amended, which
are administered by reputable financial institutions having capital of at least
$100,000,000 and the portfolios of which are limited to Investments of the
character described in the foregoing subdivisions (a), (b), (c), (e) and (f).
"Change of Control" means the occurrence of any of the following
events: (i) any Person or two or more Persons acting in concert, other than
members of the Bartol Family, shall have acquired beneficial ownership, directly
or indirectly, of, or shall have acquired by contract or otherwise, or shall
have entered into a contract or arrangement that, upon consummation, will result
in its or their acquisition of, control over, Voting Stock of Hunt (or other
securities convertible into such Voting Stock) representing 35% or more of the
combined voting power of all Voting Stock of Hunt, or (ii) during any period of
up to 24 consecutive months, commencing after the Closing Date, individuals who
at the beginning of such 24 month period were directors of Hunt (together with
any new director whose election by Hunt's Board of Directors or whose nomination
for election by Hunt's shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors of Hunt then in office. As used herein, "beneficial ownership" shall
have the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
6
<PAGE>
"Closing Date" means December 19, 1995.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto, as interpreted by the rules and regulations issued
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed also to refer to any successor sections.
"Commitment" means (i) with respect to each Lender, the Revolving
Commitment of such Lender, (ii) with respect to the Swingline Lender, the
Swingline Commitment and (iii) with respect to the Issuing Lender, the LOC
Commitment.
"Commitment Percentage" means, for any Lender, the percentage
identified as its Commitment Percentage on Schedule 2.1(a), as such percentage
may be modified in connection with any assignment made in accordance with the
provisions of Section 11.3.
"Competitive Bid" means an offer by a Lender to make a Competitive Loan
pursuant to the terms of Section 2.3.
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Lender in accordance with the provisions of Section 2.3, the fixed rate of
interest offered by the Lender making the Competitive Bid.
"Competitive Bid Request" means a request by Hunt for Competitive Bids
in accordance with the provisions of Section 2.3(b).
"Competitive Bid Request Fee" shall have the meaning assigned to such
term in Section 3.5(d).
"Competitive Loan" means a loan made by a Lender in its discretion
pursuant to the provisions of Section 2.3.
"Competitive Loan Lenders" means, at any time, those Lenders which have
Competitive Loans outstanding.
"Competitive Loan Maximum Amount" shall have the meaning assigned to
such term in Section 2.3(a).
"Competitive Note" means a promissory note of Hunt in favor of a Lender
delivered pursuant to Section 2.3(i) and evidencing the Competitive Loans, if
any, of such Lender, as such promissory note may be amended, modified, restated
or replaced from time to time.
7
<PAGE>
"Consolidated Capital Expenditures" means, for any period, all capital
expenditures (exclusive of expenditures for acquisitions permitted pursuant to
the terms of Section 8.4(a) or (c)) of Hunt and its consolidated Subsidiaries
for such period, as determined in accordance with GAAP.
"Consolidated Capitalization" means, at any time, the sum of (i)
Consolidated Net Worth at such time plus (ii) Consolidated Funded Indebtedness
at such time.
"Consolidated EBIT" means, for any period, the sum of (i) Consolidated
Net Income for such period but excluding (A) non-cash charges associated with
exercise of stock options, (B) unusual items, including but not limited to
refinancing, restructuring or reorganizational charges, (C) effects of changes
in accounting principles and (D) extraordinary items. plus (ii) an amount
which, in the determination of Consolidated Net Income for such period, has
been deducted for (A) Consolidated Interest Expense for such period and (B)
total Federal, state, local and foreign income taxes of Hunt and its
consolidated Subsidiaries for such period.
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated EBIT for such period, plus (ii) an amount which, in the
determination of Consolidated Net Income for such period, has been deducted for
consolidated depreciation and amortization expense of Hunt and its consolidated
Subsidiaries for such period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any Calculation
Date, the ratio of (i) Consolidated EBITDA for the four-quarter period ended as
of such Calculation Date minus Consolidated Capital Expenditures for the
four-quarter period ended as of such Calculation Date minus Restricted Payments
by Hunt and its consolidated Subsidiaries for the four-quarter period ended as
of such Calculation Date, to (ii) Consolidated Interest Expense for the
four-quarter period ended as of such Calculation Date plus Consolidated
Scheduled Funded Indebtedness Payments for the four-quarter period ended as of
such Calculation Date.
"Consolidated Funded Indebtedness" means, at any time, the outstanding
principal amount of all Funded Indebtedness, without duplication, of Hunt and
its consolidated Subsidiaries at such time.
"Consolidated Funded Indebtedness to Capitalization Ratio" means, as of
any Calculation Date, the ratio of (i) Consolidated Funded Indebtedness as of
such Calculation Date to (ii) Consolidated Capitalization as of such Calculation
Date.
"Consolidated Interest Coverage Ratio" means, for any period, the ratio
of (i) Consolidated EBIT for such period to (ii) Consolidated Interest Expense
for such period.
8
<PAGE>
"Consolidated Interest Expense" means, for any period, all interest
expense of Hunt and its consolidated Subsidiaries for such period, as determined
in accordance with GAAP but including in any event all imputed interest,
whether in the form of "yield", "discount" or other similar item, that accrues
in respect of the Attributed Principal Amount of any Permitted Receivables
Financing.
"Consolidated Leverage Ratio" means, as of any Calculation Date, the
ratio of (i) Consolidated Funded Indebtedness as of such Calculation Date at
such time to (ii) Consolidated EBITDA for the four fiscal-quarter period ended
as of such Calculation Date.
"Consolidated Net Income" means, for any period, net income after taxes
for such period for Hunt, and its consolidated Subsidiaries, as determined in
accordance with GAAP.
"Consolidated Net Worth" means, as of any date, total shareholders'
equity of Hunt and its consolidated Subsidiaries as of such date, as determined
in accordance with GAAP.
"Consolidated Scheduled Funded Indebtedness Payments" means, as of any
Calculation Date, the scheduled payments of principal on Funded Indebtedness for
Hunt and its consolidated Subsidiaries for the twelve month period ending on
such Calculation Date.
"Consolidated Total Assets" means, at any time, all items which, in
accordance with GAAP, would be classified as assets on a consolidated balance
sheet of Hunt as of such time minus the amount of Contingent Liabilities for
Receivables at such time as determined in accordance with GAAP.
"Contingent Liabilities for Receivables" means, at any time, the
aggregate amount of recourse (solely for defaulted or delinquent receivables)
against Hunt and all of its Subsidiaries under all Permitted Receivables
Financings.
"Controlled Group" means (i) the controlled group of corporations as
defined in Section 414(b) of the Code and the applicable regulations thereunder,
or (ii) the group of trades or businesses under common control as defined in
Section 414(c) of the Code and the applicable regulations thereunder, of which
Hunt or any of its Subsidiaries is a member.
"Credit Agreement" means the Existing Credit Agreement as amended and
restated by this Amendment.
"Credit Documents" means a collective reference to the Credit
Agreement, the Notes, the LOC Documents, each Joinder Agreement, the Agent's Fee
Letter and all other related agreements and documents issued or delivered
thereunder or pursuant thereto.
9
<PAGE>
"Credit Party" means any of the Borrowers and the Guarantors.
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Determination Date" means:
(a) the date two Business Days prior to the date any Foreign Currency
Loan is made or any Foreign Letter of Credit is issued;
(b) the date two Business Days prior to the date any Foreign Currency
Loan is continued from the current Interest Period for such Foreign Currency
Loan into a subsequent Interest Period;
(c) the date of any drawing under any Foreign Letter of Credit;
(d) the last Business Day of each March, June, September and December;
or
(e) the date of any reduction of the Revolving Committed Amount
pursuant to the terms of Section 3.4(a).
"Dollars" and "$" means dollars in lawful currency of the United States
of America.
"Dollar Amount" means (a) with respect to Dollars or an amount
denominated in Dollars, such amount and (b) with respect to an amount of Pounds
Sterling or an amount denominated in Pounds Sterling, the Dollar Equivalent of
such amount on the applicable date contemplated in this Amendment.
"Dollar Equivalent" means, on any date, with respect to an amount
denominated in Pounds Sterling, the amount of Dollars into which the Agent
could, in accordance with its practice from time to time in the interbank
foreign exchange market, convert such amount of Pounds Sterling at its spot rate
of exchange (inclusive of all reasonable related costs of conversion) applicable
to the relevant transaction at or about 10:00 A.M., Charlotte, North Carolina
time, on such date.
"Domestic Credit Party" means any one of Hunt and each of the
Guarantors which is a Domestic Subsidiary of the Borrower.
"Domestic Letter of Credit" means (i) any letter of credit issued by
the Issuing Lender for the account of Hunt in accordance with the terms of
Section 2.2 and (ii) each Existing Letter of Credit.
10
<PAGE>
"Domestic LOC Committed Amount" shall have the meaning assigned to such
term in Section 2.2.
"Domestic LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become, available to be
drawn under Domestic Letters of Credit then outstanding, assuming compliance
with all requirements for drawings referred to in such Domestic Letters of
Credit plus (ii) the aggregate amount of all drawings under Domestic Letters of
Credit honored by the Issuing Lender but not theretofore reimbursed.
"Domestic Subsidiary" means, with respect to any Person, any Subsidiary
of such Person which is incorporated or organized under the Laws of any State of
the United States or the District of Columbia.
"Eligible Assignees" means (i) any Lender or any Affiliate or
Subsidiary of a Lender, and (ii) any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D of the
Securities and Exchange Commission) reasonably acceptable to the Agent and Hunt.
"Environmental Laws" means any and all lawful and applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or to
emissions, discharges releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"Equity Transaction" means any issuance by Hunt or any of its
Subsidiaries of (A) shares of its capital stock, other than the issuance to Hunt
of the capital stock of any of its Subsidiaries, (B) any shares of its capital
stock pursuant to the exercise of options or warrants or (C) any shares of its
capital stock pursuant to the conversion of any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" means an entity, whether or not incorporated, which
is under common control with any Credit Party within the meaning of Section
4001(a)(14) of ERISA, or is a member of a group which includes Hunt and which is
treated as a single employer under Sections 414(b), (c), (m), or (o) of the
Code.
"Eurodollar Loan" means any Loan bearing interest at a rate determined
by reference to the Eurodollar Rate.
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<PAGE>
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Loan comprising part of the same borrowing (including conversions, extensions
and renewals), a per annum interest rate determined pursuant to the following
formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that percentage
(expressed as a decimal) which is in effect from time to time under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor), as
such regulation may be amended from time to time or any successor regulation, as
the maximum reserve requirement (including, without limitation. any basic,
supplemental, emergency, special, or marginal reserves) applicable with respect
to Eurocurrency liabilities as that term is defined in Regulation D (or against
any other category of liabilities that includes deposits by reference to which
the interest rate of Eurodollar Loans is determined), whether or not Lender has
any Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as
such shall be deemed subject to reserve requirements without benefits of credits
for proration, exceptions or offsets that may be available from time to time to
a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
An "Excess Sale Even" shall be deemed to have occurred if either (1)
the net book value of all assets sold pursuant to the terms of Section 8.4(b)(v)
during the preceding twelve (12) months exceeds 15% of Consolidated Total Assets
as determined at the end of the immediately preceding fiscal year or (2) the net
book value of all assets sold pursuant to the terms of Section 8.4(b)(v) during
the preceding thirty-six (36) months exceeds 30% of Consolidated Total Assets as
determined at the end of the fiscal year nearest to the date thirty-six (36)
months prior to such sale of assets.
"Excess Sale Proceeds" means, with respect to any Excess Sale Event,
either (1) if an Excess Sale Event is deemed to occur pursuant to clause (1) of
the definition thereof, the amount by which the Net Proceeds of all such asset
sales made during the preceding twelve (12) months exceeds 15% of Consolidated
Total Assets as determined at the end of the immediately preceding fiscal year
or (2) if an Excess Sale Event is deemed to occur pursuant to clause (2) of the
definition thereof, the amount by which the Net Proceeds of all such asset sales
made during the preceding thirty-six (36) months exceeds 30% of Consolidated
Total Assets as determined at the end of the fiscal year nearest to the date
thirty-six (36) months prior to such sale of assets.
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<PAGE>
"Existing Credit Agreement" shall have the meaning assigned to such
term in the preliminary statements hereto.
"Existing Letter of Credit" means any one of the letters of credit
described by date of issuance, letter of credit number, undrawn amount, name of
beneficiary and date of expiry on Schedule 1.1A.
"Facility Fee" shall have the meaning assigned to such term in Section
3.5(a).
"Facility Fee Calculation Period" shall have the meaning assigned to
such term in Section 3.5(a).
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate of interest per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (A) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day and (B) if no such rate is
so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to the Agent on such day on such
transactions as determined by the Agent.
"Fiscal Year End" means, for any fiscal year of Hunt and its
Subsidiaries, the Sunday nearest the last day of November.
"Foreign Currency Commitment Percentage" means, for any Lender, the
percentage identified as its Foreign Currency Commitment Percentage on Schedule
2.1 (a), as such percentage may be modified in connection with any assignment
made in accordance with the provisions of Section 11.3.
"Foreign Currency Committed Amount" shall have the meaning assigned to
such term in Section 2.5(a).
"Foreign Currency Equivalent" means, on any date, with respect to an
amount denominated in Dollars, the amount of Pounds Sterling into which the
Agent could, in accordance with its practice from time to time in the interbank
foreign exchange market, convert such amount of Dollars at its spot rate of
exchange (inclusive of all reasonable related costs of conversion) applicable to
the relevant transaction at or about 10:00 A.M., Charlotte, North Carolina time,
on such date.
13
<PAGE>
"Foreign Currency Loans" shall have the meaning assigned to such term
in Section 2.5(a).
"Foreign Currency Note" means a promissory note of Hunt Europe in favor
of a Lender delivered pursuant to Section 2.5(e) and evidencing the Foreign
Currency Loans of such Lender, as such promissory note may be amended, modified,
restated or replaced from time to time.
"Foreign Letter of Credit" means any letter of credit issued by the
Issuing Lender for the account of Hunt Europe in accordance with the terms of
Section 2.6.
"Foreign LOC Committed Amount" shall have the meaning assigned to such
term in Section 2.6.
"Foreign LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become, available to be
drawn under Foreign Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Foreign Letters of Credit plus
(ii) the aggregate amount of all drawings under Foreign Letters of Credit
honored by the Issuing Lender but not theretofore reimbursed.
"Foreign Subsidiary means, with respect to any Person, any Subsidiary
of such Person which is not a Domestic Subsidiary.
"Fresno Asset Sale" means the sale by Hunt of its former distribution
center and related assets located in Fresno, California and having a book value
of not more than $1,950,000.
"Funded Indebtedness" means, with respect to any Person, without
duplication, (i) all Indebtedness of such Person for borrowed money, (ii) all
purchase money Indebtedness of such Person, including without limitation the
principal portion of all obligations of such Person under Capital Leases, (iii)
all Guaranty Obligations of such Person with respect to outstanding Funded
Indebtedness of another Person, (iv) with respect to Hunt, the outstanding
Attributed Principal Amount under any Permitted Receivables Financing and (v)
all Funded Indebtedness of another Person secured by a Lien on any Property of
such Person, whether or not such Funded Indebtedness has been assumed. The
Funded Indebtedness of any Person shall include the Funded Indebtedness of any
partnership or joint venture in which such Person is a general partner or joint
venturer.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis and subject to the terms of Section 1.3.
14
<PAGE>
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantor" means:
(i) with respect to the Hunt Obligations, (A) each of those Persons
identified as a "Guarantor" on the signature pages hereto and (B) each
Additional Credit Party which may hereafter execute a Joinder
Agreement, together with the successors and permitted assigns of any
such Person referred to in clause (A) or (B) of this clause (i); and
(ii) with respect to the Hunt Europe Obligations, (A) Hunt, (B) each
of those Persons identified as a "Guarantor" on the signature pages
hereto and (C) each Additional Credit Party which may hereafter execute
a Joinder Agreement, together with the successors and permitted assigns
of any such Person referred to in clause (A), (B) or (C) of this clause
(ii).
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for depositor collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any Property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters issued to a creditor of any non-Affiliate or similar
agreements or arrangements) for the benefit of any holder of Indebtedness of
such other Person, (iii) to lease or purchase Property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness, or (iv)
to otherwise assure or hold harmless the holder of such Indebtedness against
loss in respect thereof. The amount of any Guaranty Obligation under the Credit
Agreement shall (subject to any limitations set forth therein) be deemed to be
an amount equal to the outstanding principal amount (or maximum principal
amount, if larger) of the Indebtedness in respect of which such Guaranty
Obligation is made.
"Hunt" shall have the meaning assigned to such term in the heading
hereof.
"Hunt Data" means Hunt Data Products, Inc., a Delaware corporation and
a Wholly Owned Subsidiary of Hunt.
"Hunt Europe" shall have the meaning assigned to such term in the
heading hereof.
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"Hunt Europe Obligations" means, without duplication, all of the
obligations of Hunt Europe to the Lenders (including the Issuing Lender) and
the Agent, whenever arising, under the Credit Agreement, the Foreign Currency
Notes or any of the other Credit Documents.
"Hunt Holding" means Hunt Holdings, Inc., a Delaware corporation and a
Wholly Owned Subsidiary of Hunt.
"Hunt Obligations" means without duplication, all (i) of the
obligations of Hunt to the Lenders (including the Issuing Lender) and the Agent,
whenever arising, under the Credit Agreement, the Notes or any of the other
Credit Documents and (ii) all liabilities and obligations, whenever arising,
owing from Hunt to any Lender or any affiliate of a Lender arising under
interest rate protection agreements, foreign currency exchange agreements,
commodity purchase or option agreements or other interest or exchange rate or
commodity price hedging agreements.
"Hunt X-Acto" means Hunt X-Acto, Inc., a Pennsylvania corporation and a
Wholly Owned Subsidiary of Hunt.
"Indebtedness" of any Person means (i) all obligations of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest payments are
customarily made, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person
(other than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all obligations
of such Person issued or assumed as the deferred purchase price of Property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within twelve (12) months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such Person,
(v) all obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (vi) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vii) all Guaranty Obligations of
such Person, (viii) the principal portion of all obligations of such Person
under Capital Leases, (ix) all obligations of such Person in respect of interest
rate protection agreements, foreign currency exchange agreements, commodity
purchase or option agreements or other interest or exchange rate or commodity
price hedging agreements, (x) the maximum amount of all letters of credit issued
or bankers' acceptances facilities created for the account of such Person and,
without duplication, all drafts drawn thereunder (to the extent unreimbursed),
(xi) with respect to Hunt, the outstanding Attributed Principal Amount under any
Permitted Receivables Financing and (xii) all preferred stock issued by such
Person and required by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due, by a fixed date. The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which
such Person is a general partner or a joint venturer.
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"Interbank Offered Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate equal to (i) with respect to
any Revolving Loan that is a Eurodollar Loan, for the Interest Period applicable
thereto, the per annum rate of interest determined by the Agent on the basis of
the offered rates for deposits in Dollars (for a period of time corresponding to
such Interest Period and commencing on the first day of such Interest Period)
which appear on Telerate Page 3750 as of 11:00 a.m. (London time) two Business
Days before the first day of such Interest Period (provided that if at least two
such offered rates appear on Telerate Page 3750, the rate in respect of such
Interest Period will be the arithmetic mean of such offered rates), and (ii)
with respect to any Foreign Currency Loan, for the Interest Period applicable
thereto, the sum of (a) the per annum rate of interest determined by the Agent
on the basis of the offered rates for deposits in Pounds Sterling (for a period
of time corresponding to such Interest Period and commencing, on the first day
of such Interest Period) which appear on Telerate Page 3750 as of 11:00 a.m.
(London time) two Business Days before the first day of such Interest Period
(provided that if at least two such offered rates appear on Telerate Page 3750,
the rate in respect of such Interest Period will be the arithmetic mean of such
offered rates) plus (b) the applicable MLA Cost. If for any reason the foregoing
rates are unavailable from the Telerate service, then the Interbank Offered Rate
shall be a market rate for the applicable Loan for the applicable Interest
Period as determined by the Agent plus, in the case of any Foreign Currency
Loan, the applicable MLA Cost.
"Interest Payment Date" means (i) as to any Base Rate Loan, the last
day of each March, June, September and December, the date of repayment of
principal of such Loan and the Termination Date and (ii) as to any Eurodollar
Loan, the last day of each Interest Period for such Loan and on the Termination
Date, and in addition where the applicable Interest Period is more than 3
months, then also on the date 3 months from the beginning of the Interest
Period, and each 3 months thereafter. If an Interest Payment Date falls on a
date which is not a Business Day, such Interest Payment Date shall be deemed to
be the next succeeding Business Day, except that in the case of Eurodollar Loans
where the next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding Business Day.
"Interest Period" means (i) as to Eurodollar Loans, a period of one,
two, three or six month's duration, as the applicable Borrower may elect,
commencing in each case, on the date of the borrowing (including conversions,
extensions and renewals), (ii) as to Competitive Loans, a period commencing in
each case on the date of the borrowing and ending on the date specified in the
applicable Competitive Bid whereby the offer to make such Competitive Loan was
extended (such ending date in any event to be not less than 7 nor more than 180
days from the date of the borrowing) and (iii) as to Swingline Loans, a period
commencing in each case on the date of the borrowing and ending on the date
agreed to by Hunt and the Swingline Lender in accordance with the provisions of
Section 2.4(b)(i) (such ending date in any event to be not more than seven (7)
Business Days from the date of borrowing); provided, however, (A) if any
Interest Period would end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day (except that in the
case of Eurodollar Loans where the next succeeding Business Day falls in the
next succeeding calendar month, then on the next preceding Business Day), (B) no
Interest Period shall extend beyond the Termination Date, and (C) in the case of
Eurodollar Loans, where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the Interest Period
is to end, such Interest Period shall end on the last day of such calendar
month.
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"Interim Foreign Currency Rate" means, for any day, with respect to any
Foreign Currency Loan or any unreimbursed drawing under a Foreign Letter of
Credit, a rate per annum equal to the sum of (i) the average rate at which
overnight deposits in Pounds Sterling and approximately equal in principal
amount to the applicable Foreign Currency Loan or unreimbursed drawing under a
Foreign Letter of Credit are obtainable by the Agent (or, in the case of any
Foreign Letter of Credit, the Issuing Lender) on such day in the interbank
market, adjusted to reflect any direct or indirect costs of obtaining such
deposits plus (ii) the applicable MLA Cost. The Interim Foreign Currency Rate
shall be determined for each day by the Agent or Issuing Lender, as appropriate,
and such determination shall be conclusive absent manifest error.
"Investment", in any Person, means any loan or advance to such Person,
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person, including,
without limitation, any Guaranty Obligation incurred for the benefit of such
Person.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" shall have the meaning assigned to such term in
Section 3.5(b)(iii).
"Joinder Agreement" means a Joinder Agreement substantially in the form
of Schedule 7.12, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 7.12.
"Lenders" means each of the Persons identified as a "Lender" on the
signature pages hereto, and each Person which may become a Lender by way of
assignment in accordance with the terms of Section 11.3(b), together with their
successors and permitted assigns.
"Letter of Credit" means any Domestic Letter of Credit or any Foreign
Letter of Credit.
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"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform Commercial Code
as adopted and in effect in the relevant jurisdiction or other similar recording
or notice statute, and any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans (or a portion of any
Revolving Loan bearing interest at the Base Rate or the Eurodollar Rate and
referred to as a Base Rate Loan or a Eurodollar Loan), the Competitive Loans,
the Swingline Loans (or any Swingline Loan bearing interest at the Base Rate or
the Quoted Rate and referred to as a Base Rate Loan or a Quoted Rate Swingline
Loan) and/or the Foreign Currency Loans (or any Foreign Currency Loan referred
to as a Eurodollar Loan), individually or collectively, as appropriate.
"LOC Commitment" means the commitment of the Issuing Lender to (i)
issue Domestic Letters of Credit in an aggregate face amount at any time
outstanding (together with the amounts of any unreimbursed drawings thereon) of
up to the Domestic LOC Committed Amount and (ii) issue Foreign Letters of Credit
in an aggregate face amount at any time outstanding (together with the amounts
of any unreimbursed drawings thereon) of up to the Foreign LOC Committed Amount.
"LOC Documents" means, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for such
obligations.
"LOC Obligations" means, collectively, the Domestic LOC Obligations and
the Foreign LOC Obligations.
"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), operations, business, assets, liabilities or
prospects of Hunt and its Subsidiaries taken as a whole, (ii) the ability of any
Credit Party to perform any material obligation under the Credit Documents or
(iii) the material rights and remedies of the Lenders under the Credit
Documents.
"Material Subsidiary" means (i) each of Bevis, Hunt Data, Hunt
Holdings, Hunt X-Acto and Seal and (ii) any other direct or indirect Domestic
Subsidiary of Hunt which at any time on or after the Closing Date has total
assets (as determined in accordance with GAAP) equal to or greater than
$1,000,000, provided that the aggregate total assets (as determined in
accordance with GAAP) at any time of all Subsidiaries of Hunt excluded from this
definition of "Material Subsidiary" shall not exceed 10% of Consolidated Total
Assets as of the then most recent Calculation Date with respect to which the
Agent shall have received the Required Financial Information.
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"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Laws, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"MLA Cost" means, with respect to any Foreign Currency Loan made by any
Lender, the cost imputed to such Lender of compliance with the Mandatory Liquid
Assets requirements of the Bank of England during the Interest Period applicable
to such Foreign Currency Loan, expressed as a rate per annum and determined in
accordance with Schedule 1.1B.
"Moody's" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Sections 3(37) or 4001 (a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which Hunt, any Subsidiary of
Hunt or any ERISA Affiliate and at least one employer other than Hunt, any
Subsidiary of Hunt or any ERISA Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
"Net Proceeds" means the gross proceeds received by Hunt or any of its
Subsidiaries from time to time in connection with any Asset Sale or Equity
Transaction, net of (i) the out-of-pocket costs and expenses incurred by such
Person in connection with and attributable to such Asset Sale or Equity
Transaction, as applicable, and (ii) in the case of any Asset Sale, the amount
used to repay any Indebtedness that both (a) was incurred to finance the
acquisition or construction by Hunt or any of its Subsidiaries of the related
asset (or incurred as a refinancing of any such acquisition or construction
Indebtedness) and (b) is secured by a Lien on such related asset.
"Non-Excluded Taxes" means such term as is defined in Section 3.10.
"Note" means any Revolving Note, any Competitive Note, the Swingline
Note or any Foreign Currency Note, as the context may require.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 1.1C, as required by Section 2.1(b)(i) or
Section 2.5(b)(i).
"Notice of Extension/Conversion" means the written notice of extension
or conversion in substantially the form of Schedule 1.1D, as required Section
3.2.
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"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any Property (whether real, personal or mixed) which is not a
Capital Lease other than any such lease in which that Person is the lessor.
"Participation Interest" means, the extension of credit by a Lender by
way of a purchase of a participation in any Letters of Credit or LOC Obligations
as provided in Section 2.2(c) or Section 2.6(c), in Swingline Loans as provided
in Section 2.4(b)(iii) or in any Loans as provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"Permitted Investments" means Investments which are either (i) cash and
Cash Equivalents; (ii) accounts receivable created, acquired or made by Hunt or
any of its Subsidiaries in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (iii) Investments
consisting of stock, obligations, securities or other property received by Hunt
or any of its Subsidiaries in settlement of accounts receivable (created in the
ordinary course of business) from bankrupt obligors; (iv) Investments existing
as of the Closing Date and set forth in Schedule 1.1E; (v) Investments in Hunt
Europe and any Subsidiary of Hunt which is a Guarantor; (vi) Investments in any
Subsidiary of Hunt which is not a Guarantor, provided that the aggregate
outstanding principal amount of all such Investments plus all investments made
pursuant to subsection (xv) of this definition shall not exceed, as of the date
made, 10% of Consolidated Net Worth as of the then most recent Calculation Date
with respect to which the Agent shall have received the Required Financial
Information; (vii) Guaranty Obligations permitted by Section 8.1; (viii)
acquisitions permitted by Section 6.15 and Section 8.4(c); (ix) transactions
permitted by Section 8.8; (x) loans to directors, officers, employees, agents,
customers or suppliers that do not exceed an aggregate principal amount of
$1,000,000 at any one time outstanding; (xi) Investments received as
consideration in connection with or arising by virtue of any merger,
consolidation, sale or other transfer of assets permitted under Section 8.4;
(xii) Investments by Hunt in a Subsidiary or Affiliate in connection with a
Permitted Receivables Financing; (xiii) intercompany Indebtedness of Bevis, Seal
and Hunt Europe to Hunt incurred in the ordinary course of business and
consistent with the past practices of such Persons or for cash management
purposes and, in the case of Hunt Europe, not exceeding $10,000,000 at any time
outstanding; (xiv) in the case of any Foreign Subsidiary of Hunt, Investments
which may be denominated in a currency other than Dollars, having similar
liquidity, duration and credit quality of issuer as Investments of the types
described in the definition of "Cash Equivalents" set forth in this Section 1.1;
(xv) Investments in joint ventures and partnerships, provided that the aggregate
outstanding principal amount of all such Investments plus all Investments made
pursuant to subsection (vi) of this definition shall not exceed, as of the
date made, 10% of Consolidated Net Worth as of the then most recent Calculation
Date with respect to which the Agent shall have received the Required Financial
Information; and (xvi) other Investments of types not otherwise described under
subsections (i) - (xv) of this definition, provided that all such Investments
made pursuant to this subsection (xvi) shall not exceed an aggregate principal
amount of $2,000,000 at any one time outstanding.
21
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"Permitted Liens" means:
(1) Liens in favor of the Agent on behalf of the Lenders;
(ii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other liens
imposed by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, provided that such
Liens secure only amounts not yet due and payable or, if due and
payable, are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such Lien
is not yet subject to foreclosure, sale or loss on account thereof);
(iv) Liens (other than Liens created or imposed under ERISA) incurred
or deposits made by Hunt or any of its Subsidiaries in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to secure
the performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(v) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall,
within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been discharged
within 30 days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect, impairing
the use of the encumbered Property for its intended purposes;
22
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(vii) Liens on Property securing purchase money Indebtedness
(including Capital Leases) to the extent permitted under Section
8.1(c), provided that any such Lien attaches to such Property
concurrently with or within 90 days after the acquisition thereof;
(viii) leases or subleases granted to others not interfering in any
material respect with the business of any Credit Party;
(ix) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by
the Credit Agreement;
(x) Liens created or deemed to exist in connection with a Permitted
Receivables Financing (including any related filings of any financing
statements), but only to the extent that any such Lien relates to
the applicable receivables and related property actually sold,
contributed or otherwise conveyed pursuant to such transaction;
(xi) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(xii) Liens existing as of the Closing Date and set forth on Schedule
1.1F; provided that (a) no such Lien shall at any time be extended to
or cover any property of any Credit Party other than the property
subject thereto on the Closing Date and (b) the principal amount of the
Indebtedness secured by such Liens shall not be increased; and
(xiii) other Liens; provided that the aggregate outstanding principal
amount of all Indebtedness secured by such Liens plus the aggregate
outstanding principal amount of all Indebtedness of all Subsidiaries of
Hunt plus the aggregate outstanding obligations incurred in
transactions permitted by Section 8.12 shall not, at any time, exceed
20% of Consolidated Net Worth as of the then most recent Calculation
Date with respect to which the Agent shall have received the Required
Financial Information.
"Permitted Receivables Financing" means any transaction involving one
or more sales, contributions or other conveyances by Hunt of any accounts
receivable to a Subsidiary or Affiliate of Hunt (with respect to any such
transaction, the "Receivables Financing SPC"), which Receivables Financing SPC
then (x) sells (as determined in accordance with GAAP) any such receivables (or
an interest therein) to any Person that is not a Subsidiary or Affiliate of Hunt
(with respect to any such transaction, the "Receivables Financier"), (y) borrows
from such Receivables Financier and secures such borrowings by a pledge of such
receivables or (z) otherwise finances its acquisition of such receivables and,
in connection therewith, conveys an interest in such receivables to the
Receivables Financier, provided that (i) the aggregate Attributed Principal
Amount for all such receivables financings shall not at any time exceed
$35,000,000, (ii) such receivables financing shall not involve any recourse to
Hunt or any of its Subsidiaries for any reason other than (A) repurchases of
non-eligible receivables or (B) indemnifications for losses other than credit
losses related to the receivables sold in such financing, (iii) such receivables
financing shall not include any Guaranty Obligations of Hunt or any of its
Subsidiaries, (iv) the Agent shall be reasonably satisfied with the structure of
and documentation for any such transaction and that the terms of such
transaction, including the discount at which receivables are sold and any
termination events, shall be (in the good faith understanding of the Agent)
consistent with those prevailing in the market for similar transactions
involving a receivables originator/servicer of similar credit quality and a
receivables pool of similar characteristics and (v) the documentation for such
transaction shall not be amended or modified without the prior written approval
of the Agent.
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"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section 3(3) of
ERISA) which is covered by ERISA and with respect to which Hunt, any Subsidiary
of Hunt or any ERISA Affiliate is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" within
the meaning of Section 3(5) of ERISA.
"Pounds Sterling" means the lawful currency of the United Kingdom.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by NationsBank as its prime rate in effect at its principal
office in Charlotte, North Carolina, with each change in the Prime Rate being
effective on the date such change is publicly announced as effective (it being
understood and agreed that the Prime Rate is a reference rate used by
NationsBank in determining interest rates on certain loans and is not intended
to be the lowest rate of interest charged on any extension of credit by
NationsBank to any debtor).
"Pro Forma Basis" means, with respect to any transaction, that such
transaction shall be deemed to have occurred as of the first day of the four
fiscal-quarter period ending as of the most recent Calculation Date preceding
the date of such transaction with respect to which the Agent has received the
Required Financial Information. As used herein, "transaction" means (i) any
incurrence, assumption or retirement of Indebtedness as referred to in Section
8.1(i)(i), (ii) any sale or other disposition of assets as referred to in
Section 8.3(b)(iv) or (iii) any acquisition of capital stock or securities or
any purchase, lease or other acquisition of Property as referred to in Section
8.4(c). With respect to any transaction of the type described in clause (i)
above regarding Indebtedness which has a floating or formula rate, the implied
rate of interest for such Indebtedness for the applicable period for purposes of
this definition shall be determined by utilizing the rate which is or would be
in effect with respect to such Indebtedness as at the relevant date of
determination.
24
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"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Quoted Rate" means, with respect to any Quoted Rate Swingline Loan,
the fixed percentage rate per annum offered by the Swingline Lender and accepted
by Hunt with respect to such Swingline Loan as provided in accordance with the
provisions of Section 2.4.
"Quoted Rate Swingline Loan" means a Swingline Loan bearing interest at
a Quoted Rate.
"Receivables Financier" shall have the meaning assigned to such term in
the definition of "Permitted Receivables Financing" set forth in this Section
1.1.
"Regulation G, T, U, or X" means Regulation G, T, U or X, respectively,
of the Board of Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof.
"Reimbursement Date" shall have the meaning assigned to such term in
Section 2.6(d).
"Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the post-event notice requirement
is waived under subsections .13, .14, .18, .19, or .20 of PBGC Reg. Section
2615.
"Required Financial Information" means, with respect to the applicable
Calculation Date, (i) the financial statements of Hunt required to be delivered
pursuant to Section 7.1(a) or (b) for the fiscal period or quarter ending as of
such Calculation Date, and (ii) the certificate of the chief financial officer,
controller or treasurer of Hunt required by Section 7.1(c) to be delivered with
the financial statements described in clause (i) above.
"Required Lenders" means, at any time, Lenders which are then in
compliance with their obligations under the Credit Agreement (as determined by
the Agent) and holding in the aggregate at least 51% of (i) the Commitments to
make Revolving Loans or (ii) if the Commitments have been terminated, the
outstanding Loans and Participation Interests.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its material property is subject.
25
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"Restricted Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Hunt or
any of its Subsidiaries, now or after the Closing Date outstanding, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of Hunt or any of its Subsidiaries, now or after the Closing Date outstanding
and (iii) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
stock of Hunt or any of its Subsidiaries, now or after the Closing Date
outstanding.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender, in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage of the
Revolving Committed Amount, (A) to make Revolving Loans in accordance with the
provisions of Section 2.1(a), (B) to purchase participation interests in
Domestic Letters of Credit in accordance with the provisions of Section 2.2(c),
(C) to purchase participation interests in the Swingline Loans in accordance
with the provisions of Section 2.4(c), (D) to make Foreign Currency Loans in
accordance with the provisions of Section 2.5(a) and (E) to purchase
participation interests in Foreign Letters of Credit in accordance with the
provisions of Section 2.6(c).
"Revolving Committed Amount" shall have the meaning assigned to such
term in Section 2.1 (a).
"Revolving Loans" shall have the meaning assigned to such term in
Section 2.1 (a).
"Revolving Note" means a promissory note of Hunt in favor of a Lender
delivered pursuant to Section 2.1 (e) and evidencing the Revolving Loans of
such Lender, as such promissory note may be amended, modified, restated or
replaced from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor or assignee of the business of such division in the
business of rating securities.
"Seal" means Seal Products, Inc., a Delaware corporation and a Wholly
Owned Subsidiary of Hunt.
"Senior Note" means any of the 7.86% Senior Notes due August 1, 2011,
in an aggregate original principal amount of $50,000,000, issued by Hunt in
favor of the Senior Noteholders pursuant to the Senior Note Agreement, as the
same may be amended, modified, supplemented or replaced from time to time.
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"Senior Note Agreement" means that certain Note Purchase Agreement,
dated as of August 1, 1996, by and between Hunt and the Senior Noteholders, as
the same may be amended, modified, supplemented or replaced from time to time.
"Senior Noteholder" means any of the holders from time to time of the
Senior Notes.
"Single Employer Plan" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent" or "Solvency" means, with respect to any Person as of a
particular date, that on such date (i) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (ii) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature in their ordinary course, (iii) such Person is not engaged in a business
or a transaction, and is not. about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry in
which such Person is engaged or is to engage, (iv) the fair value of the
Property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person and (v)
the present fair saleable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured. In computing the amount of
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Standby Letter of Credit Fee" shall have the meaning assigned to such
term in Section 3.5(b)(i).
"Subsidiary" means, as to any Person, (a) any corporation more than 50%
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time, any class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person directly or indirectly
through Subsidiaries, and (b) any partnership, association, joint venture or
other entity in which such Person directly or indirectly through Subsidiaries
has more than 50% equity interest at any time.
"Swingline Commitment" means the commitment of the Swingline Lender to
make Swingline Loans in an aggregate principal amount at any time outstanding of
up to the Swingline Committed Amount.
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"Swingline Committed Amount" shall have the meaning assigned to such
term in Section 2.4(a).
"Swingline Lender" means NationsBank.
"Swingline Loan" shall have the meaning assigned to such term in
Section 2.4(a).
"Swingline Note" means the promissory note of Hunt in favor of the
Swingline Lender in the original principal amount of $2,000,000, as such
promissory note may be amended, modified, restated or replaced from time to
time.
"Termination Date" means December 31, 2000.
"Termination Event" means (i) with respect to any Plan, the occurrence
of a Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by Hunt, any
Subsidiary of Hunt or any ERISA Affiliate from a Multiple Employer Plan during a
plan year in which it was a substantial employer (as such term is defined in
Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the
institution of proceedings to terminate or the actual termination of a Plan by
the PBGC under Section 4042 of ERISA; (v) any event or conditon which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; or (vi) the complete or
partial withdrawal of Hunt, any subsidiary of Hunt or any ERISA Affiliate from a
Multiemployer Plan.
"Trade Letter of Credit Fee" shall have the meaning assigned to such
term in Section 3.5(b)(ii).
"Voting Stock" means, with respect to any Person, capital stock issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
"Wholly Owned Subsidiary" of any Person means any Subsidiary 100% of
whose Voting Stock or other equity interests is at the time owned by such Person
directly or indirectly through other Wholly Owned Subsidiaries.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
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1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders under
the Credit Agreement shall be prepared, in accordance with GAAP applied on a
consistent basis. All calculations made for the purposes of determining
compliance with the Credit Agreement shall (except as otherwise expressly
provided in the Credit Agreement) be made by application of GAAP applied on a
basis consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 7.1 (or, prior to the delivery of the first
financial statements pursuant to Section 7.1, consistent with the financial
statements as at December 3, 1995); provided, however, if (a) Hunt shall object
to determining such compliance on such basis at the time of delivery of such
financial statements due to any change in or application of GAAP or the rules
promulgated with respect thereto or (b) the Agent or the Required Lenders shall
so object in writing within 30 days after delivery of such financial
statements, then such calculations shall be made on a basis consistent with the
most recent financial statements delivered by Hunt to the Lenders as to which no
such objection shall have been made.
SECTION 2
CREDIT FACILITIES
-----------------
2.1 Revolving Loans.
(a) Revolving Commitment. Subject to the terms and conditions of the
Credit Agreement and in reliance upon the representations and warranties set
forth in the Credit Agreement, each Lender severally agrees to make available to
Hunt such Lender's Commitment Percentage of revolving credit loans in Dollars
("Revolving Loans") from time to time from the Closing Date until the
Termination Date, or such earlier date as the Revolving Commitments shall have
been terminated as provided in the Credit Agreement for the purposes hereinafter
set forth; provided further, however, that the sum of the aggregate principal
amount of outstanding Revolving Loans shall not exceed SEVENTY-FIVE MILLION
DOLLARS (S75,000,000) (as such aggregate maximum amount may be reduced from time
to time as provided in Section 3.4, the "Revolving Committed Amount"); provided,
further, (i) with regard to each Lender individually, such Lender's outstanding
Revolving Loans shall not exceed such Lender's Commitment Percentage of the
Revolving Committed Amount, and (ii) with regard to the Lenders collectively,
the aggregate principal amount of outstanding Revolving Loans plus Domestic LOC
Obligations outstanding plus the aggregate principal amount of outstanding
Competitive Loans plus the aggregate principal amount of outstanding Swingline
Loans plus the Dollar Amount (as determined as of the most recent Determination
Date) of the aggregate principal amount of outstanding Foreign Currency Loans
plus the Dollar Amount (as determined as of the most recent Determination Date)
of Foreign LOC Obligations outstanding shall not exceed the Revolving Committed
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Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a
combination thereof, as Hunt may request, and may be repaid and reborrowed in
accordance with the provisions of the Credit Agreement; provided, however, that
no more than 12 separate Eurodollar Loans shall be outstanding at any time. For
purposes of the Credit Agreement, Eurodollar Loans with different Interest
Periods and/or in different currencies shall be considered as separate
Eurodollar Loans, even if they begin on the same date, although borrowings,
extensions and conversions may, in accordance with the provisions of the Credit
Agreement, be combined at the end of existing Interest Periods to constitute a
new Eurodollar Loan with a single Interest Period and in the same currency.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. Hunt shall request a Revolving Loan
borrowing by written notice (or telephone notice promptly confirmed in
writing) to the Agent not later than 12:00 Noon (Charlotte, North
Carolina time) on the Business Day of the requested borrowing in the case
of Base Rate Loans, and on the third Business Day prior to the date of
the requested borrowing in the case of Eurodollar Loans. Each such
request for borrowing shall be irrevocable and shall specify (A) that a
Revolving Loan is requested, (B) the date of the requested borrowing
(which shall be a Business Day), (C) the aggregate principal amount to be
borrowed, and (D) whether the borrowing shall be comprised of Base Rate
Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans
are requested, the Interest Period(s) therefor. If Hunt shall fail to
specify in any such Notice of Borrowing (I) an applicable Interest Period
in the case of a Eurodollar Loan, then such notice shall be deemed to be
a request for an Interest Period of one month, or (II) the type of
Revolving Loan requested, then such notice shall be deemed to be a
request for a Base Rate Loan. The Agent shall give notice to each Lender
promptly upon receipt of each Notice of Borrowing pursuant to this
Section 2.1(b)(i), the contents thereof and each such Lender's share of
any borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan
that is a Revolving Loan shall be in a minimum aggregate amount of
$2,000,000 and integral multiples of $1,000,000 in excess thereof (or the
remaining amount of the Revolving Committed Amount, if less).
(iii) Advances. Each Lender will make its Commitment
Percentage of each Revolving Loan borrowing available to the Agent for
the account of Hunt as specified in Section 3.14(b), or in such other
manner as the Agent may specify in writing, by 1:00 P.M. (Charlotte,
North Carolina time) on the date specified in the applicable Notice of
Borrowing in Dollars and in funds immediately available to the Agent.
Such borrowing will then be made available to Hunt by the Agent by
crediting the account of Hunt on the books of such office with the
aggregate of the amounts made available to the Agent by the Lenders and
in like funds as received by the Agent.
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(c) Repayment. The principal amount of all Revolving Loans shall be due
and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1, Revolving Loans
shall bear interest at a per annum rate equal to:
(i) Base Rate Loan. During such periods as Revolving Loans
shall be comprised of Base Rate Loans, the Base Rate.
(ii) Eurodollar Loan During such periods as Revolving Loans
shall be comprised of Eurodollar Loans, the Eurodollar Rate plus the
Applicable Margin.
Interest on Revolving Loans shall be payable in arrears on each Interest Payment
Date.
(e) Revolving, Notes. The Revolving Loans made by each Lender shall be
evidenced by a duly executed promissory note of Hunt to each Lender in
substantially the form of Schedule 2.1 (e).
2.2 Domestic Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions of the
Credit Agreement and of the LOC Documents, if any, and any other terms
and conditions which the Issuing Lender may reasonably require, the
Lenders will participate in the issuance by the Issuing Lender, from time
to time and in Dollars, of such Domestic Letters of Credit from the
Closing Date until the Termination Date as Hunt may request, in a form
acceptable to the Issuing Lender; provided, however, that (i) the
Domestic LOC Obligations outstanding shall not at any time exceed TEN
MILLION DOLLARS ($10,000,000) (the "Domestic LOC Committed Amount") and
(ii) the sum of the aggregate principal amount of outstanding Revolving
Loans plus Domestic LOC Obligations outstanding plus the aggregate
principal amount of outstanding Competitive Loans plus the aggregate
principal amount of outstanding Swingline Loans plus the Dollar Amount
(as determined as of the most recent Determination Date) of the aggregate
principal amount of outstanding Foreign Currency Loans plus the Dollar
Amount (as determined as of the most recent Determination Date) of
Foreign LOC Obligations outstanding shall not at any time exceed the
aggregate Revolving Committed Amount. No Domestic Letter of Credit shall
(x) have an original expiry date more than one year from the date of
issuance or (y) as originally issued or as extended, have an expiry date
extending beyond the Termination Date. Each Domestic Letter of Credit
shall comply with the related LOC Documents. The issuance and expiry date
of each Domestic Letter of Credit shall be a Business Day.
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(b) Notice and Reports. The request for the issuance of a Domestic
Letter of Credit shall be submitted by Hunt to the Issuing Lender at least three
(3) Business Days prior to the requested date of issuance. The Issuing Lender
will, at least quarterly and more frequently upon request, disseminate to each
of the Lenders and Hunt a detailed report specifying the Domestic Letters of
Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the beneficiary, the face amount, expiry
date as well as any payment or expirations which may have occurred.
(c) Participation. Each Lender, upon issuance of a Domestic Letter of
Credit (or, in the case of each Existing Letter of Credit, on the Closing
Date), shall be deemed to have purchased without recourse a risk participation
from the Issuing Lender in such Domestic Letter of Credit and the obligations
arising thereunder, in each case in an amount equal to its pro rata share of the
obligations under such Domestic Letter of Credit (based on the respective
Commitment Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and be obligated to
pay in Dollars to the Issuing Lender therefor and discharge when due, its pro
rata share of the obligations arising under such Domestic Letter of Credit.
Without limiting the scope and nature of each Lender's participation in any
Domestic Letter of Credit, to the extent that the Issuing Lender has not been
reimbursed as required under the Credit Agreement or under any such Domestic
Letter of Credit, each such Lender shall pay to the Issuing Lender in Dollars
its pro rata share of such unreimbursed drawing in same day funds on the day of
notification by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) below. The obligation of each Lender to so
reimburse the Issuing Lender shall be absolute and unconditional and shall not
be affected by the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or otherwise
impair the obligation of Hunt to reimburse the Issuing Lender under any Domestic
Letter of Credit, together with interest as hereinafter provided. As of the
Amendment Effective Date, each Existing Letter of Credit shall be deemed for all
purposes of the Credit Agreement and the other Credit Documents to be a Domestic
Letter of Credit.
(d) Reimbursement. In the event of any drawing under any Domestic Letter
of Credit, the Issuing Lender will promptly notify Hunt. Unless Hunt shall
immediately notify the Issuing Lender that Hunt intends to otherwise reimburse
the Issuing Lender for such drawing, Hunt shall be deemed to have requested that
the Lenders make a Revolving Loan in the amount of the drawing as provided in
subsection (e) below on the related Domestic Letter of Credit, the proceeds of
which will be used to satisfy the related reimbursement obligations. Hunt
promises to reimburse the Issuing Lender (either with the proceeds of a
Revolving Loan obtained under the Credit Agreement or otherwise) on the day of
drawing under any Domestic Letter of Credit in an amount equal to such drawing
in same
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day funds. If Hunt shall fail to reimburse the Issuing Lender as provided
hereinabove, the unreimbursed amount of such drawing shall bear interest at a
per annum rate equal to the Base Rate plus two percent (2%). Hunt's
reimbursement obligations under the Credit Agreement shall be absolute and
unconditional under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment Hunt may claim or have against the Issuing
Lender, the Agent, the Lenders, the beneficiary of the Domestic Letter of Credit
drawn upon or any other Person, including without limitation any defense based
on any failure of Hunt or any other Credit Party to receive consideration or the
legality, validity, regularity or unenforceability of the Domestic Letter of
Credit. The Issuing Lender will promptly notify the other Lenders of the amount
of any unreimbursed drawing and each Lender shall promptly pay to the Agent for
the account of the Issuing Lender in Dollars and in immediately available funds,
the amount of such Lender's pro rata share of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender from the
Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte,
North Carolina time) otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next succeeding the
day such notice is received. If such Lender does not pay such amount to the
Issuing Lender in full upon such request, such Lender shall, on demand, pay to
the Agent for the account of the Issuing Lender interest on the unpaid amount
during the period from the date of such drawing until such Lender pays such
amount to the Issuing Lender in full at a rate per annum equal to, if paid
within two (2) Business Days of the date of drawing, the Federal Funds Rate and
thereafter at a rate equal to the Base Rate. Each Lender's obligation to make
such payment to the Issuing Lender, and the right of the Issuing Lender to
receive the same, shall be absolute and unconditional, shall not be affected by
any circumstance whatsoever and without regard to the termination of the Credit
Agreement or the Commitments, the existence of a Default or Event of Default or
the acceleration of the obligations of Hunt under the Credit Documents and shall
be made without any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a Lender to the Issuing
Lender, such Lender shall, automatically and without any further action on the
part of the Issuing Lender or such Lender, acquire a participation in an amount
equal to such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed drawn portion
of the Domestic LOC Obligation and in the interest thereon and in the related
LOC Documents, and shall have a claim against Hunt with respect thereto.
(e) Repayment with Revolving Loans. On any day on which Hunt shall have
requested, or been deemed to have requested, a Revolving Loan advance to
reimburse a drawing under a Domestic Letter of Credit, the Agent shall give
notice to the Lenders that a Revolving Loan has been requested or deemed
requested by Hunt to be made in connection with a drawing under a Domestic
Letter of Credit, in which case a Revolving Loan advance comprised
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solely of Base Rate Loans shall be immediately made to Hunt by all Lenders
(notwithstanding any termination of the Commitments pursuant to Section 9.2) pro
rata based on the respective Commitment Percentages of the Lenders (determined
before giving effect to any termination of the Commitments pursuant to Section
9.2) and the proceeds thereof shall be paid directly to the Issuing Lender for
application to the respective Domestic LOC Obligations. Each such Lender hereby
irrevocably agrees to make its pro rata share of each such Revolving Loan
immediately upon any such request or deemed request in the amount, in the manner
and on the date specified in the preceding sentence notwithstanding (i) the
amount of such borrowing may not comply with the minimum amount for advances of
Revolving Loans othewise required under the Credit Agreement, (ii) whether any
conditions specified in Section 5.2 are then satisfied, (iii) whether a Default
or an Event of Default then exists, (iv) failure for any such request or deemed
request for Revolving Loan to be made by the time otherwise required under the
Credit Agreement, (v) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made under the Credit Agreement or
(vi) any termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to Hunt or any other Credit Party), then each such
Lender hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments received
from Hunt on or after such date and prior to such purchase) from the Issuing
Lender in Dollars such participation in the outstanding Domestic LOC Obligations
as shall be necessary to cause each such Lender to share in such Domestic LOC
Obligations ratably (based upon the respective Commitment Percentages of the
Lenders (determined before giving effect to any termination of the Commitments
pursuant to Section 9.2)), provided that at the time any purchase of
participation pursuant to this sentence is actually made, the purchasing Lender
shall be required to pay to the Issuing Lender, to the extent not paid to the
Issuer by Hunt in accordance with the terms of subsection (d) above, interest on
the principal amount of participation purchased for each day from and including
the day upon which such borrowing would otherwise have occurred to but excluding
the date of payment for such participation, at the rate equal to, if paid within
two (2) Business Days of the date of the Revolving Loan advance, the Federal
Funds Rate, and thereafter at a rate equal to the Base Rate.
(f) Renewal, Extension. The renewal or extension of any Domestic Letter
of Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Domestic Letter of Credit under the Credit Agreement.
(g) Uniform Customs and Practices. The Issuing Lender may have the
Domestic Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the International
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Chamber of Commerce (the "UCP"), in which case the UCP may be incorporated
therein and deemed in all respects to be a part thereof.
(h) Indemnification; Nature of Issuing Lender's Duties. (i) In addition
to its other obligations under this Section 2.2, Hunt hereby agrees to protect,
indemnify, pay and save the Issuing Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of any
Domestic Letter of Credit or (B) the failure of the Issuing Lender to honor a
drawing under a Domestic Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between Hunt and the Issuing Lender, Hunt shall
assume all risks of the acts, omissions or misuse of any Domestic Letter
of Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Domestic Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Domestic Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part,
that may prove to be invalid or ineffective for any reason; (C) for
errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or
not they be in cipher; (D) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under a
Domestic Letter of Credit or of the proceeds thereof; and (E) for any
consequences arising from causes beyond the control of the Issuing
Lender, including, without limitation, any Government Acts. None of the
above shall affect, impair, or prevent the vesting of the Issuing
Lender's rights or powers under the Credit Agreement.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by the Issuing Lender, under or in connection with any Domestic
Letter of Credit or the related certificates, if taken or omitted in good
faith, shall not put such Issuing Lender under any resulting liability to
Hunt or any other Credit Party. It is the intention of the parties that
the Credit Agreement shall be construed and applied to protect and
indemnify the Issuing Lender against any and all risks involved in the
issuance of the Domestic Letters of Credit, all of which risks are hereby
assumed by Hunt (on behalf of itself and each of the other Credit
Parties), including, without limitation,
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any and all Government Acts. The Issuing Lender shall not, in any way, be
liable for any failure by the Issuing Lender or anyone else to pay any
drawing under any Domestic Letter of Credit as a result of any Government
Acts or any other cause beyond the control of the Issuing Lender.
(iv) Nothing in this subsection (h) is intended to limit the
reimbursement obligations of Hunt contained in subsection (d) above. The
obligations of Hunt under this subsection (h) shall survive the
termination of the Credit Agreement. No act or omissions of any current
or prior beneficiary of a Domestic Letter of Credit shall in any way
affect or impair the rights of the Issuing Lender to enforce any right,
power or benefit under the Credit Agreement.
(v) Notwithstanding anything to the contrary contained in
this subsection (h), Hunt shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing Lender
(A) arising solely out of the gross negligence or willful misconduct of
the Issuing Lender or (B) caused by the Issuing Lender's unlawful failure
to pay under any Domestic Letter of Credit.
