SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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BLOUNT INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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BLOUNT
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 2001
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TO THE STOCKHOLDERS OF BLOUNT INTERNATIONAL, INC.:
The Annual Meeting of Stockholders of Blount International, Inc. will
be held at 10:30 A.M., C.D.T. on Thursday, April 19, 2001, in the Gilcrease Room
of the DoubleTree Hotel - Downtown, 616 W. Seventh Street, Tulsa, Oklahoma 74127
for the following purposes:
1. To elect a Board of Directors to serve until the next Annual
Meeting of Stockholders or until their successors have been
elected and qualified;
2. To consider and act upon a proposal to amend the Certificate
of Incorporation to authorize a class, or classes, of
preferred stock;
3. To consider and act upon a proposal to ratify the appointment
of PricewaterhouseCoopers LLP as independent auditors for the
Corporation for the year ending December 31, 2001; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Friday,
February 16, 2001, as the record date for determining the stockholders entitled
to notice of and to vote at the Meeting or any adjournment thereof.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Richard H. Irving, III
Richard H. Irving, III
Senior Vice President, General Counsel
and Secretary
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
March 16, 2001
(This page intentionally left blank)
BLOUNT INTERNATIONAL, INC.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
(334) 244-4000
-----------------------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
APRIL 19, 2001
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors (the "Board") of Blount International, Inc.,
a Delaware Corporation, (the "Corporation") of your proxy for use at the Annual
Meeting of Stockholders to be held on April 19, 2001, or at any adjournment
thereof (the "Meeting"). It is anticipated that this Proxy Statement and the
accompanying form of proxy will be mailed to stockholders on or about March 20,
2001.
Shares represented by each properly signed proxy on the accompanying
form received by the Corporation in time to permit its use at the Meeting or any
adjournment thereof will be voted at the Meeting, but you may revoke your proxy
at any time prior to the actual voting thereof by giving notice in writing to
the Secretary of the Corporation or by voting a subsequently dated proxy. IF A
PROXY IS SIGNED BUT NO SPECIFICATION IS MADE ON THE PROXY, THE SHARES
REPRESENTED BY THE PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD WITH RESPECT
TO PROPOSALS 1, 3 AND 4. PROPOSAL 2, INVOLVING AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION, REQUIRES A MAJORITY VOTE OF ALL SHARES ENTITLED TO VOTE, NOT
MERELY A MAJORITY OF THOSE SHARES ACTUALLY VOTING. THEREFORE, A FAILURE TO
SPECIFY IN THE CASE OF PROPOSAL 2 WILL HAVE THE EFFECT OF BEING A "NO" VOTE. If
a specification is made, the shares will be voted in accordance with the
specification. The presence of a stockholder at the Meeting does not revoke his
or her proxy; however, at the Meeting, there will be an opportunity for a
stockholder in attendance to revoke his or her proxy and vote in person if he or
she so requests.
Note that, except where expressly stated otherwise, the information
provided in this Proxy Statement constitutes the aggregation of such information
as it related to Blount, Inc. prior to November 4, 1995 and to Blount
International, Inc. after November 3, 1995. As of the close of business on
November 3, 1995, as a result of a reorganization, Blount, Inc. merged with a
wholly-owned subsidiary of Blount International, Inc. and became a wholly-owned
subsidiary of Blount International, Inc. The stock of Blount, Inc. prior to the
Blount International, Inc. has been traded on the New York Stock Exchange, Inc.
since the reorganization.
Please also note that as the result of a merger and recapitalization,
which involved the Corporation and a subsidiary of Lehman Brothers Merchant
Banking Partners II, L.P. and was completed on August 19, 1999, the Corporation
issued cash and shares in a single class of common stock in exchange for the
delivery and cancellation of its former Class A and Class B common shares.
Throughout this document this transaction is referred to as the Merger and
Recapitalization.
VOTING SECURITIES
RECORD DATE AND VOTE REQUIRED
The Board has fixed the close of business on Friday, February 16, 2001,
as the record date for determining stockholders entitled to notice of and to
vote at the Meeting. Holders of shares of the Corporation's single class of
common stock as of the record date are entitled to vote at the Meeting. As of
such date, the Corporation had issued and outstanding 30,795,882 shares. There
are no cumulative voting or preemptive rights.
The holders of common stock are entitled to one vote per share to elect
the directors and are entitled to one vote per share with respect to any other
matter properly presented at the Meeting.
Directors are elected by the affirmative vote of a majority of the
shares ACTUALLY CAST in the election. Similarly, the affirmative vote of a
majority of the shares cast in the election is required to approve any other
proposal properly presented at the Meeting other than Proposal 2, which is the
proposal to amend the Corporation's Certificate of Incorporation to authorize
the issuance of preferred stock, that requires the affirmative vote of a
majority of shares ENTITLED to vote in the election.
1
PRINCIPAL STOCKHOLDERS
The following table sets forth as of February 15, 2001, to the best
knowledge of the Corporation, information as to (a) beneficial ownership of more
than 5% of the common stock of the Corporation by certain persons (other than
director nominees); and (b) beneficial ownership of common stock of the
Corporation by (i) each director nominee, (ii) each executive officer named in
the Summary Compensation Table other than director nominees, and (iii) all
director nominees and executive officers of the Corporation as a group. Except
as otherwise indicated, all beneficial ownership stated in the table represents
sole voting and investment power.
Shares Percent
Name and Address of Beneficially of Total
Beneficial Owners Owned Shares
----------------------------------------- ------------ ------------
(a) Holders of more than 5% common
stock (other than director nominees
and executive officers named in the
Summary Compensation Table)
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Lehman Brothers Holdings, Inc. 26,262,111 (1) 85.3%
3 World Financial Center
200 Vesey Street
New York, NY 10285
(b)(i) Director Nominees
-----------------------------------------
Eliot M. Fried 20,000 *
E. Daniel James 26,262,111 (2) 85.3% (2)
Harold E. Layman 153,979 *
Alan L. Magdovitz 26,262,111 (2) 85.3% (2)
John M. Panettiere 390,231 1.3%
(ii) Executive Officers named in the
Summary Compensation Table
(Other Than Director Nominees)
-----------------------------------------
Gerald W. Bersett 4,275 *
Richard H. Irving, III 54,691 *
James S. Osterman 42,962 *
(iii) All director nominees and 26,963,413 87.7% (3)
executive officers as a group
(11 persons)
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(*) Less than 1.0% of total shares.
(1) LB Blount Investment SPV LLC, an affiliate of Lehman Brothers Holdings,
Inc., also holds warrants for 1,000,000 shares of Common Stock as a
result of the transaction described on page 18.
(2) Mr. James is, and Mr. Magdovitz may be considered to be, an affiliate
of Lehman Brothers Holdings, Inc. and may each be deemed to share
beneficial ownership of the shares of common stock shown as
beneficially owned by Lehman Brothers Holdings, Inc. Mr. James and Mr.
Magdovitz each disclaims beneficial ownership of all such shares.
(3) See Footnote (2) with respect to 26,262,111 shares which may be
attributable to Messrs. James and Magdovitz that have been included in
the total. Messrs. James and Magdovitz each disclaims any beneficial
ownership with respect to these shares.
2
ELECTION OF DIRECTORS
PROPOSAL 1
DIRECTORS
The By-laws of the Corporation, which may be amended by the Board,
presently provide that the number of directors that constitutes the whole Board
be fixed from time to time by a vote of a majority of the whole Board. The Board
has set the exact number at five effective August 19, 1999.
The Board intends to nominate and, unless contrary instructions are
specified, to vote all proxies received by the Board FOR the election of the
persons named below as directors of the Corporation.
Each director to be elected shall hold office until the next Annual
Meeting of Stockholders of the Corporation or until his successor is elected
and qualified or until his earlier resignation or removal. Should any nominee
fail to accept election, it is expected
that the Board will cast all proxies received by it, as appropriate, in favor of
the election of such other person for the office of director as the Board may
recommend. The Board has no reason to believe that any of the persons named
below will fail to accept election as a director. However, in connection with
his planned retirement from the Corporation on June 30, 2001, Mr. Panettiere
entered into an agreement with the Corporation as of March 14, 2001 whereby he
will resign from his positions of Chairman of the Board and director after April
19, 2001. At that time, the Board will elect a new Chairman and a new director,
which may be the same person. Mr. Panettiere will then serve as Chairman
Emeritus until his retirement. The Corporation expects to name a new Chief
Executive Officer to succeed Mr. Panettiere prior to April 19, 2001. See the
description of certain contractual arrangements with Mr. Panettiere at page 15
below.
BIOGRAPHICAL INFORMATION
The following biographical information is furnished with respect to
each nominee for election as director at the Meeting:
ELIOT M. FRIED, Age 68.
Director since August 1999; Chairman of the Audit Committee and Member of the
Compensation Committee
Currently a consultant with Abner, Herrman & Brock Inc., a New York asset
management firm. Retired in February 2000 as Managing Director of
Lehman Brothers, Inc., New York, New York. Mr. Fried had been a member
of the Lehman Brothers Investment Committee for nine years and was also
a member of Lehman Brothers Commitment Committee and Fairness Opinion
Committee. Mr. Fried joined Shearson, Hayden, Stone, a predecessor firm
to Lehman Brothers, Inc., in 1976 and became a Managing Director in
1982.
Mr. Fried is currently a Director of Axsys Technologies, Inc., Rocky Hill,
Connecticut, and Grant Prideco, Inc., The Woodlands, Texas.
