[LOGO] BLOUNT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 20, 2004
TO THE STOCKHOLDERS OF BLOUNT INTERNATIONAL, INC.:
The Annual Meeting of Stockholders of Blount International, Inc. (the
"Corporation") will be held at 10:30 A.M. E.D.T. on Tuesday, April 20, 2004, in
Training Room C of the Corporation's Blount Canada Ltd. facility at 505
Edinburgh Road, North in Guelph, Ontario Canada N1H 6L4 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 ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors for the Corporation for
the year ending December 31, 2004; and
3. 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
20, 2004, 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,
RICHARD H. IRVING, III
Senior Vice President, General Counsel
and Secretary
4909 SE International Way
Portland, OR 97222
March 22, 2004
(This page intentionally left blank)
BLOUNT INTERNATIONAL, INC.
4909 SE International Way
Portland, Oregon 97222
503-653-8881
-----------------------------------
PROXY STATEMENT
for the
ANNUAL MEETING OF STOCKHOLDERS
to be held
April 20, 2004
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 20, 2004, 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 22,
2004.
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
specification is made, the shares will be voted in accordance with the
specification. 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 AND 2. 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
reorganization had been traded on the American Stock Exchange. The stock of
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 20, 2004, 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 by proxy or in
person. As of such date, the Corporation had issued and outstanding 30,856,296
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
voted in the election, as distinct from a majority of shares outstanding.
Similarly, except for certain special proposals, such as one to amend the
Certificate of Incorporation, none of which is currently scheduled to come
before the Meeting, 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, including Proposal 2, which is the only such proposal currently
scheduled for the Meeting in addition to the election of directors.
3
PRINCIPAL STOCKHOLDERS
To the best knowledge of the Corporation, the following table sets forth as
of February 18, 2004,* information concerning: (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)
---------------------------
Lehman Brothers Holdings Inc. 26,262,111 (1) 85.1%
399 Park Avenue
New York, NY 10022
(b)(i) Director Nominees
R. Eugene Cartledge 20,000 **
Eliot M. Fried 50,000 **
Thomas J. Fruechtel 0 0
E. Daniel James 26,262,111 (2) 85.1% (2)
Harold E. Layman 153,979 **
James S. Osterman 43,800 **
William A. Shutzer 0 0
(ii) Executive Officers named in the
Summary Compensation Table
(other than Director Nominees)
------------------------------
Dennis E. Eagan 0 0
Richard H. Irving, III 54,690 **
Calvin E. Jenness 0 0
Kenneth O. Saito 14,250 **
(iii) All director nominees and
executive officers as a group
(11 persons) 26,598,830 (3) 86.2% (3)
--------------------------------
(*) To conform to valuation dates established by the Plan administrator,
December 31, 2003 has been used for allocating units of shares of the Blount
Retirement Savings Plan, a 401(k) plan, attributable to Messrs. Irving and
Saito. The difference between the number of shares so attributed on such date
from those that would be so attributed on February 18, 2004 is immaterial.
(**) Less than 1.0% of total shares.
(1) LB Blount Investment SPV LLC ("LB Blount"), an affiliate of Lehman
Brothers Holdings Inc., also holds warrants for 1,000,000 shares of common
stock, which are immediately convertible at LB Blount's election to common
stock. If so converted, Lehman Brothers Holdings Inc. would hold beneficial
interest in 27,262,111 shares, or 85.6% of the then outstanding shares. (In
addition, LB Blount holds a $20,000,000, plus payments-in-kind interest
("PIKs"), convertible preferred equivalent security described on page 25 that is
convertible at LB Blount's election into a new class of preferred stock at the
rate of one share for every $1,000 in principal amount. This preferred stock
would contain a convertibility feature that would permit the conversion of the
class of preferred stock into 1,881,354 shares of common stock, using
$28,220,320 as the value of the initial principal plus accumulated PIKs as of
March 15, 2004, at the contractual conversion rate of $15 per common share.
Although theoretically possible, it is unlikely that such a two-tier conversion
transaction would be undertaken within sixty days at the respective contractual
conversion rates; however, if it were, and excluding any shares for the
warrants, Lehman Brothers Holdings Inc. would hold beneficial interest in
28,143,465 shares, or 86.0% of the then outstanding shares. If the warrants and
the convertible preferred security were both converted into common stock in the
manner set forth above, Lehman Brothers Holdings Inc. would hold beneficial
interest in 29,143,465 shares, or 86.4%, of the then outstanding shares.)
(2) Mr. James is a Managing Director of Lehman Brothers Inc. and may be
deemed to share beneficial ownership of the shares of common stock shown as
beneficially owned by Lehman Brothers Holdings Inc. Mr. James disclaims
beneficial ownership of all such shares.
(3) See Footnote (2) with respect to 26,262,111 shares which may be
attributable to Mr. James that have been included in the total. Mr. James
disclaims any beneficial ownership with respect to these shares.
4
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. In
connection with the relocation of the Corporation's headquarters from
Montgomery, Alabama to Portland, Oregon, and the election of James S. Osterman
as President and Chief Executive Officer and director, the Board set the exact
number of directors at seven effective June 11, 2002.
The Board intends to nominate and to vote all proxies received by the
Board FOR the election of the persons named below as directors of the
Corporation except to the extent contrary instructions are specified by
stockholders in proxies received or in person at the Meeting.
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.
Biographical Information
The following biographical information is furnished with respect to each
nominee for election as director at the Meeting:
R. EUGENE CARTLEDGE, Age 73.
Director since April 2002; Chairman of the Audit Committee since April 2002;
formerly Director of the Corporation from September 1994 through August 19,
1999; formerly Chairman of the Compensation Committee and Member of the
Acquisition, Audit and Executive Committees during this prior term.
Chairman of Savannah Foods & Industries, Inc. of Savannah, Georgia from 1996
until retirement in 1997; previously, Chairman and Chief Executive Officer of
Union Camp Corporation of Wayne, New Jersey from 1986 to 1994.
Mr. Cartledge also serves on the Boards of Directors of Formica Corporation of
Warren, New Jersey and GrafTech International Ltd. of Wilmington, Delaware. Mr.
Cartledge formerly served on the Boards of Directors of Delta Airlines, Inc. of
Atlanta, Georgia, Sun Company, Inc. of Philadelphia, Pennsylvania and Chase
Industries, Inc. of New York, New York until his retirement from the first two
in 2002 and from the third in 2003. Mr. Cartledge serves on the Compensation and
Nomination committees for GrafTech International Ltd.; he is chairman of the
Audit committee and serves on the Compensation committee for Formica
Corporation.
ELIOT M. FRIED, Age 71.
Director since August 1999; Chairman of the Board and Chairman of the Executive
Committee since June 2001. Chairman of the Audit Committee from 1999 to 2002,
Member since 2002; Member of Compensation Committee since 1999, Chairman since
2001.
Currently a consultant with Abner, Herrman & Brock Inc., a New York City 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 Inc., a predecessor firm to Lehman Brothers Inc., in 1976
and became a Managing Director in 1982.
Mr. Fried is also a Director of Axsys Technologies, Inc. of Rocky Hill,
Connecticut and of Grant Prideco, Inc. of Houston, Texas. Mr. Fried chairs the
Governance & Nomination Committee and is on the Compensation Committee for Grant
Prideco, Inc. and chairs the Audit Committee and is on the Compensation
Committee for Axsys Technologies, Inc.
THOMAS J. FRUECHTEL, Age 53
Director since December, 2003 upon his election by the Board to fulfill the
unexpired term of H. Corbin Day, who resigned from the Board for personal
reasons effective December 16, 2003. Member of Audit Committee since December
16, 2003, replacing Mr. Day.
5
Currently President and Chief Executive Officer and Director of Leupold &
Stevens, Inc., a sports optics company based in Portland, Oregon, from 1998.
Previously, President and Chief Operating Officer from 1996, and Executive Vice
President from 1995, for Simplicity Manufacturing, Inc., a manufacturer of
lawnmowers and other outdoor power equipment, and from 1974 to 1995, various
positions with the Corporation or a predecessor company, including President of
the former Sporting Equipment Division and General Manager of the Oregon Cutting
Systems Division Latin American Operations.
Mr. Fruechtel also serves on the Board of Directors of North Pacific Group,
Inc., an employee-owned forest products company in Portland, Oregon, and on
North Pacific's Audit and Oversight committees.
E. DANIEL JAMES, Age 39.
Director since August 1999; Member of the Executive and Compensation Committees
since August 1999; Member of the Audit Committee from 1999 to February 2003.
Managing Director of Lehman Brothers Inc., New York, New York from April 2000.
Previously, Senior Vice President from 1996. Mr. James has been with Lehman
Brothers Inc. from June 1988. Prior to joining the Merchant Banking Group in
1996, Mr. James served in the Mergers and Acquisitions Group from 1990 and the
Financial Institutions Group from 1988.
HAROLD E. LAYMAN, Age 57.
Director since August 1999; member of the Executive Committee from March 2001 to
August 2002.
Former President and Chief Executive Officer of the Corporation from March 2001
to August 16, 2002; President and Chief Operating Officer from February 2000;
Executive Vice President-Finance Operations and Chief Financial Officer 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 Hague, Netherlands, a manufacturer of automotive
components and industrial equipment, from September 1988.
Mr. Layman also serves on the Boards of Directors of Von Hoffmann Holdings, Inc.
of St. Louis, Missouri; GrafTech International Ltd. of Wilmington, Delaware;
Infinity Property & Casualty Corp. of Birmingham, Alabama and Grant Prideco,
Inc. of Houston, Texas. Mr. Layman chairs the Audit Committees of Grant Prideco,
Inc. and Von Hoffman Holdings, Inc., sits on the Audit Committee of GrafTech
International, and serves as chairman of the Compensation Committee and as a
member of the Nominating & Corporate Governance Committee of Infinity Property
and Casualty.
JAMES S. OSTERMAN, Age 66.
Director since June 2002; Member of Executive Committee since August 2002.
President and Chief Executive Officer of the Corporation since August 2002;
President of the Outdoor Products Group of the Corporation from January 1997 and
President of the Oregon Cutting Systems Division of the Corporation from January
1987.
Mr. Osterman is also Chairman of Cascade Corporation of Portland, Oregon, an
international manufacturer of materials handling products used primarily on lift
trucks. He has served as a director of Cascade since 1994 and was elected
Chairman in May 2002.
WILLIAM A. SHUTZER, Age 56.
Director since June 2001; Member of the Executive Committee since April 2002 and
Compensation Committee since June 2001; Member of Audit Committee from June 2001
to April 2002.
Since December 2003, a private investor and financial consultant to, among
others, Lehman Brothers Inc. Previously, Managing Director - Private Equity
Group of Lehman Brothers Inc. from October 2000; Partner at Thomas Weisel
Partners LLC from 1999; Chairman of Investment Banking at ING Furman-Selz from
1997 and President of Furman-Selz LLC from 1996.
Mr. Shutzer also serves on the Boards of Directors of Tiffany & Company of New
York, New York; American Financial Group of Cincinnati, Ohio; Jupitermedia
Corporation of Darien, Connecticut; TurboChef Technologies, Inc. of Dallas,
Texas and since January 2004, CSK Auto Corporation of Phoenix, Arizona. He
continues to serve on the Boards of Directors of Practice Works, Inc. of
Atlanta, Georgia and RSI Holding Corp. of Newport Beach, California, both of
which are now private companies. Mr. Shutzer serves on the Compensation and
Nominating & Corporate Governance committees of both Tiffany & Company and
American Financial Group and serves on the Compensation and Audit committees of
both TurboChef Technologies, Inc. and Jupitermedia Corporation.
6
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. Lehman Brothers Holdings Inc., directly and indirectly, controls about
85.1% of the Corporation's common stock. As such, the Corporation is a
"controlled company" for purposes of Section 303A.00 of the New York Stock
Exchange Listed Company Manual, and need not comply with Section 303A.04 of the
Manual. Accordingly, the Corporation has chosen not to have a standing
Nominating or Corporate Governance Committee. During the year ended December 31,
2003, the Board held six regular meetings, held two special meetings and took
action once by written consent in lieu of a meeting. Average attendance by
directors at Board and Committee Meetings was 96.4%, and no director attended
less than 78.6% of Board and applicable committee meetings.