(i) Responsibility of Issuing Lender. It is expressly understood and
agreed that the obligations of the Issuing Lender under the Credit Agreement to
the Lenders are only those expressly set forth in the Credit Agreement and that
the Issuing Lender shall be entitled to assume that the conditions precedent set
forth in Section 5.2 have been satisfied unless it shall have acquired actual
knowledge that any such condition precedent has not been satisfied; provided,
however, that nothing set forth in this Section 2.2 shall be deemed to prejudice
the right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section 2.2 in
the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Domestic Letter of Credit constituted gross negligence
or willful misconduct on the part of the Issuing Lender.
(j) Conflict with LOC Documents. In the event of any conflict between the
Credit Agreement and any LOC Document, the Credit Agreement shall control.
2.3 Competitive Loan Subfacility.
(a) Competitive Loans. Subject to the terms and conditions and relying
upon the representations and warranties set forth in the Credit Agreement, Hunt
may, from time to time from the Closing Date until the Termination Date, request
and each Lender may, in its sole discretion, agree to make available to Hunt
Competitive Loans in Dollars; provided further, however, that (i) the aggregate
principal amount of outstanding Competitive Loans shall not at any time exceed
the lesser of (a) SEVENTY-FIVE MILLION DOLLARS ($75,000,000) or (b) the
Revolving Committed Amount (the
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"Competitive Loan Maximum Amount"), and (ii) the sum of the aggregate principal
amount of outstanding Revolving Loans plus Domestic LOC Obligations outstanding
plus the aggregate principal amount of outstanding Competitive Loans plus the
aggregate principal amount of outstanding Swingline Loans plus the Dollar Amount
(as determined as of the most recent Determination Date) of the aggregate
principal amount of outstanding Foreign Currency Loans plus the Dollar Amount
(as determined as of the most recent Determination Date) of Foreign LOC
Obligations outstanding shall not at any time exceed the Revolving Committed
Amount. Each Competitive Loan shall be not less than $5,000,000 in the aggregate
and integral multiples of $1,000,000 in excess thereof (or the remaining portion
of the Competitive Loan Maximum Amount, if less).
(b) Competitive Bid Requests. Hunt may solicit Competitive Bids by
delivery of a Competitive Bid Request substantially in the form of Schedule
2.3(b)-l to the Agent by 12:00 Noon (Charlotte, North Carolina time) on a
Business Day not less than one (1) nor more than four (4) Business Days prior to
the date of a requested Competitive Loan borrowing. A Competitive Bid Request
shall specify (i) the date of the requested Competitive Loan borrowing (which
shall be a Business Day), (ii) the amount of the requested Competitive Loan
borrowing and (iii) the applicable Interest Periods requested and shall be
accompanied by payment of the Competitive Bid Request Fee. The Agent shall,
promptly following its receipt of a Competitive Bid Request under this
subsection (b), notify the affected Lenders of its receipt and the contents
thereof and invite the Lenders to submit Competitive Bids in response thereto. A
form of such notice is provided in Schedule 2.3(b)-2. No more than three (3)
Competitive Bid Requests (e.g., Hunt may request Competitive Bids for no more
than three (3) different Interest Periods at a time) shall be submitted at any
one time and Competitive Bid Requests may be made no more frequently than once
every five (5) Business Days.
(c) Competitive Bid Procedure. Each Lender may, in its sole discretion,
make one or more Competitive Bids to Hunt in response to a Competitive Bid
Request. Each Competitive Bid must be received by the Agent not later than 10:00
A.M. (Charlotte, North Carolina time) on the Business Day next succeeding the
date of receipt by the Agent of the related Competitive Bid Request. A Lender
may offer to make all or part of the requested Competitive Loan borrowing and
may submit multiple Competitive Bids in response to a Competitive Bid Request.
The Competitive Bid shall specify (i) the particular Competitive Bid Request as
to which the Competitive Bid is submitted, (ii) the minimum (which shall be not
less than $5,000,000 and integral multiples of $1,000,000 in excess thereof) and
maximum principal amounts of the requested Competitive Loan or Loans as to which
the Lender is willing to make, and (iii) the applicable interest rate or rates
and Interest Period or Periods therefor. A form of such Competitive Bid is
provided in Schedule 2.3(c). A Competitive Bid submitted by a Lender in
accordance with the provisions hereof shall be irrevocable. The Agent shall
promptly notify Hunt of all Competitive Bids made and the terms thereof.
(d) Submission of Competitive Bids by Agent. If the Agent, in its
capacity as a Lender, elects to submit a Competitive Bid in response to any
Competitive Bid Request,
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it shall submit such Competitive Bid directly to Hunt one-half of an hour
earlier than the latest time at which the other Lenders are required to submit
their Competitive Bids to the Agent in response to such Competitive Bid Request
pursuant to subsection (c) above.
(e) Acceptance of Competitive Bids. Hunt may, in its sole and absolute
discretion, subject only to the provisions of this subsection (e), accept or
refuse any Competitive Bid offered to it. To accept a Competitive Bid, Hunt
shall give written notification (or telephone notice promptly confirmed in
writing) substantially in the form of Schedule 2.3(e) of its acceptance of any
or all such Competitive Bids to the Agent by 11:00 A.M. (Charlotte, North
Carolina time) on the date on which notice of the Competitive Bids is given to
Hunt by the Agent; provided, however, (i) the failure by Hunt to give timely
notice of its acceptance of a Competitive Bid shall be deemed to be a refusal
thereof, (ii) Hunt may accept Competitive Bids only in ascending order of rates,
(iii) the aggregate amount of Competitive Bids accepted by Hunt shall not exceed
the principal amount specified in the Competitive Bid Request, (iv) Hunt may
accept a portion of a Competitive Bid in the event, and to the extent,
acceptance of the entire amount thereof would cause Hunt to exceed the principal
amount specified in the Competitive Bid Request, subject however to the minimum
amounts provided herein (and provided that where two or more Lenders submit such
a Competitive Bid at the same Competitive Bid Rate, then pro rata between or
among such Lenders) and (v) no bid shall be accepted for a Competitive Loan
unless such Competitive Loan is in a minimum principal amount of $5,000,000 and
integral multiples of $1,000,000 in excess thereof, except that where a portion
of a Competitive Bid is accepted in accordance with the provisions of clause
(iv) above, then in a minimum principal amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof (but not in any event less than the
minimum amount specified in the Competitive Bid), and in calculating the pro
rata allocation of acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (iv) above, the amounts shall be rounded
to integral multiples of $1,000,000 in a manner which shall be in the discretion
of Hunt. A notice of acceptance of a Competitive Bid given by Hunt in accordance
with the provisions hereof shall be irrevocable. The Agent shall, not later than
12:00 Noon (Charlotte, North Carolina time) on the date of receipt by the Agent
of a notification from Hunt of its acceptance and/or refusal of Competitive
Bids, notify each affected Lender of its receipt and the contents thereof. Upon
its receipt from the Agent of notification of Hunt's acceptance of its
Competitive Bid in accordance with the terms of this subsection (e), each
successful bidding Lender will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect of which
its bid has been accepted.
(f) Funding of Competitive Loans. Each Lender which is to make a
Competitive Loan shall make its Competitive Loan borrowing available to the
Agent for the account of Hunt at the office of the Agent specified in Section
3.14(b), or at such other office as the Agent may designate in writing, by 1:30
P.M. (Charlotte, North Carolina time) on the date specified in the Competitive
Bid Request in Dollars and in funds immediately available to the Agent. Such
borrowing will then be made available to Hunt by crediting the account of Hunt
on the books of such office with the aggregate of
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the amount made available to the Agent by the applicable Competitive Loan
Lenders and in like funds as received by the Agent.
(g) Maturity of Competitive Loans. Each Competitive Loan shall mature
and be due and payable in full on the last day of the Interest Period applicable
thereto. Unless Hunt shall give notice to the Agent otherwise, Hunt shall be
deemed to have requested a Revolving Loan borrowing in the amount of the
maturing Competitive Loan, the proceeds of which will be used to repay such
Competitive Loan.
(h) Interest on Competitive Loans. Subject to the provisions of Section
3.1, Competitive Loans shall bear interest in each case at the Competitive Bid
Rate applicable thereto. Interest on Competitive Loans shall be payable in
arrears on each Interest Payment Date.
(i) Competitive Loan Notes. The Competitive Loans made by each Lender
shall be evidenced by a duly executed promissory note of Hunt to each such
Lender in an original principal amount equal to the Competitive Loan Maximum
Amount and substantially in the form of Schedule 2.3(i) (such promissory note,
as amended. modified. extended, renewed or replaced from time to time is
hereinafter referred to individually as a "Competitive Note" and collectively as
the "Competitive Notes").
2.4 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions hereof and
in reliance upon the representations and warranties set forth in the Credit
Agreement, the Swingline Lender, in its individual capacity, agrees to make
available to Hunt certain revolving credit loans in Dollars (each a "Swingline
Loan" and, collectively, the "Swingline Loans") from time to time from the
Closing Date until the Termination Date for the purposes hereinafter set forth;
provided further, however, that (i) the aggregate principal amount of Swingline
Loans outstanding at any time shall not exceed TWO MILLION DOLLARS
($2,000,000.00) (the "Swingline Committed Amount"), and (ii) the aggregate
principal amount of outstanding Revolving Loans plus Domestic LOC Obligations
outstanding plus the aggregate principal amount of outstanding Competitive Loans
plus the aggregate principal amount of outstanding Swingline Loans plus the
Dollar Amount (as determined as of the most recent Determination Date) of the
aggregate principal amount of outstanding Foreign Currency Loans plus the Dollar
Amount (as determined as of the most recent Determination Date) of Foreign LOC
Obligations outstanding shall not exceed the Revolving Committed Amount.
Swingline Loans shall be made as Base Rate Loans or Quoted Rate Swingline Loans
as Hunt may request in accordance with the provisions of this Section 2.4, and
may be repaid and reborrowed in accordance with the provisions hereof.
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(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever Hunt desires a Swingline Loan
advance it shall give written notice (or telephone notice promptly confirmed in
writing) to the Swingline Lender not later than 12:00 Noon (Charlotte, North
Carolina time) on the Business Day of the requested Swingline Loan advance. Each
such notice shall be irrevocable and shall specify (A) that a Swingline Loan
advance is requested, (B) the date of the requested Swingline Loan advance
(which shall be a Business Day) and (C) the principal amount of the Swingline
Loan advance requested. Each Swingline Loan shall be made as a Base Rate Loan or
a Quoted Rate Swingline Loan and shall have such maturity date as the Swingline
Lender and Hunt shall agree upon receipt by the Swingline Lender of any such
notice from Hunt. The Swingline Lender shall initiate the transfer of funds
representing the Swingline Loan advance to Hunt by 3:00 P.M. (Charlotte, North
Carolina time) on the Business Day of the requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be in a minimum
principal amount of $100,000 and in integral multiples of $50,000 in excess
thereof (or the remaining amount of the Swingline Committed Amount, if less).
(iii) Repayment of Swingline Loans. The principal amount of all
Swingline Loans shall be due and payable on the earlier of (A) the maturity date
agreed to by the Swingline Lender and Hunt with respect to such Loan (which
maturity date shall not be a date more than seven (7) Business Days from the
date of advance thereof) or (B) the Termination Date. The Swingline Lender may,
at any time, in its sole discretion, by written notice to Hunt and the Lenders,
demand repayment of its Swingline Loans by way of a Revolving Loan advance, in
which case Hunt shall be deemed to have requested a Revolving Loan advance
comprised solely of Base Rate Loans in the amount of such Swingline Loans;
provided, however, that any such demand shall be deemed to have been given one
Business Day prior to the Termination Date and on the date of the occurrence of
any Event of Default described in Section 9.1 and upon acceleration of the
indebtedness under the Credit Documents and the exercise of remedies in
accordance with the provisions of Section 9.2. Each Lender hereby irrevocably
agrees to make its pro rata share of each such Revolving Loan in the amount, in
the manner and on the date specified in the preceding sentence notwithstanding
(I) the amount of such borrowing may not comply with the minimum amount for
advances of Revolving Loans otherwise required under the Credit Agreement, (II)
whether any conditions specified in Section 5.2 are then satisfied, (III)
whether a Default or an Event of Default then exists, (IV) failure of any such
request or deemed request for Revolving Loan to be made by the time otherwise
required under the Credit Agreement, (V) whether the date of such borrowing is a
date on which Revolving Loans are otherwise permitted to be made under the
Credit Agreement or (VI) any termination of the Commitments relating thereto
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immediately prior to or contemporaneously with such borrowing. In the event that
any Revolving Loan cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to Hunt or any other Credit
Party), then each Lender hereby agrees that it shall forthwith purchase (as of
the date such borrowing would otherwise have occurred, but adjusted for any
payments received from Hunt on or after such date and prior to such purchase)
from the Swingline Lender such participations in the outstanding Swingline Loans
as shall be necessary to cause each such Lender to share in such Swingline Loans
ratably based upon its Commitment Percentage of the Revolving Committed Amount
(determined before giving effect to any termination of the Commitments pursuant
to Section 3.4), provided that (A) all interest payable on the Swingline Loans
shall be for the account of the Swingline Lender until the date as of which the
respective participation is purchased and (B) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing Lender
shall be required to pay to the Swingline Lender, to the extent not paid to
the Swingline Lender by Hunt in accordance with the terms of subsection (c)(ii)
hereof, interest on the principal amount of participation purchased for each day
from and including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such participation, at the
rate equal to the Federal Funds Rate.
(c) Interest on Swingline Loans. (1) Subject to the provisions of
Section 3.1, each Swingline Loan shall bear interest at a per annum rate
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to:
(A) Base Rate Loans. If such Swingline Loan is a Base Rate Loan, the
Base Rate.
(B) Quoted Rate Swingline Loans. If such Swingline Loan is a Quoted
Rate Swingline Loan, Quoted Rate applicable thereto.
Notwithstanding any other provision to the contrary set forth in the Credit
Agreement, in the event that the principal amount of any Quoted Rate Swingline
Loan is not repaid on the last day of the Interest Period for such Loan, then
such Loan shall be automatically converted into a Base Rate Loan at the end of
such Interest Period.
(ii) Payment of Interest. Interest on Swingline Loans shall be
payable in arrears on each applicable Interest Payment Date (or at
such other times as may be specified in the Credit Agreement).
(d) Swingline Note. The Swingline Loans shall be evidenced by a duly
executed promissory note of Hunt to the Swingline Lender in an original
principal amount equal to the Swingline Committed Amount substantially in the
form of Schedule
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2.4(d)(such promissory note, as amended, modified, extended, renewed or replaced
from time to time is hereinafter referred to as the "Swingline Note").
2.5 Foreign Currency Loan Subfacility.
(a) Foreign Currency Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set forth in the
Credit Agreement, each Lender severally agrees to make available to Hunt Europe
such Lender's Foreign Currency Commitment Percentage of revolving credit loans
in Pounds Sterling ("Foreign Currency Loans") from time to time from the date
five (5) Business Days subsequent to the Amendment Effective Date until the date
five (5) Business Days prior to the Termination Date, or such earlier date as
the Revolving Commitments shall have been terminated as provided in the Credit
Agreement for the purposes hereinafter set forth; provided, however, that the
Dollar Amount (as determined as of the most recent Determination Date) of the
aggregate amount of Foreign Currency Loans outstanding at any time shall not
exceed FIFTEEN MILLION DOLLARS ($15,000,000.00) (the "Foreign Currency Committed
Amount"); provided, further, (i) with regard to each Lender individually such
Lender's outstanding Foreign Currency Loans shall not exceed such Lender's
Foreign Commitment Percentage of the Foreign Currency Committed Amount, (ii)
with regard to the Lenders collectively, the sum of the Dollar Amount (as
determined as of the most recent Determination Date) of the aggregate principal
amount of outstanding Foreign Currency Loans plus the Dollar Amount (as
determined as of the most recent Determination Date) of Foreign LOC Obligations
outstanding shall not at any time exceed the aggregate Foreign Currency
Committed Amount and (iii) with regard to the Lenders collectively, the
aggregate principal amount of outstanding Revolving Loans plus Domestic LOC
Obligations outstanding plus the aggregate principal amount of outstanding
Competitive Loans plus the aggregate principal amount of outstanding Swingline
Loans plus the Dollar Amount (as determined as of the most recent Determination
Date) of the aggregate principal amount of outstanding Foreign Currency Loans
plus the Dollar Amount (as determined as of the most recent Determination Date)
of Foreign LOC Obligations outstanding shall not exceed the Revolving Committed
Amount. Foreign Currency Loans shall consist solely of Eurodollar Loans and may
be repaid and reborrowed in accordance with the provisions hereof; provided,
however, that no more than 12 separate Eurodollar Loans shall be outstanding at
any time. For purposes hereof, Eurodollar Loans with different Interest Periods
and/or in different currencies shall be considered as separate Eurodollar Loans,
even if they begin on the same date, although borrowings, extensions and
conversions may, in accordance with the provisions hereof, be combined at the
end of existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period and in the same currency.
(b) Foreign Currency Loan Borrowings.
(i) Notice of Borrowing. Hunt Europe shall request a Foreign
Currency Revolving Loan borrowing by written notice (or telephone
notice promptly confirmed in writing) to each office of the Agent
specified in Section
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3.14(b) not later than 12:00 Noon, local time in the place where such
borrowing is to be made, on the third Business Day prior to the date of
the requested borrowing. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Foreign Currency Loan is
requested, (B) the date of the requested borrowing (which shall be a
Business Day), (C) the aggregate principal amount to be borrowed, and
(D) the Interest Period(s) therefor. If Hunt Europe shall fail to
specify in any such Notice of Borrowing an applicable Interest Period,
then such notice shall be deemed to be a request for an Interest Period
of one month. The Agent shall give notice to each Lender promptly upon
receipt of each Notice of Borrowing pursuant to this Section 2.5(b)(i),
the contents thereof and each such Lender's share of any borrowing to be
made pursuant thereto.
(ii) Minimum Amounts. Each Foreign Currency Loan shall be in a
minimum aggregate amount equal to the Foreign Currency Equivalent of
$500,000 and integral multiples of $250,000 in excess thereof (or the
remaining amount of the Foreign Currency Committed Amount, if less).
(iii) Advances. Each Lender will make its Foreign Currency
Commitment Percentage of each Foreign Currency Loan borrowing available
to the Agent as specified in Section 3.14(b), or in such other manner
as the Agent may specify in writing, by 1:00 P.M., local time in the
place where such deposit is required to be made, on the date specified
in the applicable Notice of Borrowing in Pounds Sterling and in funds
immediately available to the Agent. Such borrowing will then be made
available to Hunt Europe by the Agent by crediting the account of Hunt
Europe on the books of such office with the aggregate of the amounts
made available to the Agent by the Lenders and in like funds as received
by the Agent.
(c) Repayment. The principal amount of all Foreign Currency Loans shall
be due and payable in full in Pounds Sterling on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1, Foreign
Currency Loans shall bear interest at a per annum rate equal to the Eurodollar
Rate plus the Applicable Margin. Interest on Foreign Currency Loans shall be
payable (in Pounds Sterling) in arrears on each Interest Payment Date.
(e) Foreign Currency Notes. The Foreign Currency Loans made by each
Lender shall be evidenced by a duly executed promissory note of Hunt Europe to
each Lender in substantially the form of Schedule 2.5(e).
2.6 Foreign Letter of Credit Subfacifily.
(a) Issuance. Subject to the terms and conditions hereof and of the LOC
Documents, if any, and any other terms and conditions which the Issuing Lender
may reasonably require, the Lenders will participate in the issuance by the
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Issuing Lender, from time to time and in Pounds Sterling, of such Foreign
Letters of Credit from the date five (5) Business Days subsequent to the
Amendment Effective Date until the date five (5) Business Days prior to the
Termination Date as Hunt Europe may request, in a form acceptable to the Issuing
Lender; provided, however, that (i) the Dollar Amount (as determined as of the
most recent Determination Date) of the Foreign LOC Obligations outstanding shall
not at any time exceed FIFTEEN MILLION DOLLARS ($15,000,000) (the "Foreign LOC
Committed Amount"), (ii) the sum of the Dollar Amount (as determined as of the
most recent Determination Date) of the aggregate principal amount of outstanding
Foreign Currency Loans plus the Dollar Amount (as determined as of the most
recent Determination Date) of Foreign LOC Obligations outstanding shall not at
any time exceed the aggregate Foreign Currency Committed Amount and (iii) the
sum of the aggregate principal amount of outstanding Revolving Loans plus
Domestic LOC Obligations outstanding plus the aggregate principal amount of
outstanding Competitive Loans plus the aggregate principal amount of outstanding
Swingline Loans plus the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding Foreign
Currency Loans plus the Dollar Amount (as determined as of the most recent
Determination Date) of Foreign LOC Obligations outstanding shall not at any time
exceed the aggregate Revolving Committed Amount. No Foreign Letter of Credit
shall (x) have an original expiry date more than one year from the date of
issuance or (y) as originally issued or as extended, have an expiry date
extending beyond the Termination Date. Each Foreign Letter of Credit shall
comply with the related LOC Documents. The issuance and expiry date of each
Foreign Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a Foreign Letter
of Credit shall be submitted by Hunt Europe to the Issuing Lender at least three
(3) Business Days prior to the requested date of issuance. The Issuing Lender
will, at least quarterly and more frequently upon request, disseminate to each
of the Lenders and Hunt Europe a detailed report specifying the Foreign Letters
of Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the beneficiary, the face amount, expiry
date as well as any payment or expirations which may have occurred.
(c) Participation. Each Lender, upon issuance of a Foreign Letter of
Credit, shall be deemed to have purchased without recourse a risk participation
from the Issuing Lender in such Foreign Letter of Credit and the obligations
arising thereunder, in each case in an amount equal to its pro rata share of the
obligations under such Foreign Letter of Credit (based on the respective
Commitment Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and be obligated to
pay in Pounds Sterling to the Issuing Lender therefor and discharge when due,
its pro rata share of the obligations arising under such Foreign Letter of
Credit.
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Without limiting the scope and nature of each Lender's participation in any
Foreign Letter of Credit, to the extent that the Issuing Lender has not been
reimbursed as required under the Credit Agreement or under any such Foreign
Letter of Credit, each such Lender shall pay to the Issuing Lender in Pounds
Sterling its pro rata share of such unreimbursed drawing in same day funds on
the date five (5) Business Days after notification by the Issuing Lender of an
unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The
obligation of each Lender to so reimburse the Issuing Lender shall be absolute
and unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of Hunt Europe to reimburse the
Issuing Lender under any Foreign Letter of Credit, together with interest as
hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Foreign Letter
of Credit, the Issuing Lender will promptly notify Hunt Europe. Hunt Europe
promises to reimburse the Issuing Lender on or prior to the date that is three
(3) Business Days after the day of any drawing under any Foreign Letter of
Credit (the "Reimbursement Date") an amount equal to such drawing in same day
funds. Unless Hunt Europe shall immediately notify the Issuing Lender that Hunt
Europe intends to otherwise reimburse the Issuing Lender for such drawing, Hunt
Europe shall be deemed to have requested that the Lenders make a Foreign
Currency Loan in the amount of the drawing as provided in subsection (f) hereof
on the related Foreign Letter of Credit on the applicable Reimbursement Date,
the proceeds of which will be used to satisfy the related reimbursement
obligations. The unreimbursed amount of any drawing under a Foreign Letter of
Credit shall, subject to the terms of Section 3.1, bear interest from and
including the date of drawing until but excluding the date of reimbursement at a
per annum rate equal to the Interim Foreign Currency Rate plus the Applicable
Margin applicable to Eurodollar Loans. Hunt Europe's reimbursement obligations
under the Credit Agreement shall be absolute and unconditional under all
circumstances irrespective of any rights of setoff, counterclaim or defense to
payment Hunt Europe may claim or have against the Issuing Lender, the Agent, the
Lenders, the beneficiary of the Foreign Letter of Credit drawn upon or any other
Person, including without limitation any defense based on any failure of Hunt
Europe or any other Credit Party to receive consideration or the legality,
validity, regularity or unenforceability of the Foreign Letter of Credit. The
Issuing Lender will promptly notify the other Lenders of the amount of any
unreimbursed drawing and each Lender shall promptly pay, on the Reimbursement
Date, to the Agent for the account of the Issuing Lender in Pounds Sterling and
in immediately available funds, the amount of such Lender's pro rata share of
such unreimbursed drawing. If such Lender does not pay such amount to the
Issuing Lender in full upon such request, such Lender shall, on demand, pay to
the Agent for the account of the Issuing Lender interest on the unpaid amount
during the period from the Reimbursement Date until such Lender pays such amount
to the Issuing Lender in
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full at a rate per annum equal to the Interim Foreign Currency Rate. Each
Lender's obligation to make such payment to the Issuing Lender, and the right of
the Issuing Lender to receive the same, shall be absolute and unconditional,
shall not be affected by any circumstance whatsoever and without regard to the
termination of the Credit Agreement or the Commitments, the existence of a
Default or Event of Default or the acceleration of the obligations of Hunt
Europe under the Credit Documents and shall be made without any offset,
abatement, withholding or reduction whatsoever. Simultaneously with the making
of each such payment by a Lender to the Issuing Lender, such Lender shall,
automatically and without any further action on the part of the Issuing Lender
or such Lender, acquire a participation in an amount equal to such payment
(excluding the portion of such payment constituting interest owing to the
Issuing Lender) in the related unreimbursed drawn portion of the Foreign LOC
Obligation and in the interest thereon and in the related LOC Documents, and
shall have a claim against Hunt Europe with respect thereto.
(e) Interim Interest. In the event of any drawing under any Foreign
Letter of Credit, unless Hunt Europe shall reimburse the Issuing Lender for such
drawing in full on such date, the unpaid amount of such drawing shall bear
interest for the account of the Issuing Lender at the Interim Foreign Currency
Rate plus the Applicable Margin applicable to Eurodollar Loans. Interest shall
accrue for each day from and including the date of any drawing under any Foreign
Letter of Credit to, but excluding, the date of payment in full of such drawing
(including by way of a Foreign Currency Loan pursuant to subsection (f) hereof).
(f) Repayment with Foreign Currency Loans. On any day on which Hunt
Europe shall have requested, or been deemed to have requested, a Foreign
Currency Loan advance to reimburse a drawing under a Foreign Letter of Credit,
the Agent shall give notice to the Lenders that a Foreign Currency Loan has been
requested or deemed requested by Hunt Europe to be made in connection with a
drawing under a Foreign Letter of Credit, in which case a Foreign Currency Loan
advance shall be made to Hunt Europe by all Lenders on the respective
Reimbursement Date (notwithstanding any termination of the Commitments pursuant
to Section 9.2) pro rata based on the respective Commitment Percentages of the
Lenders (determined before giving effect to any termination of the Commitments
pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the
Issuing Lender for application to the respective Foreign LOC Obligations. Each
such Lender hereby irrevocably agrees to make its pro rata share of each such
Foreign Currency Loan immediately upon any such request or deemed request in the
amount, in the manner and on the date specified in the preceding sentence
notwithstanding (i) the amount of such borrowing may not comply with the minimum
amount for advances of Foreign Currency Loans otherwise required under the
Credit Agreement, (ii) whether any conditions specified in Section 5.2 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request or deemed request for Foreign
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Currency Loans to be made by the time otherwise required under the Credit
Agreement, (v) whether the date of such borrowing is a date on which Foreign
Currency Loans are otherwise permitted to be made under the Credit Agreement,
(vi) any rights that such Lender may have in respect of such Foreign Currency
Loans under Section 3.7, or (vii) any termination of the Commitments relating
thereto immediately prior to or contemporaneously with such borrowing. In the
event that any Foreign Currency Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to Hunt
Europe or any other Credit Party), then each such Lender hereby agrees that it
shall forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from Hunt Europe on or after
such date and prior to such purchase) from the Issuing Lender in Pounds Sterling
such participation in the outstanding Foreign LOC Obligations as shall be
necessary to cause each such Lender to share in such Foreign LOC Obligations
ratably (based upon the respective Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments pursuant
to Section 9.2)), provided that at the time any purchase of participation
pursuant to this sentence is actually made, the purchasing Lender shall be
required to pay to the Issuing Lender, to the extent not paid to the Issuer by
Hunt Europe in accordance with the terms of subsection (d) hereof, interest on
the principal amount of participation purchased for each day from and including
the day upon which such borrowing would otherwise have occurred to but excluding
the date of payment for such participation, at the rate equal to the Interim
Foreign Currency Rate.
(g) Renewal, Extension. The renewal or extension of any Foreign Letter
of Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Foreign Letter of Credit.
(h) Uniform Customs and Practices. The Issuing Lender may have the
Foreign Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the International
Chamber of Commerce (the "UCP"), in which case the UCP may be incorporated
therein and deemed in all respects to be a part thereof.
(i) Indemnification; Nature of Issuing Lender's Duties. (i) In addition
to its other obligations under this Section 2.6, Hunt Europe hereby agrees to
protect, indemnify, pay and save the Issuing Lender harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that the Issuing Lender may
incur or be subject to as a consequence, direct or indirect, of (A) the issuance
of any Foreign Letter of Credit or (B) the failure of the Issuing Lender to
honor a drawing under a Foreign Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto
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government or governmental authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between Hunt Europe and the Issuing Lender, Hunt Europe shall
assume all risks of the acts, omissions or misuse of any Foreign Letter of
Credit by the beneficiary thereof. The Issuing Lender shall not be responsible:
(A) for the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for
and issuance of any Foreign Letter of Credit, even if it should in fact prove to
be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Foreign Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in part, that
may prove to be invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(D) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under a Foreign Letter of Credit or of the
proceeds thereof, and (E) for any consequences arising from causes beyond the
control of the Issuing Lender, including, without limitation, any Government
Acts. None of the above shall affect, impair, or prevent the vesting of the
Issuing Lender's rights or powers under Credit Agreement.
(iii) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Lender, under or in connection with any Foreign Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put such Issuing
Lender under any resulting liability to Hunt Europe or any other Credit Party.
It is the intention of the parties that the Credit Agreement shall be construed
and applied to protect and indemnify the Issuing Lender against any and all
risks involved in the issuance of the Foreign Letters of Credit, all of which
risks are hereby assumed by Hunt Europe (on behalf of itself and each of the
other Credit Parties), including, without limitation, any and all Government
Acts. The Issuing Lender shall not, in any way, be liable for any failure by the
Issuing Lender or anyone else to pay any drawing under any Foreign Letter of
Credit as a result of any Government Acts or any other cause beyond the control
of the Issuing Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of Hunt Europe contained in subsection (d) above. The
obligations of Hunt Europe under this subsection (i) shall survive the
termination of the Credit Agreement. No act or omissions of any current or
prior beneficiary of a Foreign Letter of Credit shall in any way affect or
impair the rights of the Issuing Lender to enforce any right, power or benefit
under the Credit Agreement.
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(v) Notwithstanding anything to the contrary contained in this
subsection (i), Hunt Europe shall have no obligation to indemnify the Issuing
Lender in respect of any liability incurred by the Issuing Lender (A) arising
solely out of the gross negligence or willful misconduct of the Issuing Lender
or (B) caused by the Issuing Lender's unlawful failure to pay under any Foreign
Letter of Credit.
(j) Responsibility of Issuing Lender. It is expressly understood and
agreed that the obligations of the Issuing Lender under the Credit Agreement to
the Lenders are only those expressly set forth in the Credit Agreement and that
the Issuing Lender shall be entitled to assume that the conditions precedent set
forth in Section 5.2 have been satisfied unless it shall have acquired actual
knowledge that any such condition precedent has not been satisfied; provided,
however, that nothing set forth in this Section 2.6 shall be deemed to prejudice
the right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section 2.6 in
the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Foreign Letter of Credit constituted gross negligence
or willful misconduct on the part of the Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict between
the Credit Agreement and any LOC Document, the Credit Agreement shall control.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing under the Credit Agreement or under the other Credit
Documents shall bear interest, payable on demand, at a per annum rate 2% greater
than the rate which would otherwise be applicable (or if no rate is applicable,
whether in respect of interest, fees or other amounts, then 2% greater than the
Base Rate).
3.2 Extension and Conversion.
Subject to the terms of Section 5.2, the Borrowers shall have the
option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another type;
provided, however, that (i) except as provided in Section 3.8, Revolving Loans
that are Eurodollar Loans may be converted into Base Rate Loans only on the last
day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be
extended, and Revolving Loans that are Base Rate Loans may be converted into
Eurodollar Loans, only if no Default or Event of Default is in existence on the
date of extension or conversion, (iii) Loans
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extended as, or Revolving Loans converted into, Eurodollar Loans shall be
subject to the terms of the definition of "Interest Period" set forth in Section
1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(11), (iv)
no more than 12 separate Eurodollar Loans shall be outstanding under the Credit
Agreement at any time; provided, that for purposes hereof, Eurodollar Loans with
different Interest Periods and/or in different currencies shall be considered as
separate Eurodollar Loans, even if they begin on the same date, although
borrowings, extensions and conversions may, in accordance with the provisions
hereof, be combined at the end of existing Interest Periods to constitute a new
Eurodollar Loan with a single Interest Period and in the same currency, (v) any
request for extension or conversion of a Eurodollar Loan which shall fail to
specify an Interest Period shall be deemed to be a request for an Interest
Period of one month and (vi) Competitive Loans and Swingline Loans may not be
extended or converted pursuant to this Section 3.2. Each such extension or
conversion shall be effected by the appropriate Borrower by giving a Notice of
Extension/Conversion (or telephone notice promptly confirmed in writing) to the
Agent prior to 11:00 A.M., local time in the place where such Loan was initially
advanced, on the Business Day of, in the case of the conversion of a Revolving
Loan that is a Eurodollar Loan into a Base Rate Loan, and on the third Business
Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Revolving Loan that is a Base Rate Loan into, a Eurodollar Loan,
the date of the proposed extension or conversion, specifying the date of the
proposed extension or conversion, the Loans to be so extended or converted, the
types of Loans into which such Loans are to be converted and, if appropriate,
the applicable Interest Periods with respect thereto. Each request for extension
or conversion shall constitute a representation and warranty by the requesting
Borrower of the matters specified in subsections (ii), (iii), (iv) and (v) of
Section 5.2(a). In the event a Borrower fails to request extension or conversion
of any Eurodollar Loan in accordance with this Section, or any such conversion
or extension is not permitted or required by this Section, then (i) in the case
of any Eurodollar Loan that is a Revolving Loan, such Loan shall be
automatically converted into a Base Rate Loan at the end of the Interest Period
applicable thereto and (ii) in the case of any Eurodollar Loan which is a
Foreign Currency Loan, such Loan shall be automatically continued as a
Eurodollar Loan for an Interest Period of one month. The Agent shall give each
Lender notice as promptly as practicable of any such proposed extension or
conversion affecting any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrowers shall have the right to
prepay Loans in whole or in part from time to time without premium or
penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on
three Business Days' prior written notice to the Agent and specifying the
applicable Loans to be prepaid; (ii) any prepayment of Eurodollar Loans,
Competitive Loans or Quoted Rate Swingline Loans will be subject to Section
3.11; and (iii) each such partial prepayment of Loans shall be in a minimum
principal amount of (A) in the case of Revolving Loans, Competitive Loans
and Foreign Currency Loans, $2,000,000 (or the Foreign Currency Equivalent
thereof) and integral multiples of $1,000,000 (or the Foreign Currency
Equivalent thereof) in excess thereof and (B) in the case of Swingline
Loans, $100,000 and integral multiples of $50,000 in excess thereof. Subject
to the foregoing terms, amounts prepaid under the
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Credit Agreement shall be applied as the prepaying Borrower may elect; provided
that, with respect to Revolving Loans, if Hunt fails to specify a voluntary
prepayment then such prepayment shall be applied first to Base Rate Loans and
then to Eurodollar Loans in direct order of Interest Period maturities.
(b) Mandatory Prepayments.
(i) If at any time (including, without limitation, on any Determination
Date), (A) the sum of the aggregate amount of outstanding Revolving Loans plus
Domestic LOC Obligations outstanding plus the aggregate principal amount of
outstanding Competitive Loans plus the aggregate principal amount of outstanding
Swingline Loans plus the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding Foreign
Currency Loans plus the Dollar Amount (as determined as of the most recent
Determination Date) of Foreign LOC Obligations outstanding shall exceed the
Revolving Committed Amount or (B) the aggregate principal amount of outstanding
Competitive Loans shall exceed the Competitive Loan Maximum Amount, Hunt
promises to prepay, or cause Hunt Europe to prepay, immediately the outstanding
principal balance on the Revolving Loans, Foreign Currency Loans, Swingline
Loans and/or Competitive Loans in an amount sufficient to eliminate such excess.
(ii) If on any Determination Date, the sum of the Dollar Amount of the
aggregate Foreign Currency Loans outstanding plus the Dollar Amount of Foreign
LOC Obligations outstanding exceeds (as the result of fluctuations in applicable
foreign exchange rates or otherwise) then Foreign Currency Committed Amount,
Hunt Europe promises to make a mandatory prepayment of the Foreign Currency
Loans to the Agent in an aggregate Dollar Amount equal to the excess of
(x) the amount equal to the sum of the Dollar Amount of the
aggregate Foreign Currency Loans outstanding plus the Dollar Amount of
Foreign LOC Obligations outstanding
over
(y) the Foreign Currency Committed Amount.
(iii) (A) Upon the occurrence of any Excess Sale Event, Hunt shall,
immediately following the related Application Pefiod, prepay the Loans in
an amount equal to the Excess Sale Proceeds not applied (or caused to be
applied) by Hunt during the related Application Period to the purchase,
acquisition or construction of Alternative Assets as contemplated by the
terms of Section 8.4(b)(v)(B)(1) multiplied by the percentage determined
by dividing (1) the then current Revolving Committed Amount by (2) the
sum of (I) the then current Revolving Committed Amount plus (II) if the
Senior Noteholders shall require Hunt to prepay the Senior Notes with any
such Excess Sale Proceeds, the aggregate then outstanding principal
amount of all Senior Notes.
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(B) Immediately upon the occurrence of the Fresno Asset Sale, Hunt shall
prepay the Loans in an amount equal to 50% of the Net Proceeds thereof in excess
of $900,000.
(iv) To the extent that the aggregate cumulative amount of cash
(including cash received in respect of non-cash consideration) Net Proceeds from
Equity Transactions received by Hunt or any of its Subsidiaries during any
fiscal year exceeds $500,000, Hunt shall, within 60 days of receipt of any such
Net Proceeds at any time that the Consolidated Leverage Ratio as of the most
recent fiscal quarter end with respect to which the Agent shall have received
the Required Financial Information is greater than 2.50 to 1.00, prepay the
Loans in an amount equal to 50% of the portion of such cash Net Proceeds
exceeding $500,000 not applied by Hunt within such 60 day period to pay the
purchase price in connection with any acquisition permitted by the terms of
Section 8.4(c).
(c) General. All prepayments made pursuant to this Section 3.3 shall be
subject to Section 3.11, shall be applied first to Base Rate Loans and then to
Eurodollar Loans in direct order, shortest to longest, of Interest Period
maturities and shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment and all other amounts due and payable
under the Credit Agreement with respect to such Loans. Amounts prepaid may be
reborrowed in accordance with the provisions hereof.
3.4 Termination and Reduction of Revolving Committed Amount.
(a) Voluntary Reductions. Hunt may from time to time permanently reduce
or terminate the Revolving Committed Amount in whole or in part (in minimum
aggregate amounts of $5,000,000 or in integral multiples of $1,000,000 in excess
thereof (or, if less, the full remaining amount of the then applicable Revolving
Committed Amount)) upon three Business Days' prior written notice to the Agent;
provided, however, no such termination or reduction shall be made which would
reduce the Revolving Committed Amount to an amount less than the aggregate
principal amount of outstanding Revolving Loans plus Domestic LOC Obligations
outstanding plus the aggregate principal amount of outstanding Competitive Loans
plus the aggregate principal amount of outstanding Swingline Loans plus the
Dollar Amount (as determined as of the most recent Determination Date) of the
aggregate principal amount of outstanding Foreign Currency Loans plus the Dollar
Amount (as determined as of the most recent Determination Date) of Foreign LOC
Obligations outstanding. The Agent shall promptly notify each of the Lenders of
receipt by the Agent of any notice from Hunt pursuant to this Section 3.4(a).
(b) Mandatory Reductions.
(i) On any date that the Revolving Loans are required to be
prepaid or the Revolving Commitments are required to be reduced
pursuant to the terms of
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Section 3.3(b)(iii) or (iv), the Revolving Committed Amount
automatically shall be permanently reduced by the amount of such
required prepayment.
(ii) On any date that Hunt shall enter into a Permitted
Receivables Financing, the Revolving Committed Amount automatically
shall be permanently reduced by the facility commitment amount of such
Permitted Receivables Financing.
(c) Termination Date. The Commitments of the Lenders and the Issuing
Lender shall automatically terminate on the Termination Date.
3.5 Fees.
(a) Facility Fee. In consideration of the Revolving Commitments of the
Lenders, Hunt agrees to pay to the Agent for the account of each Lender a fee
(the "Facility Fee") on such Lender's Commitment Percentage of the Revolving
Committed Amount (regardless of usage, but taking into account any permanent
reductions in the Revolving Committed Amount) computed at a per annum rate for
each day during the applicable Facility Fee Calculation Period (hereinafter
defined) at a rate equal to the Applicable Margin in effect from time to time.
The Facility Fee shall commence to accrue on the Closing Date and shall be due
and payable in arrears on the fifteenth (15th) day of each January, April, July
and October (and the Termination Date) for the immediately preceding fiscal
quarter (or portion thereof) (each such fiscal quarter or portion thereof for
which the Facility Fee is payable under the Credit Agreement being referred to
as an "Facility Fee Calculation Period"), beginning with the first of such dates
to occur after the Closing Date.
(b) Letter of Credit Fees.
(i) Issuance Fee. In consideration of the issuance of
standby Letters of Credit, each Borrower promises to pay to the Agent
for the account of the Lenders a fee (the "Standby Letter of Credit
Fee") on the average daily maximum amount available to be drawn under
each such standby Letter of Credit computed at a per annum rate for each
day from the date of issuance to the date of expiration equal to the
Applicable Margin for the Standby Letter of Credit Fee. The Standby
Letter of Credit Fee will be payable quarterly in arrears on the last
day of each March, June, September and December for the immediately
preceding fiscal quarter (or a portion thereof).
(ii) Trade Letter of Credit Drawing Fee. In consideration of the
issuance of trade Letters of Credit, each Borrower promises to pay to
the Agent for the account of the Lenders a fee (the "Trade Letter of
Credit Fee") of 15 basis points on the amount of each drawing under any
such trade Letter of Credit. The Trade Letter of Credit Fee will be
payable on each date of drawing under a trade Letter of Credit.
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(iii) Issuing Lender Fees. In addition to the Standby Letter of
Credit Fee payable pursuant to clause (i) above and the Trade Letter of
Credit Fee payable pursuant to clause (ii) above, each Borrower promises
to pay to the Issuing Lender for its own account without sharing by the
other Lenders the letter of credit fronting and negotiation fees agreed
to by such Borrower and the Issuing Lender from time to time and the
customary charges from time to time of the Issuing Lender with respect
to the issuance, amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit (collectively,
the "Issuing Lender Fees").
(c) Administrative Fee. Hunt agrees to pay to the Agent, for its own
account and for the account of NationsBanc Capital Markets, Inc., as applicable,
the fees referred to in the Agent's Fee Letter (collectively, the "Agent's
Fees").
(d) Competitive Bid Request Fee. Hunt shall make payment to the Agent
for each Competitive Bid Request of a Competitive Bid administrative fee (the
"Competitive Bid Request Fee") of $1500 concurrently with delivery of any
Competitive Bid Request (whether or not any Competitive Bid is offered by a
Lender or accepted by Hunt and whether or not any Competitive Loan is extended
by any Lender in connection with such Competitive Bid Request).
3.6 Capital Adequacy.
If, after the Closing Date, any Lender has determined that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations under the Credit Agreement to a level below that which such Lender
could have achieved but for such adoption, effectiveness, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy), then, upon notice and detailed explanation from such Lender to the
applicable Borrower, such Borrower shall be obligated to pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
Each determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.7 Unavailability.
(a) If prior to the first day of any Interest Period, the Agent
shall have determined (which determination shall be conclusive and
binding upon the Borrowers) that, by reason of circumstances affecting
the relevant market, adequate and reasonable
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means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, the Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the Lenders as soon as practicable thereafter. If such notice is
given (i) in respect of any Eurodollar Loans which are Revolving Loans, (A) such
Loans requested to be made on the first day of such Interest Period shall be
made as Base Rate Loans, (B) any such Loans that were to have been converted on
the first day of such Interest Period to or continued as Eurodollar Loans shall
be converted to or continued as Base Rate Loans and (C) any such Loans which are
Revolving Loans shall be converted, on the first day of such Interest Period, to
Base Rate Loans and (ii) in respect of any Eurodollar Loans which are Foreign
Currency Loans, (A) any such Loans requested to be made on the first day of such
interest Period shall be deemed rescinded and (B) any such Loans shall be repaid
in full by Hunt Europe on the first day of such Interest Period. Until such
notice has been withdrawn by the Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall Hunt have the right to convert Base Rate
Loans to Eurodollar Loans.
(b) If prior to the first day of any Interest Period, the Agent shall
have determined (which determination shall be conclusive and binding upon the
Borrowers) that deposits in Pounds Sterling are not available in the relevant
market to any Lender, the Agent shall give telecopy or telephonic notice thereof
to Hunt Europe and the Lenders as soon as practicable thereafter. If such notice
is given, (i) any Foreign Currency Loans requested to be made on the first day
of such Interest Period shall be deemed rescinded and (ii) any outstanding
Foreign Currency Loans shall be repaid in full by Hunt Europe on the first day
of such Interest Period. Until such notice has been withdrawn by the Agent, no
further Foreign Currency Loans shall be made or continued.
(c) If prior to the issuance of any Foreign Letter of Credit, the Agent
shall have determined (which determination shall be conclusive and binding upon
Hunt Europe) that, with respect to the requested Foreign Letter of Credit,
Pounds Sterling in the amount of any Lender's participation interest in such
Foreign Letter of Credit are not, and/or during the term of such Foreign Letter
of Credit will not be, available to any such Lender, then (i) the Agent shall
notify Hunt Europe and the Lenders of such circumstances and (ii) the Issuing
Lender shall have no obligation to issue, and the Lenders shall have no
obligation to participate in, such Foreign Letter of Credit.
3.8 Illegality.
(a) Notwithstanding any other provision in the Credit Agreement, if (i)
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof occurring after the Closing Date shall make it unlawful
for any Lender to make or maintain Eurodollar Loans or Foreign Currency Loans or
(ii) there shall have occurred any change in national or international
financial, political or economic conditions (including the imposition of or any
change in exchange controls) or currency exchange rates which would make it
impracticable for any Lender to make Loans denominated in Pounds Sterling to
Hunt Europe, as contemplated by the Credit
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Agreement, then, by written notice to the Borrowers and the Agent (which notice
shall be withdrawn whenever such circumstances no longer exist):
(A) such Lender may declare that Eurodollar Loans or Foreign Currency
Loans, as the case may be, will not thereafter (for the duration of such
unlawfulness or impracticability) be made by such Lender under the Credit
Agreement, whereupon any request for a Eurodollar Loan or Foreign Currency Loan,
as the case may be, shall, as to such Lender only, (1) if such Loan is not a
Foreign Currency Loan, be deemed a request for a Base Rate Loan, unless such
declaration shall be subsequently withdrawn and (2) if such Loan is a Foreign
Currency Loan, be deemed to have been withdrawn, unless such declaration shall
be subsequently withdrawn; and
(B) such Lender may require that all outstanding Eurodollar Loans or
Foreign Currency Loans, as the case may be, made by it be (1) if such Loans are
not Foreign Currency Loans, converted to Base Rate Loans, in which event all
such Eurodollar Loans shall be automatically converted to Base Rate Loans as of
the effective date of such notice as provided in paragraph (b) below or (2) if
such Loans are Foreign Currency Loans, repaid immediately, in which event all
such Foreign Currency Loans shall be required to be repaid in full by Hunt
Europe as of the effective date of such notice as provided in paragraph (b)
below.
(b) If any such conversion of a Eurodollar Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto, the
affected Borrower(s) shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 3.11.
3.9 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind whatsoever with
respect to any Letter of Credit, any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of taxation of payments
to such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 3.10 (including Non-Excluded Taxes imposed solely by reason of any
failure of such Lender to comply with its obligations under Section 3.10(b))
and changes in taxes measured by or imposed upon the overall net income, or
franchise tax (imposed in lieu of such net income tax), of such Lender or its
applicable lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other
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liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender which
is not otherwise included in the determination of the Eurodollar Rate under the
Credit Agreement; or
(c) shall impose on such Lender any other condition (excluding any tax
of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable under the Credit Agreement
in respect thereof, then, in any such case, upon notice to the applicable
Borrower from such Lender, through the Agent, in accordance therewith, the
applicable Borrower shall be obligated to promptly pay such Lender, upon its
demand, any additional amounts necessary to compensate such Lender for such
increased cost or reduced amount receivable, provided that, in any such case,
Hunt may elect to convert the Revolving Loans which are Eurodollar Loans and
made by such Lender under the Credit Agreement to Base Rate Loans by giving the
Agent at least one Business Day's notice of such election, in which case Hunt
shall promptly pay to such Lender, upon demand, without duplication, such
amounts, if any, as may be required pursuant to Section 3.11. If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall provide prompt notice thereof to the applicable Borrower, through the
Agent, certifying (x) that one of the events described in this paragraph (a) has
occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the Agent,
to a Borrower shall be conclusive and binding on the parties hereto in the
absence of manifest error. This covenant shall survive the termination of the
Credit Agreement and the payment of the Loans and all other amounts payable
under the Credit Agreement.
3.10 Taxes.
(a) Except as provided below in this subsection, all payments
made by a Borrower under the Credit Agreement and any Notes shall be
made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or after
the Closing Date imposed, levied, collected, withheld or assessed by any
court, or governmental body, agency or other official, excluding taxes
measured by or imposed upon the overall net income of any Lender or its
applicable lending office, or any branch or affiliate thereof, and all
franchise taxes, branch taxes, taxes on doing business or taxes on the
overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed in lieu
of net income taxes, imposed: (i) by the jurisdiction under the laws of
which such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is
located, or any nation within which such jurisdiction is
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located or any political subdivision thereof; or (ii) by reason of any
connection between the jurisdiction imposing such tax and such Lender,
applicable lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its obligations,
or received payment under or enforced, the Credit Agreement or any Notes. If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Lender under the Credit Agreement or under any
Notes, (A) the amounts so payable to the Agent or such Lender shall be increased
to the extent necessary to yield to the Agent or such Lender (after payment of
all Non-Excluded Taxes) interest or any such other amounts payable under the
Credit Agreement at the rates or in the amounts specified in the Credit
Agreement and any Notes, provided, however, that each Borrower shall be entitled
to deduct and withhold any Non-Excluded Taxes and shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws at the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection whenever any
Non-Excluded Taxes are payable by a Borrower, and (B) as promptly as possible
thereafter the applicable Borrower shall send to the Agent for its own account
or for the account of such Lender, as the case may be, a certified copy of an
original official receipt received by such Borrower showing payment thereof. If
a Borrower fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or other
required documentary evidence, such Borrower shall indemnify the Agent and the
Lenders for any incremental taxes, interest or penalties that may become payable
by the Agent or any Lender as a result of any such failure. The agreements in
this subsection shall survive the termination of the Credit Agreement and the
payment of the Loans and all other amounts payable under the Credit Agreement.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X)(i) on or before the date of any payment by a Borrower under
the Credit Agreement or Notes to such Lender, deliver to Hunt and the
Agent (A) two (2) duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form, as the
case may be, certifying that it is entitled to receive payments under
the Credit Agreement and any Notes without deduction or withholding of
any United States federal income taxes and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may
be, certifying that it is entitled to an exemption from United States
backup withholding tax;
(ii) deliver to Hunt and the Agent two (2) further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously
delivered by it to Hunt; and
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(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by Hunt or the
Agent; or
(Y) in the case of any such Lender that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent to
Hunt (for the benefit of Hunt and the Agent) that it is not a bank within the
meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to
furnish to Hunt on or before the date of any payment by Hunt, with a copy to the
Agent two (2) accurate and complete original signed copies of Internal Revenue
Service Form W-8, or successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under the Credit Agreement and any
Notes (and to deliver to Hunt and the Agent two (2) further copies of such form
on or before the date it expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recently provided form and, if
necessary, obtain any extensions of time reasonably requested by Hunt or the
Agent for filing and completing such forms), and (iii) agree, to the extent
legally entitled to do so, upon reasonable request by Hunt, to provide to Hunt
(for the benefit of Hunt and the Agent) such other forms as may be reasonably
required in order to establish the legal entitlement of such Lender to an
exemption from withholding with respect to payments under the Credit Agreement
and any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender under the Credit Agreement which
renders all such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender so
advises Hunt and the Agent.
(c) Each Lender shall, as soon as is reasonably practicable after the
Closing Date, file a form FD 13 with the United States Internal Revenue Service
in relation to payments made or to be made by Hunt Europe under this Credit
Agreement and any Foreign Currency Notes. If the United States Internal Revenue
Service determines that the form FD 13 filed by such Lender does not establish
that the Lender is entitled to receive payments made by Hunt Europe under this
Credit Agreement and the Foreign Currency Notes as at the date of delivery
thereof without deduction or withholding of United Kingdom withholding taxes or,
if the UK Inland Revenue requires proof of such entitlement, such Lender shall,
within forty-five (45) days after a written request from Hunt Europe, offer such
reasonable assistance as Hunt Europe may request in order to establish such
Lender's entitlement (if any) to receive payments made by Hunt Europe under this
Credit Agreement and any Foreign Currency Notes without deduction or withholding
of United Kingdom withholding taxes. Hunt Europe shall not be required to pay
any amounts to any Lender in respect of any deduction or withholding of United
Kingdom withholding taxes otherwise payable under this Section 3.10 (and Hunt
Europe, if required by law to do so, shall be entitled to withhold such amounts
and pay such amounts to the government of the United Kingdom) if the obligation
to pay such
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additional amounts would not have arisen but for a failure by such Lender to
provide Hunt Europe with the requested forms or other reasonable assistance.
(d) Each Lender agrees to make a good faith effort to minimize
any Non-Excluded Taxes by making, funding or maintaining its Foreign
Currency Loans through another lending office located in another
jurisdiction so long as the making, funding or maintenance of such
Foreign Currency Loans through such other office does not, in the
reasonable judgment of such Lender, materially affect such Lender;
provided that any Lender which is unable or unwilling to fund its
Foreign Currency Loans through a branch of such Lender in the United
Kingdom will so notify the Borrowers.
(e) Each Person that shall become a Lender or a participant of a
Lender pursuant to subsection 11.3 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this subsection,
provided that in the case of a participant of a Lender the obligations
of such participant of a Lender pursuant to subsection (b) shall be
determined as if the participant of a Lender were a Lender except that
such participant of a Lender shall furnish all such required forms,
certifications and statements to the Lender from which the related
participation shall have been purchased.
3.11 Indemnity.
Hunt promises to indemnify each Lender and to hold each Lender harmless
from any loss or expense which such Lender may sustain or incur (other than
through such Lender's gross negligence or willful misconduct) as a consequence
of (a) default by a Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Loans or Quoted Rate Swingline Loans after such
Borrower has given a notice requesting the same in accordance with the
provisions of the Credit Agreement, (b) default by a Borrower in making any
prepayment of a Eurodollar Loan or Quoted Rate Swingline Loan after such
Borrower has given a notice thereof in accordance with the provisions of the
Credit Agreement or (c) the making by a Borrower of a prepayment of Eurodollar
Loans or Quoted Rate Swingline Loans on a day which is not the last day of an
Interest Period with respect thereto. With respect to Eurodollar Loans, such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for in the Credit Agreement (excluding, however, the Applicable
Margin included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. The covenants of Hunt set forth in
this Section 3.11 shall survive the termination of the Credit Agreement and the
payment of the Loans and all other amounts payable under the Credit Agreement.
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3.12 Pro Rata Treatment.