E. DANIEL JAMES, Age 36.
Director since August 1999; Member of the Executive, Compensation and Audit
Committees.
Managing Director of Lehman Brothers, Inc., New York, New York from April 2000.
Previously, Senior Vice President, Lehman Brothers Merchant Banking
Partners II, L.P. from 1996. Mr. James has been with Lehman Brothers,
Inc. from June 1988. Prior to joining the Merchant Banking Group, Mr.
James served in the Mergers and Acquisitions Group from 1990 and the
Financial Institutions Group from 1988.
HAROLD E. LAYMAN, Age. 54.
Director since August 1999.
Presidentand Chief Operating Officer of the Corporation since February 2000;
Executive Vice President-Finance Operations and Chief Financial Officer
of the Corporation from February 1997 and Senior Vice President and
Chief Financial Officer of the Corporation from January 1993. Mr.
Layman served as Senior Vice President Finance and Administration and
was a member of the Executive Committee of VME Group, N.V., The
Netherlands, a manufacturer of automotive components and industrial
equipment, from September 1988.
3
ALAN L. MAGDOVITZ, Age 44.
Director since August 1999; Chairman of the Compensation Committee and Member of
the Executive and Audit Committees.
Private Investor from May 2000. Mr. Magdovitz was Managing Director of Lehman
Brothers, Inc. and a Principal of Lehman Brothers Merchant Banking
Partners II, L.P. from December 1996. Prior to joining Lehman Brothers,
Mr. Magdovitz served as a Principal of Seaport Capital, Inc., a firm
formed in 1992 to manage two private equity partnerships on behalf of
Prudential Securities. From 1987 to 1992, he served as a Managing
Director of Prudential Bache Interfunding, a leveraged buyout firm that
invested $1.4 billion in debt and equity securities across 14
transactions.
JOHN M. PANETTIERE, Age 63.
Director since May 1992; Chairman of the Executive Committee.
Chairman and Chief Executive Officer of the Corporation from February 2000;
Chairman, President and Chief Executive Officer from August 1999;
President and Chief Executive Officer from June 1993; President and
Chief Operating Officer from May 1992; formerly Chairman, President and
Chief Executive Officer from January 1990, President and Chief
Executive Officer from January 1988 and Senior Executive Vice President
and Chief Operating Officer from 1986 of Grove Worldwide Company, Shady
Grove, Pennsylvania, a manufacturer of mobile hydraulic cranes and
aerial work platforms.
Mr. Panettiere is also a director of Altec Industries, Inc., Birmingham,
Alabama, and the Montgomery Area Chamber of Commerce; a Trustee of
Westminster College, Fulton, Missouri, and a Churchill Fellow. He is a
Life Honorary Director and Past Chairman of the Construction Industry
Manufacturers Association, Milwaukee, Wisconsin.
THE BOARD AND ITS COMMITTEES
The property, affairs and business of the Corporation are managed under
the direction of the Board. The Board has standing Executive, Audit and
Compensation Committees, the principal functions of each of which are described
below. The Corporation does not have a Nominating Committee. During the year
ended December 31, 2000, the Board held nine regular meetings, held no special
meetings, and took action four times by written consent in lieu of a meeting.
Average attendance by directors at Board and Committee Meetings was 100%.
EXECUTIVE COMMITTEE - The Executive Committee consists of three
members, two of whom are non-employee directors. The Chairman of the Board of
the Corporation is Chairman of the Committee. The Committee may exercise all of
the authority and powers of the Board to the extent permitted by law during the
intervals between Board meetings. The Committee held no regular meetings, held
no telephone meetings, and took no action by written consent in lieu of a
meeting during 2000. The present members of the Committee are John M.
Panettiere, Alan L. Magdovitz, and E. Daniel James.
AUDIT COMMITTEE - The Audit Committee currently consists of three
members, all of whom are non-employee directors. The functions of the Committee
include (i) recommending annually to the Board the appointment of the
Corporation's independent auditors, (ii) reviewing the professional services,
proposed fees and independence of such auditors, (iii) reviewing the annual
audit plans of such auditors, (iv) reviewing the annual audit plans of the
outside auditors conducting the internal audit function by means of an
outsourcing agreement, (v) monitoring the activities of the independent auditors
and such outside audit staff serving as internal auditors, and (vi) reporting on
such activities to the Board. The Committee held two regular meetings during
2000. The present members of the Committee are Eliot M. Fried, Alan L.
Magdovitz, and E. Daniel James.
COMPENSATION COMMITTEE - The Compensation Committee consists of three
members, all of whom are non-employee directors. The functions of the Committee
include (i) approving compensation philosophy and guidelines for the
Corporation's executive and managerial employees, (ii) establishing a total
compensation range for the Chairman of the Board and Chief Executive Officer and
appraising the performance of such officer on a timely basis, (iii) approving
salaries and changes in salaries of the executive officers of the Corporation
and such other executives as the Committee may deem appropriate, (iv) approving
the participants, annual financial or other targets, and amounts to be paid
under the Corporation's Executive Management Annual Incentive Plan, (v)
reviewing and recommending to the Board any new executive incentive or stock
option plans, or additions to or revisions in existing plans, and approving any
awards or options granted under any such plan, (vi) reviewing from time to time
the Corporation's management resources and executive personnel planning,
development and selection processes, and (vii) reporting on all such activities
to the Board. The Committee held one regular meeting during 2000. The present
members of the Committee are Alan L. Magdovitz, Eliot M. Fried and E. Daniel
James.
4
COMPENSATION OF DIRECTORS
Since August 1999 neither directors currently affiliated with Lehman
Brothers, Inc. nor those who are employees of the Corporation receive any
compensation for their services as directors. Employee directors, of course,
receive compensation in their respective capacities as employees of the
Corporation, and all directors receive reimbursement of travel and lodging
expenses incurred in connection with their attendance at Board functions. Since
July 24, 2000, directors who are neither employees of the Corporation nor
currently affiliated with Lehman Brothers, Inc. receive a quarterly stipend of
$6,250, plus $1,000 per quarter if a chairman of a Board Committee and $1,000
for each Board or Committee meeting attended. In addition, such a director may
choose to participate in certain health, dental and life insurance plans of the
Corporation. During 2000, Mr. Fried, the only director eligible to participate
in this Non- Employee Director's Compensation Program, was paid $29,750, plus
reimbursement of customary expenses paid to all directors, for his services
after July 24, 2000.
In January 1983, the Board approved a Directors' Fee Deferral Plan
under which directors could defer receipt of their applicable directors' fees
until their retirement or other termination of status as a director. Deferred
amounts bore interest, adjusted quarterly, based on the prime rate set by a New
York bank. Such accumulated fees, together with the interest accrued thereon,
were payable in cash to a director or his or her estate in accordance with the
option selected by the director at the time he or she elected to participate in
this plan. The Directors' Fee Deferral Plan was unfunded and amounts due the
participants covered thereby were general obligations of the Corporation. Three
former directors chose to defer their director's fees. Under the option selected
by each, the Corporation had the opportunity in the first quarter of the year
following their resignation to pay out all amounts vested in the Plan, including
accrued interest. As a result, two former directors, Mr. Haley Barbour and Dr.
Andrew A. Sorenson, were each paid the respective amounts due them under the
Plan in a lump sum payment in February 2000. Under an alternative
five-installment arrangement reached in January 1998 following his resignation,
another former director, Dr. Joab Thomas, received $215,000 in January 2001 as
his fourth installment and will receive a like amount plus accrued interest in
January 2002. There remain no other former or current directors in the Plan, and
subject to the additional installment to Dr. Thomas, the Plan was terminated
effective at the end of February 2000.
In May 1991 the Board approved, and in April 1994 amended, the Advisory
Directors' Recognition Plan. Each member of the Board who had served as a
director for at least five consecutive years, who had not been an employee
vested in any employee benefits sponsored by the Corporation during his or her
service on the Board and who either (a) was serving upon attainment of age 72 or
(b) had become permanently and totally disabled at any time prior to age 72
became an advisory director. No advisory director and no other director, except
the co-founders of the Corporation, were eligible to stand for re-election to
the Board after reaching age 72. Under this Plan, a director who was or became
eligible for advisory director status after July 1, 1991, was, at the end of his
or her then current term, paid a quarterly benefit for life equal to the
quarterly cash retainer, exclusive of committee chairman fees, then being paid
to that director. A director who had been an employee vested in employee
benefits sponsored by the Corporation was eligible to become an advisory
director, but was not entitled to the retainer paid to other advisory directors.
When their views on a matter are sought, advisory directors are expected to
consult with management or directors of the Corporation. The status of advisory
director may be terminated upon request by the advisory director or by the Board
if it determines that an advisory director has become a director, officer,
employee or consultant of or to another company that competes with the
Corporation or any of its subsidiaries. The Advisory Directors' Recognition Plan
did not apply to Winton M. Blount, a co-founder of the Corporation. It also did
not apply to W. Houston Blount, a co-founder of the Corporation, until he ceased
to be a member of the Board of Directors regardless of his age at such time. As
a result of the Merger and Recapitalization, Mr. W. Houston Blount resigned as a
director effective August 19, 1999 at the age of 77, and thereupon became an
advisory director. The Advisory Directors' Recognition Plan is unfunded and
amounts due the participants covered thereby are general obligations of the
Corporation. There are presently 3 participants under this plan, Admiral (Ret.)
Thomas H. Moorer, W. Houston Blount and James W. Hargrove. Mr. Herbert J.