EXECUTIVE COMMITTEE - The Executive Committee consists of four members,
three of whom are non-employee directors, but one of whom is affiliated with
Lehman Brothers Holdings Inc., the Corporation's controlling shareholder. 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 telephonic meetings and took no
action by written consent in lieu of a meeting during 2003. The present members
of the Committee are Eliot M. Fried, E. Daniel James, James S. Osterman and
William A. Shutzer. Mr. Fried, as Chairman of the Board, serves as chairman of
the Committee.
AUDIT COMMITTEE - The Audit Committee currently consists of three
members, all of whom are independent directors. The functions of the Committee
include (i) approving annually 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 for the internal audit function,
whether performed by an in-house staff, outsourcing arrangement or combination
of both, (v) monitoring the activities of the independent auditors and the
internal audit function and (vi) reporting on such activities to the Board. The
Committee held three regular and two special meetings during 2003. The present
members of the Committee are R. Eugene Cartledge, Eliot M. Fried and Thomas J.
Fruechtel. Mr. Fruechtel was elected to fulfill the unexpired term of H. Corbin
Day, who served on the Audit Committee in 2003 until his resignation from the
Board on December 16, 2003 for personal reasons. Mr. Cartledge is chairman of
the Committee.
COMPENSATION COMMITTEE - The Compensation Committee consists of three
members, all of whom are non-employee directors, but one of whom is affiliated
with Lehman Brothers Holdings Inc. the Corporation's controlling shareholder. A
fourth member, H. Corbin Day, served on the Committee in 2003 until his
resignation from the Board on December 16, 2003 for personal reasons. Mr. Day
was also a non-employee director. Lehman Brothers Holdings Inc., directly or
indirectly, controls approximately 85.1% of the Corporation's common stock. As
such, the Corporation is a "controlled corporation" for purposes of Section
303A.00 of the New York Stock Exchange Listed Company Manual, and need not
comply with Section 303A.05 of the Manual regarding the "independence" of the
Compensation Committee. Accordingly, one of the three current Compensation
Committee members has an affiliation with Lehman Brothers Holdings Inc., and
another was affiliated with Lehman Brothers Holdings Inc. until December 2003,
less than the period of non-affiliation required by the New York Stock Exchange
to establish independence. 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
President and Chief Executive Officer and appraising the performance of that
officer on a timely basis, (iii) approving salaries and changes in salaries for
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 plans, (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 and one special meeting during 2003. The present members of the
Committee are Eliot M. Fried, E. Daniel James and William A. Shutzer. Mr. James
is, and Mr. Shutzer was until December 2003, an employee of Lehman Brothers
Inc., an affiliate of the Corporation's controlling shareholder. Mr. Fried is
chairman of this Committee.
COMPENSATION OF DIRECTORS
Since August 1999, neither directors currently affiliated with Lehman
Brothers Inc. nor those who are employees of the Corporation (or former
employees receiving termination benefits) 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, the date of the
adoption of the Corporation's Non-Employee Directors' Compensation Program,
directors who are neither employees of the Corporation nor currently affiliated
with Lehman Brothers Holdings Inc. receive quarterly stipends of $6,250, plus
$1,000 per quarter if they are Chairman of the Board or chairman of a Board
Committee, and $1,000 for each Board or Committee meeting they attend. In lieu
of such cash stipend, since February 6, 2003, when the Board approved an
amendment to the Non-Employee Directors' Compensation Program, any director who
qualifies for the cash payment under the Program may elect to receive
compensation in the form of stock options for the Corporation's common stock.
These options are granted under the Corporation's 2000 Stock Incentive
7
Plan, a plan that was approved by the stockholders in 2000 and expressly
authorizes option grants to directors. For any given year, the options for each
director so electing are for 15,000 shares of the Corporation's common stock,
vest immediately upon grant and are priced at the average of the closing prices
of the Corporation's common stock for the ten consecutive trading days
immediately prior to the date of grant. The election for any calendar year is
customarily made on or before December 31 of the preceding year, except that in
2003, the first year of implementing this program, qualifying directors had
thirty days from February 6 in which to make this election.
Mr. Cartledge and Mr. Fried each elected to receive his director
compensation for 2003 in stock options, as did H. Corbin Day, who served as a
director in 2003 until his resignation from the Board on December 16, 2003 for
personal reasons. As a consequence, Messrs. Cartledge, Day and Fried each
received options for 15,000 shares of the Corporation's common stock. The grants
were fully vested on June 11, 2003, the date of the grants, and priced at $4.439
per share. By action of the Compensation Committee on December 16, 2003, as
provided in the Non-Employee Directors' Compensation Program, Mr. Day's
resignation for personal reasons was deemed to be in the nature of a retirement;
consequently, he has the unexpired remainder of the ten-year term in which to
exercise his options. Thomas J. Fruechtel, who was elected to fulfill Mr. Day's
unexpired term, received $1,000 in cash payment for his participation at the
December 16 meeting.
Messrs. Cartledge, Fried and Fruechtel, each chose to receive his
compensation for service during 2004 in quarterly cash payments; however, the
Board has reserved the right to consider granting stock options in the above
manner in lieu of cash to these three directors at its April 2004 meeting.
In addition, a qualifying director under the Program may choose to
participate in certain health, dental and life insurance plans of the
Corporation. During 2003, Mr. Cartledge, Mr. Day and Mr. Fried each received
compensation valued at $582 in the form of life insurance premiums; Mr.
Fruechtel, who joined the Board on December 16, 2003, the date that Mr. Day
resigned from the Board for personal reasons, received no compensation in the
form of such premiums.
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 the 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 were three participants under this plan in 2003, W. Houston
Blount, James W. Hargrove and Admiral (Ret.) Thomas H. Moorer. Mr. Blount and
Mr. Hargrove received $25,000 each, and Admiral (Ret.) Moorer $30,800, in
Advisory Director fees in 2003. In February, 2004, Admiral (Ret.) Moorer passed
away and his estate will receive a final payment of $7,700 as the fee owing for
the First Quarter of 2004. In February 2000 this Plan was terminated, including
the prohibition on standing for election after the attainment of age 72, and,
subject to the fulfillment of obligations to the two surviving advisory
directors, there will be no additional advisory directors or payments in the
future.
AUDIT COMMITTEE DISCLOSURE
The Audit Committee Charter was amended in February 2004 and is
incorporated in this Proxy Statement as Exhibit A. With respect to the
independence of the Corporation's directors who serve on the Audit Committee,
Mr. R. Eugene Cartledge and Mr. H. Corbin Day, both independent directors under
applicable regulations, were elected to the Board in April 2002 and thereupon
appointed to the Audit Committee. Mr. Eliot M. Fried, who was an employee of
Lehman Brothers Inc., an affiliate of the Corporation's controlling shareholder,
until February 2000, met the three-year period of non-affiliation required by
the New York Stock Exchange to establish independence in February 2003. Until
February 2003, Mr. Fried served on the Audit Committee pursuant to a Board
determination passed in April 2002 to the effect that it was in the best
interest of the Corporation, given Mr. Fried's expertise and background, to
retain Mr. Fried's services as a member of the Audit Committee notwithstanding
the fact that he was an employee of Lehman Brothers Inc. less than three years
prior to that time. Mr. Fried served under this resolution until February 2003,
the time at which the termination of his affiliation with Lehman Brothers Inc.
exceeded three years. Mr. E. Daniel James, an employee of
8
Lehman Brothers Inc., resigned his membership on the Audit Committee on February
6, 2003. Mr. Day served during 2003 until his resignation for personal reasons
effective December 16, 2003. Mr. Thomas J. Fruechtel was elected to fulfill Mr.
Day's unexpired term as director and as a member of the Audit Committee. Mr.
Fruechtel, who has not been affiliated with the Corporation since July 1995, is
an independent director under applicable definitions. As a result of the
foregoing, since February 6, 2003, the membership of the Audit Committee has
consisted of Mr. Cartledge as chairman of the Committee, Mr. Day until December
2003, Mr. Fruechtel since December 2003 and Mr. Fried, all of whom are
independent under applicable rules and regulations.
The Board has determined that each of Messrs. Cartledge, Fried and
Fruechtel qualifies as a "financial expert," as defined by recently adopted
final rules of the Securities and Exchange Commission ("SEC") pursuant to
Section 407 of the Sarbanes-Oxley Act. Two of these members have served as
chairmen and chief executive officers of publicly-traded or private companies in
which capacity they supervised the chief financial officer function, one has
been a member of the Investment Committee of a major investment banking firm,
and all three possess (i) an understanding of generally accepted accounting
principles and financial statements; (ii) the ability to assess the general
application of such accounting principles in connection with the accounting for
estimates, accruals and reserves; (iii) experience actively supervising one or
more persons engaged in preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the Corporation's financial statements;
(iv) an understanding of internal controls and procedures for financial
reporting and (v) an understanding of Audit Committee functions.
No member of the Audit Committee serves on the audit committee of more
than two other public companies. Mr. Cartledge chairs the audit committee of
Formica Corporation; Mr. Fried chairs the audit committee of Axsys Technologies,
Inc.; and Mr. Fruechtel serves on the audit committee of North Pacific Group,
Inc. an employee-owned private corporation.
At its February 2, 2004 meeting, the Audit Committee approved and
adopted the Corporation's Code of Ethics for the Chief Executive Officer, Chief
Financial Officer, principal accounting officer, controller and those persons
performing similar functions involving financial reporting and financial
controls. A copy of this policy is attached hereto as Exhibit B.
The Corporation has not finalized a revision to its Code of Business
Conduct applicable to all directors, officers and employees at this time.
Nonetheless, the Corporation intends to have this revision to its Code of
Business Ethics in place by the Annual Meeting of Stockholders, the date by
which such policy is required. The policy, as revised, will be posted on the
Corporation's website at WWW.BLOUNT.COM.
AUDIT COMMITTEE REPORT
The Audit Committee (1) reviewed and discussed the Corporation's
audited financial statements as of December 31, 2003 with management and (2)
reviewed and discussed with the Independent Auditors matters required by the
Statement on Auditing Standards No. 61, as amended, and matters required by
Independence Standards Board Standard 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, and recognizing (i) that management is
primarily responsible for the Corporation's systems of internal controls and
financial reporting processes, and (ii) that the Independent Auditors are
responsible for the performance of an independent audit of the Corporation's
consolidated financial statements in accordance with generally accepted auditing
standards and the issuance of a report thereon, the Audit Committee has approved
the inclusion of the Corporation's audited financial statements in the SEC
Annual Report on Form 10-K for the fiscal year ending December 31, 2003, and the
appointment of PricewaterhouseCoopers LLP as the Corporation's Independent
Auditors for the fiscal year ending December 31, 2004, subject to ratification
of that appointment by the stockholders at the Annual Meeting.
In addition, on February 2, 2004, the Audit Committee, pursuant to the
policy for pre-approval of non-audit services adopted on May 12, 2003, approved
the provision by PricewaterhouseCoopers LLC of tax services, a non-audit
function, for the Corporation for the year ending December 31, 2004. (A copy of
this policy for pre-approval of non-audit services is attached hereto as Exhibit
C.) At its October 2003 meeting, the Audit Committee approved the performance of
the internal audit function by Moss Adams LLP through an outsourcing
arrangement. In fulfilling the internal audit function, the engagement partner
for Moss Adams reports directly to the Audit Committee and meets with the
Committee at each Committee meeting.
R. EUGENE CARTLEDGE, CHAIRMAN
ELIOT M. FRIED, MEMBER
THOMAS J. FRUECHTEL, MEMBER
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following members of the Board served as members of the
Compensation Committee during 2003:
H. Corbin Day, Chairman of Jemison Investment Co., Inc. of Birmingham,
Alabama, was elected to the Board on April 16, 2002, and served until December
16, 2003, the effective date of his resignation from the Board for personal
reasons. He was not replaced in his position as Compensation Committee member;
Eliot M. Fried, consultant with Abner, Herrman & Brock Inc., a New York
City asset management firm, and retired Managing Director of Lehman Brothers
Inc., was elected to the Board effective August 19, 1999 at the time of the
Merger and Recapitalization, and was elected Chairman of the Board in June 2001;
E. Daniel James, Managing Director of Lehman Brothers Inc., was elected
to the Board effective August 19, 1999 at the time of the Merger and
Recapitalization; and
William A. Shutzer, a private investor and financial consultant to,
among others, Lehman Brothers Inc., by whom he was employed prior to December,
2003, was elected to the Board in June 2001.