Except to the extent otherwise provided in the Credit Agreement:
(a) Loans. Each Loan, each payment or prepayment of principal of
any Loan or reimbursement obligations arising from drawings under
Letters of Credit, each payment of interest on the Loans or
reimbursement obligations arising from drawings under Letters of Credit,
each payment of Facility Fees, each payment of the Standby Letter of
Credit Fee, each payment of the Trade Letter of Credit Fee, each
reduction of the Revolving Committed Amount and each conversion or
extension of any Loan, shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding
Loans and Participation Interests. With respect to Competitive Loans, if
Hunt fails to specify the particular Competitive Loan or Loans as to
which any payment or other amount should be applied and it is not
otherwise clear as to the particular Competitive Loan or Loans to which
such payment or other amounts relate, or any such payment or other
amount is to be applied to Competitive Loans without regard to any such
direction by Hunt, then each payment or prepayment of principal on
Competitive Loans and each payment of interest or other amount on or in
respect of Competitive Loans, shall be allocated pro rata among the
relevant Competitive Loan Lenders in accordance with the then
outstanding amounts of their respective Competitive Loans.
(b) Advances. Unless the Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not
make the amount that would constitute its Commitment Percentage of such
borrowing available to the Agent, the Agent may assume that such Lender
is making such amount available to the Agent, and the Agent may, in
reliance upon such assumption, make available to the appropriate
Borrower a corresponding amount. If such amount is not made available to
the Agent by such Lender within the time period specified therefor under
the Credit Agreement, such Lender shall pay to the Agent, on demand,
such amount with interest thereon at a rate equal to the Federal Funds
Rate (or, in the case of Pounds Sterling, the Interim Foreign Currency
Rate) for the period until such Lender makes such amount immediately
available to the Agent. A certificate of the Agent submitted to any
Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's Commitment
Percentage of such borrowing is not made available to the Agent by such
Lender within two Business Days of the date of the related borrowing,
(i) the Agent shall notify the appropriate Borrower of the failure of
such Lender to make such amount available to the Agent and the Agent
shall also be entitled to recover such amount with interest thereon at
the rate per annum applicable to Base Rate Loans under the Credit
Agreement (except in the case of any Foreign Currency Loan, in which
case, at the rate per annum applicable to Foreign Currency Loans), on
demand, from the appropriate Borrower and (ii) then the applicable
Borrower may, without waiving any rights it may have against such
Lender, borrow a like amount on an unsecured basis from any commercial
bank for a period ending on the date upon which such Lender does in fact
make such borrowing available, provided that at the time such
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borrowing is made and at all times while such amount is outstanding the
applicable Borrower would be permitted to borrow such amount pursuant
to Section 2.1 or Section 1.5, as applicable.
3.13 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under the Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in the Credit Agreement, such Lender shall promptly
purchase from the other Lenders a participation in such Loans, LOC Obligations
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in the Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrowers agree that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Loan, LOC Obligations or other obligation in the amount of such
participation. Except as otherwise expressly provided in the Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to the Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate (or, in the
case of Pounds Sterling, the Interim Foreign Currency Rate). If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.13 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.13 to share in the benefits of any recovery on such secured claim.
3.14 Payments, Computations, Etc.
(a) Currency of Payments. Each payment on account of an amount
due from any Credit Party under the Credit Agreement or under any other
Credit Document shall be made by such Credit Party to the Agent for the
pro rata account of the Lenders entitled to receive such payment as
provided in the Credit Agreement in the currency in which
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such amount is denominated. Without limiting the terms of the preceding
sentence, accrued interest on any Foreign Currency Loans and all fees
owing with respect to Foreign Letters of Credit shall be payable in
Pounds Sterling. Upon request, the Agent will give the Credit Parties a
statement showing the computation used in calculating such amount, which
statement shall be conclusive in the absence of manifest error. The
obligation of each Credit Party to make each payment on account of such
amount in the currency in which such amount is denominated shall not be
discharged or satisfied by any tender, or any recovery pursuant to any
judgment, which is expressed in or converted into any other currency,
except to the extent such tender or recovery shall result in the actual
receipt by the Agent of the full amount in the appropriate currency
payable under the Credit Agreement. Each Credit Party agrees that its
obligation to make each payment on account of such amount in the
currency in which such amount is denominated shall be enforceable as an
additional or alternative claim for recovery in such currency of the
amount (if any) by which such actual receipt shall fall short of the
full amount of such currency payable under the Credit Agreement, and
shall not be affected by judgment being obtained for such amount.
(b) Place and Manner of Payments. Except as otherwise
specifically provided in the Credit Agreement, all payments under the
Credit Agreement shall be made to the Agent in immediately available
funds, without offset, deduction, counterclaim or withholding of any
kind, prior to 2:00 P.M., local time in the place where such payment is
required to be made pursuant to this subsection (b), on the date due at
the office of the Agent: at 101 N. Tryon Street, Independence Center,
15th Floor, NC1-001-15-01, Charlotte, North Carolina 28255 with respect
to payments in Dollars; at 35 New Broad Street, GB1-001-01-01, London,
England EC2M 1NH with respect to payments in British Pounds Sterling; or
at such other place as may be designated by the Agent to the Borrowers
in writing. Payments received after such time shall be deemed to have
been received on the next succeeding Business Day. The Agent may (but
shall not be obligated to) debit the amount of any such payment which is
not made by such time to any ordinary deposit account of the Borrowers
maintained with the Agent (with notice to the Borrowers). Each Borrower
shall, at the time it makes any payment under the Credit Agreement,
specify to the Agent the Loans, LOC Obligations, Fees, interest or other
amounts payable by such Borrower under the Credit Agreement to which
such payment is to be applied (and in the event that it fails so to
specify, or if such application would be inconsistent with the terms of
the Credit Agreement, the Agent shall distribute such payment to the
Lenders in such manner as the Agent may determine to be appropriate in
respect of obligations owing by such Borrower under the Credit
Agreement, subject to the terms of Section 3.12(a)). The Agent will
distribute such payments to such Lenders, if any such payment is
received prior to 12:00 Noon (Charlotte, North Carolina time) on a
Business Day in like funds as received prior to the end of such Business
Day and otherwise the Agent will distribute such payment to such Lenders
on the next succeeding Business Day. Whenever any payment under the
Credit Agreement shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for the
period of such extension), except that in the case of Eurodollar Loans,
if the extension would cause
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the payment to be made in the next following calendar month, then such
payment shall instead be made on the next preceding Business Day. Except
as expressly provided otherwise in the Credit Agreement, all
computations of interest and fees shall be made on the basis of actual
number of days elapsed over a year of 360 days, except with respect to
computation of interest on Foreign Currency Loans and Base Rate Loans
which (unless the Base Rate is determined by reference to the Federal
Funds Rate) shall be calculated based on a year of 365 or 366 days, as
appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
3.15 Mandatory Assignment.
In the event any Lender delivers to either Borrower any notice in
accordance with Section 3.6 or any Lender requests payment by any Borrower of
any additional amounts pursuant to Section 3.10, then, provided that no Default
or Event of Default has occurred and is continuing at such time, Hunt may, at
its own expense (such expense to include any transfer fee payable to the Agent
under Section 11.3(b)), and in its sole discretion require such Lender to
transfer and assign in whole or in part, without recourse (in accordance with
and subject to the terms and conditions of Section 11.3(b)), all or part of
its interests, rights and obligations under the Credit Agreement to an Eligible
Assignee which shall assume such assigned obligations, provided that (i) such
assignment shall not conflict with any law, rule or regulation or order of any
court or other Governmental Authority and (ii) the Borrowers or such assignee
shall have paid to the assigning Lender in immediately available funds the
principal of and interest accrued to the date of such payment on the Loans made
by it under the Credit Agreement and all other amounts owed to it under the
Credit Agreement.
SECTION 4
GUARANTY
4.1 The Guarantee.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender and the Agent as hereinafter provided the prompt payment of the
Borrowers' Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, a mandatory cash collateralization or
otherwise) strictly in accordance with the terms thereof. The Guarantors hereby
further agree that if any of the Borrowers' Obligations are not paid in full
when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as mandatory cash collateralization or otherwise), the Guarantors
will, jointly and severally, promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Borrowers' Obligations, the same will be promptly paid in full
when due (whether at extended maturity, as a mandatory prepayment, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
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Notwithstanding any provision to the contrary contained in any of the
Credit Documents, to the extent the obligations of a Guarantor shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each Guarantor
under the Credit Agreement shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including,
without limitation, the Bankruptcy Code).
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents, or any
other agreement or instrument referred to therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Borrowers'
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Guarantors
under the Credit Agreement shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against either Borrower
or any other Guarantor of the Borrowers' Obligations for amounts paid under this
Guaranty until such time as the Lenders have been paid in full, all Commitments
under the Credit Agreement have been terminated and no Person or Governmental
Authority shall have any right to request any return or reimbursement of funds
from the Lenders in connection with monies received under the Credit Documents.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor under the
Credit Agreement which shall remain absolute and unconditional as described
above:
(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of the
Borrowers' Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any
of the Credit Documents or any other agreement or instrument referred to
therein shall be done or omitted;
(iii) the maturity of any of the Borrowers' Obligations shall be
accelerated, or any of the Borrowers' Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents or any other agreement or instrument referred to
therein shall be waived or any other guarantee of any of the Borrowers'
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Agent or any
Lender or Lenders as security for any of the Borrowers' Obligations
shall fail to attach or be perfected; or
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(v) any of the Borrowers' Obligations shall be determined to be
void or voidable (including, without limitation, for the benefit of any
creditor of any Guarantor) or shall be subordinated to the claims of any
Person (including, without limitation, any creditor of any Guarantor).
With respect to its obligations under the Credit Agreement, each Guarantor
hereby expressly waives diligence, presentment, demand of payment, protest and
all notices whatsoever, and any requirement that the Agent or any Lender exhaust
any right, power or remedy or proceed against any Person under any of the Credit
Documents or any other agreement or instrument referred to therein, or against
any other Person under any other guarantee of, or security for, any of the
Borrowers' Obligations.
4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Borrowers' Obligations is rescinded
or must be otherwise restored by any holder of any of the Borrowers'
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat.
Sections 26-7 through 26-9, inclusive. Each Guarantor further agrees that such
Guarantor shall have no right of recourse to security for the Borrowers'
Obligations.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Borrowers' Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Borrowers'.
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Borrowers' Obligations
being deemed to have become automatically due and payable), the Borrowers'
Obligations (whether or not due and payable by any other Person) shall forthwith
become due and payable by the Guarantors for purposes of said Section 4.1.
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4.6 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence hereof and to subsection (b) below), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.6 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 4 (hereafter, the "Guaranteed
Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Guaranteed Obligations; (ii) "Excess Payment" shall mean, in
respect of any Guaranteed Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section 4.6, shall mean, for
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor under the Credit Agreement) to (b) the amount
by which the aggregate present fair saleable value of all assets and other
properties of the applicable Borrower and all of the applicable Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Borrower and Guarantors under the Credit Agreement) of such
Borrower and Guarantors, all as of the Closing Date (if any Guarantor becomes a
party hereto subsequent to the Closing Date, then for the purposes of this
Section 4.6 such subsequent Guarantor shall be deemed to have been a Guarantor
as of the Closing Date and the information pertaining to, and only pertaining
to, such Guarantor as of the date such Guarantor became a Guarantor shall be
deemed true as of the Closing Date).
4.7 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Borrowers' Obligations whenever arising.
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SECTION 5
CONDITION
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Amendment shall be
subject to satisfaction of the following conditions (in form and substance
acceptable to the Lenders):
(a) The Agent shall have received original counterparts of this
Amendment executed by each of the parties hereto;
(b) The Agent shall have received an appropriate original
Revolving Note for each Lender, executed by Hunt;
(c) The Agent shall have received an appropriate original
Foreign Currency Note for each Lender, executed by Hunt Europe;
(d) The Agent shall have received all documents it may
reasonably request relating to the existence and good standing of Hunt
Europe, the corporate or other necessary authority for and the validity
of this Amendment and the Notes, and any other matters relevant thereto,
all in form and substance reasonably satisfactory to the Agent;
(e) The Agent shall have received a legal opinion of special
United Kingdom counsel for Hunt Europe, dated as of the Amendment
Effective Date and substantially in the form of Schedule 5.1(c), and
(f) The Agent shall have received such other documents,
agreements or information which may be reasonably requested by the
Agent.
5.2 Conditions to all Extensions of Credit.
The obligations of each Lender to make, convert or extend any Loan and
of the Issuing Lender to issue or extend Letters of are subject to satisfaction
of the following conditions in addition to satisfaction of the conditions set
forth in Section 5.1:
(i) The applicable Borrower shall have delivered (A) in the case
of any Revolving Loan or any Foreign Currency Loan, an appropriate
Notice of Borrowing or Notice of Extension/Conversion or (B) in the case
of any Letter of Credit, the Issuing Lender shall have received an
appropriate request for issuance in accordance with the provisions of
Section 2.2(b) or of Section 2.6(b);
(ii) The representations and warranties set forth in Section 6
shall be, subject to the limitations set forth therein, true and correct
in all material respects as of such date (except for those which
expressly relate to an earlier date);
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(iii) There shall not have been commenced against either
Borrower or any Guarantor an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or after the Closing
Date in effect, or any case, proceeding or other action for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for any substantial
part of its Property or for the winding up or liquidation of its
affairs, and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded;
(iv) No Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto;
(v) No material adverse change shall have occurred since
December 3, 1995 in the condition (financial or otherwise), business,
management or prospects of Hunt and its Subsidiaries taken as a whole;
and
(vi) Immediately after giving effect to the making of such Loan
(and the application of the proceeds thereof) or to the issuance of such
Letter of Credit, as the case may be, (A) the sum of the aggregate
principal amount of outstanding Revolving Loans plus Domestic LOC
Obligations outstanding plus the aggregate principal amount of
outstanding Competitive Loans plus the aggregate principal amount of
outstanding Swingline Loans plus the Dollar Amount (as determined as of
the most recent Determination Date) of the aggregate principal amount of
outstanding Foreign Currency Loans p1us the Dollar Amount (as determined
as of the most recent Determination Date) of Foreign LOC Obligations
outstanding shall not exceed the aggregate Revolving Committed Amount,
(B) the sum of the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding
Foreign Currency Loans plus the Dollar Amount (as determined as of the
most recent Determination Date) of Foreign LOC Obligations outstanding
shall not exceed the aggregate Foreign Currency Committed Amount and (C)
the Domestic LOC Obligations shall not exceed the Domestic LOC Committed
Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit pursuant to Section 2.2(b) or Section
2.6(b) shall constitute a representation and warranty by the requesting Borrower
of the correctness of the matters specified in subsections (ii), (iii), (iv),
(v) and (vi) above.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 Financial Condition.
(a) The audited consolidated balance sheet of Hunt and its
consolidated Subsidiaries as of December 3, 1995 and the audited
consolidated statements of earnings and statements of cash flows for the
years ended November 27, 1994 and December 3, 1995 have heretofore been
furnished to each Lender. Such financial statements (including the notes
thereto) (i) have been audited by Coopers; & Lybrand, (ii) have been
prepared in accordance with GAAP consistently, applied throughout the
periods covered thereby and (iii) present fairly in all material
respects (on the basis disclosed in the footnotes to such financial
statements) the consolidated financial position, results of operations
and cash flows of Hunt and its consolidated Subsidiaries as of such date
and for such periods. The unaudited interim balance sheets of Hunt and
its consolidated Subsidiaries as at the end of, and the related
unaudited interim statements of earnings and of cash flows for, each
fiscal quarterly period ended after December 3, 1995 and prior to the
Closing Date have heretofore been furnished to each Lender. Such interim
financial statements for each such quarterly period, (i) have been
prepared in accordance with the requirements of the Securities and
Exchange Commission for Form 10-Q and (ii) present fairly in all
material respects (on the basis disclosed in the footnotes to such
financial statements) the consolidated financial position, results of
operations and cash flows of Hunt and its consolidated Subsidiaries as
of such date and for such periods. During the period from December 3,
1995 to and including the Amendment Effective Date, there has been no
sale, transfer or other disposition by Hunt or any of its Subsidiaries
of any material part of the business or property of Hunt and its
consolidated Subsidiaries, taken as a whole, and no purchase or other
acquisition by any of them of any business or property (including any
capital stock of any other person) material in relation to the
consolidated financial condition of Hunt and its consolidated
Subsidiaries, taken as a whole, in each case, which, is not reflected in
the foregoing financial statements or in the notes thereto and has not
otherwise been disclosed in writing to the Lenders on or prior to the
Closing Date.
(b) The projected balance sheets and income statements of Hunt
and its consolidated Subsidiaries for fiscal years 1997, 1998, 1999 and
2000, copies of which have heretofore been furnished to each Lender, are
based upon reasonable assumptions made known to the Lenders and upon
information not known to be incorrect or misleading in any material
respect.
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6.2 No Change.
Since December 3, 1995, (a) there has been no development or event
relating to or affecting Hunt or any of its Subsidiaries which has had or would
be reasonably expected to have a Material Adverse Effect and (b) except as
permitted under the Credit Agreement, no dividends or other distributions have
been declared, paid or made upon the capital stock or other equity interest in
Hunt or any of its Subsidiaries nor, except as otherwise permitted under the
Credit Agreement, has any of the capital stock or other equity interest in Hunt
or any of its Subsidiaries been redeemed, retired, purchased or otherwise
acquired for value by such Person.
6.3 Organization; Existence; Compliance with Law.
Hunt and each of its Subsidiaries (a) is a corporation duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation or organization, (b) has the corporate or other necessary
power and authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged, except to the extent that the failure to have such legal
right would not be reasonably expected to have a Material Adverse Effect, (c) is
duly qualified as a foreign entity and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, other than in such jurisdictions
where the failure to be so qualified and in good standing would not be
reasonably expected to have a Material Adverse Effect, and (d) is in compliance
with all material Requirements of Law, except to the extent that the failure to
comply therewith would not, in the aggregate, be reasonably expected to have a
Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and, in the case of the Borrowers, to borrow
under the Credit Agreement, and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of the Credit Agreement and
to authorize the execution, delivery and performance of the Credit Documents to
which it is a party. As of the Closing Date, no consent or authorization of,
filing with, notice to or other similar act by or in respect of, any
Governmental Authority or any other Person is required to be obtained or made by
or on behalf of any Credit Party in connection with the borrowings under the
Credit Agreement or with the execution, delivery, performance, validity or
enforceability of the Credit Documents to which such Credit Party is a party,
except for consents, authorizations, notices and filings described in Schedule
6.4 (which was provided by Hunt on and as of the Closing Date), all of which
have been obtained or made or have the status described in such Schedule 6.4.
This Amendment, the Credit Agreement and each other Credit Document to which any
Credit Party is a party have been duly executed and delivered on behalf of the
Credit Parties. Each of this Amendment, the Credit Agreement and the other
Credit Document to which any Credit Party is a party constitutes a legal, valid
and binding obligation of such Credit Party enforceable against such party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
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affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
6.5 No Legal Bar.
The execution, delivery and performance of the Credit Documents by the
Credit Parties, the borrowings under the Credit Agreement and the use of the
proceeds thereof (a) will not violate any Requirement of Law or contractual
obligation of Hunt or any of its Subsidiaries in any respect that would
reasonably be expected to have a Material Adverse Effect, (b) will not result
in, or require, the creation or imposition of any Lien on any of the properties
or revenues of Hunt or any of its Subsidiaries pursuant to any such Requirement
of Law or contractual obligation and (c) will not violate or conflict with any
provision of any Credit Party's articles of incorporation or by-laws.
6.6 No Material Litigation.
No litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the best knowledge of the Credit
Parties, threatened by or against Hunt or any of its Subsidiaries or against any
of their respective properties or revenues which (a) relates to any of the
Credit Documents or any of the transactions contemplated thereby or (b) would be
reasonably expected to have a Material Adverse Effect.
6.7 No Default.
Neither Hunt nor any of its Subsidiaries is in default under or with
respect to any of its contractual obligations in any respect which would be
reasonably expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
6.8 Ownership of Property; Liens.
Each of Hunt and its Subsidiaries has good record and marketable title
in fee simple to, or a valid leasehold interest in, all its material real
property, and good title to, or a valid leasehold interest in, all its other
material property, and none of such property is subject to any Lien, except for
Permitted Liens.
6.9 Intellectual Property.
Each of Hunt and its Subsidiaries owns, or has the legal right to use,
all United States trademarks, tradenames, copyrights, technology, know-how and
processes necessary for each of them to conduct its business as currently
conducted (the "Intellectual Property") except for those the failure to own or
have such legal right to use would not be reasonably expected to have a Material
Adverse Effect. Except as provided on Schedule 6.9 (which was provided by Hunt
on and as of the Closing Date), no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and the use of such
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Intellectual Property by Hunt or any of its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that in the
aggregate, would not be reasonably expected to have a Material Adverse Effect.
6.10 No Burdensome Restrictions.
Except as previously disclosed in writing to the Lenders on or prior
to the Closing Date, no Requirement of Law or contractual obligation of Hunt or
any of its Subsidiaries would be reasonably expected to have a Material Adverse
Effect.
6.11 Taxes.
(a) Each of Hunt and its Subsidiaries has filed or caused to be
filed all United States federal income tax returns and all other
material tax returns which, to the best knowledge of the Credit Parties,
are required to be filed and has paid (a) all taxes shown to be due and
payable on said returns or (b) all taxes shown to be due and payable on
any assessments of which it has received notice made against it or any
of its property and all other taxes, fees or other charges imposed on it
or any of its property by any Governmental Authority (other than any (i)
taxes, fees or other charges with respect to which the failure to pay,
in the aggregate, would not have a Material Adverse Effect or (ii)
taxes, fees or other charges the amount or validity of which are
currently being contested and with respect to which reserves in
conformity with GAAP have been provided on the books of such Person),
and no tax Lien has been filed, and, to the best knowledge of the Credit
Parties, no claim is being asserted, with respect to any such tax, fee
or other charge.
(b) There are no income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, imposed, levied,
collected, withheld or assessed by any English court, or governmental
body, agency or other official either (i) on or by virtue of the
execution or delivery of the Credit Agreement, the Foreign Currency
Notes or any other Credit Document or (ii) on any payment to be made by
the Borrowers under the Credit Agreement, the Foreign Currency Notes or
any other Credit Document.
6.12 ERISA.
Except as set forth in Schedule 6.12 (which was provided by Hunt on and
as of the Closing Date) or as could not reasonably be expected to have a
Material Adverse Effect:
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no Termination Event has
occurred, and, to the best knowledge of the Credit Parties, no event or
condition has occurred or exists as a result of which any Termination
Event could reasonably be expected to occur, with respect to any Plan;
(ii) no "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA and Section 412 of the Code, whether or not waived,
has occurred with respect to any Plan; (iii) each Plan has been
maintained, operated, and funded in compliance with its
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own terms and in material compliance with the applicable provisions of
ERISA, the Code, and any other applicable federal or state laws; and
(iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably
likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the Code, utilizing the actuarial assumptions used
to fund such Plans), whether or not vested, did not, as of the last
annual valuation date prior to the date on which this representation is
made or deemed made, exceed the current value of the assets of such Plan
allocable to such accrued liabilities.
(c) Neither Hunt, any of the Subsidiaries of Hunt nor any ERISA
Affiliate has incurred, or, to the best knowledge of the Credit
Parties, could be reasonably expected to incur, any withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer
Plan. Neither Hunt, any of the Subsidiaries of Hunt nor any ERISA
Affiliate would become subject to any withdrawal liability under ERISA
if Hunt, any of the Subsidiaries of Hunt or any ERISA Affiliate were to
withdraw completely from all Multlemployer Plans and Multiple Employer
Plans as of the valuation date most closely preceding the date on which
this representation is made or deemed made. Neither Hunt, any of the
Subsidiaries of Hunt nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within
the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of
Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge
of the Credit Parties, reasonably expected to be in reorganization,
insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject Hunt, any of the Subsidiaries of Hunt or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of
ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which Hunt, any of the Subsidiaries of Hunt or
any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
(e) Each Plan which is a welfare plan (as defined in Section
3(l) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of
the Code apply has been administered in compliance in all material
respects with such sections.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the financing transactions contemplated thereunder will
involve any transaction which is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be imposed pursuant
to Section 4975 of the Code. The representation by the Credit Parties in
the preceding sentence is made in reliance upon and subject to the
accuracy of the Lenders' representation in Section 11.17 with respect
to their source of funds and is subject, in the event that the source of
the funds used by the
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Lenders in connection with this transaction is an insurance company's
general asset account, to the continued validity of Department of Labor
Interpretative Bulletin 75-2, 29 C.F.R. Section 2509.75-2(b) (November
13, 1986) or the issuance of any other similar relief or prohibited
transaction exemption, to the effect that assets in an insurance
company's general asset account do not constitute assets of an "employee
benefit plan" within the meaning of Section 3(3) of ERISA or a "plan"
within the meaning of Section 4975(e)(1) of the Code.
6.13 Governmental Regulations, Etc.
(a) No part of the proceeds of the Loans will be used, directly
or indirectly, for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation G or Regulation U, or for the
purpose of purchasing or carrying or trading in any securities. If
requested by any Lender or the Agent, each of the Borrowers will furnish
to the Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said
Regulation U. No indebtedness being reduced or retired out of the
proceeds of the Loans was or will be incurred for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation
U or any "margin security" within the meaning of Regulation T. "Margin
stock" within the meanings of Regulation U does not constitute more than
25% of the value of the consolidated assets of Hunt and its Subsidiaries
or more than 25% of the value of the consolidated assets of Hunt Europe
and its Subsidiaries. None of the transactions contemplated by the
Credit Agreement (including, without limitation, the direct or indirect
use of the proceeds of the Loans) will violate or result in a violation
of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 19334, as amended, or regulations issued pursuant thereto, or
Regulation G, T, U or X.
(b) Neither Hunt nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or the Investment Company Act of 1940, each as
amended. In addition, neither Hunt nor any of its Subsidiaries is (i) an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, and is not controlled by
such a company, or (ii) a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(c) As of the Closing Date, no director, executive officer or
principal shareholder of Hunt or any of its Subsidiaries is a director,
executive officer or principal shareholder of any Lender. For the
purposes hereof the terms "director", "executive officer" and "principal
shareholder" (when used with reference to any Lender) have the
respective meanings assigned thereto in Regulation 0 issued by the Board
of Governors of the Federal Reserve System.
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(d) Each of Hunt and its Subsidiaries has obtained all material
licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its respective Property and to the conduct
of its business.
(e) Neither Hunt nor any of its Subsidiaries is in violation of
any applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or any other
jurisdiction, or of any agency thereof (including without limitation,
environmental laws and regulations), which violation could reasonably be
expected to have a Material Adverse Effect.
(f) Each of Hunt and its Subsidiaries is current with all
material reports and documents, if any, required to be filed with any
state or federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and
regulations of such commissions.
6.14 Subsidiaries.
Schedule 6.14 sets forth all the Subsidiaries of Hunt at the Closing
Date, the jurisdiction of their incorporation and the direct or indirect
ownership interest of Hunt therein.
6.15 Purpose of Loans and Letters of Credit.
The proceeds of the Loans (other than the Foreign Currency Loans) under
the Credit Agreement shall be used solely by Hunt (i) to refinance the existing
Indebtedness of Hunt under the Existing Credit Agreement, (ii) for the working
capital and general corporate purposes of Hunt and its Domestic Subsidiaries and
(iii) to finance acquisitions by Hunt. The proceeds of the Foreign Currency
Loans under the Credit Agreement shall be used solely by Hunt Europe (i) to
refinance certain existing Indebtedness of Hunt Europe, (ii) for working capital
and general corporate purposes of Hunt Europe and (iii) to finance acquisitions
by Hunt Europe. The Letters of Credit shall be used only for or in connection
with appeal bonds, reimbursement obligations arising in connection with surety
and reclamation bonds, reinsurance, domestic or international trade transactions
and obligations not otherwise aforementioned relating to transactions entered
into by the Borrowers in the ordinary course of business.
6.16 Environmental Matters.
Except as set forth in Schedule 6.16 (which was provided by Hunt on and
as of the Closing Date) or as could not reasonably be expected to have a
Material Adverse Effect:
(a) Each of the facilities and properties owned, leased or operated by
Hunt or any of its Domestic Subsidiaries (the "Properties") and all operations
at the Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the Properties or
the businesses operated by Hunt or any of its Domestic Subsidiaries (the
"Businesses"), and there are no conditions relating to the Businesses or
Properties that could give rise to liability under any applicable Environmental
Laws.
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(b) None of the Properties contains, or has previously contained, any
Materials of Environmental Concern at, on or under the Properties in amounts or
concentrations that constitute a violation of, or could give rise to liability
under, Environmental Laws.
(c) Neither Hunt nor any of its Domestic Subsidiaries has received any
written notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Properties or the Businesses that remains unresolved, nor
does Hunt or any of its Domestic Subsidiaries have knowledge or reason to
believe that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, or generated, treated, stored or disposed of
at, on or under any of the Properties or, to the best knowledge of the Credit
Parties, any other location, in each case by or on behalf of Hunt or any of its
Domestic Subsidiaries in violation of, or in a manner that would be reasonably
likely to give rise to liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which Hunt or any of its Domestic Subsidiaries is or will
be named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
Hunt or any of its Domestic Subsidiaries, the Properties or the Businesses.
(f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations (including, without limitation, disposal) of Hunt or any of its
Domestic Subsidiaries in connection with the Properties or otherwise in
connection with the Businesses, in violation of Environmental Laws.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as the Credit
Agreement is in effect or any amounts payable under the Credit Agreement or
under any other Credit Document shall remain outstanding, and until all of the
Commitments shall have terminated:
7.1 Information Covenants.
Hunt will furnish, or cause to be furnished, to the Agent:
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year of Hunt and
its Subsidiaries, a
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consolidated balance sheet and income statement of Hunt and its
Subsidiaries, as of the end of such fiscal year, together with related
consolidated statements of operations and retained earnings and of cash
flows for such fiscal year, setting forth in comparative form
consolidated figures for the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and
audited by independent certified public accountants of recognized
national standing reasonably acceptable to the Agent and whose opinion
shall be to the effect that such financial statements have been prepared
in accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified as to the status of Hunt and its Subsidiaries as a going
concern; provided that, the delivery within the time period specified
above of Hunt's Annual Report on Form 10-K for any fiscal year prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this subsection (a) for such period.
(b) Quarterly Financial Statements. As soon as available, and in
any event within 45 days after the close of each fiscal quarter of
Hunt and its Subsidiaries (other than the fourth fiscal quarter, in
which case 90 days after the end thereof) a consolidated balance sheet
and income statement of Hunt and its Subsidiaries, as of the end of such
fiscal quarter, together with related consolidated statements of
operations and retained earnings and of cash flows for such fiscal
quarter in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year, all
such financial information described above to be in reasonable form and
detail and reasonably acceptable to the Agent, and accompanied by a
certificate of the chief financial officer of Hunt to the effect that
such quarterly financial statements fairly present in all material
respects the financial position of Hunt and its Subsidiaries and have
been prepared in accordance with GAAP, subject to changes resulting from
audit and normal year-end audit adjustments; provided that, the delivery
within the time period specified above of Hunt's Annual Report on Form
10-Q for any fiscal quarter prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this subsection (a) for such
period.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above, a
certificate of the chief financial officer of Hunt; substantially in the
form of Schedule 7.1(c), (i) demonstrating compliance with the financial
covenants contained in Section 7.11 by calculation thereof as of the end
of each such fiscal period and (ii) stating that no Default or Event of
Default exists, or if any Default or Event of Default does exist,
specifying the nature and extent thereof and what action Hunt proposes
to take with respect thereto.
(d) Annual Business Plan and Budgets. At least 90 days after the
end of each fiscal year of Hunt, beginning with the fiscal year ending
December 1, 1996, an annual business plan and budget of Hunt containing,
among other things, projected financial statements for the next fiscal
year.
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(e) Accountant's Certificate. Within the period for delivery of
the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed Section 7.11 of the Credit Agreement and stating
further whether, in the course of their audit, they have become aware of
any Default or Event of Default under such Section 7.11 and, if any such
Default or Event of Default exists, specifying the nature and extent
thereof.
(f) Auditor's Reports. Promptly upon receipt thereof, a copy of
any other report or "management letter" submitted by independent
accountants to Hunt or any of its Subsidiaries in connection with any
annual, interim or special audit of the books of such Person.
(g) Reports. Promptly upon transmission or receipt thereof, (i)
copies of any filings and registrations with, and reports to or, if
material, from, the Securities and Exchange Commission, or any successor
agency, and copies of all financial statements, proxy statements,
notices and reports as Hunt or any of its Subsidiaries shall send to its
shareholders or to a holder of any Indebtedness owed by Hunt or any of
its Subsidiaries in its capacity as such a holder and (ii) upon the
request of the Agent, all reports and written information to and from
the United States Environmental Protection Agency, or any state or local
agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters, or any successor
agencies or authorities concerning environmental, health or safety
matters.
(h) Notices. Upon a Credit Party obtaining knowledge thereof,
Hunt will give written notice to the Agent immediately of (a) the
occurrence of an event or condition consisting of a Default or Event of
Default, specifying the nature and existence thereof and what action the
Credit Parties propose to take with respect thereto, and (b) the
occurrence of any of the following with respect to Hunt or any of its
Subsidiaries (i) the pendency or commencement of any litigation,
arbitral or governmental proceeding against such Person which if
adversely determined is likely to have a Material Adverse Effect, (ii)
the institution of any proceedings against such Person with respect to,
or the receipt of notice by such Person of potential liability or
responsibility for violation, or alleged violation of any federal, state
or local law, rule or regulation, including but not limited to,
Environmental Laws, the violation of which would likely have a Material
Adverse Effect, or (iii) any notice or determination concerning the
imposition of any withdrawal liability by a multiemployer Plan against
such Person or any ERISA Affiliate, the determination that a
Multiemployer Plan is, or is expected to be, in reorganization within
the meaning of Title IV of ERISA or the termination of any Plan.
(i) ERISA. Upon any of the Credit Parties obtaining knowledge
thereof, Hunt will give written notice to the Agent promptly (and in any
event within five business days) of: (i) of any event or condition,
including, but not limited to, any Reportable Event, that constitutes,
or might reasonably lead to, a Termination Event; (ii)
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with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed
against Hunt or any of its ERISA Affiliates, or of a determination that
any Multiemployer Plan is in reorganization or insolvent (both within
the meaning of Title IV of ERISA); (iii) the failure to make full
payment on or before the due date (including extensions) thereof of all
amounts which Hunt, any of the Subsidiaries of Hunt or any ERISA
Affiliate is required to contribute to each Plan pursuant to its terms
and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto; or (iv) any change in the funding
status of any Plan that reasonably could be expected to have a Material
Adverse Effect; together, with a description of any such event or
condition or a copy of any such notice and a statement by the principal
financial officer of Hunt briefly setting forth the details regarding
such event, condition, or notice, and the action, if any, which has been
or is being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, Hunt shall furnish the Agent and
the Lenders with such additional information concerning any Plan as may
be reasonably requested, including, but not limited to, copies of each
annual report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(j) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of Hunt or any of its Subsidiaries as the Agent or
the Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Except as otherwise permitted pursuant to the terms of Section 8.4, Hunt
will, and will cause each of its Subsidiaries to, do all things necessary to
preserve and keep in full force and effect its existence, material rights and
franchises and authority.
7.3 Books and Records.
Hunt will, and will cause each of its Subsidiaries to, keep complete and
accurate books and records of its transactions in accordance with GAAP.
7.4 Compliance with Law.
Hunt will, and will cause each of its Subsidiaries to, comply with all
laws, rules, regulations and orders, and all applicable restrictions imposed by
all Governmental Authorities, applicable to it and its property if
noncompliance with any such law, rule, regulation, order or restriction would
have a Material Adverse Effect.
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7.5 Payment of Taxes and Other Indebtedness.
Hunt will, and will cause each of its Subsidiaries to, pay and discharge
(i) all taxes, assessments and governmental charges or levies imposed upon it,
or upon its income or profits, or upon any of its properties, before they shall
become delinquent, (ii) all lawful claims (including claims for labor, materials
and supplies) which, if unpaid, might give rise to a Lien upon any of its
properties, and (iii) except as prohibited under the Credit Agreement, all of
its other Indebtedness as it shall become due; provided, however, that Hunt and
its Subsidiaries shall not be required to pay any such tax, assessment, charge,
levy, claim or Indebtedness which is being contested in good faith by
appropriate proceedings and as to which adequate accruals therefor have been
established in accordance with GAAP, unless the failure to make any such payment
(i) would give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) would have a Material Adverse Effect.
7.6 Insurance.
Hunt will, and will cause each of its Subsidiaries to, at all times
maintain in full force and effect insurance including worker's compensation
insurance, liability insurance, casualty, insurance and business interruption
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice.
7.7 Maintenance of Property.
Hunt will, and will cause each of its Subsidiaries to, maintain and
preserve its properties and equipment material to the conduct of its business in
good repair, working order and condition, normal wear and tear excepted, and
will make, or cause to be made, in such properties and equipment from time to
time all repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto as may be needed or proper, to the extent and in the manner
customary for companies in similar businesses.
7.8 Performance of Obligations.
Hunt will, and will cause each of its Subsidiaries to, perform in all
material respects all of its obligations under the terms of all material
agreements, indentures, mortgages, security agreements or other debt instruments
to which it is a party or by which it is bound.
7.9 Use of Proceeds.
The Borrowers will use the proceeds of the Loans and will use the
Letters of Credit solely for the purposes set forth in Section 6.15.
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7.10 Audits/Inspections.
Upon reasonable notice and during normal business hours, Hunt will, and
will cause each of its Subsidiaries to, permit representatives appointed by the
Agent, including, without limitation, independent accountants, agents,
attorneys, and appraisers to visit and inspect its property, including its books
and records, its accounts receivable and inventory, its facilities and its other
business assets, and to make photocopies or photographs thereof and to write
down and record any information such representative obtains and shall permit the
Agent or its representatives to investigate and verify the accuracy of
information provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of such Person.
7.11 Financial Covenants.
(a) Consolidated Net Worth. Consolidated Net Worth at all times
shall be no less than $45,000,000, increased on a cumulative basis as of
the last day of each fiscal year commencing with the last day of fiscal
year 1996, by an amount equal to 30% of Consolidated Net Income for the
fiscal year then ended.
(b) Consolidated Leverage Ratio. The Consolidated Leverage Ratio
at each Calculation Date shall be no greater than the following
proportions:
Period Ratio
------ -----
For the last day of 3.25 to 1.00
fiscal year 1996 of Hunt
For any first fiscal 3.00 to 1.00
quarter period, second
fiscal quarter period or
fourth fiscal quarter
period occurring from
the first day of fiscal
year 1997 of Hunt through
the last day of such
fiscal year
For any third fiscal 3.50 to 1.00
quarter period occurring
from the first day of
fiscal year 1997 of Hunt
through the last day of
such fiscal year
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For any first fiscal 2.75 to 1.00
quarter period, second
fiscal quarter period
or fourth fiscal quarter
period occurring from
the first day of fiscal
year 1998 of Hunt through
the last day of such
fiscal year
For any third fiscal 3.25 to 1.00
quarter period occurring
from the first day of
fiscal year 1998 of Hunt
through the last day of
such fiscal year
For any first fiscal 2.50 to 1.00
quarter period, second
fiscal quarter period or
fourth fiscal quarter
period occurring from
the first day of fiscal
year 1999 of Hunt and
thereafter
For any third fiscal 3.00 to 1.00
quarter period occurring
from the first day of
fiscal year 1999 of Hunt
and thereafter
(c) Consolidated Fixed Charge Coverage Ratio. The Consolidated
Fixed Charge Coverage Ratio at each Calculation Date shall be no less
than 1.30 to 1.00.
(d) Consolidated Interest Coverage Ratio. The Consolidated
Interest Coverage Ratio at each Calculation Date shall be no less than
2.00 to 1.00.
(e) Consolidated Funded Indebtedness to Capitalization Ratio.
The Consolidated Funded Indebtedness to Capitalization Ratio at each
Calculation Date shall be no greater than the following proportions:
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Period Ratio
------ -----
For any fiscal quarter 0.70 to 1.00
period occurring from
the Amendment Effective
Date through the last day of
fiscal year 1997 of Hunt
For any fiscal quarter 0.65 to 1.00
occurring from the first
day of fiscal year 1998 of
Hunt through the last day
of such fiscal year
For any fiscal quarter 0.60 to 1.00
period occurring from the
first day of fiscal year
1999 of Hunt and thereafter
7.12 Additional Credit Parties.
Within thirty (30) days of any Person becoming a Material Subsidiary of
Hunt or in the event that Hunt elects to cause any other present or future
direct or indirect Subsidiary of Hunt to become a Guarantor under the Credit
Agreement, Hunt shall so notify the Agent and shall cause such Person to (a)
execute a Joinder Agreement in substantially the same form as Schedule 7.12 and
(b) deliver such other documentation as the Agent may reasonably request in
connection with the foregoing, including, without limitation, certified
corporate resolutions and other corporate documents of such Person and favorable
opinions of counsel to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above), all in form, content and scope reasonably satisfactory to
the Agent.
Notwithstanding any provision of the Credit Agreement to the contrary,
in the event that any Guarantor shall not be or that any Guarantor shall cease
to be a Material Subsidiary in accordance with the terms of the Credit
Agreement, then, upon written request of Hunt to the Agent and provided that no
Default or Event of Default shall exist at such time (1) such Guarantor,
automatically and without further act on the part of the Agent or the Lenders,
shall cease to be a Guarantor and shall be released from its obligations under
the Credit Agreement and (2) the Agent (on behalf of the Lenders) shall
thereupon execute such documents and take such other action reasonably requested
by Hunt to cause such Guarantor to be released from its obligations arising
under the Credit Agreement.
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7.13 Ownership of Subsidiaries.
Except to the extent otherwise provided in Section 8.4(b), Section 8.5
and clause (xv) of the definition of "Permitted Investments" set forth in
Section 1.1 and Section 8.11. Hunt shall, directly or indirectly, own at all
times 100% of the capital stock of each of its Subsidiaries.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as the
Credit Agreement is in effect or any amounts payable under the Credit Agreement
or under any other Credit Document shall remain outstanding, and until all of
the Commitments shall have terminated:
8.1 Indebtedness.
Hunt will not, nor will it permit any of its Subsidiaries to, contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under the Credit Agreement and the
other Credit Documents;
(b) Indebtedness of Hunt and any of its Subsidiaries existing as
of the Closing Date and set forth in Schedule 8.1. (which was provided
by Hunt on and as of the Closing Date), and renewals, refinancings and
extensions thereof on terms and conditions no less favorable to such
Person than such existing Indebtedness;
(c) purchase money Indebtedness (including Capital Leases)
incurred after the Closing Date by Hunt or any of its Foreign
Subsidiaries to finance the purchase of fixed assets provided that (i)
the aggregate principal amount of such Indebtedness plus the aggregate
outstanding principal amount of Indebtedness permitted pursuant to
clause (b) above and clause (i)(i) below shall not exceed $10,000,000 at
any time, (ii) such Indebtedness when incurred shall not exceed the
purchase price of the asset(s) financed and (iii) no such Indebtedness
shall be refinanced for a principal amount in excess of the principal
balance outstanding thereon at the time of such refinancing;
(d) unsecured Indebtedness of Hunt or any of its Foreign
Subsidiaries with respect to letters of credit (other than Letters of
Credit issued under the Credit Agreement) provided that the aggregate
maximum amount available to be drawn under all such letters of credit,
together with all unreimbursed drawings with respect thereto, shall not
exceed $10,000,000 at any time outstanding;
(e) obligations of Hunt in respect of interest rate protection
agreements, foreign currency exchange, commodity purchase or option
agreements or other interest or
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exchange rate or commodity price hedging agreements entered into in
order to manage existing or anticipated interest rate, exchange rate or
commodity price risks and not for speculative purposes;
(f) obligations in connection with any Permitted Receivables
Financing;
(g) intercompany Indebtedness of Bevis, Seal and Hunt Europe
owing to Hunt to the extent permitted by the definition of "Permitted
Investments" set forth in Section 1.1;
(h) Indebtedness arising under the Senior Note Agreement and the
Senior Notes in an aggregate principal amount of up to $50,000,000; and
(i) in addition to the Indebtedness otherwise permitted by this
Section 8.1,
(i) other Indebtedness incurred after the Closing Date by
Hunt or any of its Foreign Subsidiaries provided that (A) in the
case of any such Indebtedness incurred by the Borrowers, the
loan documentation with respect to such Indebtedness shall not
contain covenants or default provisions relating to Hunt and its
Subsidiaries that are more restrictive than the covenants and
default provisions contained in the Credit Documents, (B) on the
date of incurrence of such Indebtedness after giving effect on a
Pro Forma Basis to the incurrence of such Indebtedness and to
the concurrent retirement of any other Indebtedness of Hunt or
any of its Subsidiaries, no Default or Event of Default would
exist under the Credit Agreement and (C) the aggregate principal
amount of such Indebtedness plus the aggregate outstanding
principal amount of Indebtedness permitted pursuant to clauses
(b) and (c) above shall not exceed $10,000,000 at any time; and
(ii) (A) Guaranty Obligations of Hunt with respect to any
Indebtedness of a Foreign Subsidiary permitted under this
Section 8.1 and (B) Guaranty Obligations of any Subsidiary of
Hunt that is a Guarantor with respect to any Indebtedness of
Hunt permitted under this Section 8.1.
Notwithstanding the foregoing of this Section 8.1, the aggregate
outstanding principal amount of all Indebtedness incurred after the
Closing Date by any Subsidiaries of Hunt (other than Indebtedness
permitted under subsection (a), (b) or (g) hereof) plus the aggregate
outstanding principal amount of all Indebtedness secured by Liens
permitted under subsection (xiii) of the definition of "Permitted Liens"
plus the aggregate outstanding obligations incurred in transactions
permitted by Section 8.12 shall not exceed, at any time, 20% of
Consolidated Net Worth as of the then most recent Calculation Date with
respect to which the Agent shall have received the Required Financial
Information.
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8.2 Liens.
Hunt will not, nor will it permit any of its Subsidiaries to, contract,
create, incur, assume or permit to exist any Lien with respect to any of their
Property, whether now owned or after acquired, except for Permitted Liens.
8.3 Nature of Business.
Neither Hunt nor any of its Subsidiaries will substantively alter the
character or conduct of the business conducted by any such Person as of the
Closing Date.
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
Hunt will not, nor will it permit any of its Subsidiaries to:
(a) dissolve, liquidate or wind up their affairs, or enter into
any transaction of merger or consolidation; provided, however, that, so
long as no Default or Event of Default would be directly or indirectly
caused as a result thereof, (i) Hunt may merge or consolidate with any
of its Subsidiaries provided that Hunt is the surviving corporation;
(ii) any Domestic Subsidiary of Hunt may merge or consolidate with any
other Domestic Subsidiary of Hunt; (iii) any Domestic Subsidiary of Hunt
may merge or consolidate with any Foreign Subsidiary of Hunt provided
that such Domestic Subsidiary is the surviving corporation; (iv) any
Foreign Subsidiary of Hunt may merge or consolidate with any other
Foreign Subsidiary of Hunt; and (v) any Wholly-Owned Subsidiary of Hunt
may dissolve, liquidate or wind up its affairs at any time;
(b) sell, lease, transfer or otherwise dispose of any Property
(including without limitation pursuant to any sale and leaseback
transaction) other than (i) the sale of inventory in the ordinary course
of business for fair consideration, (ii) the sale or disposition of
machinery and equipment no longer used or useful in the conduct of such
Person's business, (iii) in a Permitted Receivables Financing, (iv) the
Fresno Asset Sale, provided that Hunt shall (A) immediately repay or
prepay in full the industrial revenue bond financing in an outstanding
principal amount as of the Closing Date of approximately $1,600,000
relating to such assets and (B) prepay the Loans in connection with such
asset sale to the extent required by Section 3.3(b)(iii)(B) and (v)
other sales of assets, provide that (A) after giving effect on a Pro
Forma Basis to such sale or other disposition, no Default or Event of
Default would exist under the Credit Agreement and (B) Hunt shall give
notice to the Agent and each of the Lenders specifying the anticipated
or actual date of such asset sale, briefly describing the assets sold or
to be sold and setting forth the net book value of such assets and
the aggregate consideration and Net Proceeds to be received for such
assets in connection with such asset sale, and thereafter Hunt shall (1)
within the period of twelve months following the consummation of such
asset sale (with respect to any such asset sale, the "Application
Period"), apply (or cause an applicable Subsidiary to apply) an amount
equal to the Excess Sale Proceeds of such asset sale to the purchase,
acquisition or, in the case of real property, construction of
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Alternative Assets in a transaction complying with all of the terms and
conditions of the Credit Agreement or (2) prepay the Loans in connection
with such asset sale to the extent required by Section 3.3(b)(iii); or
(c) acquire all or any portion of the capital stock or
securities of any other Person or purchase, lease or otherwise acquire
(in a single transaction or a series of related transactions) all or any
substantial part of the Property of any other Person unless (1) such
Property or Person represents operations similar to those Hunt and its
Subsidiaries, (ii) no Default or Event of Default exists, and (iii)
after giving effect to such transaction, no Default or Event of Default
would exist.
8.5 Advances, Investments, Loans. etc.
Hunt will not, nor will it permit any of its Subsidiaries to, make
Investments in or to any Person, except for Permitted Investments.
8.6 Restricted Payments.
Hunt not, nor will it permit any of its Subsidiaries to, directly or
indirectly declare, order, make or set apart any sum for or pay any Restricted
Payment, except (1) to make (A) dividends payable solely in the same class of
capital stock of such Person and (B) other Restricted Payments payable solely in
common stock of such Person, (ii) to make dividends or other distributions
payable to Hunt (directly or indirectly through Subsidiaries of Hunt), (iii) as
permitted by Section 8.7 and (iv) so long as no Default or Event of Default
exists, other Restricted Payments made by Hunt.
8.7 Prepayments of Indebtedness, etc.
Hunt will not, nor will it permit any of its Subsidiaries to, (i) if any
Default or Event of Default has occurred and is continuing or would be directly
or indirectly caused as a result thereof, make (or give any notice with respect
thereto) any voluntary or optional payment or prepayment or redemption or
acquisition for value of (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any other
Indebtedness (other than Subordinated Indebtedness) or (ii) make (or give any
notice with respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including without limitation, by way of
depositing money or securities with the trustee with respect thereto before due
for the purpose of paying when due), refund, refinance or exchange of any
Indebtedness subordinated to the obligations of the Borrowers or the Guarantors
under the Credit Agreement or (iii) amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or other similar document) where such change would have a Material
Adverse Effect.
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8.8 Transactions with Affiliates.
Hunt will not, nor will it permit any of its Subsidiaries to, enter into
or permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Person other than (a)
advances of working capital to Hunt, (b) transfers of cash and assets to Hunt,
(c) transactions permitted by Section 8.1(g), Section 8.4(a), Section 8.5 or
Section 8.6, (d) normal compensation and reimbursement of expenses of officers
and directors and (e) except as otherwise specifically limited in the Credit
Agreement, other transactions which are entered into in the ordinary course of
such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length
transactions with a Person other than an officer, director, shareholder,
Subsidiary or Affiliate.
8.9 Fiscal Year.
Without the prior written approval of the Agent, Hunt will not, nor will
it permit any of its Subsidiaries to, change its fiscal year.
8.10 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions, etc.
Hunt will not, nor will it permit any of its Subsidiaries to, directly
or indirectly, create or otherwise cause, incur, assume, suffer or permit to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Person to (a) pay dividends or make any other
distribution on any of such Person's capital stock, (b) subject to subordination
provisions, pay any Indebtedness owed to the Borrowers or any other Credit
Party, (c) make loans or advances to any other Credit Party or (d) transfer any
of its Property to any other Credit Party, except for encumbrances or
restrictions existing under or by reason of (i) customary nonassignment
provisions in any lease governing a leasehold interest and (ii) the Credit
Agreement and the other Credit Documents.
8.11 Issuance and Sale of Subsidiary Stock.
Hunt will not, nor will it permit any of its Subsidiaries to, except to
qualify directors where required by applicable law and except as otherwise
permitted under the terms of Section 8.4(b), sell, transfer or otherwise dispose
of, any shares of capital stock of any of its Subsidiaries or permit any of its
Subsidiaries to issue, sell or otherwise dispose of, any shares of capital stock
of any of its Subsidiary.
8.12 Sale Leasebacks.
Hunt will not, nor will it permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real or personal or mixed), whether now owned or acquired
after the Closing Date, (i) which such Person has sold or transferred or is to
sell or transfer to any other Person other than Hunt or (ii) which such Person
intends to use for
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substantially the same purpose as any other Property which has been sold or is
to be sold or transferred by such Person to any other Person in connection with
such lease that would cause the aggregate outstanding obligations of Hunt and
its Subsidiaries in respect of all such transactions plus the aggregate
outstanding principal amount of all Indebtedness secured by Liens permitted
under subsection (xiii) of the definition of "Permitted Liens" plus the
aggregate outstanding principal amount of all Indebtedness of all Subsidiaries
of Hunt to exceed, at any time, 20% of Consolidated Net Worth as of the then
most recent Calculation Date with respect to which the Agent shall have received
the Required Financial Information.
8.13 No Further Negative Pledges.
Hunt will not, nor will it permit any of its Subsidiaries to, enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or acquired after the Closing Date, or requiring the
grant of any security for such obligation if security is given for some other
obligation, other than (i) pursuant to the Senior Note Agreement and the Senior
Notes, in each case as in effect as of August 1, 1996, and (ii) prohibitions
against other encumbrances on specific Property encumbered to secure payment of
particular Indebtedness (which Indebtedness relates solely to such specific
Property, and improvements and accretions thereto, and is otherwise permitted
hereby).
8.14 Operating Lease Obligations.
Hunt will not, nor will it permit any of its Subsidiaries to, enter
into, assume or permit to exist any obligations for the payment of rental under
Operating Leases which in the aggregate for all such Persons would exceed
$10,000,000 in any fiscal year.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of
any of the Loans or of any reimbursement obligations arising
from drawings under Letters of Credit, or
(ii) default, and such defaults shall continue for five
(5) or more days, in the payment when due of any interest on the
Loans or on any
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reimbursement obligations arising from drawings under Letters of
Credit, or of any Fees or other amounts owing under the Credit
Agreement, under any of the other Credit Documents or in
connection therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party in any of the Credit
Documents, or in any statement or certificate delivered or required to
be delivered pursuant thereto shall prove untrue in any material respect
on the date as of which it was deemed to have been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or observance of any
term, covenant or agreement contained in Sections 7.2, 7.9,
7.11, 7.12, 7.13 or 8.1 through 8.14, inclusive, or
(ii) default in the due performance or observance by it
of any term, covenant or agreement (other than those referred to
in subsections (a), (b) or (c)(i) or this Section 9.1) contained
in the Credit Agreement and such default shall continue
unremedied for a period of at least 30 days after the earlier of
a responsible officer of a Credit Party becoming aware of such
default or notice thereof by the Agent; or
(d) Other Credit Document. (1) Any Credit Party shall default in
the due performance or observance of any term, covenant or agreement in
any of the other Credit Documents (subject to applicable grace or cure
periods, if any), or (ii) any Credit Document shall fail to be in full
force and effect or to give the Agent and/or the Lenders the liens,
rights, powers and privileges purported to be created thereby; or
(e) Guaranties. The guaranty given by any Guarantor under the
Credit Agreement (including any Additional Credit Party) or any
provision thereof shall cease to be in full force and effect, or any
Guarantor (including any Additional Credit Party) under the Credit
Agreement or any Person acting by or on behalf of such Guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty, or
any Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to any guaranty; or
(f) Bankruptcy Event. Any Bankruptcy Event shall occur with
respect to Hunt or any of its Subsidiaries; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under the Credit
Agreement) in excess of $10,000,000 in the aggregate for Hunt and its
Subsidiaries taken as a
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whole, (i) Hunt or any of its Subsidiaries shall (A) default in any
payment (beyond the applicable grace period with respect thereto, if
any) with respect to any such Indebtedness, or (B) default in the
observance or performance relating to such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or
any other event or condition shall occur or condition exist, the effect
of which default or other event or condition is to cause, or permit, the
holder or holders of such Indebtedness (or trustee or agent on behalf of
such holders) to cause (determined without regard to whether any notice
or lapse of time is required), any such Indebtedness to become due prior
to its stated maturity; or (ii) any such Indebtedness shall be declared
due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be entered
against Hunt or any of its Subsidiaries involving a liability of
$10,000.000 or more in the aggregate (to the extent not paid or fully
covered by insurance provided by a carrier who has acknowledged
coverage) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days
from the entry thereof; or
(i) ERISA. Any of the following events or conditions, if such
event or condition could have a Material Adverse Effect: (1) any
"accumulated funding deficiency," as such term is defined in Section 302
of ERISA and Section 412 of the Code, whether or not waived, shall exist
with respect to any Plan, or any lien shall arise on the assets of Hunt,
any Subsidiary of Hunt or any ERISA Affiliate in favor of the PBGC or a
Plan; (2) a Termination Event shall occur with respect to a Single
Employer Plan, which is, in the reasonable opinion of the Agent, likely
to result in the termination of such Plan for purposes of Title IV of
ERISA; (3) a Termination Event shall occur with respect to a
Multiemployer Plan or Multiple Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in (i) the termination
of such Plan for purposes of Title IV of ERISA, or (ii) Hunt, any
Subsidiary of Hunt or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the meaning
of Section 4241 of ERISA), or insolvency or (within the meaning of
Section 4245 of ERISA) such Plan; or (4) any prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code)
or breach of fiduciary responsibility shall occur which may subject
Hunt, any Subsidiary of Hunt or any ERISA Affiliate to any liability
under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which
Hunt, any Subsidiary of Hunt or any ERISA Affiliate has agreed or is
required to indemnify any person against any such liability; or
(j) Ownership. There shall occur a Change of Control; or
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(k) Senior Note Agreement. There shall occur and be continuing
any Event of Default under and as defined in the Senior Note Agreement.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Required Lenders (pursuant to the voting
procedures in Section 11.6), the Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Credit Parties take any of the
following actions without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Credit Parties, except as otherwise specifically
provided for in the Credit Agreement:
(i) Termination of Commitments. Declare the Commitments terminated
whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any accrued
interest in respect of all Loans, any reimbursement obligations arising
from drawings under Letters of Credit and any and all other indebtedness
or obligations of any and every kind owing by the Borrowers to any of
the Lenders under the Credit Agreement to be due whereupon the same
shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
each of the Borrowers.