Dickson was an advisory director during 2000 until his death on October 25,
2000. In February 2000 this Plan was terminated, and, subject to the fulfillment
of obligations to existing advisory directors, there will be no additional
advisory directors in the future.
5
AUDIT COMMITTEE DISCLOSURE
During 2000, the Board of Directors approved and adopted an amended
Audit Committee Charter, which is attached to this Proxy Statement as Exhibit A.
The Board also made a determination as to the independence and financial
literacy of the members of the Audit Committee, as well as the financial
management expertise of one or more of the members. Nonetheless, the
Corporation, in discussions with the New York Stock Exchange, has stated its
intention during 2001 to elect at least two outside directors and appoint these
two new members to the Audit Committee.
During 2000, fees (in U.S. dollars) paid to the Corporation's
Independent Auditors, PricewaterhouseCoopers LLP, were as follows:
DOMESTIC INTERNATIONAL TOTAL
-------- ------------- -----
Audit Services 327,000 85,200 412,200
System Design and
Implementation 0 0 0
Other Services* 676,000 55,000 731,000
*Includes fees both for tax services and for the internal audit
function performed under an outsourcing contract.
AUDIT COMMITTEE REPORT
The Audit Committee (1) reviewed and discussed the Corporation's
audited financial statements as of December 31, 2000 with management and (2)
reviewed and discussed with the Independent Auditors matters required by the
Statement on Auditing Standards No. 61, as amended; matters required by
Independence Standards Board No. 1 relating, among other things, to the
Independent Auditors' independence from management; and the compatibility of the
Independent Auditors performing non-audit services with their independence.
Based upon these reviews and discussions, the Audit Committee has recommended to
the Board of Directors, and, the Board has approved, that the Corporation's
audited financial statements be included in the Securities and Exchange
Commission Annual Report on Form 10-K for the fiscal year ending December 31,
2000, and that, subject to ratification by the stockholders at the Annual
Meeting, PricewaterhouseCoopers LLP be appointed as the Corporation's
Independent Auditors for the fiscal year ending December 31, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following members of the Board served as members of the
Compensation Committee during 2000:
Eliot M. Fried, consultant with Abner, Herrman & Brock Inc., a New York
asset management firm, and retired Managing Director of Lehman Brothers, Inc.,
elected to the Board effective August 19, 1999 at the time of the Corporation's
Merger and Recapitalization.
E. Daniel James, Managing Director of Lehman Brothers, Inc., elected to
the Board effective August 19, 1999 at the time of the Corporation's Merger and
Recapitalization.
Alan L. Magdovitz, Private Investor, former Managing Director of Lehman
Brothers, Inc., elected to the Board effective August 19, 1999 at the time of
the Corporation's Merger and Recapitalization.
There were no relationships with respect to Compensation Committee
interlocks and insider participation in compensation decisions during 2000.
6
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
OVERALL OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Corporation's executive compensation program is designed to help
the Corporation attract, motivate and retain the executive resources that the
Corporation needs in order to maximize its return to shareholders.
Toward that end, the Corporation's executive compensation program
attempts to provide:
o levels of compensation that are competitive with those
provided in various markets in which the Corporation competes
for its executive resources;
o incentive compensation that varies in manner consistent with
the financial performance of the Corporation; and
o incentive compensation that effectively rewards corporate and
individual performance.
In designing and administering its executive compensation program, the
Corporation attempts to maintain an appropriate balance among these various
objectives, each of which is discussed in greater detail below.
PROVIDING COMPETITIVE LEVELS OF COMPENSATION
The Corporation attempts to provide its executives with a
total compensation package that, at expected levels of performance, is
competitive with total compensation provided to executives who hold
comparable positions or have similar qualifications in other
organizations of similar size and scope with which the Corporation
competes.
The Corporation projects an executive's competitive level of
compensation based on information drawn from a variety of sources,
including proxy statements, special surveys and independent
compensation consultants. This information is used in creating the
basic structure of the Corporation's program. The market data used in
establishing the Corporation's executive compensation levels reflect a
blending of general industry and manufacturing industry companies
comparable to the Corporation's size.
It should be noted that the value of an executive's
compensation package will vary significantly based on performance. So
while the expected value of an executive's compensation package may be
competitive, its actual value can exceed or fall below competitive
levels depending on performance.
ENSURING THAT INCENTIVE COMPENSATION VARIES WITH FINANCIAL PERFORMANCE
The Corporation's incentive plans are designed to assure that
the incentive compensation varies in a manner consistent with the
financial performance of the Corporation and its various business
units. The specific corporate performance factors for CY 2000 are
discussed in other sections of this report.
REWARDING INDIVIDUAL PERFORMANCE
The Corporation believes that effectively rewarding individual
performance will ultimately serve to enhance the financial performance
of the Corporation and its various business units. While the
Corporation's incentive plans provide compensation that varies with
financial performance, they also provide for individual awards that are
based on quantitative assessments of business unit and individual
performance.
7
CONSIDERING CERTAIN TAX IMPLICATIONS
To the extent readily determinable and as one of the factors
in its consideration of compensation matters, the Committee also
considers the anticipated tax treatment to the Corporation and to the
executives of various payments and benefits. Based on compensation
arrangements currently in place, the Committee does not reasonably
anticipate that any executive officer's current compensation will be
subject to the $1 million deductibility limitation of Section 162(m) of
the Internal Revenue Code. The Committee intends to retain the
deductibility of compensation pursuant to Section 162(m), but reserves
the right to provide non-deductible compensation if it determines that
such action is in the best interests of the Corporation and its
stockholders.
DESCRIPTION OF THE EXECUTIVE COMPENSATION PROGRAM
This section describes each of the principal elements of the
Corporation's executive compensation program.
BASE SALARY PROGRAM
The objective of the Corporation's base salary program for senior
executive management positions is to provide base salaries that are
approximately between the 70th and 85th percentile of the competitive market
norms for companies in the Corporation's lines of business and similar in size
to the Corporation. The Committee believes it is crucial to provide competitive
salaries in order to attract and retain managers who are very talented. The
specific competitive markets considered depend on the nature and level of the
positions in question and the markets from which qualified individuals are
recruited.
Base salary levels are also dependent on the performance of each
individual employee. Thus, employees with higher levels of sustained performance
will be paid correspondingly higher salaries.
Annual salary reviews are based on three factors: general levels of
market salary increases, individual performance, and the Corporation's overall
financial results. All base salary increases are premised on a philosophy of
pay-for- performance and perceptions of an individual's long-term value to the
Corporation.
THE EXECUTIVE MANAGEMENT ANNUAL INCENTIVE PLAN
The objectives of the Executive Management Annual Incentive Plan are to
motivate and reward the accomplishment of annual corporate objectives; reinforce
a strong performance orientation with differentiation and variability in
individual awards based on contributions to business results; and provide a
fully competitive compensation package that will attract, reward and retain
individuals of the highest quality. As a pay-for-performance plan, cash bonus
awards were paid upon the achievement of specific business segment and
individual performance objectives established for CY 2000.
Targeted bonus award levels are determined for eligible positions each
year using data obtained from independent consultants and surveys. The target
bonus levels reflect competitive market norms for companies similar in size to
the Corporation and the Corporation's philosophy of providing competitive total
annual compensation opportunities.
A target incentive bonus program is established each year based on the
Corporation's budgeted performance against measures approved by the Committee.
For CY 2000, the key performance measures considered were operating income and
return on capital employed for operating units; earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the Corporate staff and, for all
plan participants other than the Chairman and Chief Executive Officer,
individually-assigned key base objectives.
The weighting of target objectives among each of the Corporation's
operating units was 50% for operating income, 20% for return on capital employed
and 30% for attainment of individual performance objectives. For the corporate
staff and senior corporate officers, 65% of bonus attainment was based on the
Corporation's EBITDA and 35% on individual key base objectives. The bonus target
for the Chairman and Chief Executive Officer was based 100% on the Corporation's
EBITDA target.
In 2000, target bonuses for Incentive Plan participants ranged from 10%
to 65% of base pay. Participants could have earned 25% (minimum threshold) or
more of the target bonus depending upon achievement against performance targets.
The actual bonus was determined by the extent to which performance objectives
were accomplished. Except for the Forestry and Industrial Equipment Division,
all units were profitable for CY 2000. Except for the Oregon Cutting Systems
Division,
8
no units performed above the targets for operating income and return on capital
employed. The Sporting Equipment Group performed above the minimum threshold for
operating income. The remaining units performed below the minimum threshold for
operating income and return on capital employed and the Sporting Equipment Group
performed below the minimum threshold for return on capital employed. The
Corporation performed below the minimum threshold for EBITDA.
As a result, an annual incentive funding pool was created based upon CY
2000 performance and awards were made to certain key executives named in the
Summary Compensation Table exceeding minimum threshold bonus objectives.
LONG TERM INCENTIVES
The Corporation's approach to long-term incentives for employees is
focused on the Corporation's stock option plans. The Corporation uses stock
options to align the interests of employees and shareholders by providing value
to the employee when the stock price increases. Options are granted at 100% of
the fair market value of the stock on the date of grant. For stock options
granted after August 19, 1999, the fair market value is determined by
calculating the average closing sale price for the stock for ten consecutive
trading days ending on the trading day immediately prior to the effective date
of such grant.