There were no relationships with respect to Compensation Committee
interlocks and insider participation in compensation decisions during 2003.
Mr. Fried is an independent director and member of the Compensation
Committee; Mr. James is an employee of Lehman Brothers Inc., an affiliate of
Lehman Brothers Holdings Inc. Mr. Shutzer was employed by Lehman Brothers Inc.
until December 2003, and continues to act as a consultant to Lehman Brothers
Inc. The period since he was last employed by Lehman Brothers Inc. is less than
the period of non-affiliation required by the New York Stock Exchange to
establish independence. Lehman Brothers Holdings Inc., directly or indirectly,
controls 85.1% of the common stock of the Corporation. As such, the Corporation
is a "controlled corporation" for purposes of Section 303A.00 of the New York
Stock Exchange Listed Company Manual and need not comply with Section 303A.05 of
the Manual regarding the independence of the members of the Compensation
Committee. Nonetheless, whenever "independence," as defined in the United States
Internal Revenue Code ("Code") as it relates to matters pertaining to Section
162(m), may be required, Mr. Cartledge, chairman of the Audit Committee, sits by
special appointment on the Compensation Committee with Mr. Fried in lieu of one
of the other Committee members. Messrs. Cartledge and Fried are "independent"
both under applicable SEC and NYSE rules and regulations, as well as under the
Code for this purpose.
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 a 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 as
the Corporation and 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
10
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 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. Thus, although the
expected value of an executive's compensation package will be competitive, its
actual value can exceed or fall below competitive levels depending upon
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 calendar year 2003 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, these plans also provide for individual awards
that are based on quantitative assessments of business unit and
individual performance.
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, for fiscal years 2003 and
2004, the compensation of any executive officer, other than Mr. Osterman (as
discussed below), will be subject to the $1 million deductibility limitation of
Section 162(m) of the Internal Revenue Code. It is probable that a portion of
Mr. Osterman's compensation, consisting of $500,000 annual salary, a minimum
bonus of $500,000 and certain other compensation features, such as the gross-up
of certain items for tax purposes, will exceed the deductibility limitation of
Section 162(m) in fiscal year 2004. The exact amount of such excess is not known
at this time, but it could be between $100,000 and $200,000. The Committee
generally attempts 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, such as with respect to Mr. Osterman's 2004 total
compensation.
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 50th and 60th 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 fully
competitive compensation packages 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 calendar year 2003.
11
Targeted bonus award levels are intended to be determined for eligible
positions each year using data obtained from surveys and independent
compensation consultants. 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 calendar year 2003, the key performance measures considered were earnings
before interest, taxes, depreciation, amortization and non-recurring costs
("EBITDA") and a specific cash flow formulation ("Cash Flow") for both operating
unit managers and the Corporate staff, as well as individually-assigned key base
objectives for each plan participant. The weighting of the target objectives was
50% for EBITDA, 30% for Cash Flow and 20% for attainment of individual
performance objectives.
In 2003, 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. In 2003, the Corporate staff, Oregon Cutting Systems, ICS and
Forestry and Industrial Equipment units each exceeded their respective EBITDA
and Cash Flow targets; the Gear Products unit met its Cash Flow target, but did
not meet the minimum threshold for its EBITDA target; and the Dixon unit did not
meet the minimum threshold for either its EBITDA or Cash Flow targets.
LONG TERM INCENTIVES
The Corporation's approach to long-term incentives for employees
consists of 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. Generally, options are granted
at 100% or more 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
customarily determined by calculating the average of the closing sale prices of
the Corporation's common stock for the 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 Stockholder Agreement, which is described below
at page 23. 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 upon attainment of certain annual EBITDA performance
levels, but in any event within six years.
2000 STOCK INCENTIVE PLAN
In November 2003, the Board of Directors granted
options under the 2000 Stock Incentive Plan to 92 individuals
at an option price per share of $5.05 and representing in the
aggregate 620,000 shares. All such options have terms of ten
years. All vest in three years or less, most in accordance
with a schedule of one-third (33-1/3%) on each of the first
three anniversary dates from the date of grant. None of the
shares received upon exercise of the options under the 2000
Stock Incentive Plan is restricted by the provisions of the
Employee Stockholder Agreement.
THE 1999 STOCK INCENTIVE PLAN AND THE 2000 STOCK INCENTIVE PLAN WERE
EACH APPROVED BY THE STOCKHOLDERS IN 2000. THE CORPORATION HAS NOT GRANTED ANY
OPTIONS UNDER ANY PLAN OTHER THAN THE 1999 OR 2000 STOCK INCENTIVE PLANS.
The Corporation's stock option grant levels are established by
considering competitive market data on grant levels and the amount 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 in calendar year 2003 under
the 2000 Plan to the executive officers named in the Summary Compensation Table
are shown in the Option Grant Table (see page 17).
12
CALENDAR YEAR 2003 PAY FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
As described above, the Corporation determines its pay for all
Executive Officers of the Corporation, including the President 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 President and Chief Executive Officer's compensation are
summarized below:
Base Salary - By way of Amendments to his Employment Agreement, one
of which is described at page 24 of the 2003 Proxy Statement
and the other of which is described at page 22 of this
document, the President and Chief Executive Officer, Mr. James
S. Osterman, received an increase in base salary to $427,167
on an annualized basis during 2003, which will increase to
$500,000 on an annual basis for 2004.
Annual Bonus - The Executive Management Annual Incentive Plan that
pertains to the President and Chief Executive Officer was
approved by the shareholders in April 2000 and established a
targeted EBITDA objective. In addition, Mr. Osterman was
guaranteed a minimum bonus of $400,000 for calendar year 2003
by an Amendment to his Employment Agreement, which is
described at page 24 of the 2003 Proxy Statement, increased to
$500,000 as a result of a subsequent Amendment as of February
2, 2004, which is described at page 22 of this document. Since
the Corporation exceeded the target for the EBITDA and Cash
Flow objectives, Mr. Osterman was paid a $550,000 bonus for
2003. The 2004 Amendment was approved on February 2, 2004 by
the Compensation Committee sitting in special session and
including for this purpose Mr. Cartledge by designation, as
well as Committee members, Mr. Fried and Mr. James. Messrs.
Fried and Cartledge are independent directors.
ELIOT M. FRIED, CHAIRMAN
R. EUGENE CARTLEDGE, MEMBER BY DESIGNATION
E. DANIEL JAMES, MEMBER
WILLIAM A. SHUTZER, MEMBER
EXECUTIVE OFFICERS
The executive officers of the Corporation, in addition to Mr. Osterman,
who is also a Director nominee, as of February 18, 2004 are:
YEAR FIRST
ELECTED TO AGE
NAME OFFICE SUCH OFFICE ---
- ---- ------ ------------
Dennis E. Eagan President - Industrial and Power Equipment Group 2000 54
Richard H. Irving, III Senior Vice President - General Counsel 1995 60
and Secretary and 1999
Calvin E. Jenness Senior Vice President, Chief Financial Officer 2002 48
and Treasurer and 2001
Kenneth O. Saito President - Oregon Cutting Systems Group 2002 56
Each of these executive officers serves at the pleasure of the Board;
however, the terms of each executive officer's employment agreement, discussed
generally at pages 22 and 23, control the rights and obligations attendant to
any termination. 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.
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.
13
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.
Calvin E. Jenness was elected Senior Vice President, Chief Financial
Officer and Treasurer in August 2002. Prior to that date, he served as Vice
President and Corporate Controller and Treasurer from June 2001 and as Vice
President and Corporate Controller from September 2000. Previously, he served as
Vice President and Chief Financial Officer of Bryan Foods, a division of Sara
Lee Corporation, from 1998.
Kenneth O. Saito was elected President of the Oregon Cutting Systems
Group in August 2002. Prior to that date, he served as Senior Vice President -
Finance & Administration from 1997. He joined the Oregon Cutting Systems
Division in March 1973.
14
EXECUTIVE COMPENSATION
The following table summarizes for the fiscal years 2003, 2002 and
2001, all plan and non-plan compensation awarded to, earned by, or paid to the
Chief Executive Officer and the four most highly compensated executive officers
other than the CEO of the Corporation (collectively, the "Named Executive
Officers") who were serving in executive officer capacities at the end of
December 2003.
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 ($) ($) ($) * (#) ($)
- ----------- ---- -------- -------- ------------ --- ---
James S. Osterman (1) 2003 427,167 550,000 74,266 ** 65,113 (2)
President and Chief Executive 2002 409,355 425,000 64,508 189,400 2,124,974
Officer 2001 388,887 200,000 25,053 150,000 39,791
Dennis E. Eagan 2003 360,269 312,770 8,003 45,000 24,605 (3)
President - Industrial and Power 2002 346,077 160,160 31,676 50,000 14,647
Equipment Group 2001 330,000 150,000 14,489 50,000 12,610
Richard H. Irving, III 2003 300,000 300,000 14,113 25,000 24,183 (4)
Senior Vice President - 2002 312,500 212,953 16,960 40,000 522,201
General Counsel 2001 310,000 75,000 20,900 15,000 14,009
and Secretary
Kenneth O. Saito (5) 2003 266,300 266,300 10,038 45,000 19,836 (6)
President - Oregon Cutting 2002 228,743 164,198 2,494 98,655 14,817
Systems Group 2001 205,565 113,162 0 7,000 19,029
Calvin E. Jenness (7) 2003 230,833 230,833 8,417 25,000 14,844 (8)
Senior Vice President, 2002 194,750 90,754 14,775 34,000 38,817
Chief Financial Officer and 2001 181,500 45,000 15,385 5,000 34,870
Treasurer
- -------------------------------------
* Tax gross-up for premiums on life insurance policies, club dues, personal
financial planning, personal use of the Corporation's property and relocation
expenses, as applicable.
** On February 2, 2004, Mr. Osterman was granted options representing 50,000
shares as part of an Amendment to his Employment Agreement. 25,000 of these
options were vested upon grant and 25,000 will vest on February 2, 2005. See
additional discussion of Mr. Osterman's Amendment on page 13, relating to
compensation for the President and Chief Executive Officer, and on page 22,
referring to the Employment Agreements of the Named Executive Officers.
15
(1) Mr. Osterman was President of the Outdoor Products Group until August
16, 2002, when he was elected President and Chief Executive Officer of
the Corporation.
(2) Amount is comprised of $39,072 matching contributions to employee's
401(k) and excess 401(k) accounts and $26,041 accrued benefits pursuant
to the Omark Salary Continuation Plan. (Amount for 2002 also includes
certain supplemental executive retirement plan payouts.)
(3) Amount is comprised of $24,244 matching contributions to employee's
401(k) and excess 401(k) accounts and $361 premiums on a life insurance
policy under the Corporation's executive life insurance plan.
(4) Amount is comprised of $23,602 matching contributions to employee's
401(k) and excess 401(k) accounts and $581 premiums on a life insurance
policy under the Corporation's executive life insurance plan. (Amount
in 2002 also includes certain supplemental executive retirement plan
payouts.)
(5) Mr. Saito was Senior Vice President - Finance and Administration of the
Outdoor Products Group until August 16, 2002, when he was elected
President of Oregon Cutting Systems Group.
(6) Amount is comprised of $19,836 matching contributions to employee's
401(k) and excess 401(k) accounts.
(7) Mr. Jenness was Vice President, Controller and Treasurer until August
16, 2002, when he was elected Senior Vice President, Chief Financial
Officer and Treasurer.
(8) Amount is comprised of $14,844 matching contributions to employee's
401(k) and excess 401(k) accounts.