(iii) Cash Collateral. Direct (A) Hunt to pay (and Hunt agrees that upon
receipt of such notice, or upon the occurrence of an Event of Default
under Section 9.1(f), it will immediately pay) to the Agent additional
cash, to be held by the Agent, for the benefit of the Lenders, in a cash
collateral account as additional security for the Domestic LOC
Obligations in respect of subsequent drawings under all then outstanding
Domestic Letters of Credit in an amount equal to the maximum aggregate
amount which may be drawn under all Domestic Letters of Credits then
outstanding and/or (B) Hunt Europe to pay (and Hunt Europe agrees that
upon receipt of such notice, or upon the occurrence of an Event of
Default under Section 9.1(f), it will immediately pay) to the Agent
additional cash, to be held by the Agent, for the benefit of the
Lenders, in a cash collateral account as additional security for the
Foreign LOC Obligations in respect of subsequent drawings under all then
outstanding Foreign Letters of Credit in an amount equal to the maximum
aggregate amount which may be drawn under all Foreign Letters of Credits
then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and interests
created and existing under the Credit Documents and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in
Section 9.1(f) shall occur, then the Commitments shall automatically terminate
and all Loans, all reimbursement
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obligations arising from drawings under Letters of Credit, all accrued interest
in respect thereof, all accrued and unpaid Fees and other indebtedness or
obligations owing to the Lenders under the Credit Agreement automatically shall
immediately become due and payable without the giving of any notice or other
action by the Agent.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Lender hereby designates and appoints NationsBank of North
Carolina, N.A. as administrative agent (in such capacity as Agent under the
Credit Agreement, the "Agent") of such Lender to act as specified in the Credit
Documents, and each such Lender hereby authorizes the Agent as the agent for
such Lender, to take such action on its behalf under the provisions of the
Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated by the terms of the Credit
Agreement and of the other Credit Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in the Credit Agreement and in the other Credit Documents, the Agent
shall not have any duties or responsibilities, except those expressly set forth
in the Credit Agreement and therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Credit Agreement or any of the
other Credit Documents, or shall otherwise exist against the Agent. Except as
otherwise expressly provided in the Credit Agreement, the provisions of this
Section are solely for the benefit of the Agent and the Lenders and none of the
Credit Parties shall have any rights as a third party beneficiary of the
provisions of the Credit Agreement. In performing its functions and duties under
the Credit Agreement and the other Credit Documents, the Agent shall not act
solely as agent of the Lenders and does not assume and shall not be deemed to
have assumed any obligation or relationship of agency or trust with or for any
Credit Party.
10.2 Delegation of Duties.
The Agent may execute any of their respective duties under the Credit
Agreement or under the other Credit Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
the Credit Agreement or in connection with any of the other
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Credit Documents (except for its or such Person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by any of the
Credit Parties contained in the Credit Agreement or in any of the other Credit
Documents or in any certificate, report, document, financial statement or other
written or oral statement referred to or provided for in, or received by the
Agent under or in connection with the Credit Agreement or in connection with the
other Credit Documents, or enforceability or sufficiency therefor of any of the
other Credit Documents, or for any failure of any Credit Party to perform its
obligations thereunder. The Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of the Credit Agreement, or any of the other Credit Documents or for
any representations, warranties, recitals or statements made therein or made by
either Borrower or any Credit Party in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection therewith furnished or made by the Agent to the Lenders
or by or on behalf of the Credit Parties to the Agent or any Lender or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained therein or
as to the use of the proceeds of the Loans or the use of the Letters of Credit
or of the existence or possible existence of any Default or Event of Default or
to inspect the properties, books or records of the Credit Parties.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owner of their respective interests under the
Credit Agreement for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent in
accordance with Section 11.3(b). The Agent shall be fully justified in failing
or refusing to take any action under the Credit Agreement or under any of the
other Credit Documents unless it shall first receive such advice or concurrence
of the Required Lenders as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under any of the Credit Documents in accordance with a
request of the Required Lenders (or to the extent specifically provided in
Section 11.6, all the Lenders) and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders (including their
successors and assigns).
10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless the Agent has received
notice from a Lender or a Credit Party
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referring to the Credit Document, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent or any
affiliate thereof taken after the Closing Date, including any review of the
affairs of any Credit Party, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrowers and the other Credit Parties and made its own decision to make its
Loans and enter into the Credit Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under the Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrowers and the other Credit Parties. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent under the Credit Agreement, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrowers and the other
Credit Parties which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Borrowers and without limiting the obligation of
the Borrowers to do so), ratably according to their respective Commitments (or
if the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interests of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the final payment of all of the obligations of the Borrowers
under the Credit Documents) be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising out of the
Credit Agreement or the other Credit Documents or any documents contemplated by
or referred to therein or the transactions contemplated thereby or any action
taken or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section shall survive the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments.
10.8 Agent in its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with any Credit Party as though the
Agent were not Agent under the Credit Agreement. With respect to the Loans made
by and all obligations of the Borrowers under the Credit Documents owing to it,
the Agent shall have the same rights and powers under the Credit Agreement as
any Lender and may exercise the same as though they were not Agent, and the
terms "Lender" and "Lenders" shall include the Agent in its individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days' written notice to the
Lenders and Hunt, and be removed with or without cause by the Required Lenders
upon 30 days' written notice to the Agent. Upon any such resignation or removal,
the Required Lenders shall have the right, with the prior consent of Hunt, to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the notice of resignation or notice of removal, as appropriate, then the
retiring Agent, with the prior consent of Hunt, shall select a successor Agent
provided such successor is a Lender under the Credit Agreement or a commercial
bank organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $400,000.000. Upon
the acceptance of any appointment as Agent under the Credit Agreement by a
successor, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as Agent,
as appropriate, under the Credit Agreement and the other Credit Documents and
the provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under the Credit
Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided in the Credit Agreement, all
notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when
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transmitted via telecopy (or other facsimile device) to the number set out
below, (iii) the day following the day on which the same has been delivered
prepaid to a reputable national overnight air courier service, or (iv) the third
Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, in each case to the respective parties at the
address, in the case of the Borrowers, Guarantors and the Agent, set forth
below, and, in the case of the Lenders. set forth on Schedule 2.1(a), or at such
other address as such party may specify by written notice to the other parties
to the Credit Agreement:
if to Hunt or the Guarantors:
Hunt Manufacturing Co.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7085
Attn: Mr. William E. Chandler
Chief Financial Officer
Telephone: (215) 841-2300
Telecopy: (215) 656-3711
if to Hunt Europe:
Hunt Europe Limited
Chester Hall Lane
Basildon, Essex, England SS143BG
Attn: Mr. Derek Wotton
Telephone: 011-44-1268-530-331
Telecopy: 011-44-1268-527-211
if to the Agent:
NationsBank, N.A.
Independence Center, 15th Floor
NC1-001-15-04
101 N. Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 386-8388
Telecopy: (704) 386-9923
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with a copy to:
NationsBank, N.A.
NationsBank Corporate Center, 8th Floor
100 North Tryon Street
Charlotte, NC 28255
Attn: M. Gregory Seaton
Senior Vice President
Telephone: (704) 386-8843
Telecopy: (704) 386-3271
11.2 Right of Set-Off.
In addition to any rights now or after the Closing Date granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of an Event of Default, each Lender is authorized at any
time and from time to time, without presentment, demand, protest or other notice
of any kind (all of which rights being hereby expressly waived), to set-off and
to appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit Party against obligations and
liabilities of such Credit Party to such Lender under the Credit Agreement, the
Notes, the other Credit Documents or otherwise, irrespective of whether such
Lender shall have made any demand under the Credit Agreement and although such
obligations, liabilities or claims of such Lender to such Credit Party, or any
of them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto. Each of the Credit Parties hereby agrees that any Person purchasing a
participation in the Loans and Commitments pursuant to Section 11.3(c) or
Section 3.13 may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender under the
Credit Agreement.
11.3 Benefit of Agreement.
(a) Generally. The Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties to the Credit Agreement; provided that none
of the Credit Parties may assign and transfer any of its interests
without prior written consent of the Lenders and Hunt; provide further
that the rights of each Lender to transfer, assign or grant
participations in its rights and/or obligations under the Credit
Agreement shall be limited as set forth in this Section 11.3, provided
however that nothing in the Credit Agreement shall prevent or prohibit
any Lender from (i) pledging its Loans to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve
Bank, or (ii) granting assignments or participation in such Lender's
Loans and/or Commitments to its parent company and/or to any
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affiliate of such Lender which is at least 50% owned by such Lender or
its parent company.
(b) Assignments. Each Lender may assign all or a portion of its
rights and obligations under the Credit Agreement pursuant to an
assignment agreement substantially in the form of Schedule 11.3(b) to
one or more Eligible Assignees, provided that any such assignment shall
be in a minimum aggregate amount of $5,000,000 of the Commitments and in
integral multiples of $1,000,000 above such amount. Any assignment under
this Section 11.3(b) shall be effective upon delivery to the Agent of
written notice of the assignment together with a transfer fee of $3,500
payable to the Agent for its own account. The assigning Lender will give
prompt notice to the Agent and Hunt of any such assignment. Upon the
effectiveness of any such assignment (and after notice to Hunt as
provided in the Credit Agreement), the assignee shall become a "Lender"
for all purposes of the Credit Agreement and the other Credit Documents
and, to the extent of such assignment, the assigning Lender shall be
relieved of its obligations under the Credit Agreement to the extent of
the Loans and Commitment components being assigned. Along such lines the
Borrowers agree that upon notice of any such assignment and surrender of
the appropriate Note or Notes, each of them will promptly provide to the
assigning Lender and to the assignee separate promissory notes in the
amount of their respective interests substantially in the form of the
original Note (but with notation thereon that it is given in
substitution for and replacement of the original Note or any replacement
notes thereof). By executing and delivering an assignment agreement in
accordance with this Section 11.3(b), the assigning Lender thereunder
and the assignee thereunder shall be deemed to confirm to and agree with
each other and the other parties to the Credit Agreement as follows: (i)
such assigning Lender warrants that it is the legal and beneficial owner
of the interest being assigned thereby free and clear of any adverse
claim; (ii) except as set forth in clause (i) above, such assigning
Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or
in connection with the Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant
thereto, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any of the
other Credit Documents or any other instrument or document furnished
pursuant thereto or the financial condition of any Credit Party or the
performance or observance by any Credit Party of any of its obligations
under the Credit Agreement, any of the other Credit Documents or any
other instrument or document furnished pursuant thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has
received a copy of the Credit Agreement, the other Credit Documents and
such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such assignment
agreement; (v) such assignee will independently and without reliance
upon the Agent, such assigning Lender or any other Lender, and based on
such
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documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement and the other Credit Documents; (vi) such
assignee appoints and authorizes the Agent to take such action on its
behalf and to exercise such powers under the Credit Agreement or any
other Credit Document as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of the Credit
Agreement and the other Credit Documents are required to be performed by
it as a Lender.
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations under the Credit Agreement; provided that (i) such selling
Lender shall remain a "Lender" for all purposes under the Credit
Agreement (such selling Lender's obligations under the Credit Documents
remaining unchanged) and the participant shall not constitute a Lender
under the Credit Agreement, (ii) no such participant shall have, or be
granted, rights to approve any amendment or waiver relating to the
Credit Agreement or the other Credit Documents except to the extent any
such amendment or waiver would (A) reduce the principal of or rate of
interest on or Fees in respect of any Loans in which the participant is
participating, (B) postpone the date fixed for any payment of principal
(including extension of the Termination Date or the date of any
mandatory prepayment), interest or Fees in which the participant is
participating, or (C) release any Guarantor from its guaranty
obligations under the Credit Agreement (except as expressly provided in
the Credit Documents), (iii) sub-participations by the participant
(except to an affiliate, parent company or affiliate of a parent company
of the participant) shall be prohibited and (iv) any such participations
shall be in a minimum aggregate amount of $5,000,000 of the Commitments
and in integral multiples of $1,000,000 in excess thereof. In the case
of any such participation, the participant shall not have any rights
under the Credit Agreement or the other Credit Documents (the
participant's rights against the selling Lender in respect of such
participation to be those set forth in the participation agreement with
such Lender creating such participation) and all amounts payable by the
Borrowers under the Credit Agreement shall be determined as if such
Lender had not sold such participation, provided, however, that such
participant shall be entitled to receive additional amounts under
Sections 3.6, 3.9, 3.10 and 3.11 on the same basis as if it were a
Lender, except that all claims and petitions for payment and all
payments made pursuant to such sections shall be made through such
selling Lender and except that a participant shall not be entitled to
receive pursuant to such provisions an amount larger than its share of
the amount of which the selling Lender would have been entitled.
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11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege under any Credit Document and no course of dealing
between any of the Credit Parties shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege under any Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege thereunder. The rights and remedies provided in
the Credit Agreement are cumulative and not exclusive of any rights or remedies
which the Agent or any Lender would otherwise have. No notice to or demand on
any Credit Party in any case shall entitle the Borrowers or any other Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Agent or the Lenders to any other or
further action in any circumstances without notice or demand.
11.5 Payment of Expenses, etc.
Hunt agrees to: (i) pay all reasonable out-of-pocket costs and expenses
of the Agent in connection with the negotiation, preparation, execution and
delivery and administration of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Agent) and any
amendment, waiver or consent relating thereto including, but not limited to, any
such amendments, waivers or consents resulting from or related to any work-out,
renegotiation or restructure relating to the performance by the Credit Parties
under the Credit Agreement and of the Agent and the Lenders in connection with
enforcement of the Credit Documents and the documents and instruments referred
to therein (including, without limitation, in connection with any such
enforcement, the reasonable fees and disbursements of counsel for the Agent and
each of the Lenders); (ii) pay and hold each of the Lenders harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save each of the Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Lender) to pay such
taxes; and (iii) indemnify each Lender, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not any Lender is a
party thereto) related to the entering into and/or performance of any Credit
Document or the use of proceeds of any Loans (including other extensions of
credit) or the consummation of any other transactions contemplated in any Credit
Document, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation, litigation or
other proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
11.6 Amendments, Waivers and Consents.
Neither the Credit Agreement nor any other Credit Document nor any of
the terms thereof may be amended, changed, waived, discharged or terminated
unless such amendment, change,
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waiver, discharge or termination is in writing entered into by, or approved in
writing by, the Required Lenders, providad that no such amendment, change,
waiver, discharge or termination shall, without the consent of each Lender, (i)
extend the scheduled maturities (including the final maturity and any mandatory
prepayments) of any Loan, or any portion thereof, or reduce the rate or extend
the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) thereon or fees
under the Credit Agreement or reduce the principal amount thereof, or increase
the Commitments of the Lenders over the amount thereof in effect (it being
understood and agreed that a waiver of any Default or Event of Default or of a
mandatory reduction in the total commitments shall not constitute a change in
the terms of any Commitment of any Lender), (ii) release any Guarantor from its
guaranty obligations under the Credit Agreement (except as expressly provided in
the Credit Documents), (iii) amend, modify or waive any provision of this
Section or Section 3.6, 3.10, 3.11, 3.12, 3.13, 5.1, 5.2, 9.1(a), 11.2, 11.3,
11.5 or 11.9, (iv) reduce any percentage specified in, or otherwise modify, the
definition of "Foreign Currency Equivalent," "Determination Date," "Dollar
Amount," "Dollar Equivalent," or "Required Lenders" or (v) consent to the
assignment or transfer by any Borrower (or Guarantor) of any of its rights and
obligations under (or in respect of) the Credit Agreement. No provision of
Section 2.2 or Section 2.6 may be amended without the consent of the Issuing
Lender, no provision of Section 2.4 may be amended without the consent of the
Swingline Lender and no provision of Section 10 may be amended without the
consent of the Agent.
11.7 Counterparts.
This Amendment may be executed in any number of counterparts, each of
which where so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of the Credit Agreement to produce or account for more than one
such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of hereof.
11.9 Survival of Indemnification.
All indemnities set forth in the Credit Agreement, including, without
limitation, in Section 2.2(h), 2.6(i), 3.9, 3.11, 10.7 or 11.5 shall survive the
making of the Loans, the issuance of the Letters of Credit, the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments under.
11.10 Governing Law; Submission to Jurisdiction; Venue; Arbitration.
(a) THE CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal
action or
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proceeding with respect to the Credit Agreement or any other Credit Document may
be brought in the courts of the State of North Carolina in Mecklenburg County,
or of the United States for the Western District of North Carolina, and, by
execution and delivery of the Credit Agreement, each of the Credit Parties
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of such courts. Each of the Credit Parties
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the address
set out notices pursuant to Section 11.1, such service to become effective 30
days after such mailing. Nothing in the Credit Agreement shall affect the right
of the Agent to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against any Credit Party in
any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or after the Closing Date have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection with the
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) EACH OF THE AGENTS, EACH OF THE LENDERS AND EACH OF THE CREDIT
PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY.
(d) (i) Without limiting the generality of subsections (a), (b) and (c)
of this Section 11.10, Hunt Europe agrees that any controversy or claim with
respect to it arising out of or relating to the Credit Agreement or any of the
other Credit Documents may, at the option of the Agent and the Lenders, be
settled immediately by submitting the same to binding arbitration in the City of
Charlotte, North Carolina (or such other place as the parties may agree) in
accordance with the Commercial Arbitration Rules then obtaining of the American
Arbitration Association. Upon the request and submission of any controversy or
claim for arbitration under the Credit Agreement, the Agent shall give Hunt
Europe not less than 45 days written notice of the request for arbitration, the
nature of the controversy or claim, and the time and place set for arbitration.
Hunt Europe agrees that such notice is reasonable to enable it sufficient time
to prepare and present its case before the arbitration panel. Judgment on the
award rendered by the arbitration panel may be entered in any court in which any
action could have been brought or maintained, including without limitation any
court of the State of North Carolina or any Federal court sitting in the State
of North Carolina. The expenses of arbitration shall be paid by Hunt Europe.
104
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(ii) The provisions of subsection (d)(i) above are intended to comply
with the requirements of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the "Convention"). To the extent that any provisions of
such subsection (d)(i) are not consistent with or fail to conform to the
requirements set out in the Convention, such subsection (d)(i) shall be deemed
amended to conform to the requirements of the Convention.
(iii) Hunt Europe hereby specifically consents and submits to the
jurisdiction of the courts of the State of North Carolina and courts of the
United States located in the State of North Carolina for purposes of entry of a
judgment or arbitration award entered by the arbitration panel.
(iv) Hunt Europe hereby irrevocably appoints Hunt as process agent in
its name, place and stead (the "North Carolina Process Agent") to receive and
forward service of any and all writs, summonses and other legal process in any
suit, action or proceding brought in the State of North Carolina, agrees that
such service in any such suit, action or proceeding may be made upon the North
Carolina Process Agent and agrees to take all such action as may be necessary to
continue said appointment in full force and effect or to appoint another agent
so that Hunt Europe will at all times have an agent in the State of North
Carolina for service of process for the above purposes.
11.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
The Credit Documents represent the entire agreement of the parties
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents or the transactions contemplated therein.
11.13 Survival of Representations and Warranties.
All representations and warranties made by the Credit Parties in the
Credit Agreement shall survive delivery of the Notes and the making of the Loans
and the issuance of the Letters of Credit.
11.14 Binding Effect; Termination of Credit Agreement; etc.
(a) The Credit Agreement shall be deemed to have become effective
at such time on or after the Closing Date when it shall have been executed by
the Borrowers, the
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<PAGE>
Guarantors and the Agent, and the Agent shall have received copies thereof
(telefaxed or otherwise) which, when taken together, bear the signatures of each
Lender, and thereafter the Credit Agreement shall be binding upon and inure to
the benefit of the Borrowers, the Guarantors, the Agent and each Lender and
their respective successors and assigns.
(b) The term of the Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable under any of the Credit Documents shall
remain outstanding and until all of the Commitments shall have expired or been
terminated.
(c) This Amendment shall become effective at such time on or after
the Amendment Effective Date when it shall have been executed by the Borrowers,
the Guarantors and the Agent, and the Agent shall have received copies hereof
(telefaxed or otherwise) which, when taken together, bear the signatures of each
Lender, and thereafter the Credit Agreement shall be binding upon and inure to
the benefit of the Borrowers, the Guarantors, the Agent and each Lender and
their respective successors and assigns.
(d) At such time as this Amendment shall have become effective
pursuant to the terms of Section 11.14(c), the promissory notes executed in
connection with the Existing Credit Agreement shall be replaced with the Notes
executed in connection with this Amendment.
11.15 Judgment Currency.
(a) Each Credit Party's obligations under the Credit Agreement to make
payments in Dollars or in Pounds Sterling (the "Obligation Currency") shall not
be discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency,
except to the extent that such tender or recovery results in the effective
receipt by the Agent or a Lender of the full amount of the Obligation Currency
expressed to be payable to the Agent or such Lender under the Credit Agreement.
If, for the purpose of obtaining or enforcing judgment against any Credit Party
in any court or in any jurisdiction, it becomes necessary to convert into or
from any currency other than the Obligation Currency (such other currency being
hereinafter referred to as the "Judgment Currency") an amount due in the
Obligation Currency, the conversion shall be made, at the Dollar Equivalent or
the Foreign Currency Equivalent, as applicable, determined in each case as of
the Business Day immediately preceding the day on which the judgment is given
(such Business Day being hereinafter referred to as the "Judgment Currency
Conversion Date").
(b) If there is a change in the rate of exchange prevailing between the
Judgment Currency Conversion Date and the date of actual payment of the amount
due, such amount payable by the applicable Credit Party shall be reduced or
increased, as applicable, such that the amount paid in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of Judgment
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Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.
11.16 Confidentiality.
The Agent and the Lenders agree to keep confidential (and to cause their
respective affiliates, officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to the Agent or any such Lender by or on behalf of Hunt or any of its
Subsidiaries (whether before or after the Closing Date) which relates to Hunt or
any of its Subsidiaries (the "Information"). Notwithstanding the foregoing, the
Agent and each Lender shall be permitted to disclose Information (i) to its
affiliates, officers, directors, employees, agents and representatives who have
a need to know such Information in connection with their work on any of the
transactions evidenced by the Credit Agreement or any other Credit Documents or
the administration of the Credit Agreement or any other Credit Documents; (ii)
to the extent required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any Governmental Authority; (iii) to the
extent such Information (A) becomes publicly available other than as a result of
a breach of the Credit Agreement or any agreement entered into pursuant to
clause (iv) below, (B) becomes available to the Agent or such Lender on a
non-confidential basis from a source other than Hunt or any of its Subsidiaries
or (C) was available to the Agent or such Lender on a non-confidential basis
prior to its disclosure to the Agent or such Lender by Hunt or any of its
Subsidiaries; (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first specifically agrees in a writing furnished to and for the
benefit of Hunt and its Subsidiaries to be bound by the terms of this Section
11.16; or (v) to the extent that Hunt shall have consented in writing to such
disclosure. Nothing set forth in this Section 11.16 shall obligate the Agent or
any Lender to return any materials furnished by Hunt or any of its Subsidiaries.
11.17 Source of Funds.
Each of the Lenders hereby represents and warrants to the Borrowers that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing under
the Credit Agreement:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee
benefit plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such
Lender has disclosed to the Borrowers the name of each employee
benefit plan whose assets in such account exceed 10% of the total
assets of such account as of the date of such purchase (and, for
purposes of this subsection (b), all employee benefit plans
maintained by the same employee or employee organization are
deemed to be a single plan); or
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(c) such funds constitute assets of one or more specific benefit
plans which such Lender has identified in writing to the
Borrowers.
As used in this Section 11.17, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
[Signature Page to Follow]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Second Amendment and Restatement of Credit Agreement to be duly executed
and delivered as of the date first above written.
BORROWERS: HUNT MANUFACTURING CO.
- ---------
By William E. Chandler
---------------------------------------
Title Sr. Vice President - Finance & CFO
---------------------------------------
HUNT EUROPE LIMITED
By Dennis Pizzica
---------------------------------------
Title Director
---------------------------------------
GUARANTORS: BEVIS CUSTOM FURNITURE, INC.
- -----------
By William E. Chandler
---------------------------------------
Title Sr. Vice President and Asst. Secretary
---------------------------------------
HUNT DATA PRODUCTS, INC.
By William E. Chandler
---------------------------------------
Title Sr. Vice President
---------------------------------------
HUNT HOLDINGS, INC.
By William E. Chandler
---------------------------------------
Title Vice President & Treasurer
---------------------------------------
[Signatures Continue]
S-1
<PAGE>
HUNT X-ACTO, INC.
By William E. Chandler
-------------------------------------------
Title Sr. Vice President, Treasurer and Secretary
-------------------------------------------
SEAL PRODUCTS, INC.
By William E. Chandler
---------------------------------------
Title Sr. Vice President & Secretary
---------------------------------------
[Signatures Continue]
S-2
<PAGE>
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Agent
By Rajesh Sood
-----------------------------------
Title Vice President
-----------------------------------
[Signatures Continue]
S-3
<PAGE>
BANQUE PARIBAS
By Duane Helkowski
-----------------------------------
Title Vice President
-----------------------------------
By Mary T. Finnegan
-----------------------------------
Title Group Vice President
-----------------------------------
(Signatures Continue]
S-4
<PAGE>
CORESTATES BANK, N.A.
By Karen Leaf
-----------------------------------
Title Vice President
-----------------------------------
(Signatures Continue]
S-5
<PAGE>
FIRST UNION NATIONAL BANK
By Thomas J. Parker
-----------------------------------
Title Senior Vice President
-----------------------------------
[Signatures Continue]
S-6
<PAGE>
MELLON BANK, N.A.
By Mark Bomberger
-----------------------------------
Title Vice President
-----------------------------------
S-7
<PAGE>
Schedule 1.1B
-------------
CALCULATION OF MLA COSTS
(a) The MLA Cost for any Foreign Currency Loan made by any Lender is calculated
in accordance with the following formula:
BY + L(Y-X) + S(Y-Z) % per annum = MLA Cost
--------------------
100 - (B+S)
where on the day of application of the formula:
B is the percentage of such Lender's eligible liabilities which the Bank
of England requires such Lender to hold on a non-interest-bearing
deposit account in accordance with its cash ratio requirements;
Y is the Interbank Offered Rate (excluding any MLA Cost included in the
calculation thereof) applicable to such Foreign Currency Loan;
L is the percentage of eligible liabilities which the Bank of England
requires such Lender to maintain as secured money with members of the
London Discount Market Association and/or as secured call money with
certain money brokers and gilt-edged primary market makers;
X is the rate at which secured Pounds Sterling deposits in the relevant
amount may be placed by such Lender with members of the London Discount
Market Association and/or as secured call money with certain money
brokers and gilt-edged primary market makers at or about 11:00 a.m. on
that day for the relevant period;
S is the percentage of such Lender's eligible liabilities which the Bank
of England requires such Lender to place as a special deposit; and
Z is the interest rate per annum allowed by the Bank of England on special
deposits.
(b) For the purposes of this Schedule 1.1B:
(i) "eligible liabilities" and "special deposits" have the meanings given
to them at the time of application of the formula by the Bank of
England;
<PAGE>
(ii) "relevant period" means:
(A) in relation to any Foreign Currency Loan bearing interest on the
basis of the Eurodollar Rate, (1) if its Interest Period is 3
months or less, that Interest Period and (2) if its Interest Period
is more than three months, each successive period of three months
and any necessary shorter period comprised in that Interest Period;
or
(B) in relation to any Foreign Currency Loan bearing interest on the
basis of the Interim Foreign Currency Rate, each day that such
Foreign Currency Loan is outstanding.
(c) In application of the formula, B, Y, L, X, S and Z are included in the
formula as figures and not as percentages, e.g. if B=0.5% and Y=15%, BY is
calculated as 0.5 x 15.
(d) (i) The formula is applied (A) in relation to any Foreign Currency
Loan bearing interest on the basis of the Eurodollar Rate, on the
first day of each Interest Period of such Foreign Currency Loan and
(B) in relation to any Foreign Currency Loan bearing interest on
the basis of the Interim Foreign Currency Rate, on each day.
(ii) Each rate calculated in accordance with the formula is, if
necessary, rounded upward to four decimal places.
(e) If the Agent determines that a change in circumstances has rendered, or will
render, the formula inappropriate, the Agent shall notify Hunt Europe of the
manner in which the MLA Cost will subsequently be calculated. The manner of
calculation so notified by the Agent shall, in the absence of manifest
error, be binding on all the parties.
<PAGE>
Schedule 2.1(a)
---------------
LENDERS
================================================================================
Revolving Commitment
Name and Address of Lender Commitment Percentage
------------------------- ---------- ----------
- --------------------------------------------------------------------------------
NationsBank, N.A.
Independence Center, 15th Floor
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services $20,000,000.00 26.66666667%
- --------------------------------------------------------------------------------
Banque Paribas
787 Seventh Avenue
New York, New York 10019
Attn: Mr. Duane Helkowski $10,000,000.00 13.33333333%
- --------------------------------------------------------------------------------
Corestates Bank, N.A.
1339 Chestnut Street
Philadelphia, Pennsylvania 19101
Attn: Ms. Karen Leaf $15,000,000.00 20.00000000%
- --------------------------------------------------------------------------------
First Union National Bank
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attn: Ms. Mary E. Ashenbrenner $15,000,000.00 20.00000000%
- --------------------------------------------------------------------------------
Mellon Bank, N.A.
Plymouth Meeting Executive Campus
610 West Germanton Pike, Suite 200
Plymouth Meeting, Pennsylvania 79642
Attn: Mr. Mark Bomberger $15,000,000.00 20.00000000%
================================================================================
<PAGE>
THIRD AMENDMENT
TO
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
April 24, 1998, is by and among HUNT CORPORATION and HUNT GRAPHICS EUROPE
LIMITED (the "Borrowers"), CERTAIN GUARANTORS IDENTIFIED ON THE SIGNATURE PAGES
HERETO, THE LENDERS IDENTIFIED ON THE SIGNATURE PAGES HERETO and NATTONSBANK,
N.A., as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement dated as of December 19, 1995,
as amended by that Second Amendment and Restatement of Credit Agreement dated as
of February 20, 1997 (the "Existing Credit Agreement") among the Borrowers, the
Guarantors, the Lenders and the Agent, the Lenders have extended commitments to
make certain credit facilities available to the Borrowers; and
WHEREAS, the parties hereto have agreed to amend the Existing Credit
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein
or the context otherwise requires, the following terms used in this
Amendment, including its preamble and recitals, have the following
meanings:
"Amended Credit Agreement" means the Existing Credit Agreement as
amended hereby.
"Third Amendment Effective Date" is defined in Subpart 3.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendment, including
its preamble and recitals, have the meanings provided in the Amended
Credit Agreement.
-1-
<PAGE>
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Third Amendment
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART 2.1. Amendments to Section 1.1.
SUBPART 2.1.1. The following definitions in Section 1.1 of the
Existing Credit Agreement are amended in their entireties to read as
follows:
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, except that, (i) when used
in connection with a Revolving Loan that is a Eurodollar Loan, such
day shall also be a day on which dealings between banks are carried
on in U.S. dollar deposits in London, England and New York, New York
and (ii) when used in connection with a Foreign Currency Loan or a
Foreign Letter of Credit, such day shall also be a day on which
dealings in the applicable Available Foreign Currency are being
carried on between banks in London, England with respect to Pounds
Sterling and the interbank eurocurrency market with respect to other
Available Foreign Currencies.
"Determination Date" means each of
(a) (i) the date three Business Days prior to the date that
any Foreign Currency Loan denominated in an Available Foreign
Currency others than Pounds Sterling is made or any Foreign
Letter of Credit denominated in an Available Foreign Currency
others than Pounds Sterling is issued;
(ii) the date that any Foreign Currency Loan denominated
in Pounds Sterling is made or any Foreign Letter of Credit
denominated in Pounds Sterling is issued;
(b) (i) the date three Business Days prior to the date that
any Foreign Currency Loan denominated in an Available Foreign
Currency others than Pounds Sterling is continued from the
current Interest Period for such Foreign Currency Loan into a
subsequent Interest Period;
(ii) the date that any Foreign Currency Loan denominated
in Pounds Sterling is continued from the current Interest
Period for such Foreign Currency Loan into a subsequent
interest Period;
-2-
<PAGE>
(c) the date of any drawing under any Foreign Letter of
Credit;
(d) the last Business Day of each March, June, September and
December; and
(e) the date of any reduction of the Revolving Committed
Amount pursuant to the terms of Section 3.4(a).
"Dollar Amount" means (a) with respect to Dollars or an amount
denominated in Dollars, such amount and (b) with respect to an amount of any
Available Foreign Currency or an amount denominated in such Available Foreign
Currency, the Dollar Equivalent of such amount on the applicable date
contemplated in this Amendment.
"Dollar Equivalent" means, on any date, with respect to an amount
denominated in an Available Foreign Currency, the amount of Dollars into which
the Agent could, in accordance with its practice from time to time in the
interbank foreign exchange market, convert such amount of Available Foreign
Currency at its spot rate of exchange (inclusive of all reasonable related costs
of conversion) applicable to the relevant transaction at or about 11:00 A.M.,
London, England time, on such date.
"Foreign Currency Equivalent" means, on any date, with respect to an
amount denominated in Dollars, the amount of any applicable Available Foreign
Currency into which the Agent could, in accordance with its practice from time
to time in the interbank foreign exchange market, convert such amount of Dollars
at its spot rate of exchange (inclusive of all reasonable related costs of
conversion) applicable to the relevant transaction at or about 11:00 A.M.,
London, England time, on such date.
"Interbank Offered Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate equal to (i) with respect to
any Revolving Loan that is a Eurodollar Loan, for the Interest Period applicable
thereto, the per annum rate of interest determined by the Agent on the basis of
the offered rates for deposits in Dollars (for a period of time corresponding to
such Interest Period and commencing on the first day of such Interest Period)
which appear on Telerate Page 3750 (or any successor or equivalent page) as of
11:00 a.m. (London time) two Business Days before the first day of such Interest
Period (provided that if at least two such offered rates appear on Telerate Page
3750 (or any successor or equivalent page), the rate in respect of such Interest
Period will be the arithmetic mean of such offered rates), and (ii) with respect
to any Foreign Currency Loan, for the Interest Period applicable thereto, the
sum of (a) the per annum rate of interest determined by the Agent on the basis
of the offered rates for deposits in the relevant Available Foreign Currency
(for a period of time corresponding to such Interest Period and commencing on
the first day of such Interest Period) which appear on Telerate Page 3750 (or
any successor or equivalent page) as of 11:00 a.m. (London time) two Business
Days before the first day of such Interest Period (except in the case of Foreign
Currency Loans denominated in Pounds Sterling which shall be the per annum rate
of interest appearing on the first day of such Interest Period) (provided that
if at least two such offered rates appear on Telerate Page 3750 or any
successor or equivalent page), the rate in respect of such Interest Period will
be the arithmetic mean of such offered rates) plus (b) in the case of any
Foreign Currency Loan denominated in Pounds Sterling, the applicable MLA Cost.
If for any reason the foregoing rates are unavailable from the Telerate service,
then the Interbank Offered Rate shall be a market rate for the applicable Loan
for the applicable Interest Period as determined by the Agent plus, in the case
of any Foreign Currency Loan denominated in Pounds Sterling, the applicable MLA
Cost.
-3-
<PAGE>
"Interim Foreign Currency Rate" means, for any day, with respect to any
Foreign Currency Loan or any unreimbursed drawing under a Foreign Letter of
Credit, a rate per annum equal to the sum of (i) the average rate at which
overnight deposits in the applicable Available Foreign Currency and
approximately equal in principal amount to the applicable Foreign Currency Loan
or unreimbursed drawing under a Foreign Letter of Credit are obtainable by the
Agent (or, in the case of any Foreign Letter of Credit, the Issuing Lender) on
such day in the interbank market, adjusted to reflect any direct or indirect
costs of obtaining such deposits plus (ii) in the case of any Foreign Currency
Loan denominated in Pounds Sterling, the applicable MLA Cost. The Interim
Foreign Currency Rate shall be determined for each day by the Agent or Issuing
Lender, as appropriate, and such determination shall be conclusive absent
manifest error.
"MLA Cost" means, with respect to any Foreign Currency Loan denominated
in Pounds Sterling made by any Lender, the cost imputed to such Lender of
compliance with the Mandatory Liquid Assets requirements of the Bank of England
during the Interest Period applicable to such Foreign Currency Loan, expressed
as a rate per annum and determined in accordance with Schedule 1.1B.
SUBPART 2.1.2. The following definitions are added to Section 1.1 of
the Existing Credit Agreement in the appropriate alphabetical order:
"Available Foreign Currency" means Pounds Sterling, French Francs,
Deutsche Marks, Italian Lira and Guilders.
"Deutsche Marks" means the lawful currency of the Federal Republic of
Germany.
"French Francs" means the lawful currency of the Republic of France.
"Guilders" means the lawful currency of the Netherlands.
"Italian Lira" means the lawful currency of the Republic of Italy.
-4-
<PAGE>
SUBPART 2.2. Amendments to Section 2.5.
SUBPART 2.2.1. The first sentence of Section 2.5(a) of the Existing
Credit Agreement is amended in its entirety to read as follows:
(a) Foreign Currency Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set forth in the
Credit Agreement, each Lender severally agrees to make available to Hunt Europe
such Lender's Foreign Currency Commitment Percentage of revolving credit loans
in the Available Foreign Currency requested by Hunt Europe ("Foreign Currency
Loans") from time to time from the date five (5) Business Days subsequent to the
Amendment Effective Date until the date five (5) Business Days prior to the
Termination Date, or such earlier date as the Revolving Commitments shall have
been terminated as provided in the Credit Agreement for the purposes hereinafter
set forth; provided, however, that the Dollar Amount (as determined as of the
most recent Determination Date) of the aggregate amount of Foreign Currency
Loans outstanding at any time shall not exceed FIFTEEN MILLION DOLLARS
($15,000,000.00) (the "Foreign Currency Committed Amount"); provided, further,
(i) with regard to each Lender individually, such Lender's outstanding Foreign
Currency Loans shall not exceed such Lender's Foreign Commitment Percentage of
the Foreign Currency Committed Amount, (ii) with regard to the Lenders
collectively, the sum of the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding Foreign
Currency Loans plus the Dollar Amount (as determined as of the most recent
Determination Date) of Foreign LOC Obligations outstanding shall not at any time
exceed the aggregate Foreign Currency Committed Amount and (iii) with regard to
the Lenders collectively, the aggregate principal amount of outstanding
Revolving Loans plus Domestic LOC Obligations outstanding plus the aggregate
principal amount of outstanding Competitive Loans plus the aggregate principal
amount of outstanding Swingline Loans plus the Dollar Amount (as determined as
of the most recent Determination Date) of the aggregate principal amount of
outstanding Foreign Currency Loans plus the Dollar Amount (as determined as of
the most recent Determination Date) of Foreign LOC Obligations outstanding shall
not exceed the Revolving Committed Amount. Foreign Currency Loans shall consist
solely of Eurodollar Loans and may be repaid and reborrowed in accordance with
the provisions hereof, provided, however, that no more than 12 separate
Eurodollar Loans shall be outstanding at any time.
-5-
<PAGE>
SUBPART 2.2.2. Subsections (b), (c) and (d) of Section 2.5 of the
Existing Credit Agreement are amended in their entireties to read as
follows:
(b) Foreign Currency Loan Borrowings.
(i) Notice of Borrowing. Hunt Europe shall request a Foreign
Currency Loan borrowing by written notice (or telephone notice
promptly confirmed in writing) to each office of the Agent specified
in Section 3.14(b) not later than 11:00 A.M., local time in the
place where such borrowing is to be made, on the third Business Day
prior to the date of the requested borrowing. Each such request for
borrowing shall be irrevocable and shall specify (A) that a Foreign
Currency Loan is requested, (B) the requested Available Foreign
Currency, (C) the date of the requested borrowing (which shall be a
Business Day), (D) the aggregate principal amount to be borrowed,
and (E) the Interest Period(s) therefor. If Hunt Europe shall fail
to specify in any such Notice of Borrowing an applicable Interest
Period, then such notice shall be deemed to be a request for an
Interest Period of one month. The Agent shall give notice to each
Lender promptly upon receipt of each Notice of Borrowing pursuant to
this Section 2.5(b)(i), the contents thereof and each such Lender's
share of any borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Foreign Currency Loan shall be in a
minimum aggregate amount equal to the Foreign Currency Equivalent of
$500,000 and integral multiples of $250,000 in excess thereof (or
the remaining amount of the Foreign Currency Committed Amount, if
less).
(iii) Advances. Each Lender will make its Foreign Currency
Commitment Percentage of each Foreign Currency Loan borrowing
available to the Agent as specified in Section 3.14(b), or in such
other manner as the Agent may specify in writing, by 1:00 P.M.,
local time in the place where such deposit is required to be made,
on the date specified in the applicable Notice of Borrowing in the
applicable Available Foreign Currency and in funds immediately
available to the Agent. Such borrowing will then be made available
to Hunt Europe by the Agent by crediting the account of Hunt Europe
on the books of such office with the aggregate of the amounts made
available to the Agent by the Lenders and in like funds as received
by the Agent.
(c) Repayment. The principal amount of all Foreign Currency Loans
shall be due and payable in full in the applicable Available Foreign
Currency on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1, Foreign
Currency Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate plus the Applicable Margin. Interest on Foreign
Currency Loans shall be payable (in the applicable Available Foreign
Currency) in arrears on each Interest Payment Date.
-6-
<PAGE>
SUBPART 2.3. Amendments to Section 2.6.
SUBPART 2.3.1. The first sentence of Section 2.6(a) is amended in
its entirety to read as follows:
(a) Issuance. Subject to the terms and conditions hereof and of
the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require, the Lenders will
participate in the issuance by the Issuing Lender, from time to time
and in any Available Foreign Currency, of such Foreign Letters of
Credit from the date five (5) Business Days subsequent to the
Amendment Effective Date until the date five (5) Business Days prior
to the Termination Date as Hunt Europe may request, in a form
acceptable to the Issuing Lender; provided, however, that (i) the
Dollar Amount (as determined as of the most recent Determination
Date) of the Foreign LOC Obligations outstanding shall not at any
time exceed FIFTEEN MILLION DOLLARS ($15,000,000) (the "Foreign LOC
Committed Amount"), (ii) the sum of the Dollar Amount (as determined
as of the most recent Determination Date) of the aggregate principal
amount of outstanding Foreign Currency Loans plus the Dollar Amount
(as determined as of the most recent Determination Date) of Foreign
LOC Obligations outstanding shall not at any time exceed the
aggregate Foreign Currency Committed Amount and (iii) the sum of the
aggregate principal amount of outstanding Revolving Loans plus
Domestic LOC Obligations outstanding plus the aggregate principal
amount of outstanding Competitive Loans plus the aggregate principal
amount of outstanding Swingline Loans plus the Dollar Amount (as
determined as of the most recent Determination Date) of the
aggregate principal amount of outstanding Foreign Currency Loans
plus the Dollar Amount (as determined as of the most recent
Determination Date) of Foreign LOC Obligations outstanding shall not
at any time exceed the aggregate Revolving Committed Amount. No
Foreign Letter of Credit shall (x) have an original expiry date more
than one year from the date of issuance or (y) as originally issued
or as extended, have an expiry date extending beyond the Termination
Date.
SUBPART 2.3.2. The first and second sentences of Section 2.6(c) are
amended in their entireties to read as follows:
(c) Participation. Each Lender, upon issuance of a Foreign Letter
of Credit, shall be deemed to have purchased without recourse a risk
participation from the Issuing Lender in such Foreign Letter of
Credit and the obligations arising thereunder, in each case in an
amount equal to its pro rata share of the obligations under such
Foreign Letter of Credit (based on the respective Commitment
Percentages of the Lenders) and shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety, and be
obligated to pay
-7-
<PAGE>
in the same Available Foreign Currency as such
Foreign Letter of Credit to the Issuing Lender therefor and
discharge when due, its pro rata share of the obligations arising
under such Foreign Letter of Credit. Without limiting the scope and
nature of each Lender's participation in any Foreign Letter of
Credit, to the extent that the Issuing Lender has not been
reimbursed as required under the Credit Agreement or under any such
Foreign Letter of Credit, each such Lender shall pay to the Issuing
Lender in the same Available Foreign Currency as such Foreign Letter
of Credit its pro rata share of such unreimbursed drawing in same
day funds on the date five (5) Business Days after notification by
the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof.
SUBPART 2.3.3. The fifth sentence of Section 2.6(d) is amended in
its entirety to read as follows:
(d) Reimbursement.
*******
The Issuing Lender will promptly notify the other Lenders of the
amount of any unreimbursed drawing and each Lender shall promptly
pay, on the Reimbursement Date, to the Agent for the account of the
Issuing Lender in the same Available Foreign Currency as such
Foreign Letter of Credit and in immediately available funds, the
amount of such Lender's pro rata share of such unreimbursed drawing.
SUBPART 2.3.4. The final sentence of Section 2.6(f) is amended in
its entirety to read as follows:
(f) Repayment with Foreign Currency Loans.
*******
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<PAGE>
In the event that any Foreign Currency Loan cannot for any reason
be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under
the Bankruptcy Code with respect to Hunt Europe or any other Credit
Party), then each such Lender hereby agrees that it shall forthwith
purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from Hunt Europe on
or after such date and prior to such purchase) from the Issuing
Lender in the same Available Foreign Currency as such Foreign Letter
of Credit such participation in the outstanding Foreign LOC
Obligations as shall be necessary to cause each such Lender to share
in such Foreign LOC Obligations ratably (based upon the respective
Commitment Percentages of the Lenders (determined before giving
effect to any termination of the Commitments pursuant to Section
9.2)), provided that at the time any purchase of participation
pursuant to this sentence is actually made, the purchasing Lender
shall be required to pay to the Issuing Lender, to the extent not
paid to the Issuer by Hunt Europe in accordance with the terms of
subsection (d) hereof, interest on the principal amount of
participation purchased for each day from and including the day upon
which such borrowing would otherwise have occurred to but excluding
the date of payment for such participation, at the rate equal to the
Interim Foreign Currency Rate.
SUBPART 2.4. Amendment to Section 3.2. The following sentence is
added to Section 3.2 of the Existing Credit Agreement immediately
following the final sentence thereof:
3.2 Extension and Conversion.
*******
A Foreign Currency Loan in one Available Foreign Currency may not be
converted to a Foreign Currency Loan in another Available Foreign
Currency pursuant to this Section 3.2.
SUBPART 2.5. Amendment to Section 3.7. Subsection (b) of Section 3.7
of the Existing Credit Agreement is amended in its entirety to read as
follows:
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<PAGE>
3.7 Unavailability.
*********
(b) If prior to the first day of any Interest Period, the Agent shall
have determined (which determination shall be conclusive and binding upon the
Borrowers) that deposits in any Available Foreign Currency are not available in
the relevant market to any Lender, the Agent shall give telecopy or telephonic
notice thereof to Hunt Europe and the Lenders as soon as practicable thereafter.
If such notice is given, (i) any Foreign Currency Loans denominated in such
Available Foreign Currency requested to be made on the first day of such
Interest Period shall be deemed rescinded and (ii) any outstanding Foreign
Currency Loans denominated in such Available Foreign Currency shall be repaid in
full by Hunt Europe on the first day of such Interest Period. Until such notice
has been withdrawn by the Agent, no further Foreign Currency Loans denominated
in such Available Foreign Currency shall be made or continued, and no Foreign
Letters of Credit denominated in such Available Foreign Currency shall be issued
or extended.
SUBPART 2.6. Amendment to Section 3.8. Subsection (a) of Section 3.8 of
the Existing Credit Agreement is amended in its entirety to read as follows:
3.8 Illegality.
(a) Notwithstanding any other provision in the Credit Agreement, if (i)
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof occurring after the Closing Date shall make it unlawful
for any Lender to make or maintain Eurodollar Loans or Foreign Currency Loans or
issue or extend Foreign Letters of Credit or (ii) there shall have occurred any
change in national or international financial, political or economic conditions
(including the imposition of or any change in exchange controls) or currency
exchange rates which would make it impracticable for any Lender to make Loans or
issue Foreign Letters of Credit denominated in any Available Foreign Currency to
Hunt Europe, as contemplated by the Credit Agreement, then, by written notice to
the Borrowers and the Agent (which notice shall be withdrawn whenever such
circumstances no longer exist):
(A) such Lender may declare that Eurodollar Loans, Foreign Currency
Loans or Foreign Letters of Credit in the affected currency or
currencies, as the case may be, will not thereafter (for the duration
of such unlawfulness or impracticability) be made or issued by such
Lender under the Credit Agreement, whereupon any request for a
Eurodollar Loan, Foreign Currency Loan or Foreign Letter of Credit in
the affected currency or currencies, as the case may be, shall, as to
such Lender only, (1) if such Loan is not a Foreign Currency Loan, be
deemed a request for a Base Rate Loan, unless such declaration shall be
subsequently withdrawn, (2) if such Loan is a Foreign Currency Loan, be
deemed to have been withdrawn, unless such declaration shall be
subsequently withdrawn and (3) in the case of a Foreign Letter of
Credit, be deemed to have been withdrawn, unless such declaration shall
be subsequently withdrawn; and
(B) such Lender may require that all outstanding Eurodollar Loans or
Foreign Currency Loans in the affected currency or currencies, as the
case may be, made by it be (1) if such Loans are not Foreign Currency
Loans, converted to Base Rate Loans, in which event all such Eurodollar
Loans shall be automatically converted to Base Rate Loans as of the
effective date of such notice as provided in paragraph (b) below or (2)
if such Loans are Foreign Currency Loans, repaid immediately, in which
event all such Foreign Currency Loans in the affected currency or
currencies shall be required to be repaid in full by Hunt Europe as of
the effective date of such notice as provided in paragraph (b) below.
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<PAGE>
SUBPART 2.7. Amendment to Section 3.12. The first sentence of Section
3.12(b) of the Existing Credit Agreement is amended in its entirety to read as
follows:
3.12 Pro Rata Treatment.
*******
(b) Advances. Unless the Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Commitment Percentage of such
borrowing available to the Agent, the Agent may assume that such Lender
is making such amount available to the Agent, and the Agent may, in
reliance upon such assumption, make available to the appropriate
Borrower a corresponding amount. If such amount is not made available
to the Agent by such Lender within the time period specified therefor
under the Credit Agreement, such Lender shall pay to the Agent, on
demand, such amount with interest thereon at a rate equal to the
Federal Funds Rate (or, in the case of a Foreign Currency Loan, the
Interim Foreign Currency Rate) for the period until such Lender makes
such amount immediately available to the Agent.
SUBPART 2.8. Amendment to Section 3.13. The fourth sentence of Section
3.13 of the Existing Credit Agreement is amended in its entirety to read as
follows:
3.13 Sharing of Payments.
*******
Except as otherwise expressly provided in the Credit Agreement, if
any Lender or the Agent shall fail to remit to the Agent or any other
Lender an amount payable by such Lender or the Agent to the Agent or
such other Lender pursuant to the Credit Agreement on the date when
such amount is due, such payments shall be made together with interest
thereon for each date from the date such amount is due until the date
such amount is paid to the Agent or such other Lender at a rate per
annum equal to the Federal Funds Rate (or, in the case of an Available
Foreign Currency, the Interim Foreign Currency Rate).
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<PAGE>
SUBPART 2.9. Amendment to Section 3.14.
SUBPART 2.9.1. The second sentence of Section 3.14(a) of the
Existing Credit Agreement is amended in its entirety to read as
follows:
(a) Currency of Payments.
*******
Without limiting the terms of the preceding sentence, accrued
interest on any Foreign Currency Loans and all fees owing with
respect to Foreign Letters of Credit shall be payable in the same
Available Foreign Currency as such Loans or Foreign Letters of
Credit.
SUBPART 2.9.2. The first and seventh sentences of Section 3.14(b) of
the Existing Credit Agreement are amended in their entireties to read
as follows:
(b) Place and Manner of Payments. Except as otherwise
specifically provided in the Credit Agreement, all payments under
the Credit Agreement shall be made to the Agent in immediately
available funds, without offset, deduction, counterclaim or
withholding of any kind, prior to 2:00 P.M., local time in the place
where such payment is required to be made pursuant to this
subsection (b), on the date due at the office of the Agent: at 101
N. Tryon Street, Independence Center, 15th Floor, NCI-001-15-01,
Charlotte, North Carolina 28255 with respect to payments in Dollars;
at NationsBank, N.A., London, for the account of NationsBank, N.A.,
London Account No. 00497056 with respect to payments in British
Pounds Sterling; at Societe Generale, Paris, for the account of
NationsBank, N.A., London Account No. 001 0ll 042 150 with respect
to payments in French Francs; at Deutsche Bank, Frankfurt, for the
account of NationsBank, N.A., London Account No. 10092723030000,
with respect to payments in Deutsche Marks; at Banca Commerciale
Italiana, Milan, for the account of NationsBank, N.A., London,
Account No. 09779550132, with respect to payments in Italian Lira;
at ABN-AMRO Bank, Amsterdam, for the account of NationsBank, N.A.,
London, Account No. 417777973, with respect to payments in Dutch
Guilders, or at such other place as may be designated by the Agent
to the Borrowers in writing.
*******
Except as expressly provided otherwise in the Credit Agreement, all
computations of interest and fees shall be made on the basis of
actual number of days elapsed over a year of 360 days, except with
respect to computation of interest on Foreign Currency Loans
denominated in Pounds Sterling and Base Rate Loans which (unless the
Base Rate is determined by reference to the Federal Funds Rate)
shall be calculated based on a year of 365 or 366 days, as
appropriate.
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<PAGE>
SUBPART 2.10. New Section 3.16. The following new Section 3.16 is added
to the Existing Credit Agreement immediately existing Section 3.15 thereof.