1999 STOCK INCENTIVE PLAN
Since the Merger and Recapitalization, all options granted under the
1999 Stock Incentive Plan have terms of ten years. Shares received upon exercise
of any options that have been granted are subject to restrictions on transfer,
tag-along and drag-along rights, call and put rights, registration rights and
other rights and obligations specified in an Employee Stockholders Agreement.
Certain options are time options, and others are performance options. Time
options vest annually over time (generally three to five years) and performance
options vest based on attainment of certain annual EBITDA (earnings before
interest, taxes, depreciation and amortization) performance levels, but in any
event within six years.
2000 STOCK INCENTIVE PLAN
At last year's Annual Stockholders' Meeting, the stockholders approved
the Blount International, Inc. 2000 Stock Incentive Plan. No options have been
granted under the 2000 Plan. Any option granted under this Plan would have a
term decided by the Board at the time of the grant, but one which would not be
longer than ten years (five years for an individual who possesses more than 10%
of the voting power of all Common Stock at the time of the grant). The vesting
period and conditions for exercise for each option would also be determined by
the Board at the time of its grant, but shares received upon exercise of options
under this plan would not be restricted by the provisions of the Employee
Stockholders Agreement described below at page 16.
The Corporation's stock option grant levels are established by
considering competitive market data on grant levels and the level of shares
reserved for such plans. Individual option grants are based on the duties of
each participant in the Corporation, his or her present and potential
contributions to the success of the Corporation and such other factors as the
Compensation Committee deems relevant.
The Executive Compensation Program is revised annually by the
Compensation Committee to provide an appropriate mix of base salary, annual
bonus and long-term awards within the philosophy of providing competitive direct
compensation opportunities. Stock options granted to the named executives in CY
2000 under the 1999 Plan are shown in the Option Grant Table (see page 12 ).
CY 2000 PAY FOR THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
As described above, the Corporation determines its pay for all
Executive Officers of the Corporation, including the Chairman and Chief
Executive Officer, considering both a pay-for-performance philosophy and market
rates of compensation for the job. Specific actions taken by the Committee
regarding the Chairman and Chief Executive Officer's compensation are summarized
below:
Base Salary - the Chairman and Chief Executive Officer, Mr. John
Panettiere, received no increase in CY 2000.
Annual Bonus - The Executive Management Annual Incentive Plan that
pertains to the Chairman and Chief Executive Officer was approved by the
shareholders in April 2000 and established a targeted EBITDA objective. Since
the Corporation did not attain the minimum EBITDA target established for
Corporate officers, Mr. John M. Panettiere, Chairman and Chief Executive
Officer, received no bonus for CY 2000.
9
EXECUTIVE OFFICERS
The executive officers of the Corporation, in addition to Mr.
Panettiere and Mr. Layman, who are also Director nominees, as of February 15,
2001 are:
YEAR FIRST
ELECTED TO
NAME OFFICE SUCH OFFICE AGE
- ---- ------ ----------- ---
Gerald W. Bersett President - Sporting Equipment Group 1998 60
Rodney W. Blankenship Senior Vice President and Chief Financial Officer 2000 52
Dennis E. Eagan President - Industrial and Power Equipment Group 2000 51
Richard H. Irving, III Senior Vice President - General Counsel 1995 and 57
and Secretary 1999
Calvin E. Jenness Vice President and Controller 2000 45
John D. Marshall Senior Vice President - Administration 1999 and 50
and Treasurer 1997
James S. Osterman President - Outdoor Products Group 1997 63
Each of these executive officers serves at the pleasure of the Board.
There were no arrangements or understandings with any other person pursuant to
which any officer was elected. The executive officers of the Corporation may
also be directors or officers of subsidiaries of the Corporation.
Gerald W. Bersett was elected President of the Sporting Equipment Group
in April 1998. Prior to that date, he retired in February 1998 as President and
Chief Operating Officer of Sturm, Ruger & Co., Inc., a position he held from
1995. Previously, he served as President of Winchester Ammunition Division of
Olin Corporation from1988.
Dennis E. Eagan was elected President of the Industrial and Power
Equipment Group in August 2000. Prior to that date, he served from 1998 as
President and Chief Executive Officer of Volvo Construction Equipment North
America, Inc., and from 1993 in senior management positions in sales and finance
at Volvo. Before joining Volvo, Mr. Eagan held management positions in sales,
product support and finance with Deere and Company's Construction Equipment
Division.
Rodney W. Blankenship was elected Senior Vice President and Chief
Financial Officer in June 2000. Prior to that date, he served as Vice President
- - Controller from February 1997, and as Corporate Controller from 1985.
Calvin E. Jenness was elected Vice President and Corporate Controller
in September 2000. Previously, he served as Vice President and Chief Financial
Officer of Bryan Foods, a division of Sara Lee Corporation, from 1998, and as
Vice President- Controller with Riverwood International Corporation, an
integrated packaging supplier, from 1994.
Richard H. Irving, III was elected Senior Vice President and General
Counsel in April 1995, and Secretary of the Corporation in August 1999 at the
time of the Merger and Recapitalization. Prior to April 1995, he served from
1986 as Vice President, General Counsel and Secretary of Duchossois Industries,
Inc., a diversified privately-held company headquartered in Elmhurst, Illinois;
as Associate General Counsel of Union Camp Corporation from 1979 and as
Assistant General Counsel of Rockwell International Corporation from 1974.
John D. Marshall was elected Senior Vice President - Administration and
Treasurer in December 1999. Prior to that date, he served as Vice President and
Treasurer of the Corporation from November 1997; as Senior Vice President of
Operations for the Forestry and Industrial Equipment Division from June 1996 and
as Senior Vice President of Finance and Operations for the Forestry and
Industrial Equipment Division from 1994.
James S. Osterman was elected President of the Outdoor Products Group
in January 1997. Prior to that date, he served as President of the Oregon
Cutting Systems Division of the Corporation from January 1987.
10
EXECUTIVE COMPENSATION
The following table summarizes for the fiscal years ended the last day
of December 2000, the last day of December 1999, and the last day of December
1998, all plan and non-plan compensation awarded to, earned by, or paid to (i)
the Chief Executive Officer, (ii) the four most highly compensated executive
officers other than the CEO of the Corporation (the "Named Executive Officers")
who were serving in executive officer capacities at the end of December 2000,
and (iii) a former executive officer who terminated his employment with the
Corporation in September 2000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (1) (#) ($)
- ----------- ---- --------- ---------- ---------------- ----------- ---------------
John M. Panettiere 2000 874,999 0 92,835 0 149,584 (2)
Chairman of the Board and 1999 827,259 750,000 92,630 887,000 18,199,256 (3)
Chief Executive Officer 1998 791,666 600,000 64,270 160,000 136,833
Donald B. Zorn 2000 229,826 0 11,018 0 868,817 (5)
President - Industrial and 1999 320,384 25,000 8,985 145,000 3,297,068 (3)
Power Equipment Group (4) 1998 311,923 50,000 9,289 35,000 67,679
James S. Osterman 2000 371,922 340,000 19,584 0 38,372 (6)
President - Outdoor 1999 350,964 325,000 33,675 163,000 2,592,394 (3)
Products Group 1998 335,386 250,000 10,103 45,000 35,621
Gerald W. Bersett 2000 354,166 125,000 16,606 0 32,137 (7)
President - Sporting 1999 336,250 340,000 10,556 147,000 146,337 (3)
Equipment Group 1998 220,416 210,000 5,170 30,000 5,000
Harold E. Layman 2000 394,500 0 15,828 25,000 32,119 (8)
President and 1999 329,333 250,000 15,905 360,000 7,159,955 (3)
Chief Operating Officer 1998 315,833 240,000 12,585 45,000 29,080
Richard H. Irving, III
Senior Vice President - 2000 307,000 0 16,177 0 22,453 (9)
General Counsel and 1999 288,666 175,000 9,554 135,000 2,553,489 (3)
Secretary 1998 279,666 178,000 9,122 30,000 21,839
(1) Tax gross-up for premiums on life insurance policies, club dues, personal
financial planning, and personal use of the Corporation's property.
(2) Amount is comprised of $75,355 matching contribution to employee's 401(k)
and excess 401(k) accounts and $74,228 premiums on a life insurance policy
under the Corporation's executive life insurance plan.
(3) All Other Compensation for 1999 for Messrs. Panettiere, Zorn, Osterman,
Bersett, Layman, and Irving includes proceeds from cancellation of
pre-merger Blount Class A common stock options upon the closing of the
Merger and Recapitalization in August, 1999. For Mr. Panettiere, the
proceeds were $18,083,005; Mr. Zorn, $3,278,429; Mr. Osterman,
$2,560,038; Mr. Bersett, $120,663; Mr. Layman, $7,132,191; and Mr.
Irving, $2,532,220.
(4) Donald B. Zorn's employment terminated on September 15, 2000.
(5) Amount is comprised of $15,380 matching contribution to employee's 401(k)
and excess 401(k) accounts, $551 premiums on a life insurance policy under
the Corporation's executive life insurance plan, and $852,885 severance
pay.
(6) Amount is comprised of $31,121 matching contribution to employee's 401(k)
and excess 401(k) accounts and $7,251 accrued pursuant to the Omark Salary
Continuation Plan.
(7) Amount is comprised of $32,137 matching contribution to employee's 401(k)
and excess 401(k) accounts.
(8) Amount is comprised of $28,952 matching contribution to employee's 401(k)
and excess 401(k) accounts and $3,167 premiums on a life insurance policy
under the Corporation's executive life insurance plan.