16
OPTION GRANTS
The following table summarizes pertinent information regarding individual grants of stock options, including the
potential realizable dollar value, made during 2003 to each of the Named Executive Officers, assuming that the market value of
the underlying security appreciates in value from the date of grant to the end of the option term at the rates indicated in the
following table:
OPTION GRANTS IN CALENDAR YEAR 2003
INDIVIDUAL GRANTS
-----------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE EXPIRATION STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE DATE FOR OPTION TERM (1)
OPTIONS EMPLOYEES
NAME GRANTED (#) IN 2003 ($/SHARE) (MM/DD/YY) 5% ($) 10% ($)
- ---- ----------- ---------- --------- ----------- ------------ ------------
James S. Osterman *
Dennis E. Eagan 45,000 6.77% 5.05 11/5/13 143,000 362,000
Richard H. Irving, III 25,000 3.76% 5.05 11/5/13 79,000 201,000
Kenneth O. Saito 45,000 6.77% 5.05 11/5/13 143,000 362,000
Calvin E. Jenness 25,000 3.76% 5.05 11/5/13 79,000 201,000
- -------------------------------------
*
President and Chief Executive Officer, James S. Osterman, received a grant of options representing 50,000 shares at the per
share price of $5.05 on February 2, 2004 as part of an Amendment to his Employment Agreement. (This Amendment is also discussed
at page 13 relating to compensation for the President and Chief Executive Officer and at page 22 referring to the Employment
Agreements of the Named Executive Officers.) Although granted in calendar year 2004, information for Mr. Osterman's options
equivalent to that shown in the above table (increasing the total options granted during the relevant period from 620,000 to
721,000 to account for options granted to Mr. Osterman and four other individuals on February 2, 2004) is as follows:
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE EXPIRATION STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE DATE FOR OPTION TERM (1)
OPTIONS EMPLOYEES
NAME GRANTED (#) IN 2003/2/2004 ($/SHARE) (MM/DD/YY) 0% ($) 5% ($) 10% ($)
- ---- ----------- -------------- --------- ----------- -------- -------- --------
James S. Osterman 50,000 6.93% 5.05 2/2/14 185,000 460,000 882,000
(1) The amounts under these columns are the result of calculations at rates of 0% for options granted at a price below the
market value on the day of grant, and 5% and 10% for all options. These rates were established by rules adopted by the SEC, and
therefore are not intended as a forecast of probable future appreciation, if any, in the price of the Corporation's common
stock, the actual performance of which may be lower, in between or higher.
17
EQUITY COMPENSATION PLAN INFORMATION
EQUITY COMPENSATION PLANS APPROVED BY STOCKHOLDERS
1999 Stock Incentive Plan, see description at page 12.
2000 Stock Incentive Plan, see description at page 12.
EQUITY COMPENSATION PLANS NOT APPROVED BY STOCKHOLDERS
Stockholders have approved all compensation plans under which shares of
the Corporation's common stock may be issued.
SUMMARY TABLE
The following table sets forth certain information as of December 31,
2003 with respect to compensation plans under which shares of Blount common
stock may be issued.
NO. SHARES REMAINING
NO. SHARES TO BE WEIGHTED AVAILABLE FOR FUTURE
ISSUED UPON AVERAGE ISSUANCE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OUTSTANDING (EXCLUDING SHARES IN
PLAN CATEGORY OPTIONS (1) OPTIONS COLUMN 1) (2)
- ------------- ------------------------------------------------------------------
Equity compensation
plans approved by
stockholders
1999 Stock Incentive Plan 1,349,500 $14.60 1,525,500
2000 Stock Incentive Plan 2,707,391 $ 4.21 260,753
--------- ------ ---------
Total 4,056,891 $ 7.67 1,786,253
Equity compensation
plans not approved
by stockholders 0 Not Applicable 0
TOTAL
(1) Represents shares of common stock issuable upon exercise of outstanding
options granted under the Corporation's 1999 Stock Incentive Plan and
2000 Stock Incentive Plan.
(2) Includes shares of common stock available for future option grants
under the Corporation's 1999 Stock Incentive Plan and 2000 Stock
Incentive Plan.
18
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table summarizes pertinent information concerning the exercise of stock options during 2003 by each of
the Named Executive Officers and the year-end value of unexercised options:
AGGREGATE OPTION EXERCISES IN 2003
AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options at Options at
Exercise (#) Realized ($) 12/31/03 12/31/03
------------ ------------ -------- --------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
James S. Osterman 0 0 439,420* 19,980* 1,374,275* 0*
Dennis E. Eagan 0 0 65,000 130,000 162,400 308,200
Richard H. Irving, III 0 0 73,334 106,666 134,699 151,581
Kenneth O. Saito 0 0 63,989 121,666 210,496 347,141
Calvin E. Jenness 0 0 23,668 50,332 76,648 142,012
* Totals do not take into account Mr. Osterman's grant on February 2, 2004 of 50,000 options at a price of $5.05 per share.
25,000 of these options vested upon grant, and 25,000 will vest on February 2, 2005.
19
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 the Named Executive Officers) in
specific classifications following retirement at age 65 (normal retirement age) after 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
1,100,000 220,000 330,000 440,000 550,000 577,500 605,000 632,500
1,200,000 240,000 360,000 480,000 600,000 630,000 660,000 690,000
(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, 2004. 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
2004 is $165,000, 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 $205,000 for 2004, 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 ("Group SERP"); provided, however, it should be noted that as a result of lump sum payments for
certain supplemental retirement plan benefits to Mr. Osterman and Mr. Irving in 2002, which are described on page 23 of the
2002 Proxy Statement and page 22 of this document respectively, Mr. Osterman no longer participates in the Group SERP, and
Mr. Irving will not again be eligible to participate until August, 2004, after which time any benefit payable to him under
the Group SERP will take into account the effect of that portion of the lump sum payment he received in 2002 that was
attributable to the Group SERP through July 31, 2004.
(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, 2003, for the Named Executive Officers are: Mr.
Osterman, 34 years; Mr. Eagan, 3 years; Mr. Irving, 9 years; Mr. Saito, 31 years and Mr. Jenness, 3 years.
20
SUPPLEMENTAL RETIREMENT PLANS AND EMPLOYMENT CONTRACTS
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Corporation maintains an individual Supplemental Executive Retirement
Plan ("Eagan Individual SERP") for Dennis E. Eagan. The Eagan Individual SERP
will pay Mr. Eagan upon his normal retirement date or earlier termination of
employment 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 under the Eagan Individual SERP, reduced by any retirement benefits
payable to him under the Blount Retirement Plan and any retirement income
actually paid to him under any pension plan maintained by a former employer.
This plan is administered by the Board or, at the Board's discretion, the
Compensation Committee of the Board. The Eagan Individual SERP is unfunded and
any amount due Mr. Eagan is a general unsecured obligation of the Corporation.
This plan 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. Eagan under the Eagan
Individual SERP 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. Eagan is $74,797.
OMARK PLANS
For certain employees of Blount's Outdoor Products Group, Industrial and
Power Equipment Group and the former Sporting 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, minus (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 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 two 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 to participants prior to such amendment
or termination may not be reduced.
Mr. Osterman and Mr. Saito participate in the Omark Supplemental
Retirement Plan and Omark Protection Plan, but no benefits are projected to be
payable under these plans to either of them. Mr. Osterman participates in the
Omark Salary Continuation Plan.
21
EMPLOYMENT CONTRACTS
The Corporation has entered into Employment Agreements (the
"Agreements") with all of the Named Executive Officers. 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 50% 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.
The duration of the Agreements is a rolling two-year term for Messrs.
Irving and Saito, and a rolling one-year term for Messrs. Eagan and Jenness,
each of which is automatically extended one day for each day employed until such
time as either party gives notice to cease the automatic extension and, in such
event, the Agreement then continues for its remaining term (provided that
Messrs. Eagan's and Irving's Agreements each expire on the executive's 65th
birthday). Mr. Osterman's Agreement expires on December 31, 2005, but may be
renewed for successive one-year terms under certain circumstances. Each
Agreement has a clause that 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 (from 12 to 24 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 Agreement cease and no special severance
benefits will be paid.
A separate Agreement with Mr. Eagan provides for the Supplemental
Executive Retirement Plan described at page 21 above. Messrs. Eagan's and
Saito's Agreements contain certain provisions relating to the effect of any sale
of their respective segments or divisions. Mr. Irving is covered by the
Corporation's Executive Life Insurance Program.
Mr. Osterman's Agreement was amended and restated as of February 2,
2004 to provide for a 16-1/2 month extension of his employment through December
31, 2005. As part of this Amendment, Mr. Osterman received (i) an increase in
base salary to $500,000 on an annualized basis, (ii) a minimum annual bonus of
$500,000 for the Fiscal Years 2004 and 2005 and (iii) the grant of options under
the 2000 Stock Incentive Plan for 50,000 shares, 25,000 of which fully vested on
February 2, 2004 and 25,000 of which will vest on February 2, 2005. Mr. Osterman
was scheduled to retire on August 19, 2004 prior to the execution of this
February 2, 2004 Amendment. Mr. Osterman's two-year consulting arrangement,
which would have gone into effect on August 19, 2002, and then August 19, 2004,
under two earlier amendments to his Agreement discussed respectively in the 2002
Proxy Statement on page 18, and the 2003 Proxy Statement on page 23, was amended
to begin on January 1, 2006 and otherwise remains essentially unchanged except
that it now pertains to consulting services for the entire Corporation, not only
to the Oregon Cutting Systems segment; provides for business trips to the
Corporation's largest customers, international facilities, trade shows and
customer outings; and, subject to his nomination and election, continues Mr.
Osterman's service as a director on the Board during the two-year consulting
period.
Mr. Irving's Agreement was amended as of August 19, 2002 to provide for
his relocation in connection with the move of the Corporation's headquarters
from Montgomery, Alabama to Portland, Oregon. As part of this Amendment, Mr.
Irving received certain lump sum payments under his Individual Supplemental
Executive Retirement Plan ("Individual SERP") and under the Blount, Inc. and
Subsidiaries Supplemental Retirement Benefit Plan ("Group SERP"). The payout of
the Individual SERP benefits was in full satisfaction of the Corporation's
obligations under that Plan. With respect to the Group SERP, Mr. Irving will
again be eligible to participate in that Plan commencing August 1, 2004, but any
benefit payable thereafter under that Plan will take into account that portion
of the 2002 lump sum payment that was attributable to benefits under the Group
SERP through July 31, 2004. Mr. Irving also received an increase in his annual
Target Bonus as a percentage of base salary under the Executive Management
Annual Incentive Plan, which was part of an earlier amendment dated as of
February 14, 2002, and a change in the financial performance measurements on
which such bonus is based under his August 19, 2002 amendment. In exchange, Mr.
Irving agreed to a reduction in salary, the relinquishment of certain
perquisites formerly provided him and a waiver of his contractual relocation
provision.
Mr. Jenness' Agreement was amended effective March 1, 2004 by
increasing his salary to $260,000, his Target Bonus percentage to 50% and
extending his severance period to two years for a qualifying termination
following a change of control (as defined in the Agreement). Mr. Jenness'
salary, Target Bonus percentage and severance period were previously amended by
an earlier amendment dated February 14, 2002 in connection with his relocation
as part of the move of the Corporation's headquarters from Montgomery, Alabama
to Portland, Oregon, in exchange for which Mr. Jenness relinquished certain
perquisites.
22
Mr. Saito's Agreement was likewise amended to reflect his promotion to
President of the Oregon Cutting Systems Group as of August 16, 2002 by
increasing his base salary, his Target Bonus percentage and the severance
period, as well as providing certain retirement and health benefits and
additional perquisites.
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. ("LBMBP II") and
24 current, including all of the Named Executive Officers, and 23 former
management employees, some of whom were employees of the Sporting Equipment
segment that was divested in December 2001. The Stockholder Agreement sets forth
terms and restrictions relating to common stock either purchased by the
particular 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 generally 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 on August 19, 1999. 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 LBMBP II whenever LBMBP II sells its
shares to third parties. Similarly, LBMBP II has the right to cause each of the
executives to sell his or her shares of common stock on a pro rata basis with
LBMBP II to a third party that has made an offer to purchase the Corporation's
shares owned by LBMBP II. 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 LBMBP II 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 LBMBP II. 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.
As a result of an Amendment to his Employment Agreement at the time of
his agreed upon retirement from the Corporation in June 2001, former Chairman
and Chief Executive Officer John M. Panettiere is not subject to the
restrictions on transfer contained in the Employee Stockholder Agreement to the
extent of sales of shares of common stock representing $250,000 in value, based
upon sales price, in 2003 and again in 2004 to August 19, 2004, subject to such
sales being made in accordance with volume limitations identical to those of
Rule 144 promulgated by the SEC under the Securities Act of 1933, as amended.