3.16. European Monetary Union.
(a) If, as a result of the implementation of European monetary
union, (i) any Available Foreign Currency ceases to be the lawful
currency of its respective issuing nation and is replaced by a European
single currency or (ii) any Available Foreign Currency and a European
single currency are at the same time recognized by the central bank or
comparable authority of the nation issuing such Available Foreign
Currency as lawful currency of such nation and the Agent shall so
request in a notice delivered to Hunt Europe, then any amount payable
hereunder by the Agent or the Lenders to Hunt Europe, or by Hunt Europe
to the Agent or the Lenders, in such currency shall instead be payable
in the European single currency and the amount so payable shall be
determined by translating the amount payable in such currency to such
European single currency at the exchange rate recognized by the
European Central Bank for the purpose of implementing European monetary
union as of the date such payment is due.
(b) Hunt Europe agrees, at the request of any Lender, to compensate
such Lender for any reasonable loss, cost, expense or reduction in
return that shall be incurred or sustained by such Lender (other than
as a result of such Lender's gross negligence or willful misconduct) as
a result of the implementation of European monetary union, that would
not have been incurred or sustained but for the transactions provided
for herein and that, to the extent that such loss, cost, expense or
reduction is of a type generally applicable to extensions of credit
similar to the extensions of credit hereunder, is generally being
requested from borrowers subject to similar provisions. A certificate
of a Lender (X) setting forth the amount or amounts necessary to
compensate such Lender, (y) describing the nature of the loss or
expense sustained or incurred by such Lender as a consequence thereof
and (z) setting forth a reasonably detailed explanation of the
calculation thereof shall be delivered to Hunt Europe and shall be
conclusive absent manifest error. Hunt Europe shall pay to such Lender
the amount shown as due on any such certificate within 10 days after
receipt thereof
(c) Hunt Europe agrees, at the request of the Agent or the Required
Lenders, at the time of or at any time following the implementation of
European monetary union, to enter into an agreement amending this
Credit Agreement (subject to obtaining the approval of the Agent and
the Required Lenders) in such manner as the Agent and the Required
Lenders shall specify in order to reflect the implementation of such
monetary union to place the parties hereto in the position they would
have been in had such monetary union not been implemented.
SUBPART 2.11. Amendment to Section 11.15. The first sentence of Section
11.15(a) of the Existing Credit Agreement is amended to read as follows:
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<PAGE>
11.15 Judgment Currency.
(a) Each Credit Party's obligations under the Credit Agreement to
make payments in Dollars or in any available Available Foreign Currency
(the "Obligation Currency") shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted
into any currency other than the Obligation Currency, except to the
extent that such tender or recovery results in the effective receipt by
the Agent or a Lender of the full amount of the Obligation Currency
expressed to be payable to the Agent or such Lender under the Credit
Agreement.
SUBPART 2.12. Amendment to Schedule 1.1C. Schedule 1.1C to the Existing
Credit Agreement is deleted and replaced with a new schedule in the form
of Schedule 1.1(C) attached hereto.
SUBPART 2.13. Amendment to Schedule 2.5(e), Schedule 2.5(e) to the
Existing Credit Agreement is deleted and replaced with a new schedule in the
form of Schedule 2.5(e) attached hereto.
SUBPART 2.14. References to Hunt Europe Limited. All references to Hunt
Europe Limited appearing in the Credit Agreement or any other Credit Document
are hereby amended to refer to Hunt Graphics Europe Limited.
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Third Amendment Effective Date. This Amendment shall be
and become effective as of the date hereof (the "Third Amendment Effective
Date") when all of the conditions set forth in this Subpart 3.1 shall have
been satisfied, and thereafter this Amendment shall be known, and may be
referred to, as "Third Amendment";
SUBPART 3.1.1. Execution of Counterparts of Amendment. The Agent shall
have received counterparts (or other evidence of execution, including telephonic
message, satisfactory to the Agent) of this Amendment, which collectively shall
have been duly executed on behalf of each of the Borrowers, the Guarantors, the
Agent and the Lenders.
SUBPART 3.1.2 Execution of New Foreign Currency Notes. The Borrower
shall have executed new Foreign Currency Notes in favor of each Lender in the
form of Schedule 2.5(e) attached hereto.
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<PAGE>
PART IV
MISCELLANEOUS
SUBPART 4.1. Cross-References. References in this Amendment to any Part
or Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 4.2. Instrument Pursuant to Existing Credit Agreement. This
Amendment is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Existing Credit Agreement.
SUBPART 4.3. References in Other Credit Documents. At such time as this
Third Amendment shall become effective pursuant to the terms of Subpart 3.1 all
references in the Credit Documents to the "Credit Agreement" shall be deemed to
refer to the Credit Agreement as amended by this Third Amendment.
SUBPART 4.4. Representations and Warranties. The Borrowers hereby
represent and warrant that (i) the conditions precedent to the initial Loans and
initial Letters of Credit were satisfied as of the Closing Date (assuming
satisfaction of all requirements in such conditions that an item be in form
and/or substance reasonably satisfactory to the Agent or any Lenders or that any
event or action have been completed or performed to the reasonable satisfaction
of the Agent or any Lenders), (ii) the representations and warranties contained
in Section 6 of the Existing Credit Agreement are correct on and as of the date
hereof as though made on and as of such date and after giving effect to the
amendments contained herein and (iii) no Default or Event of Default exists
under the Existing Credit Agreement on and as of the date hereof
SUBPART 4.5. Counterparts. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SUBPART 4.6. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NORTH
CAROLINA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 4.7. Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
[The remainder of this page has been left blank intentionally]
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<PAGE>
Each of the parties hereto has caused a counterpart of this Amendment to be duly
executed and delivered as of the date first above written.
BORROWERS: HUNT CORPORATION
By /s/ W.E. Chandler
---------------------------------------------------
Title: Sr. Vice President - Finance
HUNT GRAPHICS EUROPE LIMITED
By /s/ W.E. Chandler
---------------------------------------------------
Title: Director
GUARANTORS: HUNT HOLDINGS, INC.
By /s/ W.E. Chandler
---------------------------------------------------
Title: Vice President and Treasurer
HUNT X-ACTO, INC.
By /s/ W.E. Chandler
---------------------------------------------------
Title: Sr. Vice President - Treasurer and Secretary
SEAL PRODUCTS, INC.
By /s/ W.E. Chandler
---------------------------------------------------
Title: Sr. Vice President/and Secretary
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<PAGE>
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By /s/ Philip xxxxx
-------------------------
Title: Vice President
BANQUE PARIBAS
By_________________________
Title________________
CORESTATES BANK, N.A.
By_________________________
Title________________
FIRST UNION NATIONAL BANK
By_________________________
Title________________
MELLON BANK, N.A.
By_________________________
Title________________
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<PAGE>
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By_________________________
Title________________
BANQUE PARIBAS
By /s/ Duane Helkowski
-------------------------
Title: Vice President
By /s/ Robert G. Carino
-------------------------
Title: Vice President
CORESTATES BANK, N.A.
By_________________________
Title________________
FIRST UNION NATIONAL BANK
By_________________________
Title________________
MELLON BANK, N.A.
By_________________________
Title________________
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<PAGE>
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By_________________________
Title________________
BANQUE PARIBAS
By_________________________
Title________________
CORESTATES BANK, N.A.
By /s/ Karen R. Leaf
-------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By_________________________
Title________________
MELLON BANK, N.A.
By_________________________
Title________________
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<PAGE>
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By_________________________
Title________________
BANQUE PARIBAS
By_________________________
Title________________
CORESTATES BANK, N.A.
By_________________________
Title________________
FIRST UNION NATIONAL BANK
By /s/ Tracy McKinney
-------------------------
Title: Asst. Vice President
MELLON BANK, N.A.
By_________________________
Title________________
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<PAGE>
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By_________________________
Title________________
BANQUE PARIBAS
By_________________________
Title________________
CORESTATES BANK, N.A.
By_________________________
Title________________
FIRST UNION NATIONAL BANK
By_________________________
Title________________
MELLON BANK, N.A.
By /s/ Mark Bomberger
-------------------------
Title: Vice President
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<PAGE>
Schedule 1.1C
FORM OF NOTICE OF BORROWING
NationsBank, N.A.,
as Agent for the Lenders
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255*
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, [Hunt Corporation] [Hunt Graphics Europe Limited]
refers to the Second Amended and Restatement of Credit Agreement dated as of
February 20, 1997 (as it may be amended, modified, extended or restated from
time to time, the "Credit Agreement"), among the Borrowers, the other Credit
Parties party thereto, the Lenders party thereto and NationsBank, N.A., as
Agent.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The undersigned hereby gives you notice that it requests a [Revolving
Loan advance in accordance with the provisions of Section 2.1 of the Credit
Agreement] [Foreign Currency Loan advance in accordance with the provisions of
Section 2.5 of the Credit Agreement] and in connection therewith sets forth
below the terms on which such Loan advance is requested to be made:
(A) Date of Borrowing
(which is a Business Day) _______________________
(B) Principal Amount of
Borrowing _______________________
- ------------------
*All original notices with respect to Foreign Currency Loans shall be
sent to the address set forth in Section 3.14(b) of the Credit Agreement for
payments in an Available Foreign Currency with a copy to the address set forth
in Section 3.14(b) of the Credit Agreement for payments in Dollars.
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<PAGE>
(C) Interest Period and the
last day thereof _______________________
(D) Interest rate basis** _______________________
[(E) Available Foreign Currency _______________________]
The delivery of this Notice of Borrowing shall constitute a
representation and warranty by the undersigned of the correctness of the matters
specified in subsections (ii), (iii), (iv), (v) and (vi) of Sections 5.2.
Very truly yours,
[HUNT CORPORATION]
[HUNT GRAPHICS EUROPE LIMITED]
By___________________________
Title:
- ---------------------
All Foreign Currency Loans will bear interest on the basis of the Eurodollar
Rate.
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<PAGE>
Schedule 2.5(e)
FORM OF
FOREIGN CURRENCY NOTE
April 24, 1998
FOR VALUE RECEIVED, HUNT GRAPHICS EUROPE LIMITED, a United Kingdom
corporation (the "Borrower"), hereby promises to pay to the order of
__________________________, its successors and assigns (the "Lender"), at the
times set forth in the Second Amendment and Restatement of Credit Agreement,
dated as of February 20, 1997, among Hunt Corporation, the Borrower, the other
Credit Parties party thereto, the Lenders and the Agent (as it may be amended,
modified, extended or restated from time to time, the "Credit Agreement"; all
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Credit Agreement), but in no event later than the Termination Date, the
aggregate unpaid principal amount of all Foreign Currency Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof at said place and
account, on the dates and at the rates selected in accordance with Section
2.5(d) of the Credit Agreement. Each payment on account of an amount due from
the Borrower hereunder shall be made in the applicable Available Currency at the
place and time of payment set forth in Section 3.14(b) of the Credit Agreement.
Without limiting the terms of the preceding sentence, accrued interest on any
Foreign Currency Loan shall be payable in the same Available Foreign Currency as
such Foreign Currency Loan.
Upon the occurrence and during the continuance of an Event of Default
the balance outstanding hereunder shall bear interest as provided in Section 3.1
of the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
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<PAGE>
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on Schedule A attached hereto and
incorporated herein by reference, or on a continuation thereof which shall be
attached hereto and made a part hereof; provided, however, that any failure to
endorse such information on such schedule or continuation thereof shall not in
any manner affect the obligation of the Borrower to make payments of principal
and interest in accordance with the terms of this Note.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed by its duly authorized officer as of the day and year first above
written.
HUNT GRAPHICS EUROPE LIMITED
By__________________________
Title_______________________
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<PAGE>
SCHEDULE A TO THE
FOREIGN CURRENCY NOTE
OF _______________
DATED APRIL 24, 1998
Unpaid Name of
Type Principal Person
of Interest Payments Balance Making
Date Loan Period Principal Interest of Note Notation
- ---- ---- -------- --------- -------- --------- --------
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<PAGE>
HUNT CORPORATION
(FORMERLY HUNT MANUFACTURING CO.)
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
JANUARY 1999
<PAGE>
TABLE OF CONTENTS
Paqe
Article I - Purpose ................................................... 1
1.1 Purpose .................................................... 1
Article II - Definitions .............................................. 2
2.1 Account or Accounts ........................................ 2
2.2 Accrual Computation Period ................................. 2
2.3 Accrued Benefit ............................................ 2
2.4 Actuarial Equivalent ....................................... 2
2.5 Actuary .................................................... 3
2.6 Affiliate .................................................. 3
2.7 Annuity Starting Date ...................................... 3
2.8 Applicable Compensation .................................... 3
2.9 Applicable Interest Rate ................................... 3
2.10 Applicable Mortality Table ................................. 4
2.11 Appropriate Form ........................................... 4
2.12 Average Monthly Compensation ............................... 4
2.13 Base Salary ................................................ 4
2.14 Basic Account .............................................. 4
2.15 Basic Amounts .............................................. 4
2.16 Beneficiary ................................................ 4
2.17 Board ...................................................... 5
2.18 Cause ...................................................... 5
2.19 Code ....................................................... 5
2.20 Committee .................................................. 5
2.21 Company .................................................... 5
2.22 Company Securities ......................................... 5
2.23 Computation Period ......................................... 5
2.24 Corporate Officer .......................................... 5
2.25 Deferral Account ........................................... 5
2.26 Deferral Amounts ........................................... 5
2.27 Deferral Percentage ........................................ 6
2.28 Disability ................................................. 6
2.29 Earliest Retirement Age .................................... 6
2.30 Early Retirement Date ...................................... 6
2.31 Eligible Spouse or Surviving Spouse ........................ 6
2.32 Employee ................................................... 6
2.33 Employer ................................................... 6
2.34 ERISA ...................................................... 6
2.35 Executive Officer .......................................... 6
2.36 Insolvency ................................................. 6
2.37 Insolvency Creditor ........................................ 6
2.38 Investment Advisor ......................................... 7
2.39 Joint and Survivor Annuity ................................. 7
2.40 Late Retirement Date ....................................... 7
2.41 Matching Account ........................................... 7
2.42 Matching Amounts ........................................... 7
2.43 Normal Retirement Age ...................................... 7
2.44 Normal Retirement Date ..................................... 7
2.45 One-Year Break in Service .................................. 7
2.46 Participant ................................................ 7
<PAGE>
2.47 Participating Company ...................................... 8
2.48 Pension Plan ............................................... 8
2.49 Phantom Stock Plan ......................................... 8
2.50 Plan ....................................................... 8
2.51 Plan Year .................................................. 8
2.52 Preretirement Survivor Annuity ............................. 8
2.53 Present Value .............................................. 8
2.54 Related Company ............................................ 8
2.55 Salary Deferral Compensation ............................... 8
2.56 Savings Plan ............................................... 9
2.57 Spouse ..................................................... 9
2.58 Trust ...................................................... 9
2.59 Trustee .................................................... 9
2.60 Year of Benefit Service .................................... 9
2.61 Year of Vesting Service .................................... 9
Article III - Participation ........................................... 9
3.1 Retirement Benefits ........................................ 9
3.2 Death Benefits ............................................. 10
3.3 Supplemental Savings Benefits .............................. 10
3.4 Plan Exhibit B Benefits .................................... 11
3.5 Plan Exhibit C Benefits .................................... 11
Artic1e IV - Retirement Benefits ...................................... 11
4.1 General Rules .............................................. 11
4.2 Normal Retirement Pension .................................. 11
4.3 Early Retirement ........................................... 12
4.4 Late Retirement ............................................ 13
4.5 Disability Retirement Pension .............................. 13
4.6 Separation ................................................. 15
4.7 Preretirement Survivor Annuity ............................. 16
4.8 Forms of Pension ........................................... 17
4.9 Beneficiary Designation and Proof .......................... 17
4.10 Divestment for Cause ....................................... 18
4.11 Elective Transfer of Life Insurance Policies
Providing Article IV Benefits ............................ 18
Article V - Death Benefits ............................................ 20
5.1 Death Benefits ............................................. 20
5.2 Divestment for Cause ....................................... 21
Article VI - Supplemental Savings Benefits............................. 21
6.1 Participation .............................................. 21
6.2 Accounts ................................................... 22
6.3 Vesting .................................................... 24
6.4 Valuation of Accounts ...................................... 24
6.5 Manner, Form and Time of Distribution of Accounts .......... 24
6.6 Hardship Distributions ..................................... 25
6.7 Distribution on Account of Educational Expenses ............ 26
6.8 Beneficiary Designation .................................... 26
6.9 Divestment for Cause ....................................... 26
6.10 Elective Transfer of Life Insurance Policies Providing
Article VI Benefits ...................................... 26
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Article VII - Payment of Benefits ..................................... 26
7.1 Plan Unfunded .............................................. 26
7.2 Review of Funding Status ................................... 31
7.3 Acceleration of Payments: .................................. 32
7.4 Creation of Separate Subfund in Trust upon Termination
of Employment ............................................ 32
Article VIII - Administration ......................................... 32
8.1 Appointment of Committee ................................... 32
8.2 Organization ............................................... 32
8.3 Committee Action ........................................... 32
8.4 Claims Procedure ........................................... 33
8.5 Committee Powers and Responsibilities ...................... 34
8.6 Information from Participating Companies to Committee ...... 35
8.7 Records .................................................... 35
8.8 Determination of Right to Benefits ......................... 36
8.9 Expert Services ............................................ 36
Article IX - Amendment and Termination of Plan; Successor Employer .... 36
9.1 Right of Company to Amend Plan ............................. 36
9.2 Amendment Procedure ........................................ 36
9.3 Termination of Plan ........................................ 36
9.4 Successor Employer ......................................... 37
Article X - Miscellaneous ............................................. 37
10.1 No Right to Employment ..................................... 37
10.2 Right to Withhold .......................................... 37
10.3 Nonalienation of Benefits .................................. 37
10.4 Expenses of Plan ........................................... 37
10.5 Incapacitated Beneficiaries ................................ 37
10,6 Gender and Number .......................................... 37
10.7 Law Governing Construction ................................. 38
10.8 Change in Control Agreements ............................... 38
10.9 Headings Not a Part Hereof ................................. 38
10.10 Severability of Provisions ................................. 38
10.11 Reporting and Disclosure Requirements ...................... 38
10.12 Special Provisions Relating to Ronald J. Naples ............ 38
10.13 Special Provisions Relating to Donald L. Thompson .......... 38
10.14 Power of Company to Substitute Assets ...................... 38
10.15 Voting and other Rights Associated with Trust Assets ....... 39
Article XI - Adoption of Plan by Affiliates ........................... 39
11.1 Adoption of Plan ........................................... 39
11.2 Company Appointed Agent of Participating Company ........... 39
11.3 Withdrawal from Plan ....................................... 39
PLAN EXHIBIT A - EARLY RETIREMENT FACTORS ............................. A-1
PLAN EXHIBIT B - SPECIAL PROVISIONS FOR RONALD J. NAPLES .............. B-1
PLAN EXHIBIT C - SPECIAL PROVISIONS FOR DONALD L. THOMPSON ............ C-I
PLAN EXHIBIT C - APPENDIX A PHANTOM STOCK PLAN FOR DONALD L. THOMPSON . CA-I
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<PAGE>
HUNT CORPORATION
(FORMERLY HUNT MANUFACTURING CO.)
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
WHEREAS, HUNT CORPORATION (then Hunt Manufacturing Co.) (the "Company")
established the Supplemental Executive Benefits Plan (the "Plan") effective
April 16, 1992; and
WHEREAS, the Company amended and restated the Plan, effective January 1,
1995, in order to permit salary deferrals and Employer matching contributions
for a select group of management or highly compensated employees and to make
certain other changes; and
WHEREAS, the Company again amended and restated the Plan, effective January
1, 1996, in order to conform the Plan to the requirements of the Employment
Agreement between the Company and Donald L. Thompson, dated April 8, 1996, under
which Donald L. Thompson was employed as Chairman and Chief Executive Officer of
the Company effective June 1, 1996; and
WHEREAS, the Company desires to amend and restate the Plan, effective
January 1, 1997, except as otherwise specifically provided herein, to provide
for additional savings amounts to the extent participants cannot be allocated
Basic Contributions under the Hunt Corporation (formerly Hunt Manufacturing Co.)
Savings Plan because of the limitations of the Internal Revenue Code of 1986, as
amended; to clarify the definition of compensation for purposes of salary
deferrals under Article VI so as to conform the Plan to the manner in which it
has been operated, by adding a definition of "Salary Deferral Compensation"
which includes certain additional components of compensation (as specified
herein), and by providing that Executive Officer Participants may elect to defer
different percentages of different components of "Salary Deferral Compensation",
in a calendar year effective January 1, 1995; to permit the Trustee, at the
request of an Executive Officer Participant, to invest such Executive Officer
Participant's Deferral Accounts, Matching Accounts, and the Benefit Account
under the Phantom Stock Plan in Company securities; and to make certain other
changes; and
WHEREAS, the Company reserved the right to amend the Plan at any time in
Section 9.1;
NOW, THEREFORE, effective January 1, 1997, except as otherwise specifically
provided herein, the Company amends and restates the HUNT CORPORATION (FORMERLY
HUNT MANUFACTURING CO.) SUPPLEMENTAL EXECUTIVE BENEFITS PLAN, as follows:
Article I - Purpose
1.1 Purpose:
(a) Retirement Benefits: The Plan is to provide for the payment by the
Company of retirement benefits under Article IV to a select group of
management and highly compensated employees within the meaning of section
201(2) of ERISA that would have been paid under the Pension Plan but for the
benefit limitations imposed by, inter alia, sections 401(a)(17), 401(l), and
415 of the Code. Moreover, the target benefit under the Plan is to be
similar to the benefit formula under the Pension Plan, prior to its
amendment to comply with the requirements of section 401(l) of the Code and
the Treasury regulations thereunder. However, in order to maintain ease of
administration, the target benefit is not to be integrated with Social
Security; accordingly, the applicable benefit percentages are to apply to
all compensation. Except as otherwise specifically provided herein, the
provisions of the Plan are
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to be substantially the same as those of the Pension Plan, as amended and
restated effective October 1, 1996.
(b) Death Benefits: The Plan is also intended to provide for the payment by
the Company of death benefits under Article V to the beneficiaries of a select
group of management and highly compensated employees within the meaning of
section 201(2) of ERISA. The amount of the death benefit is to equal three times
the Participant's Base Salary, reduced by the $50,000 death benefit provided
under the Hunt Corporation Group Life Insurance Plan.
(c) Supplemental Savings Benefits: The Plan is also intended to provide for
the payment by the Company of supplemental savings benefits under Article VI to
a select group of management and highly compensated employees within the meaning
of section 201(2) of ERISA.
(d) Plan Exhibit B and C Benefits: The Plan is also intended to provide for
the payment by the Company of the benefits provided under, or pursuant to, Plan
Exhibits B and C to Ronald J. Naples and Donald L. Thompson, respectively.
(e) Other: Lastly, the Plan is to be compatible with the change in control
agreements entered into between the Company and the various Participants in the
Plan. The assets from which the benefits are to be paid are to be held in a
grantor trust subject, in the case of Insolvency, to the Insolvency Creditors of
the Company.
Article II - Definitions
Where the following words and phrases appear in this Plan, they shall have
the respective meanings set forth below, unless the context clearly requires
otherwise:
2.1 Account or Accounts: The Basic Account, Deferral Account, and/or
Matching Account maintained on behalf of each Executive Officer Participant
under Article VI, as the context requires.
2.2 Accrual Computation Period: The Computation Period ending September 30.
2.3 Accrued Benefit: The annual retirement pension which a Participant
shall have earned under Article IV up to any given date, which shall be equal to
the benefit provided by Section 4.2(a) based on the Participant's Years of
Benefit Service and Average Monthly Compensation as of the determination date.
2.4 Actuarial Equivalent: A benefit of equal value, when computed in
accordance with the following actuarial assumptions:
(a) Other than Present Value and Single Sum Calculations:
(1) Interest: 7 1/2 percent per annum.
(2) Mortality: 1984 Unisex Pension Tables with a two-year
set-back for a Participant and a one-year set-back for the
Participant's Spouse or other Beneficiary.
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(b) Present Value and Single Sum Calculations:
(1) Interest: Applicable Interest Rate.
(2) Mortality: Applicable Mortality Table.
All Actuarial Equivalents shall be determined under Section 2.4(a) prior to
October 1, 1996. On and after October 1, 1996, Actuarial Equivalents shall be
determined under Section 2.4(a) or 2.4(b), as applicable.
2.5 Actuary: The enrolled actuary selected by the Company to provide
actuarial services in connection with the administration of the Plan.
2.6 Affiliate: A member of a group of employers, of which the Company or
other Participating Company is a member and which group constitutes:
(a) A controlled group of corporations (as defined in section 414(b)
of the Code);
(b) Trades or businesses (whether or not incorporated) which are under
common control (as defined in section 414(c) of the Code);
(c) Trades or businesses (whether or not incorporated) which
constitute an affiliated service group (as defined in section 414(m) of the
Code); or
(d) Any other entities required to be aggregated with the Company or
other Participating Company pursuant to section 414(o) of the Code and
Treasury regulations thereunder.
2.7 Annuity Starting Date: The first day of the first period for which an
amount is paid to a Participant as an annuity or in any other form under the
Plan.
2.8 Applicable Compensation: All compensation reported on the Participant's
Form W-2 (Wages, tips, other compensation box) for a calendar year, including,
but not limited to, any overtime and bonuses and cash awards under the Company's
Long Term Incentive Plan (terminated on February 14, 1996) actually paid by a
Participating Company to a Participant during the calendar year, but adding
thereto any amount which is contributed by a Participating Company pursuant to a
salary reduction agreement and which is not includible in a Participant's gross
income under section 125, 402(e)(3), 402(h)(1)(B), or 403(b) of the Code, and
excluding therefrom amounts received as stock awards under the Company's Long
Term Incentive Plan (terminated on February 14, 1996), and excluding therefrom
any awards under the Company's Phantom Stock Plan maintained for the benefit of
Donald L. Thompson, and any taxable employee benefits of any kind (e.g.,
reimbursements of moving and relocation expenses, insurance premiums,
automobile, health, medical, and dental expenses, the cost of group-term life
insurance, compensation arising from the exercise of a nonqualified stock option
or from a stock grant, and any fringe benefit which is not excluded from gross
income under section 132 of the Code).
2.9 Applicable Interest Rate: For each Plan Year, the interest rate shall
be the annual rate of interest on 30-year Treasury securities, as specified by
the Commissioner of Internal Revenue, for the calendar month of July preceding
the first day of the Plan Year which contains the Annuity Starting Date, all as
provided under section 417(e)(3) of the Code. This Section 2.9 shall be
effective October 1, 1996.
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Notwithstanding the foregoing, for the period beginning October 1, 1996 and
ending one year after the date the Pension Plan, as amended and restated
effective October 1, 1996, is adopted, the Plan shall use, as the Applicable
Interest Rate, the interest rate determined under the Pension Plan as in effect
before October 1, 1996, or the interest rate determined under this Section 2.9,
whichever results in the larger distribution, all as provided in Temp. Treas.
Reg. Section 1.41 7(e)-1T(d)(10).
Before October 1, 1996, the Applicable Interest Rate shall mean the
Applicable Interest Rate, as determined from time to time under the Pension
Plan as in effect before October 1, 1996.
2.10 Applicable Mortality Table: The table described in Rev. Rul. 95-6, or
any successor table prescribed by the Commissioner of Internal Revenue in
revenue rulings, notices or other published guidance, all as provided under
section 417(e)(3) of the Code. This Section 2.10 shall be effective on and after
October 1, 1996.
Before October 1, 1996, the Applicable Mortality Table shall mean the
Applicable Mortality Table, as determined from time to time under the Pension
Plan as in effect before October 1, 1996.
2.11 Appropriate Form: The form provided or prescribed by the Committee for
a particular purpose.
2.12 Average Monthly Compensation: The total Applicable Compensation
received by a Participant from a Participating Company during the five
consecutive calendar years out of his or her last ten calendar years of
employment ending with the calendar year in which occurs the earlier of the
Participant's retirement or termination of employment, which will produce the
highest Average Monthly Compensation, divided by 60. For purposes of the
preceding sentence, any part-year in which a Participant is employed shall be
included within the five-consecutive-calendar-year period if the inclusion
thereof produces a higher Average Monthly Compensation; in all other cases,
part-years shall be disregarded. If a part-year is included, the Applicable
Compensation received by a Participant during such part-year shall not be
annualized, and the part-year shall be treated, for purposes of the calculation,
as a full year. For any Participant who has less than five consecutive calendar
years of employment, Average Monthly Compensation shall be equal to the total
Applicable Compensation received by the Participant during his or her total
period of employment with a Participating Company divided by the number of his
or her total months of employment in such period of employment.
2.13 Base Salary: A Participant's annual base rate of salary, determined as
of a given date.
2.14 Basic Account: An account established under Article VI, and maintained
under this Plan solely as a bookkeeping entry for each Executive Officer
Participant, to which Basic Amounts, and earnings on such amounts, are credited,
and from which distributions to the Executive Officer Participant or his or her
Beneficiary are debited.
2.15 Basic Amounts: Amounts credited to an Executive Officer Participant's
Basic Account pursuant to Section 6.2(b)(1).
2.16 Beneficiary:
(a) Retirement Benefits: Such person or persons or legal entity or
entities designated by a Participant to receive benefits under Article IV
or Plan Exhibits B and C after such Participant's death, or the personal or
legal representative of the Participant, all as herein described and
provided. If no Beneficiary is designated by the Participant or if no
Beneficiary survives the Participant, the Beneficiary shall be the
Participant's Surviving Spouse if the Participant has a Surviving Spouse
and otherwise the Participant's estate.
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<PAGE>
(b) Death Benefits: Such person or persons or legal entity or entities
designated by a Participant or otherwise eligible to receive, pursuant to
Article V or Plan Exhibits B and C, death benefits upon the Participant's
death under the Hunt Corporation Group Life Insurance Plan.
(c) Supplemental Savings Benefits: Such person or persons or legal
entity or entities designated by a Participant or otherwise eligible to
receive, pursuant to Article VI or Plan Exhibits B and C, supplemental
savings benefits upon the Participant's death.
(d) Plan Exhibit B Benefits: Such person or persons or legal entity or
entities designated by Ronald J. Naples to receive, pursuant to Plan
Exhibit B, any benefits due under Plan Exhibit B upon Ronald J. Naples'
death.
(e) Plan Exhibit C Benefits: Such person or persons or legal entity or
entities designated by Donald L. Thompson to receive, pursuant to Plan
Exhibit C, any benefits due under Plan Exhibit C upon Donald L. Thompson's
death.
2.17 Board: The Board of Directors of the Company.
2.18 Cause: The Participant's:
(a) Dishonesty, fraud, willful malfeasance, gross negligence or other
gross misconduct, which is materially injurious to the Company or other
Employer; or
(b) Conviction of or plea of guilty to a felony.
2.19 Code: The Internal Revenue Code of 1986, as it may be amended from
time to time.
2.20 Committee: The Pension Committee appointed under the provisions of
Article VIII to administer the Plan.
2.21 Company: HUNT CORPORATION (FORMERLY HUNT MANUFACTURING CO.).
2.22 Company Securities: Company stock and unvested Company stock grants.
2.23 Computation Period: Any 12-consecutive-month period.
2.24 Corporate Officer: Any Employee of the Company designated by the
Company as a Corporate Officer to receive benefits under Section 3.2, provided
he or she is a member of a select group of management or highly compensated
employees within the meaning of section 201(2) of ERISA.
2.25 Deferral Account: An account established under Article VI, and
maintained under this Plan solely as a bookkeeping entry for each Executive
Officer Participant, to which Deferral Amounts, and earnings on such amounts,
are credited, and from which distributions to the Executive Officer Participant
or his or her Beneficiary are debited.
2.26 Deferral Amounts: Amounts credited to an Executive Officer
Participant's Deferral Account pursuant to Section 6.2(b)(2).
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2.27 Deferral Percentage: The percentage of an Executive Officer
Participant's Salary Deferral Compensation that the Executive Officer
Participant has elected to defer to his or her Deferral Account. An Executive
Officer Participant's Deferral Percentage may be any whole number as elected by
the Executive Officer Participant on the Appropriate Form.
2.26 Disability: A physical or mental condition enduring for a period of
six months or more, if the affected Participant submits evidence to the
Committee that he or she is totally and permanently disabled and is eligible to
receive disability benefits under the Federal Social Security Act.
2.29 Earliest Retirement Age: The earliest date on which, under the Plan,
the Participant could elect to receive retirement benefits.
2.30 Early Retirement Date: The first day of any month coincident with, or
immediately following, the earlier of:
(a) The Participant's 55th birthday, provided he or she has completed
15 or more Years of Vesting Service with a Participating Company on such
date; or
(b) The Participant's 52nd birthday, provided he or she has completed
20 or more Years of Vesting Service with a Participating Company on such
date,
and further provided, in either case, that he or she has not reached his or
her Normal Retirement Date.
2.31 Eligible Spouse or Surviving Spouse: The spouse or surviving spouse
of a Participant, provided, however, that for purposes of determining whether
such spouse is eligible for survivor benefits under Section 4.7, such spouse
must have been married to the Participant throughout the one-year period
preceding the Participant's death.
2.32 Employer: Any person employed by a Participating Company.
2.33 Employee: The entity that establishes or maintains the Plan; any other
organization which has adopted the Plan with the consent of such establishing
employer; and any successor of such employer.
2.34 ERISA: The Employee Retirement Income Security Act of 1974, as amended
from time to time.
2.35 Executive Officer: Any Employee who is an officer or director (as such
terms are defined in Section 16 of the Securities Exchange Act of 1934 and the
rules, regulations and interpretations thereunder) of the Company or of HUNT
MANAGEMENT COMPANY, INC. ("HMC") or of any other Participating Company, or who
is an officer of the Company or HMC of the rank of Vice President or above,
provided he or she is a member of a select group of management or highly
compensated employees within the meaning of section 201(2) of ERISA.
2.36 Insolvency: The Company's becoming insolvent within the meaning of 13
PA. CONS. STAT. ANN. Section 1201 (1984) as presently enacted (i.e., when the
Company either has ceased to pay its debts in the ordinary course of business or
cannot pay its debts as they become payable) or the Company's becoming insolvent
within the meaning of the Federal bankruptcy law, or becoming a debtor in a
proceeding under the Federal bankruptcy code.
2.37 Insolvency Creditor: Any creditor of the Company to whom a
distribution may be made in the event of the Company's Insolvency in accordance
with state and Federal bankruptcy laws
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to the same effect that unencumbered assets held by the Company are available to
satisfy such claims.
2.38 Investment Advisor: The investment advisor or advisors, if any,
selected by the Committee to assist it in selecting the investments available
for the investment of Executive Officer Participant Accounts under Article VI of
the Plan.
2.39 Joint and Survivor Annuity: An annuity described in Section 4.8(b).
2.40 Late Retirement Date: Any first day of the month following a
Participant's Normal Retirement Date.
2.41 Matching Account: An account established under Article VI, and
maintained under this Plan solely as a bookkeeping entry for each Executive
Officer Participant, to which Matching Amounts, and earnings on such amounts,
are credited, and from which distributions to the Executive Officer Participant
or his or her Beneficiary are debited.
2.42 Matching Amounts: Amounts credited to an Executive Officer
Participant's Matching Account pursuant to Section 6.2(b)(3).
2.43 Normal Retirement Age: The later of:
(a) The date a Participant attains age 65; or
(b) The fifth anniversary of the date a Participant commenced
participation in the Pension Plan. The participation commencement date is
the first day of the first Plan Year in which the Participant commenced
participation in the Pension Plan.
2.44 Normal Retirement Date: The first day of the month coincident with, or
immediately following, the Participant's Normal Retirement Age.
2.45 One-Year Break in Service: A One-Year Break in Service as defined in
the Pension Plan.
2.46 Participant:
(a) Retirement Benefits: An Executive Officer participating in the
Plan in accordance with the provisions of Section 3.1, Article IV, and/or
Plan Exhibit C, or any former Executive Officer having deferred vested
rights under Article IV and/or Plan Exhibit B.
(b) Death Benefits: A Corporate Officer or former Corporate Officer
participating in the Plan in accordance with the provisions of Section 3.2,
Article V, Plan Exhibit B and/or Plan Exhibit C.
(c) Supplemental Savings Benefits: An Executive Officer participating
in the Plan in accordance with the provisions of Section 3.3, Article VI
and/or Plan Exhibit C.
(d) Plan Exhibit B Benefits: Ronald J. Naples.
(e) Plan Exhibit C Benefits: Donald L. Thompson.
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2.47 Participating Company: The Company and each Affiliate which adopts the
Plan in accordance with Article XI.
2.48 Pension Plan: The Hunt Corporation (Formerly Hunt Manufacturing Co.)
Pension Plan.
2.49 Phantom Stock Plan: The Hunt Corporation (Formerly Hunt Manufacturing
Co.) Phantom Stock Plan maintained for the benefit of Donald L. Thompson and set
forth in Plan Exhibit C -- Appendix A.
2.50 Plan: The HUNT CORPORATION (FORMERLY HUNT MANUFACTURING CO.)
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN, as set forth herein, which plan is
intended to be a plan solely covering a select group of management or highly
compensated employees within the meaning of section 201(2) of ERISA and the DOL
regulations thereunder.
2.51 Plan Year: The fiscal period adopted by the Company for filing its
Federal income tax return.
2.52 Preretirement Survivor Annuity: Under Article IV, a survivor annuity
for the life of the Participant's Surviving Spouse, under which annuity the
payments to the Surviving Spouse are equal to the amounts which would be payable
as a survivor annuity under the Joint and Survivor Annuity if:
(a) In the case of a Participant who dies after his or her Earliest
Retirement Age, such Participant had retired with an immediate Joint and
Survivor Annuity providing a 50 percent survivor annuity on the day before
the Participant's date of death; or,
(b) In the case of a Participant who dies on or before his or her
Earliest Retirement Age, such Participant had:
(1) Separated from service on his or her date of death or, if
earlier, his or her actual date of separation;
(2) Survived to his or her Earliest Retirement Age;
(3) Retired with an immediate Joint and Survivor Annuity
providing a 50 percent survivor annuity at his or her Earliest
Retirement Age; and
(4) Died on the day after his or her Earliest Retirement Age.
2.53 Present Value: The present value of a benefit determined on the basis
of the Applicable Interest Rate and the Applicable Mortality Table.
2.54 Related Company: Any predecessor in interest to the Company or to any
Affiliate.
2.55 Salary Deferral Compensation: All wages, salaries, fees for
professional services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services rendered in the course of
employment for the Employer including, but not limited to, bonuses, amounts
realized when restricted stock (or other property) held by or for the Employee
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture but excluding amounts realized upon the exercise of a nonqualified
stock option and adding thereto any amount which is contributed by an Employer
pursuant to a salary reduction agreement and which is not includible in a
Participant's gross income under section 125, 402(e)(3), 402(h)(1)(B), or 403(b)
of the Code. This provision is effective January 1, 1995.
-8-
<PAGE>
2.56 Savings Plan: The Hunt Corporation (Formerly Hunt Manufacturing Co.)
Savings Plan.
2.57 Spouse: The Eligible Spouse of a Participant under Article IV.
2.58 Trust: The grantor trust (within the meaning of section 671 of the
Code) established pursuant to the HUNT CORPORATION (FORMERLY HUNT MANUFACTURING
CO.) SUPPLEMENTAL EXECUTIVE BENEFITS PLAN TRUST AGREEMENT.
2.59 Trustee: CORESTATES BANK, N.A., prior to its merger with and into
FIRST UNION NATIONAL BANK, and thereafter FIRST UNION NATIONAL BANK or any
corporate successor thereto appointed by the Committee to administer the Trust.
2.60 Year of Benefit Service: Under Article IV, a Year of Benefit Service
as defined in the Pension Plan.
2.61 Year of Vesting Service: Under Articles IV and VI, a Year of Vesting
Service as defined in the Pension Plan.
Article III - Participation
3.1 Retirement Benefits:
(a) Eligibility to Participate:
(1) Any Executive Officer participating in the Plan on December
31, 1996, with respect to the retirement benefits provided under
Article IV, shall continue to be eligible to participate in the Plan
on January 1, 1997, provided he or she is an Executive Officer on such
date.
(2) Any Employee who becomes an Executive Officer on January 1,
1997, shall be eligible to participate in the Plan, with respect to
the retirement benefits provided under Article IV, on January 1, 1997.
Any other Employee who becomes an Executive Officer after January 1,
1997, shall be eligible to participate in the Plan, with respect to
the retirement benefits provided under Article IV, as of the date such
Employee becomes an Executive Officer.
(b) Participation: Any Executive Officer participating in the Plan on
December 31, 1996, with respect to retirement benefits provided under
Article IV, shall continue to participate in the Plan on January 1, 1997,
provided he or she is still an Executive Officer on such date. Any other
Employee who meets the eligibility requirements of Section 3.1 shall become
a Participant in the Plan, with respect to the retirement benefits provided
under Article IV, as of the latest of:
(1) January 1, 1997;
(2) The date he or she meets such eligibility requirements; or
(3) The date he or she becomes a participant in the Pension Plan.
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3.2 Death Benefits:
(a) Eligibility to Participate:
(1) Any Corporate Officer participating in the Plan on December
31, 1996, with respect to the death benefits provided under Article V,
shall continue to be eligible to participate in the Plan on January 1,
1997, provided he or she is a Corporate Officer on such date.
(2) Any Employee who becomes a Corporate Officer on January 1,
1997, shall be eligible to participate in the Plan, with respect to
the death benefits provided under Article V, on January 1, 1997. Any
other Employee who is designated by the Company as a Corporate Officer
after January 1, 1997, shall be eligible to participate in the Plan,
with respect to the death benefits provided under Article V, as of the
date such Employee is designated by the Company as a Corporate
Officer.
(b) Participation: Any Corporate Officer participating in the Plan on
December 31, 1996, with respect to the death benefits provided under
Article V, shall continue to participate in the Plan on January 1, 1997,
provided he or she is still a Corporate Officer on such date. Any other
Employee who meets the eligibility requirements of Section 3.2 shall become
a Participant in the Plan, with respect to the death benefits provided
under Article V, as of the later of:
(1) January 1, 1997; or
(2) The date he or she meets such eligibility requirements.
3.3 Supplemental Savings Benefits:
(a) Eligibility to Participate:
(1) Any Employee who is an Executive Officer (other than Robert
B. Fritsch and Ronald J. Naples) on January 1, 1997, shall be eligible
to participate in the Plan, with respect to the supplemental savings
benefits provided under Article VI, on January 1, 1997.
(2) Any Employee who becomes an Executive Officer (other than
Robert B. Fritsch and Ronald J. Naples) after January 1, 1997, shall
be eligible to participate in the Plan, with respect to the
supplemental savings benefits provided under Article VI, as of the
date such Employee becomes an Executive Officer.
(b) Participation: An Employee who meets the eligibility requirements
of Section 3.3 shall become a Participant in the Plan, with respect to the
supplemental savings benefits provided under Article VI, as of the latest
of:
(1) January 1, 1997;
(2) The date he or she meets such eligibility requirements; or
(3) The date he or she meets the requirements of Section 6.1.
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3.4 Plan Exhibit B Benefits:
(a) Eligibility to Participate: Ronald L. Naples is the only Employee
or former Employee eligible to participate in the Plan, with respect to
Plan Exhibit B benefits.
(b) Participation: Plan Exhibit B shall govern the participation of
Ronald L. Naples in the Plan.
3.5 Plan Exhibit C Benefits:
(a) Eligibility to Participate: Donald L. Thompson is the only
Employee eligible to participate in the Plan, with respect to Plan Exhibit
C benefits.
(b) Participation: Plan Exhibit C shall govern the participation of
Donald L. Thompson in the Plan.
Article IV - Retirement Benefits
4.1 General Rules:
(a) Eligibility: Only those Participants who are Executive Officers
meeting the requirements of Section 3.1 shall be entitled to the retirement
benefits provided by this Article IV.
(b) Retirement Dates: Subject to the provisions of the Plan, an
Executive Officer Participant's Early, Normal, or Late Retirement Date, as
the case may be, shall occur on the date provided by the Plan, provided the
Executive Officer Participant is living on that date. An Executive Officer
Participant who does not retire or otherwise separate from service on or
before his or her Normal Retirement Date shall continue to participate in
the Plan until he or she retires on his or her Late Retirement Date.
(c) Amount and Manner of Payment of Retirement Benefits: All
retirement benefits shall be in the amount provided by the benefit formula
under Section 4.2 and as determined in accordance with the provisions of
this Plan, and shall, except as otherwise specifically provided herein, be
paid in monthly installments. At least 30 days prior to the Executive
Officer Participant's retirement date, the Committee and Trustee shall take
all necessary steps and shall execute or have requested execution by the
Executive Officer Participant of all documents required to provide for the
payment of the Executive Officer Participant's retirement benefit.
4.2 Normal Retirement Pension:
(a) In General: Each Executive Officer Participant shall accrue a
monthly retirement pension payable at his or her Normal Retirement Date in
the form of a single life annuity (normal retirement pension) equal to the
following:
(1) 2% of such Executive Officer Participant's Average Monthly
Compensation, multiplied by such Executive Officer Participant's Years
of Benefit Service not in excess of 25 Years of Benefit Service; plus
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(2) 1 % of the Executive Officer Participant's Average Monthly
Compensation, multiplied by such Executive Officer Participant's Years
of Benefit Service in excess of 25 Years of Benefit Service, up to a
maximum of 10 such excess Years of Benefit Service; reduced by
(3) The monthly retirement pension payable to the Executive
Officer Participant at his or her Normal Retirement Date in the form
of a single life annuity under the Pension Plan.
(b) Vested Benefit: An Executive Officer Participant shall have a
nonforfeitable (vested) right to his or her normal retirement pension when
he or she attains his or her Normal Retirement Age.
(c) Monthly Pension: An Executive Officer Participant who retires on
his or her Normal Retirement Date shall be entitled to receive his or her
normal retirement pension, as calculated under Section 4.2(a), in
accordance with the provisions of Section 4.1(b), commencing on his or her
Normal Retirement Date (except as otherwise provided in Section 4.11) and
payable for his or her lifetime.
(d) Normal Form of Payment: The form of benefit paid under Section
4.2(c) (i.e., payment of the benefit calculated under Section 4.2(a) to the
Executive Officer Participant for his or her life as a single life annuity)
is the normal form of benefit under this Article IV.
4.3 Early Retirement: An Executive Officer Participant may retire on his or
her Early Retirement Date. An Executive Officer Participant retiring under this
Section 4.3 shall be entitled to receive the benefit described in Section 4.2
commencing, except as otherwise provided below, as of the date which would have
been his or her Normal Retirement Date, unless he or she irrevocably elects, on
the Appropriate Form filed with the Committee, no later than the later of:
(a) 30 days prior to his or her termination of employment with the
Participating Companies; or
(b) 30 days prior to the beginning of his or her taxable year in which
occurs the Annuity Starting Date,
to have payment of a reduced pension commence on a date specified by him or her
in such election. Such date must be:
(1) After the date he or she terminates employment with the
Participating Companies;
(2) No earlier than the first day of his or her taxable year
following the date of his or her election; and
(3) Prior to the date which would have been his or her Normal
Retirement Date.
If payment of a reduced pension commences prior to the date the Executive
Officer Participant attains Normal Retirement Age, said reduced pension shall be
equal to the Executive Officer Participant's Accrued Benefit reduced by the
factors set forth in Table I of Plan Exhibit A.
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4.4 Late Retirement: An Executive Officer Participant who retires after his
or her Normal Retirement Date shall receive a monthly pension commencing as of
the first day of the month coincident with or next following the date on which
he or she actually retires, which shall be his or her Late Retirement Date. Such
pension shall be in an amount based on his or her Years of Benefit Service with
a Participating Company (up to 35), as calculated under Section 4.2, rendered up
to his or her actual retirement date, without actuarial increase to reflect the
Executive Officer Participant's shorter life expectancy.
4.5 Disability Retirement Pension:
(a) Eligibility and Commencement Date: Subject to Section 4.5(c), an
Executive Officer Participant who separates from service by reason of
Disability shall be eligible for a retirement pension in accordance with
(1) or (2) below:
(1) Executive Officer Participant Ineligible to Receive Benefits
under Long-Term Disability Plan of a Participating Company:
(A) Eligibility for Disability Benefit: If the Executive
Officer Participant is not eligible for benefits under a
long-term disability plan maintained by a Participating Company,
such Executive Officer Participant shall be eligible for a
Disability retirement pension if he or she retires on or after
the first day of the month coincident with or next following the
determination by the Committee of the Executive Officer
Participant's eligibility for a Disability retirement pension.
Such pension shall commence on the date which would have been the
Executive Officer Participant's Normal Retirement Date, unless he
or she irrevocably elects, on the Appropriate Form filed with the
Committee, no later than 30 days prior to the first day of his or
her taxable year in which occurs the Annuity Starting Date, to
have payment commence on a date specified by him or her which
date must be:
(i) After the date he or she terminates employment with
the Participating Companies by reason of Disability;
(ii) No earlier than the first day of his or her
taxable year following the date of his or her election; and
(iii) Prior to the date which would have been his or
her Normal Retirement Date.
(B) Cessation of Disability: Disability shall be considered
to have ended, and entitlement to a Disability retirement pension
shall cease, if, prior to his or her Normal Retirement Date, the
Executive Officer Participant:
(i) Is reemployed by a Participating Company;
(ii) Engages in any substantially gainful activity,
except for such employment as is found by the Committee to
be for the primary purpose of rehabilitation or not
incompatible with a finding of total and permanent
disability;
(iii) Has sufficiently recovered in the opinion of the
Committee, based on a medical examination by a doctor or
clinic
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appointed by the Committee, to be able to engage in regular
employment with a Participating Company and refuses an offer of
employment by a Participating Company; or
(iv) Refuses to undergo any medical examination
requested by the Committee, provided that a medical
examination shall not be required more frequently than twice
in any calendar year.
If entitlement to a Disability retirement pension ceases in
accordance with the provisions of this Section 4.5(a)(1)(B), such
Executive Officer Participant shall not be prevented from
qualifying for a benefit under another provision of the Plan, and
the Disability retirement pension payments received shall be
disregarded in computing the amount of such benefit. However, the
Executive Officer Participant shall not be credited with either
Years of Vesting Service or Years of Benefit Service during the
period he or she receives or could have received a Disability
retirement pension pursuant to this Section 4.5(a)(1).
(2) Executive Officer Participant Eligible to Receive Benefits
under Long-Term Disability Plan of Participating Company: If the
Executive Officer Participant is eligible for benefits under a
long-term disability plan maintained by a Participating Company, he or
she shall not be entitled to receive a pension under Section
4.5(a)(1), but shall be deemed to continue to be an Executive Officer
Participant in this Plan and shall continue to be credited with Years
of Vesting Service and Years of Benefit Service during the period of
his or her Disability, provided, however, that no Years of Benefit
Service shall be credited after such Executive Officer Participant
attains his or her Normal Retirement Date. If such Executive Officer
Participant continues in Disability status until his or her Normal
Retirement Date, he or she shall be eligible for a Disability
retirement pension at his or her Normal Retirement Date and payment of
such pension shall commence on his or her Normal Retirement Date.
If an Executive Officer Participant's Disability ends prior to
his or her Normal Retirement Date for any of the reasons specified in
Section 4.5(a)(1)(B) above and he or she is reemployed by a
Participating Company within a reasonable period of time as specified
by the Committee, he or she shall continue to be an Executive Officer
Participant, and the period during which he or she was on Disability,
even if such period exceeds one year, shall not be deemed to be a
One-Year Break in Service. Such Executive Officer Participant shall,
upon his or her reemployment by a Participating Company, be credited
with Years of Vesting Service and Years of Benefit Service during his
or her period of Disability, and, for purposes of determining his or
her retirement pension under the Plan, his or her Applicable
Compensation earned in the calendar year immediately preceding his or
her Disability shall be assumed to remain constant until his or her
Disability ends. If the Executive Officer Participant does not become
an Employee within the period specified by the Committee, he or she
will not be credited with any additional Years of Vesting Service or
Years of Benefit Service for the period of his or her Disability, and
his or her right to any benefits under the Plan shall be determined in
accordance with the provisions of the Plan without regard to this
Section 4.5.
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(b) Amount and Manner of Payment:
(1) Amount: The amount of the Disability retirement pension, on a
single-life basis, shall be determined in the same manner as the
normal retirement pension under Section 4.2, based upon:
(A) In the case of an Executive Officer Participant
described in Section 4.5(a)(1), his or her Years of Benefit
Service rendered to the date of Disability, calculated in the
same manner as set forth in Section 4.2, without actuarial
reduction.
(B) In the case of an Executive Officer Participant
described in Section 4.5(a)(2), the Executive Officer
Participant's Average Monthly Compensation, determined as though
he or she continued to earn, in each calendar year of his or her
Disability, the greater of the following amounts:
(i) The Applicable Compensation earned during the
calendar year which includes his or her first date of
absence due to Disability; or
(ii) The Applicable Compensation earned during the
calendar year immediately preceding the calendar year which
includes his or her first date of absence due to Disability.
(2) Manner of Payment: Payment shall be made in accordance with
the provisions of Section 4.1 (b).
(c) Prior Election of Early Retirement Pension: An Executive Officer
Participant who has attained his or her Early Retirement Date and has
elected an early retirement pension under either the Plan or the Pension
Plan shall not be eligible for a Disability retirement pension under the
Plan unless such Executive Officer Participant separated from service with
the Participating Companies by reason of Disability and payment of an early
retirement pension was made solely on an interim basis until a
determination could be made, by the Federal Social Security Administration,
of the eligibility of such Executive Officer Participant to receive
disability benefits under the Federal Social Security Act as a result of
such Executive Officer Participant's incurring a Disability prior to the
termination of such Executive Officer Participant's service with the
Participating Companies. Any Disability payments under this Section 4.5
shall be made retroactive to the date payment of the Executive Officer
Participant's early retirement pension commenced but shall be reduced by
any early retirement pension payments previously made to such Executive
Officer Participant. No further early retirement pension payments shall be
made after the determination of the Executive Officer Participant's
eligibility for a Disability pension.
4.6 Separation: An Executive Officer Participant shall be fully vested in
his or her Accrued Benefit under the Plan when he or she completes 15 Years of
Vesting Service. Except as otherwise provided in the Plan, such Executive
Officer Participant shall have no vested interest in benefits under this Article
IV until he or she completes 15 Years of Vesting Service. Any Executive Officer
Participant who separates from the service of a Participating Company (other
than for purposes of transferring to another Participating Company) after he or
she has completed 15 Years of Vesting Service but before his or her Early
Retirement Date shall be entitled to a deferred pension commencing at the date
which would have been his or her Normal Retirement Date, unless the Executive
Officer
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Participant irrevocably elects, on the Appropriate Form filed with the
Committee, no later than the later of:
(a) 30 days prior to his or her termination of employment with the
Participating Companies; or
(b) 30 days prior to the beginning of his or her taxable year in which
occurs his or her Annuity Starting Date,
to have payment commence on a date specified by him or her in such election
which date must be:
(1) after the date he or she terminates employment with the
Participating Companies;
(2) no earlier than the first day of his or her taxable year
following the date of his or her election;
(3) no earlier than the date on which he or she attains age 55;
and
(4) prior to the date which would have been his or her Normal
Retirement Date.
The amount of the deferred pension shall be in accordance with the Executive
Officer Participant's vested Accrued Benefit calculated as of the date of his or
her separation from service, but reduced, if payment commences prior to Normal
Retirement Date, by the factors set forth in Table II of Plan Exhibit A.
4.7 Preretirement Survivor Annuity:
(a) Death of Executive Officer Participant after Earliest Retirement
Age: If an Executive Officer Participant dies after his or her Earliest
Retirement Age with a vested Accrued Benefit, the Executive Officer
Participant's Surviving Spouse (if any) shall receive a Preretirement
Survivor Annuity as determined under Section 2.52(a).
(b) Death of Executive Officer Participant on or before Earliest
Retirement Age: If an Executive Officer Participant dies on or before the
Earliest Retirement Age, the Executive Officer Participant's Surviving
Spouse (if any) shall receive a Preretirement Survivor Annuity as
determined under Section 2.52(b).