(9) Amount is comprised of $21,962 matching contribution to employee's 401(k)
and excess 401(k) accounts and $490 premiums on a life insurance policy
under the Corporation's executive life insurance plan.
11
OPTION GRANTS
The following table summarizes pertinent information regarding individual
grants of stock options, including the potential realizable dollar value of
grants of options made during 2000, to each Named Executive Officer, assuming
that the market value of the underlying security appreciates in value from the
date of grant to the end of the option term at the rates indicated in the
following table:
OPTION GRANTS IN CALENDAR YEAR 2000
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE EXPIRATION STOCK PRICE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE DATE OPTION TERM (1)
NAME GRANTED (#) IN 2000 ($/SHARE) (MMDDYY) 5% ($) 10% ($)
- ---- ----------- --------- ----------- -------- ----------- ----------
Harold E. Layman BLT 25,000 20.83 14.869 2/3/10 234,000 592,000
(1) The amounts under these columns are the result of calculations at 5% and
10% rates that were established by rules adopted by the Securities and
Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, in the price of the Corporation's Common
Stock.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table summarizes pertinent information concerning the
exercise of stock options during 2000 by each of the persons named in the
Summary Compensation Table and the year-end value of unexercised options:
AGGREGATE OPTION EXERCISES IN 2000
AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES YEAR END (#) YEAR END ($)
ACQUIRED ON VALUE -------------- -------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- -------------- ----------- ------------- ----------- -------------
John M. Panettiere 0 0 121,667 608,333 0 0
Donald B. Zorn 0 0 20,000 0 0 0
James S. Osterman 0 0 20,000 100,000 0 0
Gerald W. Bersett 0 0 12,000 108,000 0 0
Harold E. Layman 0 0 32,000 313,000 0 0
Richard H. Irving, III 0 0 10,000 90,000 0 0
12
PENSION PLANS
The Blount Retirement Plan and the Blount, Inc. and Subsidiaries
Supplemental Retirement Benefit Plan (collectively the "Blount Retirement Plan")
estimated annual benefits payable to eligible employees (including executive
officers) in specific classifications following retirement at age 65 (normal
retirement age) after continuous years of credited service are shown below:
PENSION PLAN TABLE
FIVE-YEAR
AVERAGE ESTIMATED ANNUAL BENEFITS FOR SPECIFIED YEARS OF CREDITED SERVICE (A), (B)
EARNINGS AT
------------------------------------------------------------------------------------------------------------
RETIREMENT (C) 10 15 20 25 30 35 40 OR
MORE
- --------------------- ---------- --------------- ---------------- ----------------- ------------ ---------------- --------------
$100,000 $20,000 $30,000 $40,000 $50,000 $52,500 $55,000 $57,500
200,000 40,000 60,000 80,000 100,000 105,000 110,000 115,000
300,000 60,000 90,000 120,000 150,000 157,500 165,000 172,500
400,000 80,000 120,000 160,000 200,000 210,000 220,000 230,000
500,000 100,000 150,000 200,000 250,000 262,500 275,000 287,500
600,000 120,000 180,000 240,000 300,000 315,000 330,000 345,000
700,000 140,000 210,000 280,000 350,000 367,500 385,000 402,500
800,000 160,000 240,000 320,000 400,000 420,000 440,000 460,000
900,000 180,000 270,000 360,000 450,000 472,500 495,000 517,500
1,000,000 200,000 300,000 400,000 500,000 525,000 550,000 575,000
(a) The amounts set out above are based on the benefits under a straight life
annuity to a participant retiring at age 65 on January 1, 2001. The amounts
shown are to be reduced by offsetting amounts received as social security
benefits and benefits payable under master annuity contracts (purchased
upon termination of prior retirement plans).
(b) Under Section 415(b) of the Internal Revenue Code, the maximum benefit
payable under the master annuity contracts (purchased upon termination of
prior retirement plans) and the tax-qualified Blount Retirement Plan to an
employee retiring at age 65 in 2000 is $135,000, an amount that may change
each year in accordance with a determination made by the Internal Revenue
Service. In addition, Section 401(a)(17) of the Internal Revenue Code
limits the amount of an employee's compensation that may be taken into
account under any tax- qualified retirement plan to $170,000 for 2000, an
amount which also may change each year in accordance with a similar
determination. These limitations have been disregarded for the purposes of
this table since the amount of any benefit payable in excess of these
limitations is covered by the Blount, Inc. and Subsidiaries Supplemental
Retirement Benefit Plan.
(c) Earnings covered by the Blount Retirement Plan are based on the
participant's base salary or wages.
The years of benefit service used to determine benefits under the Blount
Retirement Plan and the master annuity contracts (purchased upon termination of
prior retirement plans) as of December 31, 2000, for the persons named in the
Summary Compensation Table are: Mr. Panettiere - 9 years; Mr. Bersett - 3 years;
Mr. Osterman - 31 years; Mr. Layman - 8 years; Mr. Irving - 6 years; and Mr.
Zorn - 7 years.
SUPPLEMENTAL RETIREMENT PLANS AND EMPLOYMENT CONTRACTS
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
The Corporation maintains individual Supplemental Executive Retirement
Plans for John M. Panettiere, Gerald W. Bersett, Richard H. Irving and Donald B.
Zorn. Although the Supplemental Executive Retirement Plan differs for each of
them, basically each plan will pay Mr. Panettiere, Mr. Bersett, Mr. Irving and
Mr. Zorn upon their respective normal retirement date or earlier termination of
employment, which in the case of Mr. Zorn occurred in September 2000, a benefit
equal to the benefit calculated under the benefit formula of the Blount
Retirement Plan, but based upon a schedule of years of service granted to each
under their respective Supplemental Executive Retirement Plan, reduced by any
retirement benefits payable to each under the Blount Retirement Plan and, in the
case of Mr. Panettiere and Mr. Zorn, any retirement income actually paid them
under any pension plan maintained by a former employer. These plans are
administered by the Board or, at its discretion, the Compensation
13
Committee of the Board. These plans may be amended from time to time or
terminated with the consent of the Corporation and the Executive.
The projected annual benefit payable to Mr. Panettiere under his
Supplemental Executive Retirement Plan after reduction for the benefits payable
under the Blount Retirement Plan and the retirement income payable under any
pension plan maintained by a former employer of Mr. Panettiere is $210,298.
However, under an arrangement with the Corporation described below at page 15,
Mr. Panettiere will receive a lump sum payment of $2,032,208 within ten days
following his agreed upon retirement on June 30, 2001 in full satisfaction of
the Corporation's obligations under this Plan. The projected annual benefit
payable to Mr. Bersett under his Supplemental Executive Retirement Plan after
reduction for the benefits payable under the Blount Retirement Plan is $63,143.
The Supplemental Executive Retirement Plan for Mr. Irving was established during
2000 and the Corporation will first recognize its cost in 2001. Upon his
termination of employment in September 2000, Mr. Zorn elected an alternative
under his Supplemental Executive Retirement Plan that will pay him $16,916
annually in monthly installments commencing January 1, 2001.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN OF BLOUNT INTERNATIONAL, INC.
On October 9, 1998, the Corporation adopted the Blount Deferred
Compensation Plan for a select group of highly compensated management employees.
The plan name was changed later to the Executive Supplemental Retirement Plan of
Blount International, Inc., (the "Executive Supplemental Retirement Plan"). The
Executive Supplemental Retirement Plan provides supplemental retirement benefits
to participants at age 65 in the form of a life annuity with monthly payments
equal to the excess of (i) the product of .2083% of the participant's highest
3-year average earnings (base salary plus bonuses earned under an executive
management annual incentive plan) during the last 10 years of employment
multiplied by the employee's years of benefit service (as provided under the
Executive Supplemental Retirement Plan which, for some participants, may be
greater than actual service) up to, but not in excess of, 20, over (ii) the
amount of retirement benefits payable to the participant under all other
qualified and non-qualified defined benefit plans maintained by the Corporation,
any pension plan maintained by a former employer of the participant, and the
employee's primary social security benefit. Upon the participant's death, a
survivor annuity is payable under the Executive Supplemental Retirement Plan to
the participant's surviving spouse in a monthly amount equal to 662/3% of the
monthly benefit payable to the participant. The Executive Supplemental
Retirement Plan provides for retirement before age 65 with reduced benefits in
the event of certain terminations of employment and also provides special rules
regarding benefits payable if the participant becomes disabled or dies before
commencing a benefit. If certain events occur, the Executive Supplemental
Retirement Plan allows participants to elect to receive their benefit in a
single lump sum payment.
The Executive Supplemental Retirement Plan may be amended or terminated
with the consent of all participants and the Corporation. The Board, in its
discretion and without consent of the participants, may also make certain
amendments that do not adversely affect the rights of participants. The
projected annual benefit payable under the Executive Supplemental Retirement
Plan, in addition to the benefits payable under other defined benefit plans,
pension plans of prior employers and social security, to the persons named in
the Summary Compensation Table is as follows: Mr. Panettiere - $396,010; Mr.
Osterman - $119,622; Mr. Layman - $138,283; and Mr. Zorn - $86,209. Mr. Zorn,
whose employment terminated on September 15, 2000, will start receiving monthly
payments from the Executive Supplemental Retirement Plan effective June 1, 2001.
Furthermore, under an arrangement with the Corporation described below at page
15, Mr. Panettiere will receive a lump sum payment of $3,757,511 within ten days
following his agreed upon retirement on June 30, 2001 in full satisfaction of
the Corporation's obligations under this plan. Messrs. Bersett and Irving are
not participants in the Executive Supplemental Retirement Plan.