Similarly, as a result of Amendments to the Employment Agreements of
each of former President and Chief Executive Officer Harold E. Layman and former
Senior Vice President and Chief Financial Officer Rodney W. Blankenship, each of
whose employment with the Corporation was terminated by mutual agreement on
August 15, 2002 and on August 1, 2002 (subject to a one-year authorized leave of
absence for certain purposes), respectively, in connection with the relocation
of the Corporation's headquarters from Montgomery, Alabama to Portland, Oregon,
each received the right to sell shares received upon the exercise of certain
options under the 2000 Stock Incentive Plan that had previously vested or that
vested as a result of his termination of employment, subject to maximum
aggregate sales price restrictions in any one calendar year prior to August 19,
2004 of $50,000 for Mr. Layman and $25,000 for Mr. Blankenship. In exchange, any
such shares were accorded the same "tag-along" and "drag-along" rights described
above pursuant to the Stockholder Agreement for Option Shares under the 1999
Stock Incentive Plan.
23
PERFORMANCE GRAPH
Rules adopted by the SEC 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. (As a result of a change in New York Stock Exchange
procedures, its Market Value Index has been manually recreated for years prior
to December 31, 2003.) The Corporation created a peer group index with which to
compare its own stock performance since a relevant published industry or
line-of-business index does not exist. For the purposes of this performance
comparison, the Corporation chose a group of eight manufacturing companies that
have operations in those industries in which the Corporation competes. A list of
these companies ("Peer Group") follows the graph below.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG BLOUNT INTERNATIONAL, INC., THE NYSE COMPOSITE INDEX
AND A PEER GROUP
[PERFORMANCE GRAPH]
- --------------------------------------------------------------------------------------------------------------------------------
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
==============================================================================================
The Corporation 100.00 127.86 61.68 25.19 30.57 63.14
Peer Group * 100.00 113.93 110.84 118.78 116.05 191.23
NYSE Mkt. Val. Index 100.00 112.17 115.04 105.57 85.86 110.62
- --------------------------------------------------------------------------------------------------------------------------------
- -----------
* The companies in the Peer Group are Caterpillar, Inc., Deere & Co.,
Ingersoll-Rand Co., Kaydon Corp., Kennametal Inc., Regal-Beloit Corp., Terex
Corp. and Toro Co.
24
FILING DISCLOSURE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require that the Corporation's directors, executive officers and
persons who beneficially own more than 10% of any class of equity securities of
the Corporation file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange and 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 2003 all filing requirements applicable to its directors, officers and
greater than 10% beneficial owners were complied with without exception.
CERTAIN TRANSACTIONS AND OTHER MATTERS
Messrs. Fried, James and Shutzer, who are directors of the Corporation,
are investors in LBMBP II, 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 85.1% 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.
Additionally, as a result of a transaction involving an amendment to
the Corporation's former Credit Agreement with its secured lenders on February
2, 2001, as disclosed in the 2001 Proxy Statement at page 18, LB Blount
Investment SPV LLC, an affiliate of LBMBP II, paid $20,000,000 for a convertible
preferred equivalent security bearing interest at 12% per annum, together with
warrants for 1,000,000 shares of the Corporation's common stock exercisable at
any time through March 2, 2013 at the price of $0.01 per share. The convertible
preferred equivalent security, prior to the fifth anniversary of its issuance
and at the Corporation's option thereafter, pays interest in additional such
securities (payments-in-kind, or "PIKs") in lieu of cash, and is convertible
into convertible preferred stock at the rate of one preferred share for every
$1,000 in principal amount, as increased by the accumulation of PIKs. (By an
amendment to its Restated Certificate of Incorporation passed by the
stockholders at the 2001 Annual Meeting, the Corporation has authorized a class,
or classes, of preferred stock.) The preferred stock resulting from the
conversion of the preferred equivalent security would contain a convertibility
feature in turn permitting its conversion to common stock at the rate of $1,000
times the number of preferred shares being converted divided by $15, or
approximately 66.67 shares of common for every one share of preferred.
From time to time, Lehman Brothers Holdings Inc. or its affiliates also
receives customary fees for services to the Corporation in connection with
financings, divestitures, acquisitions and certain other transactions. In 2001,
fees for investment banking and underwriting services were paid Lehman Brothers
Holdings Inc. or certain of its affiliates in connection with (i) the
Corporation's sale of its Sporting Equipment segment to Alliant Techsystems,
Inc. ("ATK") on December 7, 2001 for 3,048,786 shares of ATK common stock and
$10,000 cash, and (ii) the Corporation's subsequent underwritten sale of the
shares received from ATK for $236.7 million in gross proceeds, as well as lender
fees in connection with certain amendments to the Corporation's Credit Agreement
in February 2001 and December 2001. There were no such fees received by Lehman
Brothers Holdings Inc. or its affiliates from the Corporation during 2002. In
2003, as a result of its assistance in the arrangement, negotiation and closing
of the Corporation's refinancing transaction with General Electric Credit
Corporation and other lenders in May 2003, Lehman Brothers Inc., an affiliate of
Lehman Brothers Holdings Inc., assessed the Corporation fees of $1 million,
which were approved on February 3, 2004 by the Board members not affiliated with
Lehman Brothers Holdings Inc.
25
RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL 2
The Audit Committee has appointed the firm of PricewaterhouseCoopers
LLP as the Corporation's independent auditors for the calendar year ending
December 31, 2004. 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 a capacity of promoter, underwriter,
voting trustee, director, officer or employee.
PricewaterhouseCoopers LLP proposes to bill or has billed the
Corporation the following amounts for professional services during 2003 and
2002, all of which PricewaterhouseCoopers LLP has advised were provided at
customary rates and terms:
2003 (PROPOSED) 2002 (ACTUAL)
--------------- -------------
AUDIT FEES: $ 501,000 $ 552,000
AUDIT RELATED FEES: $ 63,980 $ 136,700
TAX FEES: $ 679,000 $ 780,024
ALL OTHER FEES AND EXPENSES: $ 0 $ 0
----------- ----------
TOTAL $ 1,243,980 $1,468,724
=========== ==========
Audit fees for the years ended December 31, 2003 and 2002,
respectively, were for professional services rendered for the audits of the
consolidated financial statements of the Corporation, statutory audits and
assistance with review of documents filed with the SEC.
Audit Related fees as of the years ended December 31, 2003 and 2002,
respectively, were for assurance and related services, including closing date
balance sheet audit procedures and consultations concerning financial accounting
and reporting standards, as well as fees incurred in connection with the audit
of certain of the Corporation's qualified benefit plans.
Tax fees for the years ending as of December 31, 2003 and 2002,
respectively, were for services related to tax compliance, including preparation
of tax returns and claims for refund, tax planning and tax advice, assistance
with respect to tax audits and requests for rulings for technical advice from
tax authorities.
The Audit Committee of the Board approved in advance all non-audit
services rendered by PricewaterhouseCoopers LLP during 2003 and concluded that
such services did not affect the independence of the auditors. The Audit
Committee adopted amendments to its pre-approval policies and procedures for
audit and non-audit services on May 12, 2003 in compliance with rules
promulgated pursuant to the Sarbanes-Oxley Act and effective, as to the
Corporation, with its annual filings for the first fiscal year ending after
December 15, 2003. Please also refer to the Audit Committee Report on page 9.
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 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, 2004. If the stockholders do not ratify the
appointment of PricewaterhouseCoopers LLP by a majority vote, the Board will
reconsider the appointment.
26
STOCKHOLDERS' COMMUNICATIONS WITH BOARD OF DIRECTORS
Stockholders interested in communicating information or inquiries to
the Board, its Committees or any specific Director should do so by submitting a
written communication to:
Board of Directors
Blount International, Inc.
4909 SE International Way
Portland, Oregon 97222
To the Attention of: General Counsel
The General Counsel will open and read the written submission only to confirm
that it relates to the business of the Corporation, and, if so, will send the
communication in its entirety to the Chairman of the Board (or to the addressee
specified, if any) without comment.
STOCKHOLDERS' PROPOSALS FOR 2005 ANNUAL MEETING
Stockholders may present proposals that are proper subjects for
inclusion in the Proxy Statement and for consideration at the Annual Meeting of
Stockholders in 2005. In order to be considered, proposals must be submitted on
a timely basis. Proposals for the 2005 Annual Meeting of Stockholders must be
received by the Corporation no later than November 22, 2004. 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.
Arrangements will 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
Portland, Oregon
March 22, 2004
27
EXHIBIT A
BLOUNT INTERNATIONAL, INC. AUDIT COMMITTEE CHARTER
PURPOSE
The purpose of the Audit Committee of the Board of Directors (the "Board") of
Blount International, Inc. (together with its subsidiaries, the "Corporation")
is to assist the Board in fulfilling its responsibility to oversee (i)
management's conduct of the Corporation's financial reporting process (including
the development and maintenance of systems of internal accounting and financial
controls), (ii) the integrity of the Corporation's financial statements, (iii)
the Corporation's compliance with legal and regulatory requirements, (iv) the
qualifications and independence of the Corporation's Independent Auditors, (v)
the performance of the Corporation's Internal Audit Function and (vi) each audit
of the Corporation's financial statements performed by the Corporation's
Independent Auditors.
ORGANIZATION
The Audit Committee shall consist of at least three Directors, of which one
shall be the Chairperson. The Audit Committee shall include only independent
Directors, as independence is defined by the listed company rules, regulations
and standards of the New York Stock Exchange, Inc. Each member of the Audit
Committee shall be financially literate or must become financially literate
within a reasonable period of time after his or her appointment to the Audit
Committee, and at least one member of the Audit Committee must be an "audit
committee financial expert" in compliance with the criteria established by the
Securities and Exchange Commission (the "SEC"). Whether a member has financial
literacy and expertise shall be determined by the Board in its business
judgment. The existence of an audit committee financial expert and whether or
not he or she is independent shall be disclosed in periodic filings as may be
required by the SEC. Audit Committee members shall be appointed by a resolution
of the Board for a one year term, commencing on the date of the Board meeting
held each year in conjunction with the annual meeting of stockholders.
RESPONSIBILITIES
The Audit 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 Independent Auditors are responsible for
auditing those financial statements. Additionally, the Audit Committee
recognizes that financial management personnel, the Internal Audit Function
(which function may be performed by an outside consultant under contract), and
the Independent Auditors have more knowledge and information relating to the
Corporation than do Audit Committee members; consequently, in carrying out its
oversight responsibilities, the Audit Committee is not providing any expert or
special assurance as to the Corporation's financial statements or any
professional certification as to the Independent Auditor's work.
Subject to the foregoing, the following functions shall be the common recurring
activities of the Audit Committee in carrying out this oversight role:
MEETINGS OF THE AUDIT COMMITTEE
(1) The Audit Committee shall hold such meetings as it shall deem advisable,
but shall meet a minimum of four times per calendar year. Minutes of all
Audit Committee meetings shall be taken and approved by subsequent
action. The Audit Committee shall circulate the minutes of an Audit
Committee meeting to any Board member who did not attend the Audit
Committee meeting as a guest.
28
(2) The Audit Committee shall meet at such times and places as the Audit
Committee shall deem advisable on the call of the Chairman of the Audit
Committee, the Chairman of the Board, the Chief Executive Officer, or,
in their absence, by any member of the Audit Committee. The presence of
a majority of the members of the Audit Committee then in office shall
constitute a quorum for the transaction of business.
(3) Upon the request of the Corporation's Independent Auditors or the
Corporation's Internal Audit Function, the Chairman of the Audit
Committee shall convene a meeting of the Audit Committee to consider any
matters such auditors believe should be brought to the attention of the
Audit Committee, Directors or shareholders.
(4) At each regular Board meeting held following an Audit Committee meeting,
the Chairman of the Audit Committee shall report to the Board regarding
the action taken by the Audit Committee.