(c) Commencement Date of Payments: Payments to an Executive Officer
Participant's Surviving Spouse under a Preretirement Survivor Annuity shall
begin within 60 days following the later of the date of the Executive
Officer Participant's death or the date which would have been the Executive
Officer Participant's Earliest Retirement Age unless the Executive Officer
Participant elected, prior to his or her death, to have payment commence at
a later date specified by him or her but a date which is no later than the
date which would have been his or her Normal Retirement Date. Benefits
commencing after the later of the Executive Officer Participant's date of
death or Earliest Retirement Age shall be the Actuarial Equivalent of the
benefit to which the Surviving Spouse would have been entitled if benefits
had commenced at the later of the Executive Officer Participant's date of
death or Earliest Retirement Age under an immediate Joint and Survivor
Annuity in accordance with Section 4.8(b).
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4.8 Forms of Pension: An Executive Officer Participant's benefit under this
Article IV may be paid in any one of the following forms, each of which shall be
the Actuarial Equivalent of the vested Accrued Benefit (i.e., the single life
annuity under Section 4.2(d)) to which such Executive Officer Participant would
otherwise be entitled:
(a) Single Life Annuity: A single life annuity for the Executive
Officer Participant's life commencing on his or her Annuity Starting Date
and ending on the date of his or her death.
(b) Joint and Survivor Annuity: An immediate annuity for the life of
the Executive Officer Participant with a survivor annuity for the life of
his or her Surviving Spouse which is equal to 50 percent or 100 percent of
the amount of the annuity payable during the joint lives of the Executive
Officer Participant and his or her Spouse.
(c) Period Certain and Life Annuity: An annuity payable to the
Executive Officer Participant for life in equal monthly payments, but, in
the event of his or her death within the period of ten years after
commencement of benefits, the same reduced amount to be paid for the
remainder of such ten-year period to the Executive Officer Participant's
Beneficiary. In the event of the death of the Executive Officer Participant
and his or her Beneficiary before the full value of the pension has been
paid out, the commuted value of the balance of the payments, as determined
by the Committee, shall be paid in a lump sum to the following relatives of
the Executive Officer Participant, if living, in the order set forth:
(1) Spouse;
(2) Children and their issue, per stirpes;
(3) Parents, in equal shares;
(4) Brothers and sisters, in equal shares; and
(5) Nephews and nieces, in equal shares.
If no such relatives are living, the commuted value shall be paid to
the Executive Officer Participant's estate.
A single Executive Officer Participant's pension under this Article IV
shall be paid in the form of a single life annuity, and a married Executive
Officer Participant's pension under this Article IV shall be paid in the form of
a Joint and 50% Survivor Annuity. Notwithstanding the foregoing, an Executive
Officer Participant shall be entitled to elect (with the consent of his or her
spouse if he or she is married), on the Appropriate Form filed with the
Committee, no later than the later of (A) 30 days prior to his or her
termination of employment with the Participating Companies, or (B) 30 days prior
to the beginning of his or her taxable year in which occurs his or her Annuity
Starting Date, to receive his or her benefit under this Article IV in any of the
optional forms provided above.
4.9 Beneficiary Designation and Proof:
(a) Designation of Beneficiary: At any time, and from time to time,
each Executive Officer Participant and former Executive Officer Participant
shall have the unrestricted right to designate the Beneficiary to receive
the benefits due such Executive Officer Participant or former Executive
Officer Participant under this Article IV upon his or her death, and to
revoke any such designation. Each such designation, or revocation thereof,
shall be evidenced on the Appropriate Form signed by the Executive Officer
Participant and
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filed with the Committee. If no such designation is on file with the
Committee at the time of the death of an Executive Officer Participant or
former Executive Officer Participant, or if such designation is not
effective for any reason, as determined by the Committee, then the executor
of the will or administrator of the estate of such Executive Officer
Participant or former Executive Officer Participant shall be conclusively
deemed to be the Beneficiary designated to receive such death benefit.
(b) Documentary Proof: The Committee and the Trustee may require the
execution and delivery of such documents, papers, and receipts as they may
deem reasonably necessary in order to be assured that the payment of any
death benefit is made to the person or persons entitled thereto.
4.10 Divestment for Cause: Notwithstanding any provision in the Plan to the
contrary, any benefit payable under this Article IV shall be forfeited in the
event a Participant's employment with a Participating Company is terminated for
Cause or in the event it is found by the Committee that a Participant hereunder,
following termination of employment with a Participating Company, willfully
engaged in any activity which is determined by the Committee to be an activity
which might reasonably be considered by the Committee to constitute Cause. If
the Committee so finds, it may suspend such benefits to such retired Participant
or his or her Beneficiary and, after furnishing notice to the retired
Participant or his or her Beneficiary, may terminate such benefits under this
Plan. The Committee shall consider in its deliberation relative to this
provision any explanation or justification submitted to it in writing by the
retired Participant or his or her Beneficiary within 60 days following the
giving of said notice.
Except as heretofore provided for in this Section 4.10, the acceptance by a
retired Participant of any benefit under this Article IV shall constitute an
agreement with the provisions of this Plan and a representation that he or she
is not engaged or employed in any activity serving as a basis for suspension or
forfeiture of benefits hereunder. The Committee may require each retired
Participant eligible for a benefit under this Article IV to acknowledge in
writing prior to payment of such benefit that he or she will accept payment of
benefits under this Article IV only if there is no basis for such suspension or
forfeiture.
4.11 Elective Transfer of Life Insurance Policies Providing Article IV
Benefits:
(a) Retirement. Any Participant who retires on or after his or her
Early Retirement Date may elect, upon such retirement, or thereafter, in
the manner provided in Section 4.11(e), to have transferred to him or her
the life insurance policies held by the Trust under the Plan to provide
benefits to such Participant under this Article IV of the Plan. In the
event of such transfer, such retired Participant shall be entitled to no
further benefits under this Article IV.
(b) Disability: Any Participant who separates from service by reason
of Disability under Section 4.5 may elect, at the time such Participant is
entitled to receive a retirement pension under Section 4.5, or thereafter,
in the manner provided in Section 4.11(e), to have transferred to him or
her the life insurance policies held by the Trust under the Plan to provide
benefits to such Participant under this Article IV of the Plan. In the
event of such transfer, such Participant shall be entitled to no further
benefits under this Article IV.
(c) Death: This Section 4.11 shall not apply to any Participant or his
or her beneficiary if such Participant dies before the transfer of the life
insurance policies held by the Trust under the Plan to provide benefits to
such Participant under this Article IV of the Plan.
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(d) Termination of Employment for Reasons Other than Retirement,
Disability or Death: The following provisions apply to a Participant whose
employment terminates for any reason other than retirement, Disability or
death:
(1) Voluntary Termination of Employment:
(A) Voluntary Termination with Less than 15 Years of Vesting
Service: Any Participant who voluntarily terminates his or her
employment with the Participating Companies with less than 15
Years of Vesting Service shall not be entitled to elect to have
transferred to him or her the life insurance policies held by the
Trust under the Plan to provide benefits to such Participant
under this Article IV of the Plan. Such Participant shall be
entitled to no benefits under this Article IV.
(B) Voluntary Termination with 15 or More Years of Vesting
Service: Any Participant who voluntarily terminates his or her
employment with the Participating Companies with 15 or more Years
of Vesting Service may elect, upon his or her termination of
employment, or thereafter, in the manner provided in Section
4.11(e), to have transferred to him or her the life insurance
policies held by the Trust under the Plan to provide benefits to
such Participant under this Article IV of the Plan. In the event
of such transfer, such Participant shall be entitled to no
further benefits under this Article IV.
(2) Involuntary Termination of Employment:
(A) Involuntary Termination for Any Reason Other than Cause
or Performance Limitations: Any Participant whose employment is
involuntarily terminated for any reason other than Cause or
performance limitations may elect, without regard to the number
of Years of Vesting Service he or she has completed, upon his or
her involuntary termination of employment, or thereafter, in the
manner provided in Section 4.11(e), to have transferred to him
or her the life insurance policies held by the Trust under the
Plan to provide benefits to such Participant under this Article
IV of the Plan subject to the following conditions:
(i) If such Participant is entitled to receive "Salary
Continuation Benefits" under the Hunt Corporation (Formerly
Hunt Manufacturing Co.) Officer Severance Plan (the
"Severance Plan"), such Participant must sign a "Separation
Agreement" under the Severance Plan; and
(ii) Such elective transfer shall not occur until the
end of the "Severance Period" under the Severance Plan.
In the event of such transfer, such Participant shall be
entitled to no further benefits under this Article IV.
(B) Involuntary Termination of Participant with 15 or more
Years of Vesting Service for Performance Limitations: If the
employment of a Participant who has completed 15 or more Years
of Vesting Service is involuntarily terminated for performance
limitations, such Participant may elect, upon his or her
involuntary termination of employment for performance
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limitations, or thereafter, in the manner provided in Section
4.11(e), to have transferred to him or her the life insurance
policies held by the Trust under the Plan to provide benefits
to such Participant under this Article IV of the Plan subject
to the following conditions:
(i) If such Participant is entitled to receive
"Salary Continuation Benefits" under the Hunt
Corporation (Formerly Hunt Manufacturing Co.) Officer
Severance Plan (the "Severance Plan"), such Participant
must sign a "Separation Agreement" under the Severance
Plan; and
(ii) Such elective transfer shall not occur until
the end of the "Severance Period" under the Severance
Plan.
In the event of such transfer, such Participant shall be
entitled to no further benefits under this Article IV.
(C) Involuntary Termination of Participant with Less
than 15 Years of Vesting Service for Performance Limitations:
This Section 4.11 shall not apply to any Participant whose
employment is terminated for performance limitations if such
Participant has not completed at least 15 Years of Vesting
Service. Such Participant shall not be entitled to any
benefits under this Article IV.
(D) Involuntary Termination for Cause: This Section 4.11
shall not apply to any Participant whose employment is
terminated for Cause regardless of the number of Years of
Vesting Service such Participant has completed. Such
Participant shall not be entitled to any benefits under this
Article IV.
(e) Manner and Effect of Election: Any election under this Section
4.11 to have transferred to the Participant his or her life insurance
policies held by the Trust under the Plan to provide such Participant
benefits under this Article IV must be made on the Appropriate Form
filed with the Committee at least 60 days before the beginning of the
Participant's taxable year in which such transfer is to be made. In the
event of such transfer, such Participant shall be entitled to no further
benefits under this Article IV.
Article V - Death Benefits
5.1 Death Benefits: Upon the death of a Corporate Officer Participant
while employed by a Participating Company or during the period such Corporate
Officer Participant is receiving "Salary Continuation Benefits" under the Hunt
Corporation Formerly Hunt Manufacturing Co.) Officer Severance Plan, a death
benefit shall be payable to a Corporate Officer Participant's Beneficiary within
a reasonable period of time following the death of the Corporate Officer
Participant. The amount of the death benefit shall be:
(a) Three times the Corporate Officer Participant's Base Salary
(determined as of the date of his or her death); reduced by
(b) $50,000.
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The death benefit payable under this Section 5.1 shall be automatically
adjusted to reflect any increase or decrease in the Corporate Officer
Participant's Base Salary. No death benefit shall be payable if the death of the
Corporate Officer Participant occurs after his or her retirement or other
termination of employment with the Company or Participating Company.
5.2 Divestment for Cause: There shall be no divestment for Cause of any
benefits under this Article V.
Article VI - Supplemental Savings Benefits
6.1 Participation:
(a) Basic Savings: Each Participant who is an Executive Officer on
January 1, 1997 (other than Robert B. Fritsch and Ronald J. Naples),
shall be eligible to participate in the basic savings portion of the
Plan on January 1, 1997. Any other Employee who becomes an Executive
Officer after January 1, 1997 (other than Robert B. Fritsch and Ronald
J. Naples), shall be eligible to participate in the basic savings
portion of the Plan as of the date such Employee becomes an Executive
Officer.
(b) Salary Deferral and Matching: An Executive Officer (other than
Robert B. Fritsch) may elect to participate in the salary deferral and
matching portions of the Plan by filing with the Committee on the
Appropriate Form an election stating his or her desired Deferral
Percentage (a different Deferral Percentage may be elected with respect
to each different component of Salary Deferral Compensation (e.g., the
component consisting of the income to be realized upon the vesting of a
transferable Company stock grant may be deferred by having the Employer
transfer such stock grant to the Plan prior to the vesting of such stock
grant)). If an Executive Officer files such an election with the
Committee, his or her Salary Deferral Compensation shall be reduced by
his or her Deferral Percentage for each payroll period during which such
election is in effect. An Executive Officer's participation in the
salary deferral and matching portions of the Plan shall commence on
January 1 of the calendar year immediately following the year in which
the Executive Officer files the election, except that when an Executive
Officer files an election within 30 days after first becoming eligible
to participate in the Plan, participation shall commence on the date of
such filing, but only with respect to services performed after the date
of such filing.
(c) Termination of Participation:
(1) General: Except as otherwise provided in Plan Exhibit B,
an Executive Officer shall cease to be an active Participant in
the supplemental savings portion of the Plan upon the earliest of
the date on which the Executive Officer retires, the date on which
the Executive Officer's employment with the Employer terminates
for any other reason including death or Disability, or the date
the Executive Officer ceases to be an Executive Officer.
Notwithstanding the foregoing, a former Executive Officer shall
continue to be an inactive Participant until such time as all
amounts in such Participant's Basic, Deferral, and Matching
Accounts have been distributed.
(2) Cancellation of Participation or Termination of Plan:
Except as otherwise provided in Section 6.1(b)(1), participation
in the salary deferral and matching portions of the Plan shall
continue until the Executive Officer Participant furnishes written
notice on the Appropriate Form to the Committee of the Executive
Officer Participant's election to terminate his or her
participation in the salary deferral
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and matching portions of the Plan or until such time as the
Company terminates the Plan pursuant to Section 9.3. An Executive
Officer Participant's election to terminate participation in the
salary deferral and matching portions of the Plan shall be made by
written notice on the Appropriate Form delivered or mailed to the
Committee no later than December 31 of the calendar year preceding
the calendar year in which such termination is to take effect.
(d) Subsequent Election to Participate: An Executive Officer
Participant who has terminated his or her participation in the salary
deferral and matching portions of the Plan may subsequently elect to
participate in such portions of the Plan by filing a new election with
the Committee on the Appropriate Form in accordance with Section 6.1(b).
(e) Change of Deferral Percentage or Component of Salary Deferral
Compensation to be Deferred Election: An Executive Officer Participant
may alter his or her Deferral Percentage or the component of Salary
Deferral Compensation to be deferred for any future calendar year by
filing a new election on the Appropriate Form with the Committee on or
before December 31 of the calendar year preceding the calendar year for
which the new Deferral Percentage or the change in the component of
Salary Deferral Compensation to be deferred is to take effect.
(f) Effective Date: The effective date of this Section 6.1, as
amended and restated herein, is January 1, 1995, except as otherwise
specifically provided.
6.2 Accounts:
(a) Establishment of Accounts: For each Executive Officer
Participant, the Committee shall establish, on the books of the
Participating Company, a Basic Account, a Deferral Account, and a
Matching Account, to record Basic Amounts, Deferral Amounts, and
Matching Amounts credited to the Executive Officer Participant, as well
as the periodic adjustments made to such amounts in accordance with
Section 6.4(a).
(b) Crediting of Accounts:
(1) Basic Amounts: For each Plan Year, the Participating
Company shall credit a Basic Amount to the Basic Account of each
Executive Officer Participant eligible to participate in the basic
savings portion of the Plan in an amount equal to the excess (if
any) of (A) the amount which would have been contributed to the
Savings Plan on behalf of such Executive Officer Participant as a
Basic Contribution for such Plan Year had the limitation described
in section 401(a)(17) of the Code not been in effect; over (B) the
amount actually contributed to the Savings Plan on behalf of such
Executive Officer as a Basic Contribution for such Plan Year. Such
Basic Amount shall be credited as of the date as of which the
Basic Contribution is allocated to the Executive Officer
Participant under the Savings Plan for such Plan Year.
(2) Deferral Amounts: While an Executive Officer Participant
participates in the Plan pursuant to an election on an Appropriate
Form, the Participating Company shall credit a Deferral Amount to
the Executive Officer Participant's Deferral Account each payroll
period. The Deferral Amount shall equal the Executive Officer
Participant's Salary Deferral Compensation for the payroll period
multiplied by his or her Deferral Percentage. An Executive Officer
Participant may elect a different Deferral Percentage with respect
to each separate component of his or her Salary Deferral
Compensation (e.g., a Deferral Percentage of 10% may be elected
with
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respect to all of his or her Salary Deferral Compensation other
than bonuses and unvested Company Stock Grants, and a Deferral
Percentage of 20% may be elected with respect to his or her
bonuses and a 100% Deferral Percentage may be elected with respect
to unvested Company stock grants).
(3) Matching Amounts: For each payroll period in which a
Deferral Amount is credited to an Executive Officer Participant's
Deferral Account, the Participating Company shall credit a
Matching Amount to the Executive Officer Participant's Matching
Account. The Matching Amount shall equal twenty-five percent (25%)
of the Allowed Deferral Amount. For purposes of this subsection,
the Allowed Deferral Amount shall be the lesser of the Executive
Officer Participant's Deferral Amount (but only to the extent such
Deferral Amount is based on Applicable Compensation for the
payroll period) or six percent (6%) of the Executive Officer
Participant's Applicable Compensation for the payroll period.
(4) Allocation of Increases and Decreases in Accounts: As of
each valuation as provided in Section 6.4, the Trustee shall
allocate any increases or decreases in the fair market value of
the assets in the Executive Officer Participant's Accounts, after
reduction for any forfeitures, to such Accounts.
(c) Investment of Accounts:
(1) In General: Each Executive Officer Participant's Basic,
Deferral, and Matching Accounts shall be invested by the Trustee
in accordance with the investment directions of such Executive
Officer Participant, but only from the investments made available
under the Plan by the Committee or its designee. Such investments
may be determined by the Committee or its designee based on the
recommendations of an Investment Advisor. Investments for the
Basic, Deferral, and Matching Accounts of any Executive Officer
Participant under this Article VI may include any property, real,
personal, or mixed, including, but not limited to, insurance
contracts, mutual funds, and Company Securities, wherever such
property is situate, without limitation.
(2) Special rules Regarding Company Securities:
Notwithstanding the foregoing, the following rules shall apply:
(A) Any Company Securities which are unvested Company
stock grants that are transferred to the Plan by an Executive
Officer Participant shall be allocated to such Participant's
Accounts.
(B) Any dividends paid with respect to Company
Securities held in any Participant's Account shall be paid in
cash and invested in accordance with Section 6.2(c)(1).
(C) Effective October 1, 1998, amounts held in any
Participant's Account which are invested in Company Securities
may not be reinvested in any other investment.
(D) No investment in Company Securities shall be
permitted with respect to any Executive Officer Participant's
Accounts, if such investment would subject such Executive
Officer Participant to liability under section 16(b) of the
Securities Exchange Act of 1934.
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<PAGE>
(d) Effective Date: Except as otherwise specifically provided,
the effective date of Section 6.2(b), as amended and restated herein, is
January 1, 1995, and the effective date of Section 6.2(c), as amended
and restated herein, is January 1, 1997.
6.3 Vesting:
(a) Basic and Deferral Accounts: Each Executive Officer
Participant will be one hundred percent (100%) vested in the balance in
his or her Basic and Deferral Accounts at all times.
(b) Matching Account: Each Executive Officer Participant will
become vested in the balance in his or her Matching Account after
completing the number of Years of Vesting Service set forth in the
following table:
YEARS OF VESTING SERVICE PERCENT VESTED
------------------------ --------------
Less than 1 0
1 20
2 40
3 60
4 80
5 or more 100
6.4 Valuation of Accounts:
(a) Quarterly Valuations: At least quarterly, the Committee shall
adjust the Accounts of each Executive Officer Participant to reflect
distributions, forfeitures, income earned, and losses incurred since the
previous valuation date.
(b) Statement of Accounts: At least once each Plan Year, the
Committee shall furnish each Executive Officer Participant with a
written statement of his or her Accounts.
6.5 Manner, Form and Time of Distribution of Accounts:
(a) Normal Manner and Time of Distribution: The vested balance in
an Executive Officer Participant's Accounts shall be paid in a single
sum as soon as practicable after the Executive Officer Participant
separates from service with the Participating Companies and all their
Affiliates for any reason.
(b) Election of Distribution Dates: An Executive Officer
Participant may choose a date of distribution for the amounts credited
to his or her Accounts in future calendar years, other then the date
specified in Section 6.5(a), by filing an election on the Appropriate
Form with the Committee on or before December 31 of the calendar year
preceding the calendar year in which Basic Amounts, Deferral Amounts,
and Matching Amounts subject to the new date of distribution are to be
credited. Each time an Executive Officer Participant so changes the date
of distribution, a new Basic Account, a new Deferral Account, and a new
Matching Account may be established to track future Basic Amounts,
Deferral Amounts, Matching Amounts and earnings thereon.
(c) Election of Manner of Distribution: An Executive Officer
Participant may elect any of the distribution methods provided under
Section 6.5(d), rather than the single sum
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<PAGE>
manner of distribution provided under Section 6.5(a), for
amounts credited to his or her Accounts in future calendar
years, by filing an election on the Appropriate Form with the
Committee on or before December 31 of the calendar year
preceding the calendar year in which Basic Amounts, Deferral
Amounts, and Matching Amounts subject to the new manner of
distribution are to be credited. Each time an Executive
Officer Participant so changes the manner of distribution, a
new Basic Account, a new Deferral Account, and a new Matching
Account may be established to track future Basic Amounts,
Deferral Amounts, and Matching Amounts and earnings thereon.
(d) Methods of Distribution: Distribution of vested Account
balances under this Article VI may be made in a single sum or in
installments, payable monthly, quarterly or annually, over a period not
to exceed ten years, as elected by the Participant in accordance with
Section 6.5(c).
(e) Death of Executive Officer Participant: Notwithstanding any
elections under Sections 6.5(b) or 6.5(c), if an Executive Officer
Participant dies prior to the complete distribution to him or her of his
or her Accounts, the remaining vested balance in such Accounts shall be
paid to the Beneficiary of the Executive Officer Participant in a single
sum as soon as practicable after the Executive Officer Participant's
death.
(f) Form of Distribution: Except as otherwise provided in this
Section 6.5(f) or Section 6.10, distribution of vested Account balances
invested in other than in Company Securities shall be made in cash to
the Executive Officer Participant and distribution of vested Account
balances invested in Company Securities shall be made in Company
Securities to the Executive Officer Participant unless the Executive
Officer Participant elects, and the Company's Board of Directors
approves such election, to have such distribution made in cash. Such
election must be made by filing the Appropriate Form with the Committee
at least 90 days before the beginning of the Participant's taxable year
in which such distribution is to be made.
6.6 Hardship Distributions: The Committee may at any time make a payment
to an Executive Officer Participant in an amount up to the Executive Officer
Participant's vested balance in his or her Accounts upon a showing of an
unforeseeable emergency. An unforeseeable emergency is a severe financial
hardship to the Executive Officer Participant resulting from a sudden and
unexpected illness or accident of the Executive Officer Participant or of a
dependent (as defined in section 152(a) of the Code) of the Executive Officer
Participant, loss of property due to casualty, or other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the control
of the Executive Officer Participant. The need to send an Executive Officer
Participant's child to college or the desire to purchase a home are not
unforeseeable emergencies. Payments may not be made to the extent the hardship
is or may be relieved:
(a) Through reimbursement or compensation by insurance or
otherwise; or
(b) By liquidation of the Executive Officer Participant's assets,
to the extent such liquidation would not itself cause severe financial
hardship.
The determination of whether an unforeseeable emergency within the
meaning of this Section exists shall be made at the sole discretion of the
Committee. The amount of any such emergency distribution shall be limited to the
amount necessary to meet the emergency and shall only be made in cash. No
hardship distribution shall be permitted from any portion of any Account
invested in Company Securities.
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<PAGE>
6.7 Distribution on Account of Educational Expenses: An Executive
Officer Participant may request a distribution in an amount up to the Executive
Officer Participant's vested balance in his or her Accounts for tuition, related
educational fees, and room and board for the next 12 months of post-secondary
education for the Executive Officer Participant, or his or her spouse, children
or dependents. Such request must be made on the Appropriate Form on or before
December 31 of the calendar year preceding the calendar year of distribution.
The Committee may grant such request in its sole discretion. Any such
distribution shall only be made in cash. No distribution shall be permitted from
any portion of any Account invested in Company Securities under this
Section 6.7.
6.8 Beneficiary Designation: Each Executive Officer Participant shall
designate on the Appropriate Form the Beneficiary or Beneficiaries to whom the
vested balance of his or her Accounts shall be paid in the event of his or her
death prior to the complete distribution of his or her Accounts to him or her.
Each Beneficiary designation shall be effective only when filed with the
Committee during the Executive Officer Participant's lifetime.
Any Beneficiary designation may be changed by an Executive Officer
Participant without the consent of any designated Beneficiary or any other
person by the filing of a new Beneficiary designation with the Committee. The
filing of a new Beneficiary designation shall cancel all Beneficiary
designations previously filed.
If any Executive Officer Participant fails to designate a Beneficiary in
the manner provided above, if the Beneficiary designated by an Executive Officer
Participant predeceases the Executive Officer Participant, or if the Beneficiary
designated by an Executive Officer Participant dies after the Executive Officer
Participant dies, but before receiving distribution of the Executive Officer
Participant's Accounts, the Committee shall direct such Executive Officer
Participant's Accounts (or the balance thereof) to be distributed:
(a) To the Executive Officer Participant's surviving spouse; or
(b) If the Executive Officer Participant has no surviving spouse,
then to the Executive Officer Participant's estate.
6.9 Divestment for Cause: There shall be no divestment for Cause of any
benefits under this Article VI.
6.10 Elective Transfer of Life Insurance Policies Providing Article VI
Benefits: Any Participant who has a vested interest in his or her Accounts may
elect, upon his or her termination of employment, or thereafter in the manner
provided in this Section 6.10, to have transferred to him or her the life
insurance policies held by the Trust under the Plan to provide benefits to such
Participant under this Article VI, after removing from such life insurance
policies the portion of such Participant's Accounts which is not vested and any
insurance company charges and fees related thereto. Such election must be made
by filing the Appropriate Form with the Committee at least 90 days before the
beginning of the Participant's taxable year in which such transfer is to be
made. In the event of such a transfer, such Participant shall be entitled to no
further benefits under this Article VI.
Article VII - Payment of Benefits
7.1 Plan Unfunded:
(a) General: It is the intention of the Company and the
Participants that the Plan be unfunded for tax purposes and for purposes
of Title I of ERISA. Benefits under this Plan
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<PAGE>
shall be paid out of the general assets of the Company. However, the
Company shall establish a grantor trust (the "Trust") within the meaning
of section 671 of the Code under the HUNT CORPORATION (FORMERLY HUNT
MANUFACTURING CO.) SUPPLEMENTAL EXECUTIVE BENEFITS PLAN TRUST AGREEMENT
(the "Trust Agreement"), to which the Company may make contributions in
order to provide for the payment of benefits under the Plan. Such
contributions may consist of cash, annuity contracts, insurance
policies, Company Securities, or other property acceptable to the
Trustee. Except as otherwise provided in Section 6.2(c) with respect to
amounts credited to a Participant's Accounts under Article VI, the
Trustee shall be responsible for the investment of all Trust assets, but
may follow any investment directions or guidelines given the Trustee by
the Company, the Committee or the Committee's designee under the other
provisions of the Plan. The Trustee shall invest amounts credited to a
Participant's Accounts under Article VI in accordance with Section
6.2(c). Notwithstanding the foregoing, Trust assets shall be treated as
assets of the Company and shall remain, in the event of the Company's
Insolvency, subject to the Company's Insolvency Creditors. Moreover, no
Participant, former Participant, Spouse, or Beneficiary shall have any
property interest whatsoever in any specific assets of the Trust or of
the Company. A Participant, former Participant, Spouse, or Beneficiary
shall have only the rights of a general, unsecured creditor against the
Company for any distributions due under this Plan, and the Plan shall
constitute a mere promise by the Company to make benefit payments in the
future. To the extent that the assets of the Trust are insufficient to
pay any benefits which are due under the Plan, such benefits may, at the
direction of the Compensation Committee of the Board, be paid out of
other general assets of the Company.
(b) Purchase of Insurance Contracts: The Company shall purchase a
separate insurance contract on the life of each Participant in the Plan.
The Company shall retain all ownership rights in such contracts but such
contracts shall be held by the Trustee for the sole benefit of the
Company. No Participant shall have any rights in such contracts.
(c) Change in Control:
(1) Article IV Benefit: In the event of a "Change in Control"
(as defined in Section 7.1(d)), the Compensation Committee of the
Board (as it is constituted on the day preceding the date of the
Change in Control) may cause the Accrued Benefit payable under
Article IV to an Executive Officer Participant, as determined on
the date of the Change in Control, to be paid from the Trust to
such Executive Officer Participant. Moreover, in the event of a
Change in Control, if the Compensation Committee of the Board (as
it is constituted on the day preceding the date of the Change in
Control) does not exercise its discretion to cause said payment to
the Executive Officer Participant, the Trustee, at the request of
51% of the Participants or in the Trustee's discretion, may cause
the Accrued Benefit payable under Article IV to an Executive
Officer Participant, as determined on the date of the Change in
Control, to be paid from the Trust to such Executive Officer
Participant. To the extent there are sufficient assets in the
Trust, any distribution under this Section 7.1(c)(1) shall be
increased by the amount necessary to pay all Federal, state, and
local income taxes and any excise taxes imposed by section 4999 of
the Code and other taxes resulting from the distribution
(including any additional taxes resulting from the increase under
this sentence). All payments made pursuant to this Section
7.1(c)(1) shall be made in one lump sum and shall equal the
Present Value of the Accrued Benefit payable to the Executive
Officer Participant under Article IV as determined on the date of
the Change in Control, plus any additional amount described in the
preceding sentence. The intent of this Section 7.1(c)(1) is that,
in the event distribution is made under this Section 7.1(c)(1),
the recipient Executive Officer Participant shall be paid, to the
extent there
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<PAGE>
are sufficient assets in the Trust, by the Trust, an additional
amount (the "Gross Up") such that the net amount retained by the
recipient Executive Officer Participant after deduction of
Federal, state and local income taxes and any excise taxes imposed
by section 4999 of the Code and any other taxes resulting from the
distribution shall be equal to the Present Value of the Accrued
Benefit payable to the Executive Officer Participant under Article
IV as determined on the date of the Change in Control. For
purposes of determining the amount of the Gross Up, the Executive
Officer Participant shall be deemed to pay Federal, state and
local income taxes at the highest marginal rate of taxation in the
calendar year in which the distribution is to be made. The
determination of whether an excise tax under section 4999 of the
Code is payable and the amount thereof shall be based upon the
opinion of tax counsel selected by the Trustee and acceptable to
the Executive Officer Participant. If such opinion is not finally
accepted by the Internal Revenue Service upon audit, then
appropriate adjustments shall be computed (without interest but
with Gross Up, if applicable) by such tax counsel based upon the
final amount of the excise tax so determined. The amount shall be
paid by the appropriate party in one lump-sum cash payment within
30 days of such computation.
(2) Article V Benefit: In the event of a "Change in Control"
(as defined in Section 7.1(d)), the Compensation Committee of the
Board (as it is constituted on the day preceding the date of the
Change in Control) may cause all or a portion of the assets
allocated to the Trust Account of a Corporate Officer Participant,
as of the date of the Change in Control, to be used to purchase a
paid-up insurance contract providing a death benefit equal to the
benefit determined under Article V with respect to such Corporate
Officer Participant as of the date of the Change in Control, or
such lesser amount as the Actuary determines may be purchased with
the Trust assets allocated to the Corporate Officer Participant's
Trust Account. Moreover, in the event of a Change in Control, if
the Compensation Committee of the Board (as it is constituted on
the day preceding the date of the Change in Control) does not
exercise its discretion to cause the purchase of such paid-up
insurance contract, the Trustee, at the request of 51% of the
Participants or in the Trustee's discretion, may cause all or a
portion of the assets allocated to the Trust Account of a
Corporate Officer Participant, as of the date of the Change in
Control, to be used to purchase a paid-up insurance contract
providing a death benefit equal to the benefit determined under
Article V with respect to such Corporate Officer Participant, as
of the date of the Change in Control, or such lesser amount as the
Actuary determines may be purchased with the Trust assets
allocated to the Corporate Officer Participant's Trust Account. In
addition, to the extent there are sufficient assets in the Trust,
an amount shall be paid to each Corporate Officer Participant
receiving a distribution under this Section 7.1(c)(2) as necessary
to pay all Federal, state, and local income taxes and any excise
taxes imposed by section 4999 of the Code and other taxes
resulting from the distribution (including any additional taxes
resulting from the increase under this sentence). Any paid-up
contract described in this Section 7.1(c)(2), plus any additional
amount described in the preceding sentence, shall be distributed
to the Corporate Officer Participant as soon as practicable. The
intent of this Section 7.1(c)(2) is that in the event distribution
is made under this Section 7.1(c)(2) the recipient Corporate
Officer Participant shall be paid, to the extent there are
sufficient assets in the Trust, by the Trust, an additional amount
(the "Gross Up") such that the net amount deemed to be received by
the recipient Corporate Officer Participant (i.e., the fair market
value of the paid-up insurance contract) after deduction of
Federal, state and local income taxes and any excise taxes imposed
by section 4999 of the Code and any other taxes resulting from the
distribution shall be equal to the fair
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<PAGE>
market value of the paid-up insurance contract purchased for the
Corporate Officer Participant pursuant to this Section 7.1(c)(2).
For purposes of determining the amount of the Gross Up, the
Corporate Officer Participant shall be deemed to pay Federal,
state and local income taxes at the highest marginal rate of
taxation in the calendar year in which the distribution is to be
made. The determination of whether an excise tax under section
4999 of the Code is payable and the amount thereof shall be based
upon the opinion of tax counsel selected by the Trustee and
acceptable to the Corporate Officer Participant. If such opinion
is not finally accepted by the Internal Revenue Service upon
audit, then appropriate adjustments shall be computed (without
interest but with Gross Up, if applicable) by such tax counsel
based upon the final amount of the excise tax so determined. The
amount shall be paid by the appropriate party in one lump-sum cash
payment within 30 days of such computation.
(3) Article VI Benefits: In the event of a "Change in Control"
(as defined in Section 7.1(d)), the Compensation Committee of the
Board (as it is constituted on the day preceding the date of the
Change in Control) may cause the balance in an Executive Officer
Participant's Accounts under Article VI, as determined on the date
of the Change in Control, to be paid from the Trust to such
Executive Officer Participant. Moreover, in the event of a Change
in Control, if the Compensation Committee of the Board (as it is
constituted on the day preceding the date of the Change in
Control) does not exercise its discretion to cause said payment to
the Executive Officer Participant, the Trustee, at the request of
51 % of the Participants or in the Trustee's discretion, may cause
the balance in an Executive Officer Participant's Accounts under
Article VI, as determined on the date of the Change in Control, to
be paid from the Trust to such Executive Officer Participant. To
the extent there are sufficient assets in the Trust, any
distribution under this Section 7.1(c)(1) shall be increased by
the amount necessary to pay all Federal, state, and local income
taxes and any excise taxes imposed by section 4999 of the Code and
other taxes resulting from the distribution (including any
additional taxes resulting from the increase under this sentence).
All payments made pursuant to this Section 7.1(c)(1) shall be made
in one lump sum. The intent of this Section 7.1(c)(1) is that,
in the event distribution is made under this Section 7.1(c)(1),
the recipient Executive Officer Participant shall be paid, to the
extent there are sufficient assets in the Trust, by the Trust, an
additional amount (the "Gross Up") such that the net amount
retained by the recipient Executive Officer Participant after
deduction of Federal, state and local income taxes and any excise
taxes imposed by section 4999 of the Code and any other taxes
resulting from the distribution shall be equal to the balance in
the Executive Officer Participant's Accounts under Article VI, as
determined on the date of the Change in Control. For purposes of
determining the amount of the Gross Up, the Executive Officer
Participant shall be deemed to pay Federal, state and local income
taxes at the highest marginal rate of taxation in the calendar
year in which the distribution is to be made. The determination of
whether an excise tax under section 4999 of the Code is payable
and the amount thereof shall be based upon the opinion of tax
counsel selected by the Trustee and acceptable to the Executive
Officer Participant. If such opinion is not finally accepted by
the Internal Revenue Service upon audit, then appropriate
adjustments shall be computed (without interest but with Gross Up,
if applicable) by such tax counsel based upon the final amount of
the excise tax so determined. The amount shall be paid by the
appropriate party in one lump-sum cash payment within 30 days of
such computation.
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(d) Definition of "Change in Control": As used in Sections
7.1(c)(1), (2), and (3), a "Change in Control" of the Company shall be
deemed to have occurred if:
(1) Any person (a "Person"), as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than (i) the Company and/or its
wholly-owned subsidiaries, (ii) any ESOP or other employee benefit
plan of the Company, and any trustee or other fiduciary in such
capacity holding securities under such plan, (iii) any corporation
owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock
of the Company or (iv) the Participant or any group of Persons of
which he or she voluntarily is a part), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities, or such lesser percentage
of voting power, but not less than 15%, as the Board shall
determine; provided, however, that a Change in Control shall not
be deemed to have occurred under the provisions of this Section
7.1(d)(1) by reason of the beneficial ownership of voting
securities by members of the Bartol Family (as defined below)
unless and until the beneficial ownership of all members of the
Bartol Family (including any other individuals or entities who or
which, together with any member or members of the Bartol Family,
are deemed under Sections 13(d) or 14(d) of the Exchange Act to
constitute a single Person) exceeds 50% of the combined voting
power of the Company's then outstanding securities.
(2) During any two-year period beginning after September 12,
1990, Directors of the Company in office at the beginning of such
period plus any new Director (other than a Director designated by
a Person who has entered into an agreement with the Company to
effect a transaction within the purview of Section 7.1(d)(1) or
(3)) whose election by the Board, or whose nomination for election
by the Company's shareholders, was approved by a vote of at least
two-thirds of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved, shall cease
for any reason to constitute at least a majority of the Board; or
(3) The Company's shareholders or the Board shall approve (i)
any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which
the Company's voting common shares (the "Common Shares") would be
converted into cash, securities and/or other property, other than
a merger of the Company in which holders of Common Shares
immediately prior to the merger have the same proportionate
ownership of common shares of the surviving corporation
immediately after the merger as they had in the Common Shares
immediately before, (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions)
of all or substantially all the assets or earning power of the
Company, or (iii) the liquidation or dissolution of the Company.
As used in this Section 7.1(d), "members of the Bartol Family"
shall mean the wife, children and descendants of such children of the
late George E. Bartol III, their respective spouses and estates, any
trusts primarily for the benefit of any of the foregoing and the
administrators, executors and trustees of any such estates or trusts.
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Whether a Change in Control has occurred shall be determined by
the Compensation Committee of the Board (as it is constituted on the day
preceding the date of the Change in Control) subject to the provisions
of Section 3.7(d) of the Trust Agreement.
7.2 Review of Funding Status: At least annually, the Compensation
Committee of the Board shall make a determination as to whether the Trust
described in Section 7.1 provides adequate security to Participants. The
Chairman of the Company may also call upon the Compensation Committee of the
Board to make such a determination at any time.
(a) Determination of Inadequate Security: If the Compensation
Committee of the Board determines that the Trust does not provide
adequate security, the Compensation Committee of the Board shall cause:
(1) A single sum payment equal to the Present Value of the
Accrued Benefit payable under Article IV to an Executive Officer
Participant, as determined on the date of the Compensation
Committee of the Board's determination, to be paid from the Trust
to such Executive Officer Participant;
(2) All or a portion of the assets allocated to the Trust
Account of a Corporate Officer Participant, as of the date of the
Compensation Committee of the Board's determination, to be used to
purchase a paid-up insurance contract providing a death benefit
equal to the death benefit determined under Article V with respect
to the Corporate Officer Participant; and
(3) The balance in the Executive Officer Participant's
Accounts under Article VI, as determined on the date of the
Compensation Committee of the Board's determination, to be paid
from the Trust to such Executive Officer Participant.
If the assets in the Trust are not adequate to pay the amounts
payable under this Section 7.2, the Company shall be liable for and
shall pay the deficiency to the Participant.
(b) Gross Up: To the extent there are sufficient assets in the
Trust, any distribution under Section 7.2(a) shall be increased by the
amount necessary to pay all Federal, state, and local income taxes and
any other taxes resulting from the distribution (including any
additional taxes resulting from the increase under this sentence). All
payments made pursuant to this Section 7.2(b) shall be made in one lump
sum. The intent of this Section 7.2(b) is that, in the event
distribution is made under Section 7.2(a), the recipient Participant
shall be paid, to the extent there are sufficient assets in the Trust,
by the Trust, an additional amount (the "Gross Up") such that the net
amount retained by the recipient Participant after deduction of Federal,
state and local income taxes and any other taxes resulting from the
distribution (all as determined on the date of distribution) shall be
equal to the sum of the following:
(1) The amount payable under Section 7.2(a)(1);
(2) The amount payable under Section 7.2(a)(2); and
(3) The amount payable under Section 7.2(a)(3).
For purposes of determining the amount of the Gross Up, the
recipient Participant shall be deemed to pay Federal, state and local
income taxes at the highest marginal rate of taxation in the calendar
year in which the distribution is to be made.
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7.3 Acceleration of Payments: Notwithstanding any other provision of the
Plan or Trust Agreement, if the Trustee determines, based on a change in the tax
or revenue laws of the United States, a published ruling or similar announcement
issued by the Internal Revenue Service, a regulation issued by the Secretary of
the Treasury or his delegate, a decision by a court of competent jurisdiction
involving a Participant, or a closing agreement involving a Participant made
under section 7121 of the Code that is approved by the Commissioner, that such
Participant or Beneficiary has recognized or will recognize income for Federal
income tax purposes with respect to retirement benefits that are or will be
payable to the Participant under Article IV, the death benefits that are or will
be payable to the Participant or Beneficiary under Article V, or the
supplemental savings benefits that are or will be payable to the Participant or
Beneficiary under Article VI before they otherwise would be paid to the
Participant or the Beneficiary (as applicable), upon the request of the
Participant or Beneficiary, the Trustee shall immediately make distribution from
the Trust to the Participant or Beneficiary of the amount so taxable. Moreover,
in the event of a Change in Control, payment of retirement benefits provided
under Article IV (and any additional amounts provided under Section 7.1(c)(1))
shall be made in accordance with Section 7.1(c)(1), payment of death benefits
provided under Article V (and any additional amounts provided under Section
7.1(c)(2)) shall be made in accordance with Article V and Section 7.1(c)(2), and
payment of supplemental savings benefits provided under Article VI (and any
additional amounts provided under Section 7.1(c)(3)) shall be made in
accordance with Section 7.1(c)(3). Moreover, in the event of a determination of
inadequate security under Section 7.2(a), payment shall be made in accordance
with Section 7.2(a) (and payment of any additional amounts provided under
Section 7.2(b) shall be made in accordance with Section 7.2(b)).
7.4 Creation of Separate Subfund in Trust upon Termination of
Employment: Upon the termination of a Participant's employment with the
Participating Companies (except for Cause), a separate subfund in the Trust
under the Plan shall be established to hold all insurance contracts which will
provide benefits for the Participant under the Plan.
Article VIII - Administration
8.1 Appointment of Committee: To supervise and administer the Plan, the
Board shall appoint a Committee consisting of not less than three persons who
shall serve without compensation and at the pleasure of the Board. Any member of
the Committee may be removed at any time by the Board, which shall fill all
vacancies in the Committee, however occurring (if there are less than three
persons remaining on the Committee; if there are more than three persons
remaining on the Committee the Board may, but is not required to, fill such
vacancy or vacancies). Until a new appointment is made, the Committee shall have
full authority to act. The Company shall notify the Trustee of the appointment
of the Committee and of any subsequent changes in its membership.
8.2 Organization: The Committee shall enact such rules and regulations
consistent with the Plan as it may consider desirable for the conduct of its
business and for the administration of the Plan. Its members shall elect a
chairman, who shall be a member of the Committee, and a secretary who may, but
need not, be a member of the Committee.
8.3 Committee Action: A majority of the members of the Committee shall
constitute a quorum for the transaction of business. All resolutions or other
actions taken by the Committee at any meeting shall be by vote of the majority
of the Committee members present at such meeting. Resolutions may be adopted or
other action taken without a meeting upon written consent signed by all of the
members of the Committee. No member of the Committee shall act on any matter
which involves his or her personal interest or benefit under the Plan as
distinguished from the general interest
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of all Participants. The Committee shall maintain full and complete records of
its deliberations and decisions, and the minutes of its proceedings shall be
conclusive proof of the facts stated therein.
8.4 Claims Procedure:
(a) Filing Claim for Benefits: If an individual (hereinafter
referred to as the "Applicant," which reference shall include the legal
representative, if any, of the individual) does not receive the timely
payment of the benefits to which the Applicant believes he or she is
entitled under the terms of the Plan, the Applicant may make a claim for
benefits in the manner hereinafter provided.
All claims for benefits under the Plan shall be made in writing
and shall be signed by the Applicant. Claims shall be submitted to a
representative designated by the Committee and hereinafter referred to
as the "Claims Coordinator." The Claims Coordinator may, but need not,
be a member of the Committee. If the Applicant does not furnish
sufficient information with the claim for the Claims Coordinator to
determine the validity of the claim, the Claims Coordinator shall
furnish the Applicant with forms prescribed by the Committee within ten
days of receipt of the initial claim, indicating any additional
information which is necessary for the Claims Coordinator to determine
the validity of the claim.
Each claim hereunder shall be acted on and approved or disapproved
by the Claims Coordinator within 60 days following the receipt by the
Claims Coordinator of the information necessary to process the claim.
In the event the Claims Coordinator denies a claim for benefits,
in whole or in part, the Claims Coordinator shall notify the Applicant
in writing of the denial of the claim and notify such Applicant of his
or her right to a review of the Claims Coordinator's decision by the
Committee. Such notice by the Claims Coordinator shall also set forth,
in a manner calculated to be understood by the Applicant, the specific
reason for such denial, the specific Plan provisions on which the denial
is based, a description of any additional material or information
necessary to perfect the claim, with an explanation of why such material
or information is necessary, and an explanation of the Plan's claim
review procedure as set forth in this Section 8.4.
If no action is taken by the Claims Coordinator on an Applicant's
claim within 60 days after receipt by the Claims Coordinator, such
application shall be deemed to be denied for purposes of the following
appeals procedure.
(b) Appeals Procedure: Any Applicant whose claim for benefits is
denied in whole or in part (such Applicant being hereinafter referred to
as the "Claimant") may appeal from such denial to the Committee for a
review of the decision by the entire Committee. Such appeal must be made
within six months after the Claimant has received written notice of the
denial as provided above. An appeal must be submitted in writing within
such period and must:
(1) Request a review by the entire Committee of the claim for
benefits under the Plan;
(2) Set forth all of the grounds upon which the Claimant's
request for review is based and any facts in support thereof; and
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(3) Set forth any issues or comments which the Claimant deems
pertinent to the appeal.
The Committee shall regularly review appeals by Claimants. The
Committee shall act upon each appeal within 60 days after receipt
thereof unless special circumstances require an extension of the time
for processing the Claimant's request for review. If such an extension
of time for processing is required, written notice of the extension
shall be forwarded to the Claimant prior to the commencement of the
extension. In no event shall such extension exceed a period of 120 days
after the request for review is received by the Committee.
The Committee shall make a full and fair review of each appeal and
any written materials submitted by the Claimant or a Participating
Company in connection therewith. The Committee may require the Claimant
or a Participating Company to submit such additional facts, documents,
or other evidence as the Committee in its discretion deems necessary or
advisable in making its review. The Claimant shall be given the
opportunity to review pertinent documents or materials upon submission
of a written request to the Committee, provided the Committee finds the
requested documents or materials are pertinent to the appeal.
On the basis of its review, the Committee shall make an
independent determination of the Claimant's eligibility for benefits
under the Plan. The decision of the Committee on any claim for benefits
shall be final and conclusive upon all parties thereto.
In the event the Committee denies an appeal, in whole or in part,
the Committee shall give written notice of the decision to the Claimant,
which notice shall set forth in a manner calculated to be understood by
the Claimant the specific reasons for such denial and which shall make
specific reference to the pertinent Plan provisions on which the
Committee decision was based.
It is intended that the claims procedure of this Plan be
administered in accordance with the claims procedure regulations of the
Department of Labor set forth in 29 CFR Section 2560.503-1.
8.5 Committee Powers and Responsibilities: Except as otherwise provided
in the Plan and Trust Agreement, the Committee shall have sole responsibility
for administration of the Plan and shall supervise and control the operation of
the Plan in accordance with its terms. Except as otherwise provided in the Plan
and Trust Agreement, the Committee shall have the responsibility, the power, the
authority, and discretion to do all things necessary to accomplish that purpose,
including, but not limited to, the responsibility, power, authority, and
discretion to do the following:
(a) To construe and interpret the Plan, decide all questions of
eligibility, and determine the amount, manner, and time of payment of
any benefits hereunder;
(b) To prescribe procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(c) To prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(d) To require a Participant to complete and file with the
Committee an application for a benefit and all other forms approved by
the Committee, and to furnish all pertinent
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<PAGE>
information requested by the Committee (the Committee may rely upon all
such information so furnished, including the Participant's current
mailing address);
(e) To furnish the Participating Companies, upon request, such
annual reports with respect to the administration of the Plan as are
reasonable and appropriate;
(f) To appoint or employ, at the expense of the Participating
Companies, persons to carry out administrative duties under the Plan and
any other agents it deems advisable, including, but not limited to,
actuaries, accountants, Investment Advisor(s), and legal counsel, and to
rely in good faith upon the opinion of any professional or specialist so
employed;
(g) To adopt such rules and make such determinations as are
appropriate to the administration of the Plan, provided that all rules
of the Committee shall be uniformly and consistently applied to all
Participants in similar circumstances, and that, when making a
determination or calculation, the Committee shall be entitled to rely
upon information furnished by a Participant or Beneficiary, a
Participating Company, the legal counsel of a Participating Company, the
Trustee, or other appropriate persons;
(h) To bring suit in a court of competent jurisdiction, or to take
any other action necessary either to ascertain the proper actions to be
taken in the event that a reasonable interpretation of applicable law
precludes the Committee from satisfying its requirements under the Plan
and Trust or to enforce the rights of the Participants under the Plan
and Trust;
(i) To delegate certain of its responsibilities relating to the
administration of the Plan to responsible persons;
(j) To supervise the investment of assets held in the grantor
trust;
(k) To establish the investment media available for the investment
of Participants' Accounts under Article VI and to communicate the
investments so available to the Trustee and the Participants; in
establishing the investment media available under Article VI of the Plan
the Committee may rely upon the advice of Investment Advisors and may
take into account the investment preferences of the Participants but the
Committee shall not be bound by such preferences; to establish
guidelines for the investment of the Phantom Stock Plan under Plan
Exhibit C; and
(1) To do such other acts as may be necessary or desirable in
order to administer the Plan.
8.6 Information from Participating Companies to Committee: To enable the
Committee to perform its functions, the Participating Companies shall supply
full and timely information to the Committee on all matters relating to the pay
and service of Participants, their retirement, Disability, death, or other cause
for separation from service, and such other pertinent facts as the Committee may
require; and the Committee shall advise the Trustee of such of the foregoing
facts as may be pertinent to the Trustee's duties.
8.7 Records: The Committee shall maintain records containing all
relevant data pertaining to Participants and Beneficiaries and their rights
under the Plan. Records pertaining solely to a particular Participant or
Beneficiary shall be made available to him or her for examination during
business hours.
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<PAGE>
8.8 Determination of Right to Benefits: Except as otherwise provided in
the Plan and Trust Agreement, the Committee shall make all determinations as to
the right of any person to a benefit under the Plan. The procedures relating to
the submission of claims for benefits, their review, and the appeal of denied
claims are set forth in Section 8.4.
8.9 Expert Services: The Committee may, in accordance with Section
8.5(f), contract for actuarial, legal, accounting, clerical, trustee, custodial,
investment and other services necessary to carry out its responsibilities under
the Plan.
Article IX - Amendment and Termination of Plan; Successor Employer
9.1 Right of Company to Amend Plan:
(a) General: Subject to the limitations set forth in this Section
9.1, the Company reserves the right to amend the Plan with respect to
all Participating Companies by action of the Board at any time and from
time to time, to the extent it may deem advisable or appropriate.
(b) Limitations: No amendment shall cause or permit the duties or
liabilities of the Committee or Trustee to be increased without the
written consent of the party affected. In addition, no amendment to the
Plan (including a change in the actuarial basis for determining optional
or early retirement benefits) shall be effective to the extent that it
has the effect of decreasing a Participant's Accrued Benefit under
Article IV, death benefit under Article V, or vested supplemental
savings benefits under Article VI (all as determined as of the date on
which the amendment becomes effective). No amendment shall be permitted
on or after the day preceding the date of a Change in Control (within
the meaning of Section 7.1 (d)) without the consent of at least 51% of
the Participants participating in the Plan on the day before the date of
such Change in Control.
9.2 Amendment Procedure: Any amendment shall be made only by an
instrument in writing pursuant to written resolution adopted by the Board at a
duly held meeting of said Board or by unanimous written consent of the Board. A
certified copy of the resolutions adopting any amendment and a copy of the
adopted amendment as executed by the Company shall be delivered to the Committee
and to the Trustee.
Upon the taking of such action by the Board, the Plan shall be deemed
amended as of the date specified as the effective date by such Board action or
in the instrument of amendment. The effective date of any amendment may be
before, on, or after the date of such Board action.
9.3 Termination of Plan: The Company reserves, with respect to all
Participating Companies, the right to terminate the Plan at any time by written
resolution adopted by the Board at a duly held meeting of said Board or by
unanimous written consent of the Board. Moreover, each other Participating
Company reserves the right, by written resolution adopted by the Board at a duly
held meeting of said Board or by unanimous written consent of the Board, to
terminate the Plan as to such Participating Company as provided herein. Upon
termination of the Plan, each Executive Officer Participant shall continue to
have the right to receive his or her vested Accrued Benefit under Article IV,
each Corporate Officer Participant shall continue to have the right to have his
or her Beneficiary receive a death benefit under Article V, and each Executive
Officer Participant shall continue to have the right to receive vested
supplemental savings benefits under Article VI (all as determined as of the date
on which the Plan is terminated) in accordance with the terms of the Plan as in
effect immediately prior to its termination. Moreover, upon the termination of
the Plan, life insurance in an
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amount equal to three times his or her Base Salary shall be restored to each
Corporate Officer Participant under the group term life insurance plan of his or
her Participating Company, at the expense of the Participating Company.
9.4 Successor Employer: In the event of the dissolution, merger,
consolidation, or reorganization of a Participating Company, provision may be
made by which the Plan and Trust will be continued by the successor to such
Participating Company; and, in that event, such successor shall be substituted
for the Participating Company under the Plan. The substitution of the successor
shall constitute an assumption of Plan liabilities by the successor and the
successor shall have all of the powers, duties, and responsibilities of the
Participating Company under the Plan. Neither the Company nor any Participating
Company nor Affiliate shall have any further liability with respect to the
making of contributions on behalf of the employees of any such Participating
Company which continues the Plan and Trust for its employees.
Article X - Miscellaneous
10.1 No Right to Employment: Participation in the Plan shall not be
deemed to be consideration for, an inducement to, or a condition of the
employment of any Employee. The establishment of the Plan shall not confer upon
any Employee or Participant the right to be continued in the employ of a
Participating Company, and the Participating Company expressly reserves the
right to terminate the employment of any Employee, whether or not a Participant,
whenever the interest of the Participating Company, in its sole judgment, may so
require.
10.2 Right to Withhold: The Company shall have the right to withhold
from all distributions from the Plan any Federal, state, or local taxes required
by law to be withheld with respect to such distributions.
10.3 Nonalienation of Benefits: Except as otherwise required by
applicable law, the right of any Participant or Beneficiary to any benefit or
interest under any of the provisions of this Plan shall not be subject to
encumbrance, attachment, execution, garnishment, assignment, pledge, alienation,
sale, transfer, or anticipation, either by the voluntary or involuntary act of
any Participant or his or her Beneficiary or by operation of law, nor shall such
payment, right, or interest be subject to any other legal or equitable process.