OMARK PLANS
For certain employees of Blount's Outdoor Products Group, Sporting
Equipment Group and Industrial and Power Equipment Group, the Corporation
sponsors:
(i) a Supplemental Retirement Plan for key management
employees (the "Omark Supplemental Retirement Plan");
(ii) a retirement protection plan (the "Omark Protection
Plan"); and
(iii) a salary continuation plan (the "Omark Salary
Continuation Plan").
The Omark Supplemental Retirement Plan provides a supplemental
retirement benefit to participants equal to the excess, if any, of (i) 50% of
the participant's highest 5-year average base salary during the last 10 years of
employment before age 65, over (ii) the aggregate amount available to the
participant under certain other benefit plans and one-half the primary social
security benefit. Benefits under the Omark Protection Plan are limited to the
amount of any reduction of benefits under the
14
master annuity contracts (purchased upon termination of the Omark Retirement
Plan) or the pre-1992 Omark Retirement Plan as a result of any deferral of
compensation pursuant to the Omark Deferred Plan prior to its termination in
1986. The Omark Salary Continuation Plan provides the beneficiary of each
participant with a continuation of 2 years of annual salary upon the death of
the participant. The Omark Plans are unfunded and amounts due participants are
general unsecured obligations of the Corporation. The Omark Plans may be amended
or terminated by the Board, provided that rights vested in participants may not
be reduced.
Mr. Osterman participates in the Omark Supplemental Retirement Plan and
Omark Protection Plan, but no benefits are projected to be payable under these
plans to him. Mr. Osterman participates in the Omark Salary Continuation Plan.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT CONTRACTS
The Corporation entered into Employment Agreements (the "Agreements")
effective on August 19, 1999 in connection with the Merger and Recapitalization
with all of the executive officers named in the Summary Compensation Table. The
terms of the Agreements provide that each executive will be paid a base salary
no less than his then current base salary, be eligible to participate in the
Corporation's incentive plans with target bonuses ranging from 45% to 65% of
base salary, participate in the Corporation's stock option programs and all
other benefit plans, arrangements and perquisites generally available to
executive officers. Messrs. Panettiere, Layman and Irving are covered by the
Corporation's Executive Life Insurance Program. The Agreements with Mr.
Panettiere and Mr. Bersett, and a separate agreement with Mr. Irving, provide
for the Supplemental Executive Retirement Plan described starting at page 13
above.
The duration of the Agreements is a rolling two-year term for Messrs.
Bersett and Irving, and a rolling three-year term for Mr. Layman, each of which
is automatically extended one day for each day employed until such time as the
Agreement would expire on the executive's 65th birthday. Mr. Panettiere's
Agreement expires on July 31, 2002 and Mr. Osterman's Agreement expires on
August 19, 2002. Each Agreement has a clause which prohibits the executive, for
up to three years following the termination of employment, from competing
directly or indirectly with the Corporation or disclosing proprietary or
confidential information.
The Agreements also contain provisions for severance payments and
benefits (for 24 to 36 months, depending on the executive) if the Corporation
terminates the executive's employment for reasons other than death, disability
or cause (as defined in the Agreements), or if the executive terminates his
employment for "good reason" (as defined in the Agreements). In the event of
death, disability or termination for cause or in the event the employee
terminates his employment for other than "good reason," the Corporation's
obligations under the Employment Agreements cease and no special severance
benefits will be paid.
Mr. Osterman's Agreement was amended on February 2, 2001 to
provide that if he remains actively employed with the Corporation until the
expiration of the full term of his Agreement, he will be entitled to a two-year
consulting arrangement with the Corporation. That arrangement provides that,
upon such expiration, in exchange for the performance of specified duties
relating to the Corporation's Outdoor Products business, Mr. Osterman will
receive an annual retainer, together with the possibility of a 25% bonus if the
Outdoor Products segment achieves certain financial targets, reimbursement of
reasonable out- of-pocket business expenses incurred in the performance of his
consulting duties, an office and the services of an administrative assistant.
During the consulting period, Mr. Osterman will also be eligible to participate
in certain executive benefit programs and receive perquisites similar to those
he has now as an executive officer.
Mr. Panettiere's Agreement was amended as of March 14, 2001 to provide
for his mutually agreed upon retirement from the Corporation on June 30, 2001.
Prior to this date, under the terms of this amendment, Mr. Panettiere will
retire from his positions as Chairman of the Board, Chief Executive Officer and
director and serve as Chairman Emeritus until June 30, 2001. With respect to the
period through July 31, 2002 that remained on Mr. Panettiere's Employment
Agreement, he will receive the lump sum equivalent of his base salary and
certain bonuses at the time of his retirement, and will continue to receive
certain benefits and perquisites available to all executive officers during this
remaining thirteen-month period. He will also receive certain lump sum payments
totaling $7,234,674 from a trust established to fund such obligations,
reflecting his participation in the Blount, Inc. and Subsidiaries Supplemental
Retirement Benefit Plan, Blount, Inc. Supplemental Executive Retirement Plan and
Executive Supplemental Retirement Plan of Blount International, Inc. In
addition, the remaining 243,333 time-based stock options granted to Mr.
Panettiere under the 1999 Stock Incentive Plan will become fully vested and have
a ten year exercise term.
15
As part of this Amendment, the restrictions on transfer contained in
the Employee Stockholder Agreement, described below on page 16, will not apply
to Mr. Panettiere's sale of certain shares of Common Stock representing up to
$100,000 in value, based upon sales price, from August 1, 2002 through December
31, 2002, and shares representing $250,000 in value in any one calendar year
thereafter, subject to such sales being made in accordance with the volume
limitations of Rule 144 promulgated by the SEC under the Securities Act of 1933,
as amended.
For two years following July 31, 2002, Mr. Panettiere will have a
consulting arrangement with the Corporation whereby he will receive a monthly
consulting fee, reimbursement of reasonable out-of-pocket expenses incurred in
the performance of his consulting services, office space and the services of an
administrative assistant.
EMPLOYEE STOCKHOLDER AGREEMENT
Related to the Employment Agreements is an Employee Stockholder
Agreement (the "Stockholder Agreement"). This Agreement is among the
Corporation, Lehman Brothers Merchant Banking Partners II, L.P. and forty-one
current and five former management employees, including all of the current
executive officers named in the Summary Compensation Table. The Stockholder
Agreement sets forth terms and restrictions relating to common stock either
purchased by the named executive in the Merger and Recapitalization ("Purchased
Shares") or received through the exercise of stock options ("Option Shares")
under the 1999 Stock Incentive Plan.
The Stockholder Agreement restricts the transfer of Purchased Shares,
Option Shares and any underlying options owned by these executives for a period
of five years from the closing of the Merger and Recapitalization. Exceptions to
this restriction include transfers to heirs and trusts, so long as the
transferee agrees to be bound by the terms of the Stockholder Agreement. In
addition, executives have rights to sell their shares on a pro rata basis with
Lehman Brothers Merchant Banking Partners II, L.P. whenever Lehman Brothers
Merchant Banking Partners II, L.P. sells its shares to third parties. Similarly,
Lehman Brothers Merchant Banking Partners II, L.P. has the right to cause each
of the executives to sell his or her shares of common stock on a pro rata basis
with Lehman Brothers Merchant Banking Partners II, L.P. to a third party that
has made an offer to purchase the Corporation's shares owned by Lehman Brothers
Merchant Banking Partners II, L.P. In the event that the Corporation registers
shares under the Securities Act of 1933 (except for registrations related to
exchange offers or benefit plans) and Lehman Brothers Merchant Banking Partners
II, L.P. sells its shares in connection with this registration, the executives
have the right to have their shares concurrently registered and sold on a pro
rata basis with Lehman Brothers Merchant Banking Partners II, L.P. The Purchased
Shares and Option Shares owned by the executives are also subject to "put" and
"call" rights that entitle the Corporation to purchase from an executive, and
the executive to sell to the Corporation, his or her Purchased Shares and Option
Shares at fair market value if the executive's employment is terminated under
certain circumstances.
16
PERFORMANCE GRAPH
Rules adopted by the Securities and Exchange Commission require that
the Corporation include in the proxy statement a line graph presentation
comparing the cumulative five-year shareholder return on the Corporation's
Common Stock on an indexed basis with the cumulative return of a broad equity
market index that includes companies whose equity securities are traded on the
same exchange as the Corporation's and either a published industry index or an
index of peer companies selected by the Corporation. Since the Corporation is
not included in the Standard and Poor's 500 Stock Index and its equity
securities are traded on the New York Stock Exchange, the New York Stock
Exchange Market Value Index was selected as the broad equity market index. The
Corporation chose a group of 11 manufacturing companies that have operations in
those industries in which the Corporation competes as its peer group for
purposes of this performance comparison. A list of these companies ("Peer
Group") follows the graph below.
[PERFORMANCE GRAPH]
- --------------------------------------------------------------------------------
2/29/96 12/31/96 12/31/97 12/31/98 12/31/99 12/29/00
=========================================================
The Corporation 100.00 127.11 178.93 168.98 217.11 104.73
Peer Group* 100.00 110.87 152.10 129.30 145.69 141.98
NYSE Mkt. Val. Index 100.00 117.82 157.13 202.03 244.55 222.28
- --------------------------------------------------------------------------------
- -----------
* The companies in the Peer Group are as follows: Brunswick Corp., Caterpillar,
Inc., Deere & Co., Ingersoll-Rand Co., Johnson Outdoors Inc., Kaydon Corp.,
Kennametal Inc., Regal-Beloit Corp., Scott Technologies, Inc., Terex Corp.
and Toro Co.