(5) The Audit Committee also has the authority to direct and supervise an
investigation into any matter, without seeking Board approval. The Audit
Committee has the authority to retain independent, outside counsel or
other professional services as it deems necessary, without seeking Board
approval. The Corporation shall provide such funding as the Audit
Committee determines is necessary for payment of compensation to the
Independent Auditor and any counsel or other advisors employed by the
Audit Committee and for the ordinary administrative expenses of the
Audit Committee in the performance of its duties.
APPOINTMENT OF THE INDEPENDENT AUDITOR AND APPROVAL OF SERVICES
(1) The Audit Committee is directly responsible for the appointment,
compensation, retention, termination and oversight of the work
(including the resolution of any disagreements between management and
the Independent Auditor regarding financial reporting) of any
Independent Auditor engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services for
the Corporation, subject (if applicable) to subsequent shareholder
ratification. The Independent Auditor engaged for the purpose of
preparing or issuing an audit report or performing other audit, review
or attest services for the Corporation shall be a "registered public
accounting firm," as provided in the Sarbanes-Oxley Act of 2002 and the
regulations thereunder, and shall report directly to the Audit
Committee.
(2) The Audit Committee shall review with the Independent Auditors their
audit plans and scope for the coming year and any non-audit services to
be performed by such Independent Auditor. The Audit Committee shall
review the compensation to be paid to the Independent Auditors for all
audit and non-audit services to be performed. Subject to a de minimis
exception relating to non-audit services, which is described in the
following sentence, all audit and non-audit services to be performed for
the Corporation by the Independent Auditor must be pre-approved by the
Audit Committee or entered into pursuant to pre-approval policies and
procedures established by the Audit Committee. Pre-approval of non-audit
services shall not be required if:
(a) the aggregate amount of all non-audit services provided to the
Corporation does not exceed 5% of the total amount of revenues
paid by the Corporation to the Independent Auditor during the
fiscal year in which the non-audit services are provided;
(b) the services were not recognized by the Corporation at the time
of the engagement to be non-audit services; and
(c) the services are promptly brought to the attention of the Audit
Committee and approved by the Audit Committee prior to
completion of the audit.
29
Any pre-approval policies and procedures established by the Audit Committee:
(a) must be detailed as to the particular services;
(b) must provide that the Audit Committee will be informed of each
service; and
(c) may not delegate the Audit Committee's responsibilities to
management.
The Audit Committee may delegate this pre-approval function to one or more
members of the Audit Committee. The decisions of any Audit Committee member to
whom pre-approval authority has been delegated shall be presented to the Audit
Committee at its regularly scheduled meetings. Any non-audit service
pre-approved by the Audit Committee (or any member to whom authority has been
delegated) and any non-audit service entered into pursuant to pre-approval
policies and procedures established by the Audit Committee shall be disclosed by
the Corporation as required by law.
REVIEWS OF INDEPENDENT AUDITORS
(1) At least annually, the Audit Committee shall obtain and review a report
by the Independent Auditor describing:
(a) the firm's internal quality-control procedures;
(b) any material issues raised by the firm's most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps
taken to deal with any such issues; and
(c) all relationships between the Independent Auditor and the
Corporation (in order to assess the Independent Auditor's
independence).
(2) After reviewing the report discussed in (1) above and the Independent
Auditor's work for the year, the Audit Committee shall evaluate the
Independent Auditor's qualifications, performance and independence. The
evaluation will include a review and evaluation of the lead partner of
the Independent Auditor assigned to the Corporation's audit. The
evaluation also will consider the opinions of management and the
Corporation's Internal Audit Function. The audit partners shall be
rotated as required by law. The Audit Committee shall present the
results of its evaluation of the Independent Auditor to the Board.
(3) The Audit Committee shall ensure that the Independent Auditors submit on
a periodic basis to the Audit Committee a formal written statement
delineating all relationships between such auditors and the Corporation.
The Audit Committee also shall actively engage in dialogues with the
Independent Auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence of such
auditors, and recommend that the Board take appropriate action in
response to the Independent Auditors' reports to satisfy itself of such
auditors' independence.
REPORTS FROM INDEPENDENT AUDITORS
(1) The Audit Committee shall review with the Independent Auditors timely
reports concerning:
(a) the audit report and their comments arising from the audit;
(b) all critical accounting policies and practices to be used;
30
(c) all alternative treatments within generally accepted accounting
principles for policies and practices related to material items
that have been discussed with the Corporation's management,
including the ramifications of the use of such alternative
disclosures and treatments and the treatment preferred by the
Independent Auditor; and
(d) other material written communications between the Independent
Auditor and management, such as any management letter or
schedule of unadjusted differences.
(2) The Audit Committee shall regularly review with the Independent Auditor
any problems or difficulties that the Independent Auditor encounters in
the course of the audit work, including management's response. The
review shall include a review of any restrictions on the scope of the
Independent Auditor's activities or on access to requested information
and any significant disagreements with management.
REQUIRED PERIODIC AUDIT COMMITTEE REVIEW AND REPORTS
(1) To assist the Audit Committee in effectively performing its oversight
function, the Audit Committee shall meet periodically (but, in any
event, not less than quarterly) in separate sessions with management,
the Internal Audit Function and the Independent Auditors.
(a) The Audit Committee shall provide an open avenue of
communication among the management, the Internal Audit Function,
the Independent Auditors and the Board.
(b) The Audit Committee's review with the Corporation's Internal
Audit Function shall include a review of the internal audit
organization and the internal audit goals and plans and a
discussion of the findings and recommendations resulting from
internal audits.
(c) The Audit Committee's review with the Corporation's chief
accounting officer or person performing a similar function (the
"Controller") shall include a review of the adequacy of the
Corporation's overall systems of internal control and the
responses taken with respect to the audit findings. In addition,
the Audit Committee's review with each of the Chief Executive
Officer, the Chief Financial Officer and the Independent Auditor
shall include a review of their assessments of the Corporation's
internal controls, as required by applicable law.
(2) Periodically, the Audit Committee shall discuss guidelines and policies
with respect to risk assessment and risk management. The discussion will
include a review of the Corporation's major financial risk exposures and
the steps management has taken to monitor and control such exposures.
(3) The Audit Committee shall review in a timely manner all materials
received from the Independent Auditors and provide a summary report of
such materials to the Board and executives and management of the
Corporation, if such summary is deemed necessary or advisable by the
Audit Committee.
(4) The Audit Committee shall review the significant reports to management
prepared by the Internal Audit Function as well as management's
responses thereto.
(5) The Audit Committee shall review periodically with management (including
the General Counsel) and the Independent Auditors any correspondence
with, or other action by, regulators or governmental agencies, any
material legal affairs of the Corporation, and the Corporation's
compliance with applicable laws and NYSE listing standards.
31
REQUIRED ANNUAL AUDIT COMMITTEE REVIEW AND REPORTS
(1) The Audit Committee shall produce and provide to the Board an annual
performance evaluation of the Audit Committee, which evaluation shall
compare the performance of the Audit Committee with the requirements of
this Charter. The performance evaluation shall also recommend to the
Board any improvements to this Charter deemed necessary or desirable by
the Audit Committee. The performance evaluation by the Audit Committee
shall be conducted in such manner as the Audit Committee or a majority
of the non-employee Directors deems appropriate.
(2) The Audit Committee shall prepare the report of the Audit Committee
required by the rules of the SEC to be included in the Corporation's
annual proxy statement.
(3) The Audit Committee shall recommend to the Board policies and procedures
to be developed for dealing with various matters as to which conflicts
of interest may arise (including affiliate transactions, expense
accounts and perquisites of officers and management of the Corporation)
and periodically review the application of such policies and procedures.
The Audit Committee shall review periodically, but at least once each
year, all material agreements between the Corporation and any business
organization wherein a director or officer of the Corporation is also a
director or officer of such organization to ensure that such agreements
are fair to the Corporation and its shareholders.
REVIEW OF FINANCIAL STATEMENTS AND PRESS RELEASES
(1) The Audit Committee shall discuss the annual audited financial
statements and the quarterly unaudited financial statements with
management and the Independent Auditor prior to their filing with the
SEC in the Corporation's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q. The discussion of financial information also shall
include a review of the Corporation's disclosures in the section
entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) The Audit Committee shall conduct open and frank discussions with the
Corporation and the Independent Auditors regarding the auditor's
evaluation of the quality of the Corporation's accounting principles and
essential estimates in its financial statements. This dialogue will
include discussion of the consistency, clarity and completeness of the
financial statements and related disclosures. The discussion will also
include items that may impact the representational faithfulness,
verifiability and neutrality of the information shown in the financial
statements, such as changes in accounting policies, estimates,
judgments, uncertainties and unusual transactions (including matters
required to be discussed by SAS No. 61, as amended or supplemented),
including but not limited to:
(a) a review any analyses prepared by management and/or the
Independent Auditor setting forth significant financial
reporting issues and judgments made in connection with the
preparation of the financial statements, including analyses of
the effects on the financial statements of alternative methods
under generally accepted accounting principles;
(b) issues regarding accounting principles and financial statement
presentations, including any significant changes in the
Corporation's selection or application of accounting principles;
(c) the effect of any regulatory and accounting initiatives, as well
as off-balance sheet structures, on the financial statements of
the Corporation; and
(d) any unusual, non-operating and/or non-recurring items.
32
(3) Based on these reviews and discussions, the Audit Committee shall
determine whether to recommend to the Board that the Corporation's
audited financial statements be included in the Corporation's Annual
Report on Form 10-K.
(4) Periodically, the Audit Committee shall have a general discussion
regarding earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies. These
discussions need not occur in advance of each earnings release or
instance in which the Corporation may provide financial information or
earnings guidance.
OTHER DUTIES OF THE AUDIT COMMITTEE
(1) The Audit Committee shall have responsibility for monitoring the
Corporation's policies for compliance with applicable federal, state,
local and foreign laws and regulations as well as the Corporation's
policies on corporate conduct. The Audit Committee shall have the
authority to review the Corporation's legal and ethical compliance
program and to institute any changes or revisions to such program as may
be deemed warranted or desirable by the Audit Committee. The Audit
Committee shall be responsible for reviewing and determining whether to
grant any requests by Directors or executive officers for waivers of the
Corporation's Code of Ethics. Any such waiver shall be disclosed to
shareholders, as required by law.
(2) The Audit Committee shall establish procedures for:
(a) the receipt, retention and treatment of complaints received by
the Corporation regarding accounting, internal accounting
controls or auditing matters; and
(b) the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or
auditing matters.
(3) The Audit Committee shall set clear hiring policies for employees or
former employees of the Corporation's Independent Auditor.
(4) No member of the Audit Committee may receive, directly or indirectly,
any compensation from the Corporation other than (i) fees paid to
Directors for service on the Board, (ii) fees paid to Directors for
service on a committee of the Board (including the Audit Committee) and
(iii) a pension or other deferred compensation for prior service that is
not contingent on future service on the Board.
33
EXHIBIT B
1. INTRODUCTION
Blount International, Inc. ("Blount") is publishing this Code of Ethics
(the "Code") in order to provide the Chief Executive Officer, Chief Financial
Officer and Controller (or persons performing similar functions) (the "Covered
Officers") with clear guidance as to their conduct as officers of Blount. While
covering a wide range of business practices and procedures, this Code cannot and
does not cover every specific issue that may arise, or every specific situation
in which ethical decisions must be made. Rather, this Code sets forth key
guiding principles of business conduct that Blount expects of the Covered
Officers, which principles underscore Blount's commitment to conduct its
business in compliance with all applicable laws and regulations and with the
highest ethical standards. These principles are intended to provide guidance to
the Covered Officers in handling any and all situations and issues that may
arise during the Covered Officers' performance of their duties as officers of
Blount. This Code is intended to be our Code of Ethics for the Chief Executive
Officer and the Senior Financial Officers pursuant to the provisions of Section
406 of the Sarbanes-Oxley Act of 2002 and related rules of the U.S. Securities
and Exchange Commission.
2. HONESTY AND ETHICAL CONDUCT
Each Covered Officer owes a duty to Blount to act honestly and
ethically. Deceit and subordination of principle are inconsistent with honest
and ethical conduct. Each Covered Officer must be honest and candid while still
maintaining the confidentiality of information where required or consistent with
Blount's policies, and each Covered Officer must adhere to a high standard of
business ethics in the performance of each of his or her duties as an officer of
Blount (including the handling of actual or apparent conflicts of interest).
3. FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE PUBLIC DISCLOSURE
Blount is committed to providing information about Blount and its
subsidiaries to the public in a manner that is consistent with all applicable
legal and regulatory requirements and that promotes investor confidence by
facilitating fair, orderly and efficient behavior. Therefore, each Covered
Officer is responsible for ensuring that all disclosures made in all periodic
reports and documents filed with the Securities and Exchange Commission, and all
other public communications by Blount, are full, fair, accurate, timely and
understandable. In furtherance thereof, each Covered Officer should (i) be
familiar with and comply with the disclosure requirements applicable to Blount
and (ii) not knowingly misrepresent, or cause others to misrepresent, facts
about Blount and its subsidiaries, whether to internal or external persons or
parties (including Blount's Independent Auditors, governmental regulators and
the New York Stock Exchange).
In addition, in order to satisfy the disclosure obligations referred to
above, Blount is required by law to keep accurate and complete company books,
records, and accounts to reflect Blount's transactions and is required to
maintain an adequate system of internal controls for all of its business
transactions, records and accounts. Therefore, Blount's books and records must
exhibit the highest degree of integrity. The Covered Officers should, to the
extent appropriate within their area or responsibility, consult with other
officers and employees of Blount and take other appropriate steps regarding such
books, records and accounts with the goal of making Blount's books, records and
accounts complete, accurate, and supported by appropriate documents in auditable
form.
The Covered Officers shall promptly bring to the attention of the Senior
Vice President and General Counsel of Blount (the "General Counsel") and the
Audit Committee any information to which they have actual knowledge concerning
(i) significant deviations in the design or operation of internal controls which
could adversely affect Blount's ability to record, process, summarize and report
financial data or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in Blount's financial
reporting, disclosures or internal controls.
34
4. COMPLIANCE WITH LAWS, RULES AND REGULATIONS
Blount is strongly committed to conducting its business affairs with
honesty and integrity and in full compliance with all applicable laws, rules and
regulations, wherever business is conducted. No Covered Officer may violate any
applicable law, rule or regulation, or instruct or authorize others to do so,
for any reason in connection with any act, decision or activity that is or may
appear to be related to such Covered Officer's employment by or position with
Blount. In some instances, laws, rules and regulations may be ambiguous and
difficult to interpret. In such cases, a Covered Officer should seek legal
advice through Blount's Legal Department in order to ensure that he or she in
compliance with this policy as it pertains to legal matters and that both the
Covered Officer and Blount are observing and obeying all applicable laws, rules
and regulations.
Covered Officers who have knowledge of material nonpublic information
are prohibited from trading in securities of Blount or another company who may
be the subject of such information (including customers, partners or suppliers)
and should not pass along such information to anyone else who does not have a
need to know.
5. CONFLICT OF INTEREST
The term "conflict of interest" describes any circumstance in which a
Covered Officer's personal interests, relationships or activities, or those of a
member of such Covered Officer's immediate family, interfere or conflict, or
appear to interfere or conflict, with the interests of Blount. Activities which
involve the unauthorized use of Blount time, equipment, or information, which
significantly interfere with job performance, which could damage the Covered
Officer's or Blount's good reputation, or which otherwise conflict or compete
with Blount's business interests, are examples of conflicts of interest. In
essence, a Covered Officer should not use his or her position or the assets or
influence of Blount for personal advantage or for the advantage of immediate
family members to the detriment of Blount, and should always act in the best
interests of Blount. Covered Officers should not take for themselves personally
opportunities that are discovered through the use of corporate property,
information or position. Blount is prohibited from, directly or indirectly,
extending or maintaining credit (or arranging for an extension of credit) in the
form of a personal loan to any Covered Officer.
Each Covered Officer should avoid conflicts of interest wherever
possible, and should discuss any material transaction or relationship that could
reasonably be expected to give rise to a conflict of interest (or any situation
which accidentally or unexpectedly gives rise to a conflict of interest) with
the General Counsel, and upon the General Counsel's recommendation, with the
Audit Committee.
6. REPORTING AND ACCOUNTABILITY
Situations that may involve a violation of ethical principles, laws or
this Code may not always be clear and may require difficult judgments. Covered
Officers who have concerns or questions about violations of laws, rules or
regulations or of this Code, should seek the advice of the General Counsel. If
the General Counsel has concerns or questions about the rules and regulations
set forth in this Code, or the interpretation thereof, he or she should seek the
guidance of the Audit Committee.
The Audit Committee is responsible for applying this Code to specific
situations in which questions are presented to it and has the authority to
interpret this Code in any particular situation. Each Covered Officer must (i)
notify the General Counsel promptly of any existing or potential violation of
this Code (failure to do so is itself a violation of this Code) and (ii) not
retaliate against any officer or employee for reports of potential violations
that are made in good faith. Other persons who have knowledge of any existing or
potential violation of this Code by a Covered Officer should promptly notify the
General Counsel.
Blount will follow the following procedures in investigating and
enforcing this Code and in reporting on the Code: (i) violations and potential
violations will be reported by the General Counsel to the Audit Committee after
appropriate investigation, (ii) the Audit Committee shall take all action it
considers appropriate to investigate any violations reported to it, (iii) if the
Audit Committee determines that a violation has occurred, it will inform the
Board of Directors of Blount and (iv) upon being notified that a violation has
occurred, the Board of Directors will take such disciplinary or preventive
action as it deems appropriate, up to and including dismissal or, in the event
of criminal or other serious violations of law, notification to the Securities
and Exchange Commission or other appropriate law enforcement authorities.
35
7. WAIVERS AND AMENDMENTS
Any waiver of this Code relating to a Covered Officer may be made only
by the Audit Committee or the Board of Directors. Management shall periodically
review and reassess the adequacy of this Code and shall recommend changes to the
Board for approval. The Board reserves the right to amend this Code from time to
time as its determines to be desirable or appropriate. Amendments to or waivers
of the provisions in this Code for Covered Officers will promptly be disclosed
to Blount's investors in accordance with all applicable laws and regulations.
36
EXHIBIT C
AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
I. STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 (the "Act"), the Audit Committee
of the Board of Directors is responsible for the appointment,
compensation and oversight of the work of the Independent Auditor. As
part of this responsibility, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the
Independent Auditor for Blount International, Inc. ("Company") , in
order to assure that they do not impair the auditor's independence. To
implement the provisions of the Act, the Securities and Exchange
Commission (the "SEC") has issued rules specifying the types of
services that an Independent Auditor may not provide to its audit
client, as well as the Audit Committee's administration of the
engagement of the Independent Auditor. Accordingly, the Audit
Committee has adopted this Audit and Non-Audit Services Pre-Approval
Policy (the "Policy"), which sets forth the procedures and the
conditions pursuant to which services to be performed by the
Independent Auditor are to be pre-approved.
The SEC's rules establish two different approaches to pre-approving
services that the SEC considers to be equally valid. Proposed services
either may be pre-approved by agreeing to a framework with
descriptions of allowable services with the Audit Committee ("general
pre-approval"), or require the specific pre-approval of the Audit
Committee ("specific pre-approval"). The Audit Committee believes that
the combination of these two approaches in this Policy will result in
an effective and efficient procedure to pre-approve services performed
by the Independent Auditor. AS SET FORTH IN THIS POLICY, UNLESS A TYPE
OF SERVICE HAS RECEIVED GENERAL PRE-APPROVAL, IT WILL REQUIRE SPECIFIC
PRE-APPROVAL BY THE AUDIT COMMITTEE IF IT IS TO BE PROVIDED BY THE
INDEPENDENT AUDITOR.
Exhibit I to this Policy describes the Audit, Audit-related, Tax and
All Other Services that will be subject to the general pre-approval of
the Audit Committee. The Audit Committee will annually review and
pre-approve the services that may be provided by the Independent
Auditor that are subject to general pre-approval. The Audit Committee
will add to or subtract from the list of general pre-approved services
from time to time, based on subsequent determinations. Updates to the
level of fees associated with the services, subject to general
pre-approval, will be provided to the Audit Committee at regularly
scheduled Audit Committee meetings.
The purpose of this Policy is to set forth the procedures by which the
Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve
services performed by the Independent Auditor to management.
II. DELEGATION
As provided in the Act, the SEC's rules and the Audit Committee
Charter, the Audit Committee may delegate either type of pre-approval
authority to its chairperson or any other member or members. The
member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit
Committee at its next meeting.
III. AUDIT SERVICES
The annual audit services engagement scope and terms will be subject
to the general pre-approval of the Audit Committee. Audit services
include the annual financial statement audit (including required
quarterly reviews) and other procedures required to be performed by
the Independent Auditor to be able to form an opinion on the Company's
consolidated financial statements. Audit services also include the
attestation engagement for the Independent Auditor's report on
management's assertion on internal controls for financial reporting.
The Audit Committee will monitor the audit services engagement
throughout the year and will also approve, if necessary, any changes
in terms and conditions resulting from changes in audit scope, Company
structure or other items. The Audit Committee will pre-approve the
audit services in Exhibit I.
IV. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the
Company's financial statements or that are traditionally performed by
the Independent Auditor. Because the Audit Committee believes that the
provision of audit-related services does not impair the independence
of the Auditor and is consistent with the SEC's rules on auditor
independence, the Audit Committee will grant general pre-approval to
audit-related services.
37
THE AUDIT COMMITTEE WILL PRE-APPROVE THE AUDIT-RELATED SERVICES IN
EXHIBIT I. ALL OTHER AUDIT-RELATED SERVICES NOT LISTED IN EXHIBIT I
MUST BE SPECIFICALLY PRE-APPROVED BY THE AUDIT COMMITTEE.
V. TAX SERVICES
The Audit Committee believes that the Independent Auditor can provide
tax services to the Company such as tax compliance, tax planning and
tax advice without impairing the Auditor's independence, and the SEC
has stated that the Independent Auditor may provide such tax services
since they do not impair independence. Hence, the Audit Committee will
grant general pre-approval to those tax services that have
historically been provided by the Auditor, that the Audit Committee
has reviewed and believes would not impair the independence of the
auditor, and that are consistent with the SEC's rules on auditor
independence.
THE AUDIT COMMITTEE WILL PRE-APPROVE THE TAX SERVICES IN EXHIBIT I.
VI. ALL OTHER SERVICES
The Audit Committee believes, after taking into account the SEC's
rules prohibiting the Independent Auditor from providing specified
non-audit services, that other types of non-audit services are
permitted. Accordingly, the Audit Committee believes it may grant
general pre-approval to those permissible non-audit services
classified as "all other services" that it believes are routine and
recurring services, would not impair the independence of the auditor
and are consistent with the SEC's rules on auditor independence.
THE AUDIT COMMITTEE WILL APPROVE THE "ALL OTHER SERVICES" IN EXHIBIT
I, WITH THE EXCEPTION OF "INTERNAL INVESTIGATIONS." PERMISSIBLE OTHER
SERVICES NOT LISTED IN EXHIBIT I MUST BE SPECIFICALLY PRE-APPROVED BY
THE AUDIT COMMITTEE.
The Independent Auditor is permitted to assist management and the
Corporate Internal Audit Department with internal investigations and
fact-finding into alleged improprieties; however, these services are
subject to specific approval and engagement by the Audit Committee or
its delegate.
At the beginning of each year, the Chief Financial Officer and the
Independent Auditor shall jointly submit to the Audit Committee a
schedule of audit, audit-related, tax and other non-audit services
that are subject to general pre-approval.
This schedule, referred to as EXHIBIT I, provides a description of
each type of service that is subject to general pre-approval and,
where possible, will provide projected fees (or a range of projected
fees) for each service. The Audit Committee will review and approve
the types of services and review the projected fees for the next
fiscal year. This approval acknowledges that the Audit Committee is in
agreement with the specific types of services that the Independent
Auditor will be permitted to perform. The fee amounts listed on
EXHIBIT I will be updated to the extent necessary at each of the
regularly scheduled meetings of the Audit Committee.