10.4 Expenses of Plan: All expenses of the Plan shall be paid by the
Participating Companies.
10.5 Incapacitated Beneficiaries: If any person entitled to receive
benefits hereunder shall at any time be mentally or physically incapacitated, or
for any other reason shall be incapable of properly or legally receipting for,
receiving, and dispensing the benefits to which he or she is entitled hereunder,
the payments to which such person shall be entitled under this Plan during such
period of incapacity may, at the direction of the Committee, be used, expended,
or applied by the Participating Companies for the maintenance, education, or
support of such person or his or her dependents without the intervention of a
guardian or committee.
10.6 Gender and Number: Whenever any words are used herein in any
specific gender, they shall be construed as though they were also used in any
other applicable gender. The singular form, whenever used herein, shall mean or
include the plural form, and vice versa, as the context may require.
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10.7 Law Governing Construction: The construction and administration of
the Plan, the Trust Agreement, and the Trust maintained thereunder, and all
questions pertaining thereto, shall be governed by ERISA and other applicable
Federal law and, to the extent not governed by Federal law, by Pennsylvania law.
10.8 Change in Control Agreements: To the extent possible, this Plan
shall be construed in a manner compatible with any applicable change in control
agreement between a Participating Company and a Participant and in accordance
with Section 7.1(c).
10.9 Headings Not a Part Hereof: Any headings preceding the text of the
several Articles, Sections, subsections, or paragraphs hereof are inserted
solely for convenience of reference and shall not constitute a part of the Plan,
nor shall they affect its meaning, construction, or effect.
10.10 Severability of Provisions: If any provision of this Plan is
determined to be void by any court of competent jurisdiction, the Plan shall
continue to operate and, for the purposes of the jurisdiction of that court
only, shall be deemed not to include the provision determined to be void.
10.11 Reporting and Disclosure Requirements: In order to comply with
the requirements of Title I of ERISA, the Committee shall:
(a) File a statement with the Secretary of Labor that includes the
name and address of the employer, the employer identification number
assigned by the Internal Revenue Service, a declaration that the
employer maintains the Plan primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees and a statement of the number of such plans and
the number of employees in each; and
(b) Provide plan documents, if any, to the Secretary of Labor upon
request as required by section 104(a)(1) of ERISA. It is intended that
this provision comply with the requirements of DOL Reg. Section
2520.104-23.
This method of compliance is available to the Plan only so long as the
Plan is maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees and for which benefits are paid as needed solely from the general
assets of the employer or are provided exclusively through insurance contracts
or policies, the premiums for which are paid directly by the employer from its
general assets, issued by an insurance company or similar organization which is
qualified to do business in any state, or both.
10.12 Special Provisions Relating to Ronald J. Naples: Notwithstanding
any other provision of the Plan, the provisions of Plan Exhibit B shall apply to
the benefits provided hereunder for Ronald J. Naples, formerly Chief Executive
Officer of the Company.
10.13 Special Provisions Relating to Donald L. Thompson: Notwithstanding
any other provision of the Plan, the provisions of Plan Exhibit C shall apply to
the benefits provided hereunder for Donald L. Thompson, Chairman and Chief
Executive Officer of the Company, effective June 1, 1996.
10.14 Power of Company to Substitute Assets: The Company shall have the
right at any time and from time to time, in its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust. This right is
exercisable by the Company in a nonfiduciary capacity without the approval or
consent of any person in a fiduciary capacity.
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10.15 Voting and other Rights Associated with Trust Assets: The Trustee
shall exercise all voting rights relating to securities (including Company
Securities) held in the Trust under the Plan. Except as otherwise specifically
provided in the Plan, all other rights associated with Trust assets shall be
exercised by the Trustee or by the person designated by the Trustee, and shall
in no event be exercisable by or rest with Plan Participants.
Article XI - Adoption of Plan by Affiliates
11.1 Adoption of Plan: The Plan may be adopted by any Affiliate
provided:
(a) The Company consents to such adoption;
(b) The Board of Directors or other governing entity of the
Affiliate adopts the Plan by appropriate action; and
(c) The adopting Affiliate executes such documents as may be
required to make such Affiliate a party to the Plan as a Participating
Company.
An Affiliate which adopts the Plan shall thereafter be a Participating
Company with respect to its Employees for purposes of the Plan.
11.2 Company Appointed Agent of Participating Company: Each
Participating Company appoints the Company as its agent to exercise on its
behalf all of the powers and authority conferred upon the Company by this Plan,
including, without limitation, the power to amend the Plan or to terminate the
Plan.
11.3 Withdrawal from Plan: Any Participating Company may, at any time,
withdraw from the Plan upon giving the Company and the Committee at least 30
days' notice in writing of its intention to withdraw.
IN WITNESS WHEREOF, HUNT CORPORATION has caused these presents to be
duly executed, under seal this ____ day of ____________, 1999.
[CORPORATE SEAL] HUNT CORPORATION
Attest:
/s/ Dennis S. Pizzica By: /s/ William E. Chandler
- --------------------------- -------------------------
Dennis S. Pizzica, William E. Chandler
Assistant Secretary
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FIRST UNION NATIONAL BANK hereby agrees to assume all duties and
responsibilities imposed on it under this amended and restated Plan and
therefore has caused these presents to be duly executed, under seal this
_______ day of ________________ 1998.
TRUSTEE:
[CORPORATE SEAL] FIRST UNION NATIONAL BANK
Attest:
____________________ By:_______________________
Trust Officer Vice President
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PLAN EXHIBIT A - EARLY RETIREMENT FACTORS
TABLE I
Participants Who Terminate Employment on or
After Early Retirement Date
Age at Benefit Early Commencement
Commencement Reduction Factor
- -------------- ------------------
62 and over 1.0000
61 0.9333
60 0.8667
59 0.8000
58 0.7333
57 0.6667
56 0.6333
55 0.6000
54 0.5667
53 0.5333
52 0.5000
TABLE II
Participants Who Terminate Employment Prior to
Early Retirement Date
Age at Benefit Early Commencement
Commencement Reduction Factor
- -------------- ------------------
65 and over 1.0000
64 0.9333
63 0.8667
62 0.8000
61 0.7333
60 0.6667
59 0.6333
58 0.6000
57 0.5667
56 0.5333
55 0.5000
IN NO EVENT SHALL BENEFITS BE ACTUARIALLY INCREASED FOR COMMENCEMENT OF BENEFITS
SUBSEQUENT TO AGE 62 (FOR TABLE I) OR SUBSEQUENT TO AGE 65 (FOR TABLE II).
- A-1 -
<PAGE>
PLAN EXHIBIT B - SPECIAL PROVISIONS FOR RONALD J. NAPLES
I. Continued Participation in Plan by Naples. In accordance with the
terms of the Transition Agreement (the "Agreement") entered into on June 13,
1995, between the Company and Ronald J. Naples, formerly Chief Executive Officer
of the Company ("Naples"), Naples shall continue to participate in the Plan,
which provides supplemental retirement benefits under Article IV of the Plan,
life insurance benefits under Article V of the Plan, and supplemental savings
benefits (including matching employer contributions) under Article VI of the
Plan, subject to, and in accordance with, the terms of the Plan and this Plan
Exhibit B.
II. Calculation and Payment of Benefit under Article IV of Plan.
(A) Calculation of Benefit. For purposes of calculating Naples's
benefit under Article IV of the Plan, Naples shall be credited with
Years of Benefit Service from July 20, 1995, through July 19, 1998, and
with Applicable Compensation during such time at the rate of $565,000
per year (without regard to any mitigation pursuant to Section 4(b) of
the Agreement during the period from July 20, 1997, through July 19,
1998). Notwithstanding the preceding sentence, Naples's Applicable
Compensation for computing benefits under Article IV of the Plan for
calendar year 1995 shall include, in addition to the $565,000, any pro
rata bonuses for 1995.
(B) Payment of Benefit. Under the Plan, any Participant (including
Naples) who retires after age 52 with at least 20 Years of Vesting
Service shall be able to commence receiving payments under Article IV of
the Plan at such time. Such payments shall be actuarially reduced in
accordance with the terms of the Plan.
III. Naples's Life Insurance Benefit and Determination of Base Salary
under Article V.
(A) Life Insurance Benefit. Life insurance benefits (three times
Naples's Base Salary as determined under III(B) of this Plan Exhibit (B)
for Naples under Article V of the Plan shall continue until July 19,
1997, or, if later, until the termination of his employment with the
Company.
(B) Base Salary. Naples's Base Salary for purposes of Article V of
the Plan from July 20, 1995, through July 19, 1998, shall be at the rate
of $565,000 per year (without regard to any mitigation pursuant to
Section 4(b) of the Agreement during the period from July 20, 1997,
through July 19, 1998).
IV. Application to Naples of Article VI and Determination of Applicable
Compensation under Article VI.
(A) Application of Article VI to Naples. Naples may continue to
make Deferral Amounts and be credited with Matching Amounts thereon in
accordance with Section 6.2 of the Plan until his employment with the
Company is terminated. Moreover, Naples may continue to make Deferral
Amounts, but shall not be eligible for Matching Amounts, with respect to
consulting payments as provided under the terms of the Agreement. Naples
shall not be eligible for Basic Amounts under Article VI.
(B) Salary Deferral Compensation. Naples's Salary Deferral
Compensation for purposes of Article VI of the Plan from July 20, 1995,
through July 19, 1998, shall be at the
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rate of $565,000 per year (without regard to any mitigation pursuant to
Section 4(b) of the Agreement during the period from July 20, 1997,
through July 19, 1998).
V. Election to Take Ownership of Certain Insurance Policies under
Article VI of Plan. Pursuant to the terms of Article VI of the Plan, Naples
shall be entitled to elect to take ownership of certain life insurance policies
held by the Trust under the Plan for benefits under Article VI of the Plan, in
lieu of receiving such benefits under the Plan. Such election shall be made in
accordance with the terms of Section 6.10 of the Plan.
VI. Use of Cash Value of Separate Insurance Contracts Purchased on
Naples's Life. Under the Plan, the cash value of any separate insurance
contracts purchased on Naples's life shall be used solely for the payment of
benefits under the Plan to Naples (to the extent such cash value does not exceed
the Company's obligation to Naples under the Plan). Upon Naples's termination of
employment, a separate subfund shall be established within the Trust pursuant to
Section 7.4 of the Plan for such contracts. The Company agrees to pay the
premiums on such contracts as they come due, until June 1, 1998, and expects to
continue to make contributions to the Trust thereafter in accordance with the
normal funding procedures of the Plan.
Notwithstanding the foregoing, the proceeds of any death benefit
received pursuant to such contracts may be used for any purpose under the Plan
and Trust. Naples shall have only the rights of a general, unsecured creditor
against the Company for any distributions due under the Plan and Trust, and
shall not have any property interest in such insurance contracts or any other
assets of the Plan and Trust.
VII. Section 4.10 (Divestment for Cause) not Applicable to Naples.
Section 4.10 of the Plan (Divestment for Cause) shall not be applicable to
Naples.
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PLAN EXHIBIT C - SPECIAL PROVISIONS FOR DONALD L. THOMPSON
I. Participation in Plan. In accordance with the Employment Agreement
(the "Agreement") between the Company and Donald L. Thompson ("Executive") dated
April 8, 1996, Executive shall participate in the Plan which provides
supplemental retirement benefits under Article IV of the Plan, life insurance
benefits under Article V of the Plan, and supplemental savings benefits
(including matching employer contributions) under Article VI of the Plan,
subject to, and in accordance with, the terms of the Plan and this Plan
Exhibit C.
II. Phantom Stock Plan.
(A) General. In accordance with the Agreement, the Company
established a Phantom Stock Plan for Executive effective June 1, 1996. A
copy of the Phantom Stock Plan is attached hereto as Appendix A.
Although the Phantom Stock Plan is unfunded, in order to enable Company
to provide for the payment of benefits under the Phantom Stock Plan as
they become due, Company shall establish a separate Phantom Stock
Account under the Trust to which it shall make contributions at such
times and in such amounts as the Board, in its sole discretion, shall
determine. The Company shall also establish a separate Phantom Stock
Dividend Account to which Dividend Amounts shall be credited as provided
in the Phantom Stock Plan.
(B) Investment of Phantom Stock Account and Phantom Dividend
Account.
(i) Phantom Stock Account. The Phantom Stock Account shall be
invested by the Trustee in such property including, but not
limited to, Company Securities as the Compensation Committee shall
determine, in its sole discretion. However, notwithstanding the
property in which the Phantom Stock Account is invested or the
value of such property at the time of any distribution under the
Phantom Stock Plan, Executive shall only be entitled to the value
at the time of any distribution of the 175,000 shares of Phantom
Stock (which, pursuant to Section 4.1 of the Phantom Stock Plan,
shall be deemed to be the equivalent of an equal number of shares
of Common Stock of the Company) credited to Executive's Phantom
Stock Account pursuant to the terms of the Phantom Stock Plan, as
adjusted pursuant to the terms of the Phantom Stock Plan.
(ii) Phantom Dividend Account. The Phantom Dividend Account
shall be invested in such property including, but not limited to,
Company Securities as the Compensation Committee shall determine,
in its sole discretion. However, notwithstanding the property in
which the Phantom Dividend Account is invested or the value of
such property at the time of any distribution under the Phantom
Stock Plan, Executive shall only be entitled to the value at the
time of any distribution of the undistributed Dividend Amounts
held in his Phantom Dividend Account, as determined under Section
5.4 of the Phantom Stock Plan.
(iii) Reinvestment of Company Securities Prohibited.
Notwithstanding the foregoing, effective October 1, 1998, amounts
held in the Phantom Stock Account and the Phantom Dividend Account
which are invested in Company Securities may not be reinvested in
any other investment.
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(C) Payment of Amounts in Phantom Stock Account and Phantom
Dividend Account.
(i) Emergency Distributions. Emergency distributions shall be
made from the Phantom Stock Account and the Phantom Dividend
Account pursuant to the provisions of Section 6.3(a) and (b) of
the Phantom Stock Plan and shall only be made in cash but in no
event shall such distributions exceed the values of such Accounts
as determined under II.(B)(i) and (ii) and in the case of
distributions under Section 6.3(b) of the Phantom Stock Plan,
shall be reduced by the 8% discount provided under Section 6.3(b)
of the Phantom Stock Plan.
(ii) Other Distributions. Payment from the Phantom Stock
Account and the Phantom Dividend Account shall be made in cash in
the manner provided in the Agreement and Appendix A hereto.
Notwithstanding the foregoing, to the extent invested in Company
Securities or other property, payment shall be made in Company
Securities or other property unless the Executive elects, but only
with the approval of the Board, to have such portion of the
Phantom Stock Account and the Phantom Dividend Account paid in
cash but in no event shall such distributions exceed the values of
such Accounts as determined under II.(B)(i) and (ii). Such
election must be made by filing the Appropriate Form with the
Committee at least 90 days before the beginning of the Executive's
taxable year in which such distribution is to be made.
III. Death of Executive. In the event Executive's death occurs while
employed by Employer, notwithstanding any provision of the Plan to the contrary,
Executive shall be fully vested in all benefits to which he is entitled under
the terms of the Plan, and, if Executive has not become fully vested in his
accrued benefit under the Company's Pension Plan on the date of his death, the
Company shall provide for such accrued benefit to be paid pursuant to the Plan.
IV. Disability of Executive. In the event of Executive's "Disability",
as such term is defined in Section 4.2 of the Agreement, notwithstanding any
provision of the Plan to the contrary, Executive shall be fully vested in all
benefits to which he is entitled under the terms of the Plan, and if Executive
has not become fully vested in his accrued benefit under the Company's Pension
Plan on the date of his "Disability", the Company shall provide for such accrued
benefit to be paid pursuant to the Plan.
V. Executive's Resignation or Termination without Cause.
(A) Resignation or Retirement. Upon Executive's resignation or
retirement pursuant to Section 4.4(a) of the Agreement, Executive shall
be entitled only to those benefits under the Plan which are provided by
the express terms of the Plan and by the express terms of the Phantom
Stock Plan.
(B) Termination of Executive's Employment without Cause. Upon the
termination by the Board of Executive's employment under the Agreement
without Cause (as such term is defined in Section 4.3 of the Agreement)
pursuant to Section 4.4(b) of the Agreement or upon Executive's
resignation from his employment pursuant to a material reduction in the
nature or scope of his authority, power, functions or duties, all as
described in Section 4.3(b) of the Agreement, any shares of phantom
stock which have not become vested by the passage of time shall become
fully vested upon the date of such termination of employment and, to the
extent not otherwise paid, shall be paid by the Plan in accordance with
the terms of the Agreement and the Phantom Stock Plan. Executive shall
also be entitled to receive all pension benefits accrued under the
Company's Pension Plan and the Plan to the date of termination
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and during the two-year period thereafter during which Executive
receives payments under Section 4.4(b) of the Agreement. If Executive is
not fully vested in the Pension Plan on the date of his termination of
employment, such accrued benefit shall be paid pursuant to the Plan and,
likewise, additional pension accruals under the Company's Pension Plan
subsequent to the termination of Executive's termination of employment
shall be paid from the Plan.
VI. Executive's Termination for Cause. In the event of Executive's
termination of employment for "Cause" (within the meaning of Section 4.3 of the
Agreement), Executive shall be entitled to no further accruals under the Plan,
all as provided in Section 4.3 of the Agreement.
VII. Change in Control. The Change in Control provisions of the Plan
shall apply to Executive except to the extent that any such provisions conflict
with the terms of the Agreement in which case the terms of the Agreement shall
control.
VIII. Agreement to Control. This Plan Exhibit C is in all respects to be
governed by the terms of the Agreement and in the event of any conflict between
the terms of the Agreement and the terms of this Plan Exhibit C, the terms of
the Agreement shall control.
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PLAN EXHIBIT C - APPENDIX A PHANTOM STOCK PLAN FOR DONALD L. THOMPSON
HUNT MANUFACTURING CO.
PHANTOM STOCK PLAN
FOR
DONALD L. THOMPSON
ARTICLE I - Purpose of Plan
1.1 Purpose. The purpose of the HUNT MANUFACTURING CO. PHANTOM STOCK
PLAN FOR DONALD L. THOMPSON (the "Plan") is to further the long-term growth in
earnings of Hunt Manufacturing Co. by offering long-term financial incentives to
the Chairman and Chief Executive Officer of the Company.
ARTICLE II - Definitions
Whenever the following terms are used in the Plan, they shall have the
meanings specified below unless the context clearly indicates to the contrary:
2.1 Beneficiary shall mean such person or persons or legal entity as may
be designated by the Participant to receive benefits hereunder after the
Participant's death, or in the absence of such designation, the personal or
legal representative of the Participant.
2.2 Benefit Account shall mean the account established pursuant to
Section 6.2(A).
2.3 Board shall mean the Board of Directors of the Company.
2.4 Code shall mean the Internal Revenue Code of 1986, as amended.
2.5 Committee shall mean the Compensation Committee of the Board.
2.6 Common Stock shall mean shares of Hunt Manufacturing Co. common
stock, par value $.10 per share.
2.7 Company shall mean Hunt Manufacturing Co.
2.8 Dividend Account shall mean the account established by the Committee
for the Participant and to which the undistributed portion of the Participant's
Dividend Amounts and payments attributable thereto are credited or debited.
2.9 Dividend Amount shall mean the amount to which the Participant
becomes entitled at the time that shareholders of Common Stock are paid cash
dividends on such Stock, determined as provided in Article V.
2.10 Effective Date shall mean June 1, 1996, or, if earlier, the date on
which the Participant commences employment with the Company.
2.11 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
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2.12 Interest shall mean the average monthly rate of interest paid on
ten-year bonds on a specified date, as evidenced by the Moody's Ten-Year Bond
Index, multiplied by 1.333.
2.13 Participant shall mean Donald L. Thompson.
2.14 Phantom Stock shall mean the number of shares credited to the
Participant's Stock Account as provided in Article V.
2.15 Plan shall mean the HUNT MANUFACTURING CO. PHANTOM STOCK PLAN FOR
DONALD L. THOMPSON.
2.16 Plan Year shall mean the fiscal year of the Plan ending each
December 31.
2.17 Separation Date shall mean the date on which a Participant
terminates employment with the Company (whether by retirement, death,
resignation, discharge, or otherwise).
2.18 Stock Account shall mean the account established by the Committee
for the Participant and to which the Participant's Phantom Stock and all assumed
appreciation, depreciation, and payments attributable thereto are credited or
debited.
2.19 Valuation Date shall mean June 1, 1996, and the last day of each
calendar month thereafter.
2.20 Vesting Percentage shall mean that percentage of the Participant's
Stock Account to which he has a vested (non-forfeitable) right.
ARTICLE III - Participation
3.1 Participation. Participation shall begin on the Effective Date.
Participation in the Plan shall continue until the Participant's Separation
Date.
ARTICLE IV - Establishment of Stock Account
4.1 Stock Account. The Committee shall establish and maintain, for the
Participant, a Stock Account to record the value of the Participant's interest
under the Plan. On the Effective Date, for the purpose of computing the value of
the cash benefits to which Participant is entitled hereunder, the Participant's
Stock Account shall be credited with 175,000 shares of Phantom Stock which shall
be deemed to be the equivalent of an equal number of shares of Common Stock.
4.2 Valuation of Stock Account. As of each Valuation Date the Committee
shall determine the value of each share of Phantom Stock credited to the Stock
Account by reference to the mean between the highest and lowest quoted selling
prices of the Common Stock on the New York Stock Exchange on the Valuation Date,
as reported in The Wall Street Journal or, if the Valuation Date is not a
regular business day, on the immediately preceding regular business day. Such
value, as determined by the Committee, shall be conclusive.
4.3 Adjustments to Stock Account. In the event of a change in the
outstanding shares of Common Stock by reason of a recapitalization, stock split,
stock dividend, merger, consolidation, reorganization, or similar corporate
change, the Committee shall make equitable adjustments in the
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Stock Account of the Participant so that the number of shares of Phantom Stock
credited to the Stock Account is not diluted as a result of such change.
4.4 No Shareholder Rights. The crediting of Phantom Stock to the
Participant's Stock Account shall not entitle the Participant to voting rights
or any other rights of a shareholder with respect to such Phantom Stock (except
for the crediting to Participant's Dividend Account of an amount equal to the
dividends paid on the Common Stock.)
ARTICLE V - Establishment of Dividend Account and Allocation and
Crediting of Dividend Amounts
5.1 Dividend Account. The Committee shall establish and maintain, for
the Participant, a separate Dividend Account to record the undistributed
Dividend Amounts of the Participant.
5.2 Entitlement to and Calculation of Dividend Amounts. Whenever the
shareholders of Common Stock become entitled to receive cash dividends on such
common stock, the Participant shall become entitled to a Dividend Amount. Such
Dividend Amount shall be determined by multiplying the per share cash dividend
payable to shareholders of the Common Stock by the number of shares of Phantom
Stock allocated to the Participant's Stock Account.
5.3 Distribution of Vested Dividend Amounts. Not later than November 30,
1996, and each November 30 thereafter until the Participant's Separation Date,
the Participant may elect, by filing an appropriate form with the Committee, to
receive a cash distribution of the Dividend Amount otherwise allocable to the
Participant's Dividend Account for the following calendar year, multiplied by
the Participant's Vesting Percentage. Such cash distribution shall be made to
the Participant at the same time that cash dividends are paid to the
shareholders of Common Stock. Such cash distributions shall not be treated as
"compensation" for purposes of benefits pursuant to the Company's benefit plans.
5.4 Treatment of Undistributed Dividend Amounts. That portion of the
Participant's Dividend Amount which is not distributed in accordance with
Section 5.3 shall be credited to his Dividend Account and shall vest in
accordance with Section 6.1(B). Amounts credited to the Participant's Dividend
Account shall be credited with earnings, on the last day of each month, at the
rate of Interest in effect on the first day of the month. The vested amount in
the Participant's Dividend Account shall be distributed in accordance with
Section 6.2.
ARTICLE VI - Distribution of Benefits on Separation
6.1 Vesting.
(A) Stock Account. The Participant's right to the cash value of
the amounts credited to his Stock Account shall become vested
(non-forfeitable) in accordance with the following schedule, provided
Participant is employed by the Company on each of the dates shown:
25% on December 1, 1996
50% on December 1, 1997
75% on December 1, 1998
100% on December 1, 1999
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(B) Dividend Account. The Participant shall have a vested
(non-forfeitable) right to the amount credited to his Dividend Account
equal to:
(1) the product of (a) the total of all Dividend Amounts to
which the Participant has become entitled (including portions of
such Dividend Amounts which have been distributed to the
Participant), multiplied by (b) the Participant's Vesting
Percentage (as determined under Section 6.1(A); less
(2) the total of all Dividend Amounts which have been
distributed to the Participant.
(C) Special Vesting. The preceding provisions of Section 6.1
notwithstanding, the Participant shall have a vested (non-forfeitable)
right to the amounts credited to his Stock Account and Dividend Account
in the event of (1) the termination of his employment by the Company
without Cause, as provided in Section 4.4 of the Employment Agreement
between the Participant and the Company dated April 8, 1996; (2) a
Change in Control of the Company, as defined in Section 4.5(b) of the
Employment Agreement; (3) the Participant's death; or (4) the
Participant's Disability, as determined pursuant to Section 4.2 of the
Employment Agreement.
6.2 Distribution of Benefits on Separation.
(A) Amount of Benefits. The amount of benefits payable to a
Participant (or his Beneficiary) under the Plan, as a distribution after
the Participant's Separation Date, shall be equal to the sum of (a) the
Participant's vested interest in his Dividend Account, such vesting to
be determined pursuant to Section 6.1(B) or (C), plus (b) the product
of his Vesting Percentage (determined as of his Separation Date)
multiplied by the value of the Participant's Stock Account as of the
Valuation Date last preceding such Separation Date. Such valuation shall
be determined in accordance with Section 4.2. Effective as of such
Valuation Date, the amount of benefit so determined shall be credited to
the Participant's Benefit Account and shall thereafter be credited with
Interest on the last day of each month at the rate of Interest
determined on the first day of such month.
(B) Method and Timing of Payment. The Participant's Benefit
Account, as determined under Section 6.2(A), shall be distributed to him
(or to his Beneficiary if he has died) in 240 monthly installments,
payable on the first of each month commencing on January 1 of the year
following the Participant's Separation Date. The amount of each
installment shall be equal to 1/n multiplied by the balance credited to
the Participant's Benefit Account as of the last day of the month
preceding the payment date, where "n" equals the number of payments yet
to be made. The final payment will equal the balance in the
Participant's Benefit Account on the date of payment. For example, if
payments begin on January 1, 2005, the first payment will be equal to
1/240 of the balance in the Benefit Account on December 31, 2004, the
February 1, 2005 payment will be equal to 1/239 of the balance in the
Benefit Account of January 31, 2005, and so on until 240 installments
have been paid.
6.3 Emergency Distributions.
(A) The Compensation Committee may at any time make a payment to a
Participant in an amount up to the Participant's vested portion of his
Stock and Dividend Accounts upon a showing of an unforeseeable
emergency. An unforeseeable emergency is a severe financial hardship to
the Participant resulting from a sudden and unexpected illness or
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accident of the Participant or of a dependent (as defined in section
152(a) of the Code) of the Participant, loss of property due to
casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. The
need to send a Participant's child to college or the desire to purchase
a home are not unforeseeable emergencies. Payments may not be made to
the extent the hardship is or may be relieved (1) through reimbursement
or compensation by insurance or otherwise, or (2) by liquidation of the
Participant's assets, to the extent such liquidation would not itself
cause severe financial hardship. The determination of whether an
unforeseeable emergency within the meaning of this Section 6.3(A) exists
shall be made at the sole discretion of the Compensation Committee. The
amount of any such emergency distribution shall be limited to the amount
necessary to meet the emergency.
(B) In addition to the distributions permitted under Section
6.3(A), the Participant may, at any time, request the Compensation
Committee to distribute all or part of the vested portion of his Stock
and Dividend Accounts to him, which distributions shall be reduced by an
8% discount as a restriction on the availability of distributions
pursuant to this Section 6.3(B).
ARTICLE VII - Funding
7.1 Plan Unfunded. The Plan shall be unfunded and no trust shall be
created. The Participant's Stock Account shall be reflected solely through
bookkeeping entries. No actual funds shall be set aside. All benefits shall be
paid by the Company from its general assets, and the Participant (or his
Beneficiary) shall have only the rights of a general, unsecured creditor against
the Company for any distributions due hereunder. The foregoing notwithstanding,
the Company shall establish a grantor or "rabbi" trust for the purpose of
enabling the Company to provide for the payment of benefits hereunder as they
come due. Contributions to the rabbi trust shall be made by the Company at such
times and in such amounts as the Board, in its sole discretion, shall determine.
ARTICLE VIII - Administration
8.1 Compensation Committee. The Compensation Committee of the Board
shall be in charge of the operation and administration of the Plan. The
Committee may, however, delegate specific administrative responsibilities to
officers or employees of the Company or to other individuals, all of whom shall
serve at the pleasure of the Committee and, if full-time employees of the
Company, without additional compensation.
8.2 Powers and Duties of Committee. The Committee shall administer the
Plan in accordance with its terms and shall have all the powers necessary to
carry out such terms. The Committee shall act by a majority of its members at
the time in office, and such action may be taken by a vote at a meeting or in
writing without a meeting. The Chairman, or any member of the Committee
designated by the Chairman, shall execute any certificate, instrument or other
written direction on behalf of the Committee and shall direct the payment of
benefits under the Plan. All interpretations of the Plan, and questions
concerning its administration and application, shall be determined by the
Committee in its sole discretion, and such determination shall be binding on all
Participants and their Beneficiaries.
8.3 Records and Reports. The Committee shall maintain records which
shall contain all relevant data pertaining to the Participant and his rights
under the Plan. It shall have the duty to carry into effect all rights or
benefits provided hereunder to the extent Company assets are properly available
therefor.
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8.4 Payments of Expenses. The Company shall pay all expenses of
administering the Plan.
8.5 Indemnification for Liability. The Company shall indemnify the
members of the Committee and other employees of the Company to whom the
Committee has delegated administrative or fiduciary duties against any and all
claims, losses, damages, expenses, and liabilities arising from their
responsibilities in connection with the Plan, unless the same is determined to
be due to gross negligence or willful misconduct.
8.6 Claims Procedure. A claim for benefits under the Plan shall be filed
with the Chairman of the Committee. Written notice of the disposition of a claim
shall be furnished the Participant within 30 days after the application therefor
is filed. In the event the claim is denied, the specific reasons for such denial
shall be set forth, pertinent provisions of the Plan shall be cited and, where
appropriate, an explanation as to how the Participant can perfect his claim will
be provided.
8.7 Claims Review Procedure. The Participant or a Beneficiary who has
been denied a benefit, shall be entitled, upon request to the Chairman of the
Committee, to receive a written notice of such action, together with a full and
clear statement of the reasons for the action. If the Participant or Beneficiary
wishes further consideration of such claimant's position, the claimant may by
written application request a hearing. The written request together with a
written statement of the claimant's position, shall be filed with the Committee
no later than 90 days after receipt of the written notification provided for
above or in Section 8.6. The Committee shall schedule an opportunity for a full
and fair hearing of the issue within 30 days following receipt of the claimant's
written statement. The decision following such hearing shall be made within 30
days of such hearing and shall be communicated in writing to the claimant.
8.8 Reporting and Disclosure Requirements. In order to comply with the
requirements of Title I of ERISA, the Company shall:
(a) File a statement with the Secretary of Labor that includes the
name and address of the employer, the employer identification number
assigned by the Internal Revenue Service, a declaration that the Company
maintains the Plan primarily for the purpose of providing deferred
compensation for a management and highly compensated employee and a
statement of the number of such plans and the number of employees in
each; and
(b) Provide plan documents, if any, to the Secretary of Labor upon
request as required by Section 104(a)(1) of ERISA. It is intended that
this provision comply with requirements of DOL Reg. Section 2520.104-23.
ARTICLE IX - Amendment and Termination
9.1 Amendment and Termination. The Board shall have the right, at any
time, by an affirmative vote of a majority thereof, to amend or terminate, in
whole or in part, the Plan, provided that such amendment or termination shall
not adversely affect the right of the Participant to the benefits set forth in
the Plan as effective June 1, 1996, including the right to accrue further
Interest as provided herein.
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ARTICLE X - Miscellaneous Provisions
10.1 Alienation or Assignment of Benefits. The Participant's rights and
interest under the Plan may not be assigned or transferred prior to his death,
and then only pursuant to the provisions of this Plan.
10.2 Right to Withhold. The Company shall have the right to deduct from
all cash payments any Federal, state or local taxes required by law to be
withheld with respect to such cash payments.
10.3 Construction. All legal questions pertaining to the Plan shall be
determined in accordance with the laws of the Commonwealth of Pennsylvania
except as preempted by Federal law.
10.4 Headings. The headings are for reference only. In the event of a
conflict between a heading and the content of an Article or Section, the content
of the Article or Section shall control.
IN WITNESS WHEREOF, HUNT MANUFACTURING CO. has caused this Plan to be
duly executed, under seal, this ________ day of _______________, 1996.
[CORPORATE SEAL] HUNT MANUFACTURING CO.
Attest:
______________________ By:___________________________
Secretary Chief Executive Officer
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HUNT CORPORATION (FORMERLY HUNT MANUFACTURING CO.)
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
TRUST AGREEMENT
(As Amended and Restated Effective January 1, 1997)
JANUARY 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I -- DEFINITIONS .................................................. 2
1.1 Change in Control ................................................ 2
1.2 Company Securities ............................................... 3
1.3 Death Benefits ................................................... 3
1.4 Deferred Benefits ................................................ 3
1.5 Fiduciary ........................................................ 4
1.6 Grantor .......................................................... 4
1.7 Insurance Contract ............................................... 4
1.8 Insurer .......................................................... 4
1.9 Phantom Stock Account ............................................ 4
1.10 Plan ............................................................. 4
1.11 Supplemental Savings Benefits .................................... 4
1.12 Trust Account .................................................... 4
1.13 Trust Agreement .................................................. 4
1.14 Trust Assets ..................................................... 4
1.15 Trustee .......................................................... 4
1.16 Valuation Date ................................................... 4
ARTICLE 11 -- THE TRUST ASSETS ............................................ 4
2.1 Continuation of Trust ............................................ 4
2.2 Future Contributions ............................................. 5
2.3 Rights in Trust Assets ........................................... 5
2.4 Nontransferability ............................................... 6
2.5 Permitted Investments ............................................ 6
2.6 Investment Directions ............................................ 7
2.7 Allocation of Investment Responsibilities ........................ 7
2.8 Investment after Change in Control ............................... 7
2.9 Distribution of Trust Assets ..................................... 7
2.10 Termination of Trust ............................................. 9
ARTICLE III -- ALLOCATION OF RESPONSIBILITIES ............................. 9
3.1 General Responsibilities ......................................... 9
3.2 Designated Fiduciaries ........................................... 10
3.3 Delegation of Fiduciary Duties; Employment of Agents and Certain
Other Matters .................................................... 10
3.4 Allocation of Responsibility ..................................... 10
3.5 Duties of the Board and Compensation Committee of the Board ...... 11
3.6 Duties of the Committee .......................................... 11
3.7 Duties of Trustee ................................................ 12
3.8 Board, Compensation Committee of the Board and Committee
Directions, Instructions or Data ................................. 15
3.9 Indemnification of Trustee ....................................... 15
ARTICLE IV -- ADMINISTRATIVE PROVISIONS ................................... 16
4.1 General Administrative Powers .................................... 16
4.2 Payment of Deferred Benefits, Death Benefits, Supplemental
Savings Benefits and Plan Exhibits B and C Benefits .............. 17
4.3 Distribution ..................................................... 18
4.4 Account Records .................................................. 18
4.5 Notices, Directions and Other Communications ..................... 19
4.6 Reports by Trustee ............................................... 19
<PAGE>
4.7 Notification of Rights Regarding Securities ...................... 19
4.8 Tax Assessments .................................................. 19
4.9 Validity of Contracts ............................................ 20
4.10 Principal and Income ............................................. 20
ARTICLE V -- PROVISIONS RELATING TO TRUSTEE ............................... 20
5.1 Resignation and Removal .......................................... 20
5.2 Appointment of Successor ......................................... 20
5.3 Information Furnished to Trustee ................................. 21
5.4 Expenses and Trustee Compensation ................................ 21
ARTICLE VI -- AVAILABILITY OF TRUST FUND .................................. 21
6.1 Trust Irrevocable; Amendments .................................... 21
6.2 Participants' Rights to Trust Assets ............................. 22
6.3 Grantor Trust .................................................... 22
ARTICLE VII -- MISCELLANEOUS .............................................. 22
7.1 Applicable Law ................................................... 22
7.2 Binding Effect ................................................... 22
7.3 Separability ..................................................... 22
7.4 Notices to Parties ............................................... 22
7.5 Headings ......................................................... 23
7.6 Gender and Number ................................................ 23
7.7 Incorporation of Plan ............................................ 23
7.8 Conflicting Provisions ........................................... 23
7.9 Effective Date ................................................... 23
7.10 Court Proceedings ................................................ 23
7.11 Successors and Assigns ........................................... 23
7.12 Prohibition on Trustee ........................................... 23
7.13 Power of Company to Substitute Assets ............................ 23
7.14 Voting and Other Rights Associated with Trust Assets ............. 23
TRUST EXHIBIT A-SPECIAL PROVISIONS RELATING TO RONALD J. NAPLES .............A-1
TRUST EXHIBIT B-SPECIAL PROVISIONS RELATING TO DONALD L. THOMPSON ...........B-1
<PAGE>
HUNT CORPORATION (FORMERLY HUNT MANUFACTURING CO.)
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
TRUST AGREEMENT
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
---------------------------------------------------
THIS AMENDED AND RESTATED TRUST AGREEMENT, made by and between HUNT
CORPORATION (FORMERLY HUNT MANUFACTURING CO.) ("Grantor"), with its principal
place of business at One Commerce Square, 2005 Market Street, Philadelphia, PA
19103, and FIRST UNION NATIONAL BANK (successor to CoreStates Bank, N.A.)
("Trustee"), with an office at 123 South Broad Street, Philadelphia, PA 19109,
WITNESSETH:
WHEREAS, effective April 16, 1992, Grantor established the HUNT
CORPORATION (FORMERLY HUNT MANUFACTURING CO.) SUPPLEMENTAL EXECUTIVE BENEFITS
PLAN (the "Plan") to provide deferred compensation to certain eligible
officers who constitute a select group of management or highly compensated
employees of Grantor within the meaning of section 201(2) of ERISA ("Executive
Officers") and to provide death benefits to the beneficiaries ("Beneficiaries")
of certain officers of Grantor ("Corporate Officers"); and
WHEREAS, effective January 1, 1995, Grantor amended the Plan to provide
salary deferral and matching contributions to said Executive Officers and to
make certain other changes; and
WHEREAS, Article IV of the Plan provides for payment of deferred
compensation to Plan participants who are Executive Officers ("Participants") or
their beneficiaries upon death, disability or other termination of employment
("Deferred Benefits"); and
WHEREAS, Article V of the Plan provides for payment of a death benefit
to Beneficiaries of the Corporate Officers upon the death of such Corporate
Officers ("Death Benefits"); and
WHEREAS, Article VI of the Plan provides for supplemental savings
benefits for Plan participants who are Executive Officers ("Supplemental Savings
Benefits"); and
WHEREAS, effective April 16, 1992, Grantor and CoreStates Bank, N.A.
("CoreStates") entered into the HUNT CORPORATION (FORMERLY HUNT MANUFACTURING
CO.) SUPPLEMENTAL EXECUTIVE BENEFITS PLAN TRUST AGREEMENT (the "Trust
Agreement"), whereby Grantor placed certain funds in a grantor trust (the
"Trust") to be used to pay such Deferred Benefits to Participants and their
beneficiaries under the terms and conditions set forth in Article IV of the
Plan, if not otherwise paid by Grantor, and to pay such Death Benefits to the
Beneficiaries of the Corporate Officers under the terms and conditions set forth
in Article V of the Plan, if not otherwise paid by Grantor; and
WHEREAS, effective February 17, 1993, Grantor and CoreStates amended and
restated the Trust Agreement in order to provide for a broader range of
investment alternatives and to facilitate the payment of benefits paid under the
Plan from the Trust from the investments held in the Trust or from contributions
made by the Grantor to the Trust prior to the investment thereof; and
WHEREAS, effective January 1, 1995, Grantor and CoreStates again amended
and restated the Trust Agreement in order to place certain funds in the Trust to
be used to pay said Supplemental Savings Benefits to Participants and their
beneficiaries under the terms and conditions set forth in Article VI of the
Plan, if not otherwise paid by Grantor, and to make certain other changes; and
<PAGE>
WHEREAS, effective January 1, 1996, the Plan was amended by adding
thereto Plan Exhibits B and C and by making certain other changes in order to
provide certain benefits to Ronald J. Naples, formerly Chief Executive Officer
of Grantor, and to Donald L. Thompson, Chairman and Chief Executive Officer of
Grantor; and
WHEREAS, effective January 1, 1996, Grantor and CoreStates amended and
restated the Trust Agreement in order to conform the Trust Agreement to the
Plan, as amended and restated effective January 1, 1996; and
WHEREAS, effective January 1, 1997, the Plan was amended to provide for
additional savings amounts to certain participants; to clarify the definition of
compensation for purposes of salary deferrals under the Plan; to permit
Participants in the Plan to defer different components of compensation at
different Deferral Percentages; to permit the Trustee, at the direction of the
Committee, to invest Deferral Accounts, Matching Accounts and the Phantom Stock
Account under the Plan in Company Securities; and to make certain other changes;
and
WHEREAS, effective January 1, 1997, Grantor and Trustee, as successor to
CoreStates, desire to amend and restate the Trust Agreement in order to conform
the Trust Agreement to the Plan, as thus amended and restated effective January
1, 1997, and to change the responsibility for tax withholding under the Trust
and to make certain other changes;
NOW, THEREFORE, EFFECTIVE JANUARY 1, 1997, UNLESS SPECIFICALLY PROVIDED
OTHERWISE:
(a) The Grantor hereby reappoints FIRST UNION NATIONAL BANK
(successor to CoreStates), as trustee of the grantor trust continued by
this Trust Agreement;
(b) FIRST UNION NATIONAL BANK accepts its reappointment as trustee
of the grantor trust continued by this Trust Agreement and agrees to
hold all funds which it has received and may receive hereunder, IN
TRUST, upon the terms and conditions hereinafter stated; and
(c) The parties hereto, intending to be legally bound hereby, agree
as follows:
ARTICLE I -- DEFINITIONS
------------------------
Except as otherwise provided in this Article I, and unless the context
of this Trust Agreement clearly indicates otherwise, the terms defined in the
Plan shall, when used herein, have the same meaning as in the Plan. The
following additional words and phrases, as used herein, shall have the following
meanings, unless the context clearly indicates otherwise:
1.1 Change in Control: A "Change in Control" of the Grantor shall be
deemed to have occurred if:
(a) Any person (a "Person"), as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than (1) the Grantor and/or its wholly-owned
subsidiaries, (2) any ESOP or other employee benefit plan of the
Grantor, and any trustee or other fiduciary in such capacity holding
securities under such plan, (3) any corporation owned, directly or
indirectly, by the shareholders of the Grantor in substantially the same
proportions as their ownership of stock of the Grantor or (4) the
Participant or any group of Persons of which he voluntarily is a part),
is or becomes the
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<PAGE>
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Grantor representing thirty (30) percent or
more of the combined voting power of the Grantor's then outstanding securities,
or such lesser percentage of voting power, but not less than fifteen (15)
percent, as the Board shall determine; provided, however, that a Change in
Control shall not be deemed to have occurred under the provisions of this
Section 1.11(a) by reason of the beneficial ownership of voting securities by
members of the Bartol Family (as defined below) unless and until the beneficial
ownership of all members of the Bartol Family (including any other individuals
or entities who or which, together with any member or members of the Bartol
Family, are deemed under Sections 13(d) or 14(d) of the Exchange Act to
constitute a single Person) exceeds fifty (50) percent of the combined voting
power of the Grantor's then outstanding securities.
(b) During any two-(2-) year period beginning after September 12, 1990,
Directors of the Grantor in office at the beginning of such period plus any new
Director (other than a Director designated by a Person who has entered into an
agreement with the Grantor to effect a transaction within the purview of Section
1.1(a) or (c)) whose election by the Board, or whose nomination for election by
the Grantor's shareholders, was approved by a vote of at least two-thirds (2/3)
of the Directors then still in office who either were Directors at the beginning
of the period or whose election or nomination for election was previously so
approved, shall cease for any reason to constitute at least a majority of the
Board; or
(c) The Grantor's shareholders or the Board shall approve (1) any
consolidation or merger of the Grantor in which the Grantor is not the
continuing or surviving corporation or pursuant to which the Grantor's voting
common shares (the "Common Shares") would be converted into cash, securities
and/or other property, other than a merger of the Grantor in which holders of
Common Shares immediately prior to the merger have the same proportionate
ownership of common shares of the surviving corporation immediately after the
merger as they had in the Common Shares immediately before, (2) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets or earning power of the
Grantor, or (3) the liquidation or dissolution of the Grantor.
As used in this Section 1.1, "Members of the Bartol Family" shall mean
the wife, children and descendants of such children of the late George E. Bartol
III, their respective spouses and estates, and trusts primarily for the benefit
of any of the foregoing and the administrators, executors and trustees of any
such estates or trusts.
Whether a Change in Control has occurred shall be determined by the
Compensation Committee of the Board (as it is constituted on the day preceding
the date of the Change in Control) subject to the provisions of Section 3.7(d).
1.2 Company Securities: Company Securities as defined in the Plan.
1.3 Death Benefits: The benefits payable to Beneficiaries of
Participants who are Corporate Officers or former Corporate Officers under the
terms of Article V of the Plan and Plan Exhibits B and C. The term "Death
Benefits" shall also include paid-up Insurance Contracts which may be purchased
for Participants who are Corporate Officers or former Corporate Officers under
Article V of the Plan and Plan Exhibits B and C in the event of a Change in
Control.
1.4 Deferred Benefits: The benefits payable to Participants who are
Executive Officers or former Corporate Officers under the terms of Article IV of
the Plan and Plan Exhibits B and C.
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<PAGE>
1.5 Fiduciary: The Board, the Compensation Committee of the Board, the
Committee, the Trustee, and any person to whom the responsibilities of such
persons under this Trust Agreement are delegated in accordance with Section 3.3.
References to such persons as Fiduciaries herein are for convenience only and
shall not be construed to create or enlarge any duties of such persons under any
statute or at common law. The Grantor and Trustee intend that such persons shall
not be subject to the fiduciary responsibility provisions of Part 4 of Title I
of ERISA.
1.6 Grantor: HUNT CORPORATION (FORMERLY HUNT MANUFACTURING CO.).
1.7 Insurance Contract: Any insurance contract issued by an Insurer.
1.8 Insurer: Any insurance company authorized to do business in any
state provided such insurance company has the highest rating (AA or better from
Standard and Poor's Corporation, Moody's Investors Services, or Duff and Phelps,
or A+ from A.M. Best) from any two (2) of Standard and Poor's Corporation,
Moody's Investors Services, A.M. Best, and Duff and Phelps.
1.9 Phantom Stock Account: The Phantom Stock Account maintained for
Donald L. Thompson under Plan Exhibit C and Trust Exhibit B.
1.10 Plan: The HUNT CORPORATION (FORMERLY HUNT MANUFACTURING CO.)
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN, as the same may be amended from time to
time.
1.11 Supplemental Savings Benefits: The benefits payable to Participants
who are Executive Officers or former Executive Officers under the terms of
Article VI of the Plan and Plan Exhibits B and C.
1.12 Trust Account: An account to which Trust Assets are allocated to
cover the Grantor's obligations to a Participant or Beneficiary under the Plan.
1.13 Trust Agreement: The HUNT CORPORATION (FORMERLY HUNT MANUFACTURING
CO.) SUPPLEMENTAL EXECUTIVE BENEFITS PLAN TRUST AGREEMENT, as set forth
herein and as the same may be amended from time to time.
1.14 Trust Assets: The Insurance Contracts, cash, Company Securities,
and other property contributed by Grantor to the Trust under Sections 2.1 and
2.2, and any earnings thereon.
1.15 Trustee: CORESTATES BANK, N.A., prior to its merger with and
into FIRST UNION NATIONAL BANK, and thereafter FIRST UNION NATIONAL BANK or any
corporate successor thereto appointed by the Committee to administer the Trust.
1.16 Valuation Date: The last day of each Plan Year and each February
28/29, May 31, and August 31, and such other date or dates as the Committee
shall from time to time direct the Trustee.
ARTICLE II -- THE TRUST ASSETS
------------------------------
2.1 Continuation of Trust: The Trustee shall continue to hold, manage,
and distribute, as hereinafter provided, the assets of the Trust. As of January
1, 1997, such assets consist of Insurance Contracts on the lives of the
Participants in the Plan and such cash and other property as has been
contributed to the Trust. Each Insurance Contract and other amounts shall
continue to be held by and owned by the Trustee as agent of the Grantor, and to
be allocated to the Trust Account
-4-
<PAGE>
maintained with respect to the Participant on whose life such Insurance Contract
was purchased or with respect to whom such additional amounts were contributed.
2.2 Future Contributions: At the direction of the Committee, the Grantor
shall contribute to the Trust such amounts as are necessary to purchase
Insurance Contracts providing benefits under the Plan and to make scheduled
premium payments under such Insurance Contracts, and any additional amounts
necessary to cover the Grantor's potential liabilities under the Plan to each
Participant. Any such Insurance Contract or additional amounts shall be
allocated to the Trust Account maintained with respect to the Participant on
whose life such Insurance Contract was purchased or with respect to whom such
additional amounts are contributed. The Grantor's contributions may consist of
cash, Insurance Contracts, Company Securities, or other property valued at fair
market value and acceptable to the Trustee. All contributions shall be paid to
the Trustee for investment and reinvestment pursuant to the terms of this Trust
Agreement and in accordance with the written directions issued by the Committee
pursuant to Section 2.6. The Trustee shall have no duty to determine or inquire
whether any contributions to this Trust are in compliance with the Plan, or to
compute any amount to be paid to the Trustee; nor shall the Trustee be
responsible for the collection or adequacy of any contributions to this Trust to
meet and discharge liabilities to the Participants and/or Beneficiaries under
the Plan. Notwithstanding the foregoing, no Company Securities shall be
contributed to the Plan unless such contribution is approved by the Board of
Directors of the Company or such Company Securities are held in the Account of
the Participant on behalf of whom such contribution is made for a period of at
least six months from the date contributed.
2.3 Rights in Trust Assets:
(a) Use of Trust Assets: The Trust Assets shall remain in this
Trust until:
(1) Used to pay all Deferred Benefits due the Participants
under Article IV of the Plan and Plan Exhibits B and C;
(2) Used to pay all Death Benefits due to Participants or
Beneficiaries under Article V of the Plan and Plan Exhibits B and
C;
(3) Used to pay all Supplemental Savings Benefits due the
Participants under Article VI of the Plan and Plan Exhibits B and
C;
(4) Used to pay all other payments due under, or pursuant to,
Plan Exhibits B and C;
(5) Used to pay the expenses of this Trust;
(6) Used to pay the claims of Insolvency Creditors of the
Grantor; or
(7) Returned to the Grantor on termination of this Trust
pursuant to Section 2.10.
(b) Purposes: The Trustee shall hold, invest, and dispose of all
Trust Assets in accordance with the applicable provisions of the Plan
and this Trust Agreement. Until such time as all Deferred Benefits due
the Participants have been paid, and until such time as all Death
Benefits due the Participants and Beneficiaries have been paid, and
until such time as all Supplemental Savings Benefits due the
Participants have been paid, and until such time as all other payments
due Ronald J. Naples and Donald L. Thompson under, or pursuant to, Plan
-5-
<PAGE>
Exhibits B and C have been made, no part of the Trust Assets, other
than such part as is required to pay taxes or administration expenses as
provided herein, shall be used for, or diverted to, purposes other than
the payment of Deferred Benefits to the Participants, or the payment of
Death Benefits to the Participants and Beneficiaries, or the payment of
Supplemental Savings Benefits to the Participants, or the payment of
other benefits to Ronald J. Naples and Donald L. Thompson under, or
pursuant to, Plan Exhibits B and C, or the payment of obligations to the
Insolvency Creditors of the Grantor.
(c) Insolvency Creditors: All Trust Assets held shall at all times
remain subject to the claims, if any, of the Insolvency Creditors of the
Grantor.
(d) Return to Grantor: Trust Assets remaining in this Trust, if any,
after all Deferred Benefits due the Participants and all Death Benefits
due the Participants and Beneficiaries and all Supplemental Savings
Benefits due the Participants and all other benefits due Ronald J.
Naples and Donald L. Thompson under, or pursuant to, Plan Exhibits B and
C are paid shall revert to the Grantor in accordance with Section 2.10.
2.4 Nontransferability: Except as otherwise required by applicable law,
the interest, if any, of the Participants and Beneficiaries in this Trust shall
not be subject to anticipation, alienation, sale, transfer, assignment, pledge
or encumbrance, nor to legal process, nor to the debts, contracts, liabilities,
engagements or torts of any Participant or Beneficiary.
2.5 Permitted Investments:
(a) In General: All investments under this Article II may be made in
any property, real, personal, or mixed, including, with respect to
Supplemental Savings Benefits and the Phantom Stock Account only,
investment in Company Securities, wherever such property is situate,
without being limited to the classes of property in which trustees are
authorized to invest trust funds by any law, or any rule of court, of
any state.
(b) Investment of Accounts under Article VI of Plan: Each Executive
Officer Participant's Basic, Deferral, and Matching Accounts under Article VI of
the Plan shall be invested by the Trustee in accordance with the investment
directions of such Executive Officer Participant, but only from the investments
made available under the Plan by the Committee or its designee. Such
investments may be determined by the Committee or its designee based on the
recommendations of an Investment Advisor. Investments for the Basic, Deferral,
and Matching Accounts of any Executive Officer Participant under Article VI of
the Plan may include any property, real, personal, or mixed, including, but not
limited to, insurance contracts, mutual funds, and Company Securities, wherever
such property is situate, without limitation. Notwithstanding the foregoing, the
following rules shall apply:
(i) Any Company Securities which are unvested Company stock grants
that are transferred to the Trust by an Executive Officer Participant
shall be allocated to such Participant's Accounts only under the Trust.
(ii) Any dividends paid with respect to Company Securities held in
any Executive Officer Participant's Account under the Plan shall be paid
in cash and invested in accordance with the investment directions of the
Executive Officer Participant under this Section 2.5(b).
-6-
<PAGE>
(iii) Effective October 1, 1998, amounts held in any Executive
Officer Participant's Account which are invested in Company Securities
may not be reinvested in any other investment.
(iv) No investment in Company Securities shall be permitted with
respect to any Executive Officer Participant's Accounts, if such
investment would subject such Executive Officer Participant to liability
under section 16(b) of the Securities Exchange Act of 1934.
2.6 Investment Directions: The Committee shall provide written
investment directions to the Trustee, except as otherwise provided in Section
2.5 with respect to amounts in an Executive Officer Participant's Basic,
Deferral, and Matching Accounts. The investment directions shall be in
accordance with Sections 2.5, 2.8 and the terms of the Plan. In no event,
however, shall investment rights be exercisable by or rest with Plan
Participants, except as otherwise provided in Section 2.5 with respect to
amounts in an Executive Officer Participant's Basic, Deferral, and Matching
Accounts.
2.7 Allocation of Investment Responsibilities: The Trustee shall control
and manage the Trust Assets, and shall invest and reinvest the same without
distinction between income and principal in accordance with the guidelines in
Sections 2.5, 2.8, the written investment directions issued by the Committee
pursuant to Sections 2.6 and 3.6(b), and the terms of the Plan; provided,
however, that at any time prior to the date of any Change in Control (but not
after such date) the Committee may allocate and reallocate investment
responsibility with respect to any Trust Assets between the Committee and the
Trustee. Any such allocation or reallocation of investment responsibility shall
be made by the Committee in a written instrument delivered to the Trustee.