17
FILING DISCLOSURE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Corporation's directors, executive officers and persons
who beneficially own more than 10% of any class of equity securities of the
Corporation to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange and to
furnish the Corporation with copies.
Based on the review of copies of such forms received by it, or written
representations from certain reporting persons, the Corporation believes that
during 2000 all filing requirements applicable to its directors, officers and
greater than 10% beneficial owners were complied with except as follows:
John D. Marshall, Senior Vice President - Administration and Treasurer,
due to administrative oversight, failed to file timely his Form 3 for December
6, 1999. This report was mailed to the SEC on January 13, 2000.
Dennis E. Eagan, President - Industrial and Power Equipment Group,
failed to file timely his Form 3 for August 15, 2000. This report was mailed to
the SEC on August 29, 2000.
CERTAIN TRANSACTIONS AND OTHER MATTERS
Messrs. Magdovitz, Fried and James, who are directors of the
Corporation, are investors in Lehman Brothers Merchant Banking Partners II,
L.P., an affiliate of Lehman Brothers Holdings, Inc. As a result of the Merger
and Recapitalization, Lehman Brothers Holdings, Inc., through its affiliates,
beneficially owns approximately 85.3% of the Corporation's stock. By virtue of
such ownership, Lehman Brothers Holdings, Inc. is able significantly to
influence the business and affairs of the Corporation with respect to matters
requiring stockholder approval.
On February 2, 2001, the Corporation and its secured lenders under a
$500 million Secured Credit Agreement entered into an amendment that avoided the
possibility that the Corporation would not be in compliance with the leverage
ratio and interest coverage ratio covenants of the Agreement. One of the
conditions imposed by the secured lenders for the amendment was the requirement
that an affiliate of Lehman Brothers Holdings, Inc. invest $20 million in the
Corporation in the form of an equity contribution or mezzanine financing within
thirty days. On March 2, 2001, in order to meet this condition, LB Blount
Investment SPV LLC, an affiliate of Lehman Brothers Merchant Banking Partners
II, L.P., paid $20 million for a convertible preferred equivalent security,
together with warrants for 1,000,000 shares of the Corporation's Common Stock
exercisable at any time through March 2, 2013 at $0.01 per share. The
convertible preferred equivalent security earns interest at 12% per annum, but
interest for the first five years is payable in kind rather than in cash. This
security is convertible into convertible preferred stock at the rate of one
preferred share for every $1,000 in principal amount should the Corporation
authorize and issue a class of preferred stock. See discussion of Proposal 2
beginning at page 19.
From time to time, Lehman Brothers Holdings, Inc. or its affiliates
also receive customary fees for services to the Corporation in connection with
other financings, divestitures, acquisitions and certain other transactions.
18
APPROVAL OF AN AMENDMENT
TO THE BLOUNT RESTATED CERTIFICATE OF INCORPORATION
TO AUTHORIZE ISSUANCE OF PREFERRED STOCK
PROPOSAL 2
GENERAL
The Board of Directors has unanimously adopted a resolution declaring
it advisable to amend the Corporation's restated Certificate of Incorporation to
authorize the issuance of 200,000 shares of preferred stock. The text of the
proposed amendment to the Restated Certificate of Incorporation is attached to
this proxy statement as Exhibit B, and the Corporation urges you to read the
Exhibit for a more complete understanding.
If the amendment to the Restated Certificate of Incorporation is
approved by the Corporation's stockholders, then the Board of Directors would be
empowered, with no need for further stockholder approval, to issue preferred
stock in one or more classes or series. Each of these classes or series would
have such voting powers, designations, preferences and relative, participating,
optional or other special rights, subject to such qualifications, limitations or
restrictions, as the Board determined.
At the annual meeting, stockholders will be asked to consider and vote
on the proposed amendment to the Restated Certificate of Incorporation. If the
amendment is approved by the stockholders, an amendment to the Restated
Certificate of Incorporation to authorize the issuance of preferred stock will
become effective upon the filing of a certificate of amendment to the Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware, which filing is likely to be made promptly after the annual meeting.
If the amendment is not approved by stockholders, Blount's existing Restated
Certificate of Incorporation will continue in effect. The existing certificate
does not authorize any class of preferred stock.
PURPOSE OF THE PROPOSED AMENDMENT
The Board of Directors has determined that it would be advisable for
the Corporation to amend the Restated Certificate of Incorporation to authorize
the issuance of preferred stock in order to have such shares available, among
other things, for issuance in connection with financing alternatives,
acquisitions and general corporate purposes, including public or private
offerings of shares for cash. The Board of Directors believes that having the
ability to issue preferred stock without further stockholder action will save
the expense and delay of holding a special stockholders' meeting and will give
the Board of Directors greater flexibility in connection with the Corporation's
future financing requirements and other corporate purposes. The Board of
Directors believes that the complexity of modern business financing and possible
future transactions require greater flexibility in the Corporation's capital
structure than currently exists. If approved, this proposal would permit the
Board of Directors to issue preferred stock from time to time for any proper
corporate purpose, including acquisitions of other businesses or properties and
the raising of additional capital. For example, the Board expects to issue a
series of convertible preferred stock in connection with a recent investment by
an affiliate of Lehman Brothers Holdings, Inc. described below.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT
It is not possible to determine the actual effect of the authorization
of the preferred stock on the rights of the holders of the Corporation's Common
Stock until the Board of Directors determines the rights of the holders of one
or more classes or series of the preferred stock. However, such effects might
include, without limitation:
o restrictions on the payment of dividends to the holders of Common
Stock;
o dilution of voting power for holders of Common Stock to the extent
that the holders of shares of preferred stock are given voting rights;
o dilution of the equity interests and voting power of the Common Stock
if the preferred stock is convertible into Common Stock; and
o restrictions upon any distribution of assets to the holders of Common
Stock upon liquidation or dissolution and until the satisfaction of
any liquidation preferences granted to the holders of the preferred
stock.
19
ONE POSSIBLE USE OF PREFERRED STOCK
You should be aware that on March 2, 2001, LB Blount Investment SPV
LLC, an affiliate of Lehman Brothers Merchant Banking Partners II, L.P.,
purchased a 12% Convertible Preferred Equivalent Security due 2013 (the
"Security") from the Corporation for $20 million. The holders at their option
may convert this Security into shares of convertible preferred stock of the
Corporation at the rate of one share of preferred stock containing certain terms
for each $1,000 principal amount of the existing Security, subject to the
authorization by the Corporation's stockholders of preferred stock through an
amendment to the Restated Certificate of Incorporation and by action of the
Board. These shares of convertible preferred stock will have terms substantially
similar to those of the Security.
Although the Corporation does not presently have any understanding or
agreement to issue preferred stock as a part of this transaction, the Board
expects to issue this series of convertible preferred stock. The documents
governing the terms of the Security and the convertible preferred stock have
been filed with the United States Securities and Exchange Commission.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
The affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock of the Corporation entitled to vote at the Annual
Meeting is required to approve the amendment to the Corporation's Restated
Certificate of Incorporation. ABSTENTIONS, FAILURES TO VOTE AND BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE AMENDMENT TO THE
CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT
TO THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE THE
ISSUANCE OF A CLASS, OR CLASSES, OF PREFERRED STOCK.
20
RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL 3
Upon the recommendation of the Audit Committee, the Board has appointed
the firm of PricewaterhouseCoopers LLP as its independent auditors for the
calendar year ending December 31, 2001. Although stockholder ratification is not
required, the Board has determined that it would be desirable to request an
expression from the stockholders as to whether or not they concur with this
appointment.
PricewaterhouseCoopers LLP, including Coopers & Lybrand LLP prior to
its merger with Price Waterhouse LLP, has served as auditors of the consolidated
financial statements of the Corporation and its subsidiaries from year to year
since 1972. The Corporation has been advised by PricewaterhouseCoopers LLP that
they do not have any direct financial interest or any material indirect
financial interest in the Corporation or any of its subsidiaries, and that
during the above time, PricewaterhouseCoopers LLP has not had any connection
with the Corporation or its subsidiaries in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
Representatives of PricewaterhouseCoopers LLP and of the Audit
Committee of the Board will be present at the Meeting and will have the
opportunity to make a statement if they desire to do so. Those representatives
will also be available to respond to appropriate questions.
The Audit Committee of the Board approved all non-audit services
rendered by PricewaterhouseCoopers LLP during 2000 and concluded that such
services did not affect the independence of the auditors. The audit services
provided by PricewaterhouseCoopers LLP included the audit of the consolidated
financial statements of the Corporation for 2000, the audit of certain
subsidiary financial statements for 2000, reviews of various filings with the
Securities and Exchange Commission and the performance of such other appropriate
auditing services as were required by management or the Board. The non-audit
services include, among other things, tax services, internal audit services
under an outsourcing contract, and special services regarding accounting issues.
Please also refer to the Audit Committee Disclosure and Report on page 6.
PricewaterhouseCoopers LLP has advised that all professional services
were provided at customary rates and terms.
The Board recommends a vote FOR ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the Corporation for the
calendar year ending December 31, 2001. If the stockholders should not ratify
the appointment of PricewaterhouseCoopers LLP by a majority vote, the Board will
reconsider the appointment.
STOCKHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING
Stockholders may present proposals which may be proper subjects for
inclusion in the Proxy Statement and for consideration at the Annual Meeting of
Stockholders in 2002. In order to be considered, proposals must be submitted on
a timely basis. Proposals for the 2002 Annual Meeting of Stockholders must be
received by the Corporation no later than November 1, 2001. Any such proposals,
as well as any questions related thereto, should be directed to the Secretary of
the Corporation.
GENERAL INFORMATION
The expenses of soliciting proxies will be paid by the Corporation. In
addition to the use of the mails, proxies may be solicited personally, by
telephone or by facsimile by directors, officers and regular employees of the
Corporation and its subsidiaries, who, except for normal overtime pay in certain
instances, will not receive additional compensation for these services.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of proxy soliciting materials to
beneficial owners of the Corporation's Common Stock, and the Corporation will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection with this
solicitation.
By Order of the Board of Directors,
Richard H. Irving, III
Senior Vice President - General Counsel
and Secretary
Montgomery, Alabama
March 16, 2001
21
EXHIBIT A
BLOUNT INTERNATIONAL, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Committee shall consist of at least three Directors including a Chairperson.
The Committee shall include only independent Directors as defined by the New
York Stock Exchange, Inc. or (if applicable) other relevant listing authority.
Each member of the Committee shall be financially literate or must become
financially literate within a reasonable period of time after his or her
appointment to the Committee, and at least one member of the Committee must have
accounting or related financial management expertise as the foregoing
qualifications are interpreted by the Board of Directors ("Board") of Blount
International, Inc. (the "Corporation") in its business judgment.
STATEMENT OF POLICY
The Committee shall, through regular or special meetings with management, the
management member or outside consulting firm performing the internal audit
function and the Corporation's independent auditor, provide oversight on matters
relating to accounting, financial reporting, internal control, auditing, and
regulatory compliance activities and other matters as the Board or the Committee
Chairperson deems appropriate.
RESPONSIBILITIES
The Committee shall recommend to the Board the appointment of the Corporation's
independent auditor and shall review the activities and independence of the
independent auditor. This includes communicating to the independent auditor that
he or she is ultimately accountable to the Board and the Committee. The
Committee and the Board have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the independent auditor (or to
nominate the independent auditor to be proposed for shareholder approval in any
proxy statement). The Committee shall: (1) ensure that the independent auditor
provides annually to the Committee a formal written statement delineating all
relationships between the independent auditor and the Corporation, (2) actively
engage in a dialogue with the independent auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the independent auditor, and (3) recommend that the Board take appropriate
action in response to the independent auditor's report to satisfy itself of the
independent auditor's independence.
The Committee's job is one of oversight and it recognizes that the Corporation's
management is responsible for preparing the Corporation's financial statements
and that the outside auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management,
the internal audit function, which may be performed by an outside consulting
firm under contract, and the outside auditors have more time, knowledge, and
more detailed information on the Corporation than do Committee members;
consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Corporation's financial
statements or any professional certification as to the outside auditor's work.
Subject to the foregoing, the following functions shall be the common recurring
activities of the Committee in carrying out this oversight role. These functions
are set forth as a guide with the understanding that the Committee may diverge
from this guide as appropriate given the circumstances.
1. The Committee shall have separate direct lines of communication between
itself and the independent auditor, the management member or outside consultant
performing the internal audit function and, with regard to litigation and legal
and regulatory compliance, the General Counsel. In this regard, the Committee
shall meet privately (without members of management present) and separately with
the independent auditor and the management member or outside consultant firm
conducting the internal audit function at least once each year and, when
requested, with the Corporation's General Counsel.
2. The Committee shall review:
o annual audit plans of the internal audit function (which may be
performed by an outside consultant under contract) and the
independent auditor;
o the results of the activities of the internal audit function, which
may be performed by an outside consulting firm under contract, and
of the independent auditors, including major conclusions, findings
and recommendations, and related management responses;
22
o the Corporation's accounting and financial reporting practices,
annual report to shareholders and significant SEC filings;
o adequacy and effectiveness of internal controls;
o the continued adequacy of this Audit Committee Charter on an
annual basis; and
o such other matters as the Board or the Committee considers
appropriate.
3. With regard to the SEC Form 10-K, prior to its filing, the Committee, in
addition to its assessment of the independent auditor's independence, shall
review and discuss the audited financial statements with management, and discuss
with the independent auditors the matters required to be discussed by relevant
auditing standards, including the quality, not just the acceptability, of the
accounting principles and underlying estimates used in the audited financial
statements. The Committee shall report to the Board and to the shareholders
whether, based on such reviews and discussions, it recommends to the Board that
the most recent year's audited financial statements be included in the
Corporation's SEC Form 10-K to be filed with the SEC.
4. With regard to the SEC Form 10-Q, the Chairperson or other Committee
members so designated shall review the document with management and the
independent auditor prior to its filing.
Where the Committee deems it appropriate or necessary in fulfilling its duties,
the Committee may receive reports from management, the General Counsel, any
management member or outside consultant firm conducting the internal audit
function, and the independent auditor, as applicable, on matters relating to
accounting, financial reporting, internal control, auditing, litigation and
compliance with legal business policies and regulatory requirements.
The Committee may also cause an investigation to be made into any matters within
the scope of its responsibility. The Committee may engage independent resources
to assist in its investigations as it deems necessary.
The Committee Chairperson shall make regular reports to the Board on the
Committee's activities.
23
EXHIBIT B
PROPOSED
--------
BLOUNT INTERNATIONAL, INC.
ACTION BY APPROVAL OF A MAJORITY OF THE
SHARES ENTITLED TO VOTE AT THE
ANNUAL MEETING OF STOCKHOLDERS
ON THE 19TH DAY OF APRIL, 2001
WHEREAS, the Board of Directors ("Board") of Blount International,
Inc. (the "Corporation") has determined that it is in the best interest of the
Corporation to amend its Restated Certificate of Incorporation to authorize the
issuance of a class, or classes, of Preferred Stock in order to provide
flexibility in the Corporation's capital structure, to facilitate possible
financings or acquisitions, to raise additional capital, and for any other
proper corporate purpose; and,
WHEREAS, the Stockholders of the Corporation by the vote of a
majority of the shares of the Common Stock entitled to vote at the Corporation's
Annual Meeting of Stockholders on April 19, 2001 have authorized such amendment
to the Certificate of Incorporation of the Corporation to authorize the issuance
of Preferred Stock from time to time with such voting powers, designations,
preferences and relative, participating, optional or other special rights,
subject to such qualifications, limitations or restrictions, as the Board
determines.
NOW, THEREFORE, BE IT RESOLVED that the Restated Certificate of
Incorporation, a copy of which in its current form and before giving effect to
this Resolution is attached hereto as a reference, be amended as follows:
Strike the only sentence of Article Fourth and substitute in lieu
thereof the following:
The Corporation shall have the authority to issue an aggregate of
100,200,000, shares, consisting of 100,000,000 shares of Common
Stock, par value $.01 per share, and 200,000 shares of Preferred
Stock, par value $.01 per share. The Board of Directors of the
Corporation may authorize, to the full extent now or hereafter
permitted by the laws of the State of Delaware, the issuance from
time to time of the Preferred Stock in one or more classes or
series and with such voting powers, designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions (which may differ with
respect to each class or series) as the Board of Directors may fix
by resolution;
BE IT FURTHER RESOLVED that all other provisions of such Restated
Certificate of Incorporation remain unchanged in all respects and be restated in
their entirety;
BE IT FURTHER RESOLVED that, after giving effect to the foregoing
amendment, the Restated Certificate of Incorporation be designated the Amended
and Restated Certificate of Incorporation;
BE IT FURTHER RESOLVED that the Officers of the Corporation be,
and they hereby are, authorized to file a Certificate of Amendment to this
Amended and Restated Certificate of Incorporation with the Secretary of State of
the State of Delaware to give effect to this Amendment and to do all such other
acts and sign all such documents or instruments necessary or advisable to carry
out and give effect to this Resolution.
24
PRIOR TO GIVING
EFFECT TO THE
PROPOSED AMENDMENT
------------------
RESTATED CERTIFICATE OF INCORPORATION
OF
BLOUNT INTERNATIONAL, INC.
----------------------------------------
Blount International, Inc. (the "Corporation"), a corporation organized
and existing under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the corporation is Blount International, Inc. Blount
International, Inc. was originally incorporated under the name
HBC, Incorporated, and the original Certificate of Incorporation
of the Corporation was filed with the Secretary of State of the
State of Delaware on October 5, 1979.
2. Pursuant to the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware, this Restated
Certificate of Incorporation restates and integrates and further
amends the provisions of the Certificate of Incorporation.
3. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby restated and further amended and
supplemented to read in its entirety as follows:
FIRST: The name of the Corporation is Blount International, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
THIRD: The Purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares which the Corporation shall
have authority to issue is 100,000,000 of Common Stock, par value $.01 per
share.
FIFTH: In furtherance and not in limitation of the powers conferred
upon it by law, the Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the By-laws of the Corporation.
SIXTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of the Sixth Article by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
25
SEVENTH: Unless and except to the extent that the By-laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
4. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Blount International, Inc. has caused this Restated
Certificate of Incorporation to be executed by its duly authorized President as
of the 18th day of August, 1999, upon the adoption by the Stockholders on that
same date of that certain Plan of Merger and Recapitalization dated as of April
18, 1999.
Blount International, Inc.
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1180-PS-01
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