If subsequent to the approval of EXHIBIT I by the Audit Committee, the
Company determines that it would like to engage its Independent
Auditor to perform a service not included on the EXHIBIT I list, then
the Company's Chief Financial Officer will determine whether the
particular service fits within the independence guidelines, and, if
so, will arrange for a discussion of the service to be included on the
agenda for the next regularly scheduled Audit Committee meeting so
that specific approval can be obtained. If the timing of the project
is critical and the project needs to commence before the regularly
scheduled meeting, the specific pre-approval by the Chairman of the
Audit Committee must be obtained before any services are provided.
This will be arranged by the Company's Chief Financial Officer or
Secretary. The Independent Auditor must not commence any such project
until specific approval has been given.
38
EXHIBIT I
SCHEDULE OF AUDIT, AUDIT-RELATED, TAX AND OTHER NON-AUDIT INDEPENDENT
AUDITOR AND PROJECTED FEES
FOR THE YEAR ENDING DECEMBER 31, 20___
AS OF____________
AFFILIATE NAME COMPANY NO.
--------------------- ------------
- ---------------------------- ------------------------------------------------- --------------------------------
SERVICE SUMMARY OF SERVICES PROJECTED FEES
- ---------------------------- ------------------------------------------------- --------------------------------
AUDIT SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
AUDIT Recurring audit of consolidated financial
statements of the Company, including statutory
audits.
Other audit and special reports which include,
among others:
o Accounting consultations and tax
services required to perform an audit
in accordance with Generally Accepted
Auditing Standards
o All services relating to the filing of
SEC Registration Statements, including
issuance of comfort letters
o Separate audit reports in connection
with management compensation programs
and debt compliance letters
Attestation engagement on annual Section 404
certification of the Sarbanes-Oxley Act
- ---------------------------- ------------------------------------------------- --------------------------------
SUBTOTAL AUDIT SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
AUDIT RELATED SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
PENSION AND BENEFIT PLAN Audits of pension and other benefit plans
AUDITS relating to ERISA and SEC requirements
- ---------------------------- ------------------------------------------------- --------------------------------
CONSULTATIONS CONCERNING Includes discussions, research consultations
ACCOUNTING AND FINANCIAL and auditing procedures relating to new
REPORTING STANDARDS pronouncements, unusual or non-recurring
transactions and other technical topics which
are generally non-recurring
- ---------------------------- ------------------------------------------------- --------------------------------
39
- ---------------------------- ------------------------------------------------- --------------------------------
SERVICE SUMMARY OF SERVICES PROJECTED FEES
- ---------------------------- ------------------------------------------------- --------------------------------
ASSISTANCE WITH STATUTORY Providing technical advice and compliance
FINANCIAL REPORTING (preparation) services in connection with
required statutory filings in various countries
and local jurisdictions
- ---------------------------- ------------------------------------------------- --------------------------------
INTERNAL CONTROL REVIEWS Assessing e-business and IT controls and
- INFORMATION TECHNOLOGY providing recommendations for improvements in
("IT") the controls, including pre-implementation
reviews, attack and penetration studies, and
assessments of IT security framework, policies
and procedures
- ---------------------------- ------------------------------------------------- --------------------------------
GENERAL INTERNAL CONTROL Assessing internal accounting and risk
REVIEWS management controls and providing
recommendations for improvements in the design
and implementation of those controls.
Assistance relating to Section 404 other than
the attestation engagement
- ---------------------------- ------------------------------------------------- --------------------------------
DUE DILIGENCE Assistance with financial due diligence
(non-tax) performed on potential acquisition
targets, including review of financial
statements, and other financial data and
records, discussions with target's finance
and accounting personnel and also accounting
consultations relating to the proposed
transactions, etc.
- ---------------------------- ------------------------------------------------- --------------------------------
AFFILIATE AND PRODUCT Audits of financial statements on a stand
LINE SPECIAL PURPOSE alone basis for management purposes and audits
AUDITS of closing or interim financial statements in
connection with acquisitions or dispositions
- ---------------------------- ------------------------------------------------- --------------------------------
OTHER AUDITING PROCEDURES Auditing procedures and special reports (as
AND ISSUANCE OF SPECIAL periodically requested by the Company and
PURPOSE REPORTS affiliates), including those needed for
various governmental agencies tax authorities,
suppliers, vendors and customers
- ---------------------------- ------------------------------------------------- --------------------------------
SUBTOTAL AUDIT-RELATED
SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
TOTAL AUDIT AND AUDIT-
RELATED SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
40
- ---------------------------- ------------------------------------------------- --------------------------------
SERVICE SUMMARY OF SERVICES PROJECTED FEES
- ---------------------------- ------------------------------------------------- --------------------------------
TAX SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
TRANSFER PRICING Advice and assistance with respect to transfer
(U.S. AND INTERNATIONAL) pricing planning, defense and documentation
matters, including preparation of reports used
by the Company and its affiliates to comply
with taxing authority documentation
requirements (in U.S. and foreign jurisdictions)
in connection with royalties, intercompany
pricing and similar issues
- ---------------------------- ------------------------------------------------- --------------------------------
EXPATRIATE TAX SERVICES Preparation of tax estimates and projections,
(U.S. AND INTERNATIONAL) preparation of U.S. and foreign individual
income tax returns, provide advice with
respect to tax registration/deregistration
procedures, compute tax equalization payments,
provide advice on impact of changes in local
tax laws and consequences of changes in
compensation programs, provide assistance with
reporting requirements, provide general tax
advice and planning to expatriate employees
- ---------------------------- ------------------------------------------------- --------------------------------
EXTRA TERRITORIAL INCOME Advice and assistance with respect to the ETI
(ETI) ANALYSIS exclusion; assist with the data collection
(U.S. ONLY) process, prepare computations, compile
workpapers and prepare federal tax forms
necessary to claim the ETI exclusion claimed
by the Company
- ---------------------------- ------------------------------------------------- --------------------------------
STATE AND LOCAL TAX Representation before state governments for
PLANNING (U.S. ONLY) voluntary compliance; performing credit
studies; determining sales tax conclusions for
products sold; representation to state
governments for agreements to tax methodologies;
advising and researching in connection with
reorganizations; advising and researching in
connection with tax return positions; obtaining
funds for excise taxes, sales taxes, property
taxes, income taxes; representation on audit
assessments and some appeals work outside of
court
Advice and assistance with regard to U.S.
state and local tax planning, compliance and
audit defense
- ---------------------------- ------------------------------------------------- --------------------------------
41
- ---------------------------- ------------------------------------------------- --------------------------------
DUE DILIGENCE Tax related due diligence performed on
(U.S. AND INTERNATIONAL) potential acquisition targets, including
review of target's tax returns, filing
positions and financial information
- ---------------------------- ------------------------------------------------- --------------------------------
REVIEW OF U.S. FEDERAL Review of Company's U.S. Federal Income Tax
INCOME TAX RETURN return on a pre-filing basis
- ---------------------------- ------------------------------------------------- --------------------------------
CONSULTATIONS ON VARIOUS Consultations on U.S. tax technical matters,
U.S. FEDERAL TAX MATTERS such as, structuring acquisitions,
dispositions, joint ventures, licenses and
reorganizations; tax basis ad earnings and
profits computations; evaluating the
deductibility of certain expenses and
creditability of certain expenses and income
items; advice on accounting methods, timing
issues, compliance matters and
characterization issues
- ---------------------------- ------------------------------------------------- --------------------------------
ASSISTANCE WITH TAX Technical and procedural advice in connection
EXAMINATIONS with examinations by various tax jurisdictions.
(U.S. AND INTERNATIONAL) Please note that the Independent Auditor is
not permitted to represent the Company in
front of a tax court or equivalent body
- ---------------------------- ------------------------------------------------- --------------------------------
INTERNATIONAL TAX Tax return preparation and review in various
COMPLIANCE international locations
- ---------------------------- ------------------------------------------------- --------------------------------
INTERNATIONAL Advice on tax matters in various international
TAX PLANNING jurisdictions, including among others, foreign
local income tax, VAT, sales/use taxes, excise
taxes, excise taxes and other miscellaneous
matter. Advice on the U.S. and foreign tax
consequences of certain cross- border
transactions, including acquisitions,
reorganizations and restructurings
============================ ================================================= ================================
SUBTOTAL TAX SERVICES
============================ ================================================= ================================
OTHER NON-AUDIT SERVICES
- ---------------------------- ------------------------------------------------- --------------------------------
42
- ---------------------------- ------------------------------------------------- --------------------------------
RISK MANAGEMENT REVIEWS Compliance reviews in connection with privacy
AND ASSESSMENTS standards and government healthcare
regulations, such as pricing and FDA
validation, IT Security and other operational
reviews, including development of process maps
to identify inefficiencies or weaknesses in
internal control
- ---------------------------- ------------------------------------------------- --------------------------------
INTERNAL INVESTIGATIONS Conducting internal investigations and fact
finding in connection with alleged
improprieties. Projects are usually performed
on behalf of management or internal audit;
however, specific approval by project is
required by the Audit Committee.
- ---------------------------- ------------------------------------------------- --------------------------------
EXPATRIATE ADMINISTRATIVE Providing expatriate administration services,
SERVICES such as assisting the assignee with relocation
matters, advising on expatriate
allowances/deduction updates based on Company
policy and assignee changing circumstances,
and collection and proper tax reporting of
compensation paid by the Company in various
international jurisdictions
- ---------------------------- ------------------------------------------------- --------------------------------
REVIEW OF ACTUARIAL Review actuarial reports and calculations to
REPORTS AND CALCULATIONS assist the Company in understanding the various
processes surrounding the actuarial valuations
and the potential impact of plan changes
(excludes work performed in connection with
the recurring audit)
- ---------------------------- ------------------------------------------------- --------------------------------
NON-FINANCIAL SYSTEMS Advisory services with respect to non-financial
systems, such as FDA validation reviews,
support services, project management risk
assessments, and business continuity planning
============================ ================================================= ================================
TOTAL OTHER NON-AUDIT
SERVICES
============================ ================================================= ================================
43
BLOUNT
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8694
EDISON, NJ 08818-869
DETACH HERE ZBLIC1
PLEASE MARK #BLI
[X] VOTES AS IN
THIS EXAMPLE.
THE BAORD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS NUMBERED 1 AND 2. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSALS NUMBERED
1 AND 2.
FOR AGAINST ABSTAIN
1. Election of Directors 2. Ratify the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
NOMINEES: (01) R. Eugene Cartledge, (02) Elliot M. Fried, independent auditors for the
(03) Thomas J. Fruechtel, (04) E. Daniel James, Corporation for the year ending
(05) Harold E. Layman, (06) James S. Osterman December 31, 2004.
and (07) William A. Shutzer
FOR WITHHELD 3. In their discretion, the Proxies are authorized to vote upon
ALL [ ] [ ] FROM ALL such other business as may properly come before the meeting.
NOMINEES NOMINEES
[ ]______________________________________
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please mark, sign exactly as your name is printed hereon and return
in the enclosed envelope. If the stock is held jointly, each joint
owner must sign. When signing as Attorney, Executor, Administrator,
Trustee, Guardian or in any other representative capacity, please
give full title.
Signature__________________________________ Date:________________ Signature__________________________________ Date:________________
THIIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the operation of the Corporation that require
your immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Blount International, Inc.
DETACH HERE ZBLIC2
PROXY
BLOUNT INTERNATIONAL, INC.
4909 SE INTERNATIONAL WAY
PORTLAND, OREGON 97222
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 20, 2004
COMMON STOCK
The undersigned, revoking previous proxies, if any, relating to these shares,
hereby acknowledges receipt of the Notice and Proxy Statement dated March 22,
2004 in connection with the Annual Meeting of Stockholders to be held at 10:30
A.M., E.D.T., on Tuesday, April 20, 2004, in Training Room C of the
Corporation's Blount Canada Ltd. facility at 505 Edinburgh Road, North in
Guelph, Ontario Canada N1H 6L4, and hereby appoints NICK GALOVICH and DONNA
WECKER, or either one of them acting in absence of the other, the proxies of the
undersigned, with power of substitution to each, to represent and vote, as
designated on the reverse side, all shares of Common Stock of Blount
International, Inc. registered in the name provided herein as of February 20,
2004 that the undersigned is entitled to vote at the 2004 Annual Meeting of
Stockholders, and at any adjournment thereof, with all powers the undersigned
would have if personally present.
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SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
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