2.8 Investment after Change in Control: Upon any Change in Control, the
Trust Assets, to the extent not invested in Insurance Contracts, shall be
invested and reinvested in short-term liquid investments until such Trust Assets
are used to pay out the Deferred Benefits to the Participants in accordance with
Section 7.1 (c)(1) of the Plan and to provide for the payment of Death Benefits
to the Participants and Beneficiaries in accordance with Section 7.1(c)(2) of
the Plan and to pay out the Supplemental Savings Benefits to the Participants in
accordance with Section 7.1(c)(3) of the Plan and to pay out the other Plan
Exhibit B and C benefits to Ronald J. Naples and Donald L. Thompson in
accordance with Plan Exhibits B and C.
2.9 Distribution of Trust Assets:
(a) Payment of Deferred Benefits, Death Benefits, Supplemental
Savings Benefits and Other Plan Exhibits B and C Benefits: The Trustee
shall pay the Grantor and the Grantor shall, in turn, pay the Deferred
Benefits in cash to Participants (or, at the election of Participants
pursuant to the Plan, shall distribute paid-up Insurance Contracts to
Participants) in satisfaction of the Grantor's obligations under the
Plan and the Trustee shall pay the Grantor and the Grantor shall, in
turn, pay the Death Benefits in cash to Beneficiaries in satisfaction of
the Grantor's obligations under the Plan and the Trustee shall pay the
Grantor and the Grantor shall, in turn, pay the Supplemental Savings
Benefits in cash to Participants (or, at the election of Participants
pursuant to the Plan, shall distribute paid-up Insurance Contracts to
Participants) in satisfaction of the Grantor's obligations under the
Plan and the Trustee shall pay the Grantor and the Grantor shall, in
turn, pay the other benefits provided under, or pursuant to, Plan
Exhibits B and C to Ronald J. Naples and Donald L. Thompson,
respectively (or, at the election of Ronald J. Naples or Donald L.
Thompson, as applicable, pursuant to the Plan, shall distribute paid-up
Insurance Contracts to Ronald J. Naples or Donald L. Thompson, as
applicable), in satisfaction of the Grantor's obligations under, or
pursuant to, Plan Exhibits B and C to the extent Grantor does not make
such payments
-7-
<PAGE>
directly from non-Trust assets to Participants and Beneficiaries, respectively
(or to Ronald J. Naples or Donald L. Thompson under, or pursuant to, Plan
Exhibits B and C, as applicable). Notwithstanding the foregoing, to the extent
the Accounts of any Participant are invested in Company Securities, distribution
shall only be made in Company Securities unless the Participant elects and the
Board of Directors of the Company approves the distribution to such Participant
in cash. Such election shall be made in accordance with the terms of the Plan.
Moreover, notwithstanding the foregoing, to the extent the Phantom Stock Account
is invested in Company Securities, distribution from such Account shall be made
in Company Securities unless Donald L. Thompson elects and the Board of
Directors of the Company approves a cash distribution of such Account. Such
election shall be made in accordance with the terms of the Plan. To the extent
sufficient Trust Assets do not exist to pay Deferred Benefits to a Participant
or Death Benefits to a Participant or Beneficiary or Supplemental Savings
Benefits to a Participant, or other benefits under, or pursuant to, Plan
Exhibits B and C to Ronald J. Naples and Donald L. Thompson, respectively,
neither the Trust nor Trustee shall be liable to such Participant or such
Beneficiary. The Grantor's obligations shall not be limited to the value of the
Trust Assets, and a Participant and/or Beneficiary (as applicable) shall have a
claim against the Grantor for any payment not made from the Trust to such
Participant and/or Beneficiary. The Trustee shall make payments to the Grantor
for the benefit of the Participant and/or Beneficiary in accordance with Section
4.2. The Grantor shall make any required income and other tax withholding and
shall pay amounts withheld to the appropriate taxing authorities.
(b) Acceleration of Payments: Notwithstanding any other provision of
this Trust Agreement, if the Trustee determines, based on a change in the tax or
revenue laws of the United States, a published ruling or similar announcement
issued by the Internal Revenue Service, a regulation issued by the Secretary of
the Treasury or his delegate, a decision by a court of competent jurisdiction
involving a Participant, or a closing agreement involving a Participant made
under section 7121 of the Code that is approved by the Commissioner, that such
Participant or Beneficiary has recognized or will recognize income for Federal
income tax purposes with respect to the Deferred Benefits that are or will be
payable to the Participant or the Death Benefits that are or will be payable to
the Participant or Beneficiary or the Supplemental Savings Benefits that are or
will be payable to the Participant or the other benefits that are or will be
payable under, or pursuant to, Plan Exhibits B and C to Ronald J. Naples and
Donald L. Thompson before they otherwise would be paid to the Participant or the
Beneficiary (as applicable), upon the request of the Participant or Beneficiary,
the Trustee shall immediately make distribution to the Grantor and the Grantor
shall, in turn, make immediate distribution to the Participant or Beneficiary of
the amount so taxable. In the event of such payments, the Grantor shall withhold
from such payments the amounts required to satisfy any income and other tax
withholding and shall pay over such amounts to the appropriate taxing
authorities.
Moreover, in the event of a Change in Control, payment of Deferred
Benefits provided under Article IV of the Plan (and any additional amounts
provided under Section 7.1(c)(1) of the Plan) shall be made in accordance with
Article IV of the Plan and Section 7.1(c)(1) of the Plan and payment of Death
Benefits provided under Article V of the Plan (and any additional amounts
provided under Section 7.1(c)(2) of the Plan) shall be made in accordance with
Article V of the Plan and Section 7.1(c)(2) of the Plan and payment of
Supplemental Savings Benefits provided under Article VI of the Plan (and any
additional amounts provided under Section 7.1(c)(3) of the Plan) shall be made
in accordance with Article VI of the Plan and Section 7.1 (c)(3) of the Plan and
the payment of benefits under, or pursuant to, Plan Exhibits B and C shall be
made in accordance with Plan Exhibits B and C. Moreover, in the event the
Compensation Committee of the Board determines that the Trust does not provide
adequate
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<PAGE>
security for payment of benefits under the Trust pursuant to Section
7.2 of the Plan, at the direction of the Compensation Committee of the
Board, payment of Deferred Benefits provided under Article IV of the
Plan (and any additional amounts provided under Section 7.2(b)(1) of the
Plan) shall be made in accordance with Article IV of the Plan and
Section 7.2(b)(1) of the Plan and payment of Death Benefits provided
under Article V of the Plan (and any additional amounts provided under
Section 7.2(b)(2) of the Plan) shall be made in accordance with Article
V of the Plan and Section 7.2(b)(2) of the Plan and payment of
Supplemental Savings Benefits provided under Article VI of the Plan (and
any additional amounts provided under Section 7.2(b)(3) of the Plan)
shall be made in accordance with Article VI of the Plan and Section
7.2(b)(3) of the Plan and payment of benefits provided under, or
pursuant to, Plan Exhibits B and C for Ronald J. Naples and Donald L.
Thompson, respectively, shall be made in accordance with Plan Exhibits B
and C.
(c) Confirmation of Payment: The Grantor shall provide the Committee
with written confirmation of the fact and time of any payment hereunder
within ten (10) business days after any payment to a Participant or a
Beneficiary is made or any series of payments to a Participant
commences.
2.10 Termination of Trust: The Trust shall terminate on the first date
on which:
(a) All Deferred Benefits due Participants and all Death Benefits
due Participants or Beneficiaries and all Supplemental Savings Benefits
due Participants and all benefits due Ronald J. Naples and Donald L.
Thompson under, or pursuant to, Plan Exhibits B and C, respectively,
have been paid; or
(b) There are no remaining Trust Assets.
Upon termination of the Trust, any and all Trust Assets remaining in the
Trust, after the payment to Participants and Beneficiaries of all amounts to
which they are entitled and after payment of expenses under Section 5.4, shall
revert to the Grantor, and the Trustee shall promptly take such action as shall
be necessary to transfer any such Trust Assets to the Grantor. In no event,
however, shall the Trust be terminated solely for the purpose of accelerating
the payment of Deferred Benefits or Death Benefits or Supplemental Savings
Benefits hereunder or solely for the purpose of accelerating the payment of
benefits under, or pursuant to, Plan Exhibit B and/or C.
ARTICLE III -- ALLOCATION OF RESPONSIBILITIES
---------------------------------------------
3.1 General Responsibilities: In establishing and continuing this Trust,
it is the intention of the Grantor and the Trustee that, except in the event of
the Insolvency of the Grantor or subsequent to the satisfaction of all
liabilities of the Grantor to the Participants under Article IV of the Plan and
to the Participants or Beneficiaries under Article V of the Plan and to the
Participants under Article VI of the Plan and to Ronald J. Naples and Donald L.
Thompson under, or pursuant to, Plan Exhibits B and C, all Trust Assets held
pursuant to this Trust shall be used only for the following purposes:
(a) To pay any Deferred Benefits due the Participants;
(b) To pay any Death Benefits due the Participants or Beneficiaries;
(c) To pay any Supplemental Savings Benefits due the Participants;
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(d) To pay any other benefits due Ronald J. Naples and Donald L.
Thompson under, or pursuant to, Plan Exhibits B and C, respectively; or
(e) To pay the expenses, including Trustee's fees, incurred in the
administration of this Trust and any taxes assessed in accordance with
Section 4.8.
In the event of the Insolvency of the Grantor, all Trust Assets then
held pursuant to this Trust shall be available to pay the claims of any
Insolvency Creditor of the Grantor to whom a distribution may be made in
accordance with state and Federal bankruptcy laws to the same extent that
unencumbered assets held by the Grantor are available to satisfy such claims.
Each Fiduciary, in carrying out the responsibilities assigned to him under this
Trust Agreement, shall act in accordance with the intent and the terms of the
Plan and this Trust Agreement using the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
3.2 Designated Fiduciaries: The following Fiduciaries are designated to
control and manage the operation and administration of this Trust:
(a) The Board, including, but not limited to, the Compensation
Committee of the Board;
(b) The Committee; and
(c) The Trustee.
3.3 Delegation of Fiduciary Duties; Employment of Agents and Certain
Other Matters: Each Fiduciary (other than the Trustee) designated pursuant to
Section 3.2 (herein referred to as a "designated Fiduciary") may delegate any or
all of its responsibilities to persons who are not designated Fiduciaries with
respect to the specific responsibility or responsibilities so delegated;
provided, however, that the duties of the Compensation Committee (as it is
constituted on the day preceding the date of a Change in Control) may not be
delegated following a Change in Control. Any such delegation shall be in writing
and shall be made a permanent part of the records of the designated Fiduciary.
Such delegation shall be reviewed periodically by the designated Fiduciary and
shall be terminable under such conditions and upon such notice as the designated
Fiduciary, in its sole discretion, deems reasonable and prudent under the
circumstances. No such delegation shall relieve a Fiduciary from liability for a
breach by persons to whom responsibilities have been delegated. In addition,
each designated Fiduciary (including the Trustee) shall be entitled to employ
and consult with such agents and counsel as may be reasonably necessary in
connection with the performance of such designated Fiduciary's responsibilities
hereunder, and to pay them or cause them to be paid reasonable compensation out
of this Trust.
3.4 Allocation of Responsibility: The responsibilities of the
Fiduciaries designated in Section 3.2 shall be allocated among them as provided
in Sections 3.5 through 3.8, and the Committee may allocate among its designees
its responsibilities under this Trust, and the Board and the Compensation
Committee of the Board (except to the extent prohibited after a Change in
Control under Section 3.3) may do the same with respect to the responsibilities
of the Board and the Compensation Committee of the Board hereunder. Except as
otherwise provided by applicable law, no Fiduciary shall be liable for a breach
by another Fiduciary.
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3.5 Duties of the Board and Compensation Committee of the Board: The
Board shall provide written notice to the Trustee of the Grantor's Insolvency as
soon as possible after such Insolvency becomes known to the Grantor.
Upon a Change in Control, the Compensation Committee of the Board (as it
is constituted on the day preceding the date of the Change in Control) may, in
its discretion, issue written directions to the Trustee which shall govern the
distribution of Trust Assets in accordance with Section 7.1 (c)(1) of the Plan
with respect to Deferred Benefits and in accordance with Section 7.1 (c)(2) of
the Plan with respect to Death Benefits and in accordance with Section 7.1(c)(3)
of the Plan with respect to Supplemental Savings Benefits and in accordance with
Plan Exhibits B and C with respect to benefits payable under, or pursuant to,
Plan Exhibits B and C. The directions shall be in accordance with Section
7.1(c)(1) of the Plan with respect to Deferred Benefits and in accordance with
Section 7.1 (c)(2) of the Plan with respect to Death Benefits and in accordance
with Section 7.1 (c)(3) of the Plan with respect to Supplemental Savings
Benefits and in accordance with Plan Exhibits B and C with respect to benefits
payable under, or pursuant to, Plan Exhibits B and C all as they exist on the
day before the date of any Change in Control. After such written directions have
been issued to the Trustee, they shall be amended only with the consent of the
Participant or Beneficiary to whom such directions apply. Said Compensation
Committee of the Board shall furnish a copy of the directions issued under this
Section 3.5 to the Trustee who shall promptly acknowledge receipt of such
directions to the Grantor and shall furnish a copy of such directions to each
Participant and to each Beneficiary.
In the event that all members of the Compensation Committee of the Board
(as it is constituted on the day preceding the date of a Change in Control) die
or otherwise become incapacitated, the duties and responsibilities of the
Compensation Committee shall devolve upon the Trustee.
3.6 Duties of the Committee: The Committee shall have sole authority and
responsibility for:
(a) Prior to a Change in Control, the removal of the Trustee and the
appointment of one or more successor Trustees, subject to the provisions of
Sections 5.1 and 5.2;
(b) The issuance of written investment directions pursuant to Section
2.6 and in accordance with the standards set forth in Section 2.8 and with the
terms of the Plan to be followed by the Fiduciary or Fiduciaries to whom
investment responsibilities have been allocated;
(c) The allocation of investment responsibilities between itself and
the Trustee in accordance with Section 2.10;
(d) Subject to the provisions of Sections 3.5 and 3.7(a)(4) and prior to
a Change in Control, the issuance of written directions to the Trustee which
shall govern the distribution of Trust Assets; such directions shall be made in
accordance with the terms of the Plan;
(e) Providing to the Trustee such statements as may be appropriate to
inform the Trustee of Deferred Benefits payable to the Participants and of Death
Benefits payable to Participants and Beneficiaries and of Supplemental Savings
Benefits payable to the Participants and of other benefits payable to Ronald J.
Naples and Donald L. Thompson under, or pursuant to, Plan Exhibits B and C, as
they exist on the day before the date of any Change in Control and as may be
required by the Trustee to implement the written directions issued by the
Compensation Committee of the Board under Section 3.5 or the Committee under
Section
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3-6(b); after the day before the date of any Change in Control, such statements
shall be amended only with the consent of the Participants under the Plan;
(f) The preparation and filing of reports and other information concerning
this Trust as may be required by the Plan, the Trust Agreement and by applicable
law, except such reports and information as are specifically required by law to
be prepared and filed by the Trustee;
(g) Subject to the provisions of Section 2.7, acting on behalf of the
Grantor in connection with the termination of this Trust;
(h) Except as provided in Section 3.5, all other acts permitted or required
to be performed by the Grantor under this Trust Agreement.
3.7 Duties of Trustee:
(a) Authority and Responsibility: The Trustee shall have sole authority
and responsibility for:
(1) The control, management, investment, and reinvestment of the
Trust Assets of this Trust in accordance with the written investment
directions provided by the Committee under Section 3.6(b) and by the
Executive Officer Participants under Section 2.5(b) and in accordance
with the standards set forth in Section 2.8 and with the terms of the
Plan, unless and to the extent the Committee has allocated such powers
to another Fiduciary;
(2) The valuation of the Trust Assets;
(3) The maintenance and production of records and reports pertaining
to the administration of this Trust;
(4) At the request of a Participant or Beneficiary, determining
whether the written distribution instructions issued by the Compensation
Committee of the Board pursuant to Section 3.5 or by the Committee
pursuant to Section 3.6(b) (or in either case, the failure to issue
written instructions) are in accordance with the terms of the Plan as it
exists on the day before the date of any Change in Control and then
determining what the rights of such Participant or Beneficiary are;
(5) Payment of Deferred Benefits in accordance with Article IV of
the Plan and Section 7.1(c)(1) of the Plan and Section 4.2 and Death
Benefits in accordance with Article V of the Plan and Section 7.1 (c)(2)
of the Plan and Section 4.2 and payment of Supplemental Savings Benefits
in accordance with Article VI of the Plan and Section 7.1(c)(3) of the
Plan and Section 4.2 and payment of benefits under, or pursuant to, Plan
Exhibits B and C;
(6) Promptly furnishing to the Participants a copy of the written
notice of Insolvency received pursuant to Section 3.5; and
(7) The performance of the general administrative powers conferred
under Article IV; subject, however, to the directions of Fiduciaries
specifically authorized to direct the Trustee with respect to the
exercise of such powers.
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(b) Insolvency: In the event that the Trustee is informed of the
Grantor's Insolvency pursuant to Section 3.5, the Trustee shall suspend payments
to the Participants under Article IV of the Plan and to the Participants and
Beneficiaries under Article V of the Plan and to the Participants under Article
VI of the Plan and to Ronald J. Naples and Donald L. Thompson under, or pursuant
to, Plan Exhibits B and C and shall hold the Trust Assets for the benefit of the
Insolvency Creditors of the Grantor. In addition, if the Trustee receives other
written allegations of the Grantor's Insolvency, the Trustee shall suspend
payments of Deferred Benefits to the Participants and payments of Death Benefits
to the Participants and Beneficiaries and payments of Supplemental Savings
Benefits to the Participants and payments of other benefits to Ronald J. Naples
and Donald L. Thompson under, or pursuant to, Plan Exhibits B and C and shall
hold the Trust Assets for the benefit of the Grantor's Insolvency Creditors, and
shall take such steps as it determines, in its sole discretion, to be reasonably
necessary to determine within thirty (30) days whether the Grantor is Insolvent.
Upon a determination that the Grantor is solvent, the Trustee shall resume
payments of Deferred Benefits to the Participants and payments of Death Benefits
to the Participants and Beneficiaries and payments of Supplemental Savings
Benefits to the Participants and payments of other benefits to Ronald J. Naples
and Donald L. Thompson under, or pursuant to, Plan Exhibits B and C, including
any Deferred Benefits or Death Benefits or Supplemental Savings Benefits or Plan
Exhibit B benefits or Plan Exhibit C benefits previously suspended. In the case
of the Trustee's actual knowledge of, or determination of, or receipt of a court
order evidencing the Grantor's Insolvency, the Trustee shall deliver Trust
Assets as necessary to satisfy claims of the Insolvency Creditors of the Grantor
as directed by a court of competent jurisdiction. Unless the Trustee has actual
knowledge of the Grantor's Insolvency, or has received notice from the Grantor
or a person claiming to be a creditor alleging Grantor's Insolvency, the Trustee
shall have no duty to inquire as to the Insolvency of Grantor. The Trustee may,
in all events, rely on such evidence concerning Grantor's solvency as may be
furnished to the Trustee pursuant to this Section 3.7(b) and that provides the
Trustee with a reasonable basis for making a determination concerning Grantor's
solvency.
(c) Change in Control: If a Change in Control occurs:
(1) Subject to Sections 7.1(c)(1) and 7.1(c)(2) and 7.1(c)(3) of
the Plan and Plan Exhibits B and C, the Trustee shall follow the written
distribution directions issued by the Compensation Committee of the
Board pursuant to Section 3.5; provided, however, that if the Trustee
determines, pursuant to Section 3.7(a)(4), that the written distribution
instructions issued by the Compensation Committee of the Board pursuant
to Section 3.5 or the Committee pursuant to Section 3.6 are not in
accord with the Plan as it exists on the day before the date of any
Change in Control, or if there are no written directions from the
Compensation Committee, the Trustee shall determine the rights of
Participants and Beneficiaries; and
(2) The Trustee shall distribute the Trust Assets in accordance with
Section 7.1 (c)(1) of the Plan with respect to Deferred Benefits and
Section 7.1 (c)(2) of the Plan with respect to Death Benefits and
Section 7.1(c)(3) of the Plan with respect to Supplemental Savings
Benefits and in accordance with Plan Exhibits B and C with respect to
benefits payable under, or pursuant to, Plan Exhibits B and C.
(d) Determination of Change in Control: At the request of fifty-one (51)
percent or more of the Participants in the Plan, or in the Trustee's discretion,
the Trustee shall request that the Grantor furnish evidence to enable the
Trustee to determine whether a Change in Control has occurred. The Trustee shall
make such determination in accordance with the definition of Change in Control
in this Trust Agreement. In performing its duties pursuant to
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Sections 2.9, 4.2 and 4.3, the Trustee may rely on its determination, including
an opinion of counsel (who may be counsel to the Trustee), that a Change in
Control has occurred, as long as the Trustee acts in accordance with the terms
of the Plan and this Trust Agreement using the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. Except as provided in the
next succeeding sentence, the Trustee's determination that a Change in Control
has occurred shall be binding and conclusive on all persons. Notwithstanding the
foregoing, if the Compensation Committee of the Board (as it is constituted on
the day before the date of a Change in Control) determines that a Change in
Control has occurred prior to the date such determination is made by the Trustee
or, if the Trustee has determined that a Change of Control has not occurred,
after the date of such Trustee determination, the determination of the
Compensation Committee of the Board that a Change in Control has occurred shall
be final and binding on the Trustee and on all other persons.
(e) Notice by Trustee of Payment of Deferred Benefits, Death Benefits,
Supplemental Savings Benefits and Plan Exhibits B and C Benefits: The Trustee
shall promptly provide written notice to the Grantor and each Participant and
Beneficiary when it believes that all Deferred Benefits due each such
Participant and that all Death Benefits due each such Participant or Beneficiary
and that all Supplemental Savings Benefits due each such Participant and that
all other benefits due Ronald J. Naples and Donald L. Thompson under, or
pursuant to, Plan Exhibits B and C under the distribution directions on which it
is relying have been paid. Such notice shall state that the Trustee believes
that all Deferred Benefits, Death Benefits, Supplemental Savings Benefits and
other benefits under, or pursuant to, Plan Exhibits B and C due from the Trust
have been paid and that if any Participant or Beneficiary (as applicable)
disagrees with this determination he must do so within sixty (60) days of the
date of the notice. Such Participant or Beneficiary (as applicable) shall notify
the Trustee within sixty 160) days of the date of the notice if he believes all
Deferred Benefits or Death Benefits or Supplemental Savings Benefits (as
applicable) due the Participant or Beneficiary (as applicable) under the Plan or
other benefits under, or pursuant to, Plan Exhibits B and C due Ronald J. Naples
or Donald L. Thompson (as applicable) have not been paid. If the Participant or
Beneficiary (as applicable) provides such notice to the Trustee, the Trustee
shall make an independent determination of whether all Deferred Benefits due the
Participants and all Death Benefits due the Participants and Beneficiaries and
all Supplemental Savings Benefits due the Participants and all other benefits
due Ronald J. Naples and Donald L. Thompson under, or pursuant to, Plan Exhibits
B and C have been paid. Any such determination shall be in accordance with the
Plan as it exists on the day before the date of any Change in Control. In
performing its duties pursuant to this Section 3.7(e) and pursuant to Section
2.3(d), the Trustee may rely on an opinion of counsel (who may be counsel to the
Trustee but shall not be counsel to the Grantor) that all such Deferred Benefits
due the Participants and all such Death Benefits due the Participants and
Beneficiaries and all such Supplemental Savings Benefits due the Participants
and all other benefits due Ronald J. Naples and Donald L. Thompson under, or
pursuant to, Plan Exhibits B and C have been paid, as long as the Trustee acts
in accordance with the terms of the Plan and this Trust Agreement using the
care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims. The determination made by the Trustee in this manner shall be conclusive
on all persons.
If the Trustee determines that all Deferred Benefits due the Participant
and/or all the Death Benefits due the Participant and/or Beneficiary and/or all
Supplemental Savings Benefits due the Participant and/or all the other benefits
due Ronald J. Naples and Donald L. Thompson
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under, or pursuant to, Plan Exhibits B and C have not been paid, the
Trustee shall make such further payments as it determines are due.
If (1) the Trustee determines that all Deferred Benefits due the
Participant and all Death Benefits due the Participant and/or
Beneficiary and all Supplemental Savings Benefits due the Participant
and all other benefits due Ronald J. Naples and Donald L. Thompson
under, or pursuant to, Plan Exhibits B and C have been paid or (2) the
Participant and/or Beneficiary does not provide notice to the Trustee
within the sixty (60)-day period described above that such Participant
believes that all Deferred Benefits due have not been paid or that such
Participant or Beneficiary believes that all Death Benefits due have not
been paid or that such Participant believes that all Supplemental
Savings Benefits due have not been paid or that Ronald J. Naples or
Donald L. Thompson believe that all other benefits due under, or
pursuant to, Plan Exhibits B and C have not been paid, then the Trustee
shall pay to the Grantor all Trust Assets remaining in this Trust, if
any.
3.8 Board, Compensation Committee of the Board and Committee Directions,
Instructions or Data: The Trustee shall not be liable for losses or unfavorable
results arising from its compliance with, or reliance on, proper directions,
instructions or data from the Board, Compensation Committee of the Board or the
Committee given prior to the date of any Change in Control in accordance with
the terms of the Plan and this Trust Agreement; provided, however, the Trustee
shall not be entitled to rely on any directions, instructions or data:
(a) Received from the Grantor after the day before the date of any
Change in Control, but only if the Trustee is aware that a Change in
Control has occurred;
(b) If, after the day before the date of any Change in Control, any
Participant or Beneficiary requests that the Trustee make a
determination pursuant to Section 3.7(a)(4); or
(c) If, after the day before the date of any Change in Control, any
Participant or Beneficiary requests that the Trustee make a
determination pursuant to Section 3.7(e).
3.9 Indemnification of Trustee: The Grantor hereby indemnifies the
Trustee against, and agrees to hold the Trustee harmless from, all liabilities
and claims (including reasonable attorneys' fees and expenses in defending
against such liabilities and claims) against the Trustee as a result of:
(a) Any breach of Fiduciary responsibility by a Fiduciary other than
the Trustee unless the Trustee participates knowingly in such breach,
has actual knowledge of such breach and fails to take reasonable
remedial action to remedy such breach, or is negligent in performing its
own specific Fiduciary responsibilities;
(b) The Trustee's payment of Deferred Benefits to the Participant
pursuant to Article IV of the Plan and Section 7-1(c)(1) of the Plan
and Section 4.2 and of Death Benefits to the Participant or Beneficiary
pursuant to Article V of the Plan and Section 7.1 (c)(2) of the Plan and
Section 4.2 and of Supplemental Savings Benefits to the Participant
pursuant to Article VI of the Plan and Section 7.1(c)(3) of the Plan
and Section 4.2 and of other benefits to Ronald J. Naples and Donald L.
Thompson pursuant to Plan Exhibits B and C and Section 4.2;
(c) The Trustee's determination under Section 3.7(d) as to whether a
Change in Control has occurred;
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(d) The Trustee's determination under Section 3.7(a)(4) of the
rights of a Participant or Beneficiary; or
(e) The Trustee's determination under Section 3.7(e) as to whether
all Deferred Benefits due the Participants and all Death Benefits due
the Participants and Beneficiaries and all Supplemental Savings Benefits
due the Participants and all other benefits due Ronald J. Naples and
Donald L. Thompson under, or pursuant to, Plan Exhibits B and C have
been paid.
ARTICLE IV -- ADMINISTRATIVE PROVISIONS
---------------------------------------
4.1 General Administrative Powers: The Trustee shall have the rights,
powers, and privileges of an absolute owner when dealing with property of the
Trust, including, without limitation, the powers listed below. Except as
otherwise specified below, the Trustee's exercise of such powers shall be
subject to the direction of a Fiduciary authorized to direct the Trustee under
this Trust Agreement with respect to the management or control of Trust Assets
and any earnings thereon:
(a) To hold, manage, and control all property; to sell, convey,
transfer, exchange, and otherwise dispose of such property from time to
time in such manner, for such consideration, and upon such terms and
conditions, including credit, as may be deemed proper;
(b) To exercise any option, conversion privilege, or subscription
right given the Trustee as the owner of any security held in this Trust;
to vote any corporate stock (including Company Securities) either in
person or by proxy, with or without power of substitution; to consent
to, or oppose, any reorganization, consolidation, merger, readjustment
of financial structure, sale, lease, or other disposition of the assets
of any corporation or other organization, and to take any action in
connection therewith and receive and retain any securities resulting
therefrom;
(c) To deposit any security with any protective or reorganization
committee, and to delegate to such committee such power and authority
with respect thereto as may be deemed proper, and to pay out of this
Trust an appropriate portion of the expenses and compensation of such
committee;
(d) Regardless of whether the Trustee or any other Fiduciary has
responsibility to manage or control the Trust Assets, to cause any
Insurance Contracts to be issued, held, or registered in the name of the
Trustee as Trustee, or in the name of a nominee or in such form that
title will pass by delivery, provided that the records of the Trustee
shall in all events indicate the true ownership of such property;
(e) To renew or extend the time of payment of any obligation due or
to become due;
(f) To commence or defend suits or legal or administrative
proceedings, and to compromise, arbitrate, or settle claims, debts, or
damages in favor of or against this Trust and to deliver or accept, in
either total or partial satisfaction of any indebtedness or other
obligation, any property, and to continue to hold for such period of
time as may be deemed appropriate any property so received, and to pay
all costs and reasonable attorneys' fees in connection therewith out of
the Trust Assets; and to select counsel acceptable to the Trustee and to
the Committee or, on or after a Change in Control, acceptable to the
Compensation Committee of the Board (as it is constituted on the day
before the date of a Change in
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Control), and to conduct the prosecution or defense of any litigation
or legal dispute subject to the control of the Committee or, on or after
a Change in Control, subject to the control of the Compensation
Committee of the Board (as it is constituted on the day before the date
of a Change in Control);
(g) To foreclose any obligation by judicial proceeding or otherwise;
(h) Regardless of whether the Trustee or the Committee has
responsibility to manage or control the Trust Assets, to deposit any
securities held in this Trust with a securities depository; and
(i) To hold amounts contributed to the Trust by the Grantor for the
payment of premiums on Insurance Contracts uninvested for such limited
periods of time not to exceed five (5) business days as may be necessary
for purposes of orderly account administration or pending required
directions, without liability for payment of interest prior to the
payment of such premiums to the Insurer; provided, however, that
regardless of whether the Trustee or any other Fiduciary has
responsibility to manage such Trust Assets, the Trustee shall be
authorized in its discretion to invest such Trust Assets, pending
receipt of such directions, in interest bearing accounts (including
interest bearing accounts established with the Trustee).
4.2 Payment of Deferred Benefits, Death Benefits, Supplemental Savings
Benefits and Plan Exhibits B and C Benefits: The Trustee shall, prior to a
Change in Control, pay to the Grantor and the Grantor shall, subject to the
claims of the Insolvency Creditors, if any, of the Grantor, make payment of
Deferred Benefits due a Participant directly to the Participant (or the Spouse
or other Beneficiary of the Participant). The Trustee shall, prior to a Change
in Control, pay to the Grantor and the Grantor shall, subject to the claims of
the Insolvency Creditors, if any, of the Grantor, make payment of Death Benefits
due a Participant or Beneficiary directly to the Participant or Beneficiary. The
Trustee shall, prior to a Change in Control, pay to the Grantor and the Grantor
shall, subject to the claims of the Insolvency Creditors, if any, of the
Grantor, make payment of Supplemental Savings Benefits due a Participant
directly to the Participant (or the Spouse or other Beneficiary of the
Participant). The Trustee shall, prior to a Change in Control, pay to the
Grantor and the Grantor shall, subject to the claims of the Insolvency
Creditors, if any, of the Grantor, make payment of Plan Exhibits B and C
benefits due Ronald J. Naples and Donald L. Thompson (as applicable) under, or
pursuant to, Plan Exhibits B and C directly to Ronald J. Naples and Donald L.
Thompson (as applicable) (or the Spouse or other Beneficiary of Ronald J. Naples
or Donald L. Thompson (as applicable). On and after a Change in Control, all
such payments shall be made by the Trustee, subject to the claims of Insolvency
Creditors, directly to the Participant (or the Spouse or other Beneficiary of
the Participant), except that the amount of any required income or other tax
withholding shall be withheld from such payments and paid over to the Grantor
and the Grantor shall remit such required withholding to the appropriate taxing
authorities. To the extent Trust Assets are insufficient to pay such Deferred
Benefits and/or Death Benefits and/or Supplemental Savings Benefits and/or Plan
Exhibit B or C benefits, the Grantor shall make such payments. Such payments
shall be made pursuant to written directions issued by the Committee under
Section 3.6(b) prior to any Change in Control and, upon a Change in Control,
pursuant to Section 3.5, and subject, in each case, to the terms of the Plan as
it exists on the day before the date of any Change in Control. After the day
before the date of any Change in Control, modifications to the written
directions of the Committee or to the Plan shall be effective as to the
Participant or Beneficiary (as applicable) with respect to payments from this
Trust only if the Compensation Committee of the Board (as constituted on the day
before the date of the Change in Control) and such Participant or Beneficiary
(as applicable) both consent in writing to such modification. In the event that
the Trustee determines, pursuant to Section 33(a)(4), that written directions
issued by the Committee pursuant to Section 3.6(b) or by the Compensation
Committee pursuant to Section 3.5 are not in accordance with the terms of the
Plan as
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it exists on the day before the date of any Change in Control, or the failure to
issue such directions is not in accordance with the terms of the Plan as it
exists on the day before the date of any Change in Control, the Trustee shall
act in accordance with the determination made by the Trustee pursuant to Section
33(a)(4).
The establishment of this Trust shall not reduce the Grantor's
obligations to the Participant pursuant to the provisions of Article IV of the
Plan or to the Participants or Beneficiaries pursuant to the provisions of
Article V of the Plan or to the Participant pursuant to the provisions of
Article VI of the Plan or to Ronald J. Naples or to Donald L. Thompson pursuant
to the provisions of Plan Exhibits B and C. If for any reason the Trustee fails
to make payment to the Grantor of the Deferred Benefit due a Participant in
accordance with the terms of Article IV of the Plan or of a Death Benefit due a
Participant or Beneficiary in accordance with the terms of Article V of the Plan
or of the Supplemental Savings Benefit due a Participant in accordance with the
terms of Article VI of the Plan or of the Plan Exhibit B and C benefits due
Ronald J. Naples or Donald L. Thompson (as applicable) in accordance with the
terms of Plan Exhibits B and C, the Grantor shall remain fully liable for the
payment of such amounts. Such liability of the Grantor constitutes an unsecured
promise to pay Deferred Benefits and/or Death Benefits and/or Supplemental
Savings Benefits and/or Plan Exhibit B and C benefits and the Participant's
and/or Beneficiary's (as applicable) status shall be that of a general unsecured
creditor. In the event of the Grantor's Insolvency or any written allegation of
such Insolvency, the Trustee shall apply the Trust Assets in accordance with
Section 3.7(b).
The Trustee shall be authorized to apply to a court of competent
jurisdiction for direction at any time it determines that it has insufficient
information to determine the amounts of Deferred Benefit and/or Death Benefit
and/or Supplemental Savings and/or Plan Exhibits B and C payments that would be
consistent with the provisions of the Plan. In the event that the Trustee
applies to a court for direction pursuant to this Section 4.2, all costs and
reasonable attorneys' fees incurred in connection with such application shall be
paid by the Grantor.
The Grantor, in the event payment is made by the Grantor in accordance
with the provisions set forth above before a Change in Control, shall withhold
from any payment to the Participant (or his Spouse or other beneficiary) under
Article IV of the Plan and from any payment to the Participant or Beneficiary
under Article V of the Plan and from any payment to the Participant (or his
Spouse or other Beneficiary) under Article VI of the Plan and from any payment
to Ronald J. Naples (or his Spouse or other Beneficiary) and to Donald L.
Thompson (or his Spouse or other Beneficiary) under Plan Exhibits B and C the
amount required by law to be withheld under Federal, state and local wage
withholding requirements and shall pay over to the appropriate governmental
authority any amount so withheld. On and after a Change in Control, the Trustee
shall make such payments but shall withhold therefrom and pay over to the
Grantor the amount required to satisfy such withholding requirements and the
Grantor shall remit such amounts to the appropriate governmental authorities.
4.3 Distribution: Except as otherwise provided in Section 2.9(a),
distribution of Deferred Benefits payable to the Participant or his Spouse or
other Beneficiary and of Death Benefits payable to the Participant or
Beneficiary and of Supplemental Savings Benefits payable to the Participant or
his Spouse or other Beneficiary and of Plan Exhibit B benefits payable to Ronald
J. Naples or his Spouse or other Beneficiary and of Plan Exhibit C benefits
payable to Donald L. Thompson or his Spouse or other Beneficiary shall be made
in accordance with the terms of Articles IV, V and VI of the Plan and of Plan
Exhibits B and C as in effect on the day before the date of a Change in Control.
4.4 Account Records: All accounting records, valuation schedules,
periodic statements, and audits pertaining to this Trust and the Trust Accounts
shall be retained as a part of the permanent records of the Trustee in
accordance with its usual recordkeeping procedures for trust accounts. The
Committee may, in its discretion, direct the Trustee to retain, at the expense
of this Trust,
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independent certified public accountants to audit such records; provided,
however, that nothing in this Trust Agreement shall be construed so as to
deprive the Trustee of the right to seek and obtain a judicial settlement of its
accounts at the expense of this Trust.
4.5 Notices, Directions and Other Communications: All notices,
directions, and other communications by a Fiduciary pursuant to this Trust
Agreement (herein referred to as "directions") shall be given or made in writing
by the person or persons specifically authorized by the Fiduciary to act on its
behalf, and shall be deemed effective upon receipt by the addressee; provided,
however, that transmission of such directions by photostatic teletransmission
with duplicate or facsimile signature shall be an authorized method of
communication until the Fiduciary is notified by the Committee that the use of
such device is no longer authorized, and provided further that transmission of
such directions by telephone shall also be an authorized method of communication
until the Fiduciary is notified by the Committee to the contrary. Any direction
transmitted by telephone shall be promptly confirmed by a written instrument.
The Trustee shall be entitled to act upon and settle any transactions with the
Insurer in reliance upon directions transmitted by telephone as recorded and
transcribed by the Trustee. If the Trustee fails to receive a written
confirmation of such a direction transmitted by telephone within five (5)
business days following the date of receipt of such direction, or if a written
confirmation received conflicts with the oral direction received by telephone,
the Trustee shall promptly notify the Fiduciary giving the direction orally of
such fact and request (a) delivery of such written confirmation forthwith if it
has not been received, or (b) an additional direction if there is a conflict
between the oral directions and the written confirmation. Notwithstanding the
foregoing, the Trustee is authorized to settle trades effected by a Fiduciary
having investment authority through a securities depository utilizing an
institutional delivery system, in which event the Trustee may deliver or receive
securities in accordance with appropriate trade reports or statements given the
Trustee by such depository without having received communications or
instructions directly from the Fiduciary.
4.6 Reports by Trustee: The Trustee shall submit to the Committee and
each Participant in the Plan such interim valuations, reports, or other
information as the Committee and such Participant may reasonably request. Within
sixty (60) days after (a) the end of each Plan Year, (b) the end of each Plan
Year quarter, (c) the effective date of the Trustee's removal or resignation,
or (d) the effective date of termination of this Trust, unless a different
period is mutually agreed upon, the Trustee shall submit to the Committee
and the Participants in the Plan a written report relating to the period
following the period covered by its last report. Such report shall set forth
all transactions relating to this Trust during the applicable period,
including, but not limited to, investment purchases and sales, receipts,
disbursements, and a listing of the Trust Assets by Trust Account showing
carrying and market values as of the end of the report period.
4.7 Notification of Rights Regarding Securities: The Trustee shall have
no obligation to determine the existence of any conversion, redemption,
exchange, subscription, or other right relating to any securities purchased
hereunder of which notice was given prior to the purchase of such securities,
and shall have no obligation to exercise any such right unless it is informed of
the existence of the right and is instructed to exercise such right, in writing,
by the Fiduciary making or directing the investment in such securities, within a
reasonable time prior to the expiration of such right.
4.8 Tax Assessments: In the event that any income or other tax or
assessment is levied upon or assessed against this Trust or any portion thereof,
or upon or against the interest, if any, of any person in this Trust or any
portion thereof, or the transfer or payment of such interest to any such person,
or upon the Trustee by reason of the existence of this Trust or anything done by
the Trustee pursuant thereto, the Trustee shall immediately notify the Committee
thereof. If the Trustee receives no notice or direction from the Committee, the
Trustee shall have the power to pay such tax or assessment to the extent not
paid by the Grantor from such portion of this Trust against which the
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<PAGE>
tax or assessment has been levied; or if such tax or assessment is not
applicable to any specific portion of this Trust or to the interest, if any, of
any specific person therein, the Trustee shall have authority to pay such tax or
assessment from this Trust. In the event that the Committee desires to contest
the validity, in whole or in part, of any such tax or assessment, it shall give
the Trustee notice thereof, and the Trustee, upon receiving reasonable indemnity
(including reasonable attorneys' fees and expenses) therefor from the Grantor,
shall take such steps as the Committee directs with respect to contesting the
validity, in whole or in part, of any such tax or assessment. The Trustee shall
further, upon receiving reasonable indemnity from the Grantor, either permit the
Committee to bring such action or proceeding in the name of the Trustee as said
Committee deems advisable to test the validity of such tax or assessment, or the
Trustee itself shall bring such action. Whether the action is brought in the
name of the Trustee by the Committee or prosecuted directly by the Trustee, the
Committee shall have the right to select counsel acceptable to the Trustee and
to control the prosecution of said action or proceeding. The Trustee, however,
shall not be required to bring any action or proceeding to test the validity, in
whole or in part, of any such tax or assessment unless so directed by the
Committee, and upon giving said Committee notice of the levy of any such tax or
assessment, the Trustee shall not itself be required to inquire into or question
the validity of such tax or assessment. Prior to making any payments, transfers
or distributions of, or from, any portion of this Trust as provided in this
Trust Agreement, the Trustee may require such releases or other documents from
any lawful taxing authorities as it shall deem necessary or advisable.
4.9 Validity of Contracts: The Trustee shall not be responsible for the
validity or proper execution of any contract delivered to it, nor for any act of
any person which may render any such contract void or voidable.
4.10 Principal and Income: No distinction shall be made between the
principal and income in the management and administration of this Trust.
ARTICLE V -- PROVISIONS RELATING TO TRUSTEE
-------------------------------------------
5.1 Resignation and Removal: The Trustee may resign at any time upon
sixty (60) days' written notice to the Committee, unless a shorter period is
acceptable to the Committee. The Committee may at any time prior to the date of
a Change in Control remove the Trustee upon sixty (60) days' written notice to
the Trustee, unless a shorter period is acceptable to the Trustee. On or after
the date of a Change in Control, the Compensation Committee of the Board (as it
is constituted on the day before the date of a Change in Control) may, with the
written consent of at least fifty-one (51) percent of the Participants in the
Plan, remove the Trustee upon sixty (60) days' written notice to the Trustee,
unless a shorter period is acceptable to the Trustee.
5.2 Appointment of Successor: In the event of the removal of, or
resignation of, the Trustee prior to a Change in Control, the Committee shall
appoint a successor with the written consent of the Grantor. In the event of the
removal of, or resignation of, the Trustee on or after the date of a Change in
Control, the Compensation Committee of the Board (as it is constituted on the
day before the date of a Change in Control) shall appoint a successor with the
written consent of at least fifty-one (51) percent of the Participants in the
Plan. If the Committee, or said Compensation Committee of the Board, fails to
appoint a successor by the end of the sixty (60)-day period referred to in
Section 5.1, the Trustee may secure the appointment of a successor by a court of
competent jurisdiction. All expenses of the Trustee in connection with the
proceeding shall be allowed as an expense of the Trust. The Trustee shall remain
vested with the rights, powers and duties set forth in this Trust Agreement
until its successor delivers written acceptance of such appointment to the
Committee (or Compensation Committee of the Board, if applicable) and the
retiring Trustee. Upon the receipt of such written acceptance, the successor
Trustee shall be vested with all the rights,
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powers and duties of the Trustee under this Trust Agreement, and the retiring
Trustee shall endorse, transfer, assign, convey and deliver to its successor all
of the Insurance Contracts and other property then held by it under this Trust,
except such amount as shall be agreed upon between the Trustee and the Committee
(or Compensation Committee of the Board, if applicable), as reasonable
compensation and expenses in connection with the settlement of accounts and the
delivery of the assets to the successor Trustee.
A successor Trustee may not be the Grantor, any person who would be a
"related or subordinate party" to the Grantor within the meaning of section
672(c) of the Code, or a corporation that would be a member of an "affiliated
group" of corporations including the Grantor within the meaning of section
1504(a) of the Code if the words "80 percent" were replaced by the words "50
percent" wherever they appear in such section.
5.3 Information Furnished to Trustee: Upon the original execution of
this Trust Agreement, the Grantor delivered to the Trustee the name, address,
date of birth, and Social Security number of each Participant covered under
Article IV of the Plan and each Participant covered under Article V of the Plan
and the name, address, date of birth and social security number of each
Beneficiary of each Participant covered under Article V of the Plan. Upon the
execution of the Trust Agreement, as previously amended and restated, the
Grantor delivered to the Trustee the name, address, date of birth, and Social
Security number of each Participant covered under Article VI of the Plan. Upon
the execution of the Trust Agreement, as amended and restated herein, the
Grantor shall deliver to the Trustee the address, date of birth, and Social
Security number of Ronald J. Naples and Donald L. Thompson who are entitled to
benefits under, or pursuant to, Plan Exhibits B and C, respectively. Not later
than sixty (60) days after the end of each calendar year, Grantor shall provide
Trustee with any changes in such information through the close of the calendar
year.
5.4 Expenses and Trustee Compensation: The Trustee shall be entitled to
reasonable compensation for its services and shall be reimbursed for all
reasonable expenses incurred by it in performing its duties hereunder,
including, but not limited to, legal and accounting expenses. Such compensation
is set forth in a separate schedule. Such schedule may be modified from time to
time as agreed to by the Committee (or Compensation Committee of the Board, if
applicable) and the Trustee. All such compensation and expenses shall be paid to
the Trustee by the Grantor; provided, however, that such compensation and
expenses shall constitute a charge upon this Trust, and may be withdrawn by the
Trustee from this Trust upon prior written notice to the Grantor if not
otherwise paid. Any costs or expenses that are chargeable to this Trust but
which for administrative convenience and efficiency are paid or incurred by the
Grantor shall be fully reimbursed by this Trust to the Grantor upon presentation
to the Trustee of an accounting of such costs and expenses, including any costs
and expenses incurred by the Committee or any employees in connection with
administrative activities relating to the Plan. In all cases the Trustee shall
be entitled to rely upon the Grantor's statement and directions concerning the
payment of any such administration expenses and shall be fully protected in
making such payments pursuant to the directions of the Committee.
ARTICLE VI -- AVAILABILITY OF TRUST FUND
----------------------------------------
6.1 Trust Irrevocable; Amendments: The Trust shall be irrevocable and
may not be amended or terminated by the Grantor in whole or in part, except as
follows:
(a) The Grantor and the Trustee may amend this Trust Agreement by
written instrument executed by both parties, without the consent of the
Participants in the Plan, provided such amendment does not have an
adverse effect on the rights of such Participants hereunder.
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<PAGE>
(b) Except as provided in Section 6.1 (a), the Grantor and the
Trustee may amend this Trust Agreement by written instrument executed by
both parties and consented to in writing by Participants having at least
fifty-one (51) percent of the value of the Deferred Benefits and Death
Benefits under the Plan and of the value of benefits under, or pursuant
to, Plan Exhibits B and C at the time of the amendment.
6.2 Participants' Rights to Trust Assets: No Participant in the Plan
shall have any preferred claim on, or any beneficial ownership interest in, any
of the Trust Assets prior to the time such Trust Assets are paid to such
Participant or to his Beneficiary as provided in Section 2.9, and all rights
created under the Trust and the Plan shall be mere unsecured contractual rights
of such Participants against the Grantor.
6.3 Grantor Trust: The Trust is intended to be a trust of which the
Grantor is treated as the owner for Federal income tax purposes in accordance
with the provisions of sections 671 through 679 of the Code. If the Trustee, in
its sole discretion, deems it necessary or advisable for the Grantor or the
Trustee to undertake or refrain from undertaking any actions (including, but not
limited to, making or refraining from making any elections or filings) in order
to ensure that the Grantor is at all times treated as the owner of the Trust for
Federal income tax purposes, the Grantor or the Trustee will undertake or
refrain from undertaking (as the case may be) such actions. The Grantor hereby
irrevocably authorizes the Trustee to be its attorney-in-fact for the purpose of
performing any act which the Trustee, in its sole discretion, deems necessary or
advisable in order to accomplish the purposes and the intent of this Section
6.3. The Trustee shall be fully protected in acting or refraining from acting in
accordance with the provisions of this Section 6.3.
ARTICLE VII -- MISCELLANEOUS
----------------------------
7.1 Applicable Law: This Trust Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania except where
pre-empted by Federal law.
7.2 Binding Effect: This Trust Agreement shall be binding upon the
heirs, personal representatives, successors, and assigns of any and all present
and future parties.
7.3 Separability: In the event that any provision of this Trust
Agreement or the application thereof to any person or circumstances shall be
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Trust Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each provision of
this Trust Agreement shall be valid and enforced to the fullest extent permitted
by law.
7.4 Notices to Parties: Any notice or instructions required under any of
the provisions of this Trust Agreement shall be deemed effectively given only if
such notice is in writing and is delivered personally or by certified or
registered mail, return receipt requested and postage prepaid, and shall be
effective when actually delivered or, if mailed, when deposited. Mail to a party
shall be directed to the following addresses or to such other address as either
party may specify by notice to the other party:
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<PAGE>
(a) Grantor:
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
(b) Trustee:
123 South Broad Street
Philadelphia, PA 19109
7.5 Headings: Headings of Articles and Sections or any divisions thereof
are inserted for convenience only and do not constitute an operative part of
this Trust Agreement.
7.6 Gender and Number: The masculine pronoun wherever used shall include
the feminine and neuter and the singular may include the plural, and vice versa,
as the context may require.
7.7 Incorporation of Plan: All the provisions of the Plan are
incorporated herein by reference.
7.8 Conflicting Provisions: In the event of any conflict between the
provisions of this Trust Agreement and the provisions of the Plan, the
provisions of the Plan shall control.
7.9 Effective Date: The original effective date of the Trust Agreement
was April 16, 1992. The effective date of the Trust Agreement, as last amended
and restated herein, was January 1, 1996. The effective date of the Trust
Agreement, as amended and restated herein, shall be January 1, 1997.
7.10 Court Proceedings: In the case of any court proceeding involving
the Trustee or this Trust, only the Grantor and the Trustee shall be necessary
or proper parties thereto; provided, however, that the Trustee shall notify the
Committee, the Compensation Committee of the Board (as constituted on the day
before the date of the Change in Control (if applicable)) and each Participant
in the Plan of any such court proceeding, and such Participants shall have the
right to intervene. Any final judgment entered in any such proceeding shall be
conclusive upon the Grantor, the Trustee, the Participants in, and Beneficiaries
under the Plan and the creditors, including Insolvency Creditors, of the
Grantor.
7.11 Successors and Assigns: This Trust Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their successors and
assigns, except as is expressly provided to the contrary herein.
7.12 Prohibition on Trustee: Notwithstanding any powers granted to the
Trustee pursuant to this Trust Agreement or applicable laws, the Trustee shall
not have any power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom within the meaning of Treas.
Reg. Section 301.7701-2.
7.13 Power of Company to Substitute Assets: The Grantor shall have the
right at anytime and from time to time, in its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust. This right is
exercisable by the Grantor in a nonfiduciary capacity without the approval or
consent of any person in a fiduciary capacity.
7.14 Voting and Other Rights Associated with Trust Assets: The Trustee
shall exercise all voting rights relating to securities (including Company
Securities) held in the Trust under the Plan. Except as otherwise specifically
provided in the Plan, all other rights associated with Trust assets shall
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<PAGE>
be exercised by the Trustee or by the person designated by the Trustee, and
shall in no event be exercisable by or rest with Plan Participants.
IN WITNESS WHEREOF, the Trustee and the Grantor have caused this amended
and restated Trust Agreement to be executed by their duly authorized officers
and their seals to be hereunto affixed as of the____day of___________, 1999.
[CORPORATE SEAL] Grantor: HUNT CORPORATION
Attest:
_______________________________ By:_________________________________
Dennis S. Pizzica William E. Chandler
Assistant Secretary
[CORPORATE SEAL] Trustee: FIRST UNION NATIONAL BANK
Attest:
______________________________ By:_________________________________
Trust Officer Vice-President
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<PAGE>
TRUST EXHIBIT A -- SPECIAL PROVISIONS RELATING TO RONALD J. NAPLES
------------------------------------------------------------------
I. The provisions of Plan Exhibit B shall apply.
-A-1 -
<PAGE>
TRUST EXHIBIT B -- SPECIAL PROVISIONS RELATING TO DONALD L. THOMPSON
--------------------------------------------------------------------
I. Preamble. Hunt Corporation (formerly Hunt Manufacturing Co.)
("Grantor") entered into an Employment Agreement (the "Agreement") with Donald
L. Thompson ("Executive") on April 8, 1996. Pursuant to the Agreement, Executive
shall participate in the Plan in accordance with the terms of the Plan and Plan
Exhibit C to the Plan.
II. Phantom Stock Account.
A. Establishment of and Contributions to Phantom Stock Account. In
accordance with the Agreement and Plan Exhibit C to the Plan, there shall be
established under the Trust a separate Phantom Stock Account for Executive.
Grantor shall make contributions to such Phantom Stock Account at such times and
in such amounts as the Board, in its sole discretion, shall determine. Such
contributions may, at the sole discretion of Grantor, be in Company Securities
or in other property.
B. Investment of Phantom Stock Account. The Phantom Stock Account shall
be invested by the Trustee in accordance with the terms of Section 2.5(b) of
the Trust Agreement.
C. Payment of Amounts in Phantom Stock Account. Payment from the Phantom
Stock Account shall be made in accordance with the Plan and Section 2.9 of
the Trust Agreement.
-B-1
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements Nos.
33-57103, 33-57105, 33-70660, 33-25947, 33-6359, and 2-83144 on Forms S-8 dated
December 28, 1994, December 28, 1994, October 21, 1993, December 7, 1988, June
29, 1986 and April 8, 1983, respectively, of our report dated January 28, 1999
on our audits of the consolidated financial statements and financial statement
schedule of Hunt Corporation and subsidiaries as of November 29, 1998 and
November 30, 1997 and for the three years in the period ended November 29, 1998,
which report is included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, PA 19103
February 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF HUNT CORPORATION
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> NOV-29-1998
<PERIOD-START> NOV-29-1998
<PERIOD-END> NOV-29-1998
<EXCHANGE-RATE> 1
<CASH> 40,724
<SECURITIES> 0
<RECEIVABLES> 32,739
<ALLOWANCES> (1,721)
<INVENTORY> 21,604
<CURRENT-ASSETS> 99,517
<PP&E> 87,735
<DEPRECIATION> (37,818)
<TOTAL-ASSETS> 186,857
<CURRENT-LIABILITIES> 34,956
<BONDS> 57,741
0
0
<COMMON> 1,615
<OTHER-SE> 76,265
<TOTAL-LIABILITY-AND-EQUITY> 186,857
<SALES> 246,563
<TOTAL-REVENUES> 246,563
<CGS> 151,784
<TOTAL-COSTS> 151,784
<OTHER-EXPENSES> 75,272
<LOSS-PROVISION> 77
<INTEREST-EXPENSE> 1,718
<INCOME-PRETAX> 17,712
<INCOME-TAX> 6,089
<INCOME-CONTINUING> 11,623
<DISCONTINUED> 484
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,107
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.05
</TABLE>
