<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1995
REGISTRATION NO. 33- 63141
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BLOUNT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 3425 63-0780521
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4520 EXECUTIVE PARK DRIVE,
MONTGOMERY, ALABAMA 36116-1602
(334) 244-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
WINTON M. BLOUNT
BLOUNT INTERNATIONAL, INC.
4520 EXECUTIVE PARK DRIVE
MONTGOMERY, ALABAMA 36116-1602
(334) 244-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C> <C>
THOMAS N. CARRUTHERS, ESQ. RICHARD H. IRVING III, ESQ. LOUIS KAHN, ESQ.
JOHN K. MOLEN, ESQ. BLOUNT, INC. CLEARY, GOTTLIEB, STEEN & HAMILTON
BRADLEY, ARANT, ROSE & WHITE 4520 EXECUTIVE PARK DRIVE 1 LIBERTY PLAZA, 38TH FLOOR
2001 PARK PLACE, SUITE 1400 MONTGOMERY, ALABAMA 36116-1602 NEW YORK, NEW YORK 10006
BIRMINGHAM, ALABAMA 35203 (334) 244-4000 (212) 225-2000
(205) 521-8000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: At the effective time of the merger of Blount, Inc. with a wholly
owned-subsidiary of the registrant, as described in the Proxy
Statement/Prospectus included herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE** FEE***
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, par
value $.01 per share....... 11,922,377 Shares+ *
$377,265,574.88 $54,351.72
Class B Common Stock, par
value $.01 per share....... 1,721,241 Shares *
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</TABLE>
+ Includes 1,721,241 shares issuable upon conversion of Class B Common Stock.
* Not Applicable
** Estimated solely for purposes of determining the amount of the registration
fee in accordance with Rule 457(f)(1) under the Securities Act of 1933 based
upon the aggregate market value of $377,265,574.88 determined as of
September 29, 1995 of the 6,800,757 shares of Class A Common Stock and
1,147,494 shares of Class B Common Stock of Blount, Inc. outstanding on such
date or issuable pursuant to options which are presently exercisable or will
become exercisable prior to consummation of the transaction which may be
acquired by Blount International, Inc. pursuant to the transaction described
herein based upon the average of the high and low prices on such date (or on
September 27, 1995 with respect to the Class B Common Stock, which was the
last date on which a sale of such class of stock occurred) resulting in a
price of $47.375 per share of Class A Common Stock and $48.00 per share of
Class B Common Stock of Blount, Inc. for purposes of such calculation.
*** Pursuant to Rule 457(b), the required fee of $130,091.58 is reduced by
$75,739.86 paid on August 18, 1995 contemporaneous with the filing of the
Schedule 14A of Blount, Inc., resulting in a net payment of $54,351.72.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
BLOUNT INTERNATIONAL, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN THE
PROXY STATEMENT/PROSPECTUS OF INFORMATION REQUIRED
BY PART I OF FORM S-4 PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION OR HEADING IN PROXY
ITEM STATEMENT/PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Forepart of Registration State; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary; Market and Dividend Information
Respecting the Common Stock of Parent and
the Company
4. Terms of the Transaction................... Summary; The Merger; Description of Parent
Capital Stock; Comparison of the Capital
Stock of Parent and the Company; Certain
Federal Income Tax Considerations
5. Pro Forma Financial Information............ Pro Forma Condensed Consolidated Financial
Statements
6. Material Contracts with the Company Being
Acquired................................... *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ *
8. Interests of Named Experts and Counsel..... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ *
10. Information With Respect to S-3
Registrants................................ *
11. Incorporation of Certain Information by
Reference.................................. *
12. Information With Respect to S-2 or S-3
Registrant................................. *
13. Incorporation of Certain Information by
Reference.................................. *
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants.......... Summary; Certain Information Concerning the
Business of Parent; Market and Dividend
Information Respecting the Common Stock of
Parent and the Company; Selected Financial
Data of Parent; Management's Discussion and
Analysis of Financial Condition and Results
of Operations of Parent; Index to the
Consolidated Financial Statements of Parent
15. Information With Respect to S-3
Companies.................................. Summary; Incorporation of Certain Documents
by Reference
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION OR HEADING IN PROXY
ITEM STATEMENT/PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
16. Information With Respect to S-2 or S-3
Companies.................................. *
17. Information With Respect to Companies Other
than S-3 or S-2 Companies.................. *
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Introduction; Summary; The Merger;
Additional Information
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or
in an Exchange Offer....................... *
</TABLE>
- ---------------
* Not Applicable
<PAGE> 4
BLOUNT, INC.
4520 EXECUTIVE PARK DRIVE
MONTGOMERY, ALABAMA 36116
October 4, 1995
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of Blount, Inc. (the "Company"), to be held on Friday,
November 3, 1995, at the Company's principal executive offices, 4520 Executive
Park Drive, Montgomery, Alabama 36116, at 10:00 a.m. local time.
At the Special Meeting, you will be asked to consider and to vote upon a
proposal to adopt a Plan and Agreement of Merger (the "Merger Agreement"), dated
August 17, 1995, among Blount International, Inc., a Delaware corporation
formerly named HBC, Incorporated ("Parent"), HBC Transaction Subsidiary, Inc., a
wholly-owned subsidiary of Parent (the "Subsidiary"), and the Company, providing
for the merger of the Subsidiary with and into the Company (the "Merger"). The
Company will be the surviving corporation in the Merger and, following the
Merger, will conduct its current business as a wholly-owned subsidiary of Parent
under the name Blount, Inc. Parent does not currently anticipate that its
dividend policy, following the Merger, will be different from the current
dividend policy of the Company, except for adjustments in the per share dividend
rate necessary to reflect what is in effect a 3-for-2 split of the capital stock
of the Company resulting from the Merger. In addition, the current officers and
directors of the Company will continue to be the officers and directors of the
Company, and such persons will also become the officers and directors of Parent.
If the Merger is consummated (i) all of the outstanding capital stock of
the Company (other than stock owned by Parent) will be converted into shares of
the Class A Common Stock and Class B Common Stock of Parent pursuant to a ratio
that will result in each present stockholder of the Company receiving 1.5 shares
of the capital stock of Parent for each share of the capital stock of the
Company presently owned, thus effectively resulting in a 3-for-2 split of each
class of the common stock of the Company; (ii) members of the family of Winton
M. Blount will become subject to certain restrictions on their ability to sell
or transfer their shares of the capital stock of Parent; and (iii) Parent and
the Company will be indemnified against pre-Merger liabilities of Parent by a
partnership through which the members of the Blount family will continue to hold
significant portions of their stock in Parent. Adoption of the Merger Agreement
at the Special Meeting will also be deemed to constitute the approval for
purposes of federal securities laws of the assumption by Parent of the 1992
Blount Incentive Stock Option Plan, the 1994 Blount Executive Stock Option Plan,
and the 1995 Blount Long-Term Executive Stock Option Plan, all of which plans
have been approved previously by the stockholders of the Company.
Details of the proposed Merger and other information are set forth in the
accompanying Proxy Statement/Prospectus, which you are urged to read carefully.
The Merger was proposed by Winton M. Blount and his family and provides
substantial benefits to the members of the Blount family. See "THE
MERGER -- Interests of Certain Named Persons in the Merger" in the accompanying
Proxy Statement/Prospectus. A committee of the Board of Directors of the Company
independent of the Blount family and of the management of the Company (the
"Independent Committee") was formed to review the Merger and the terms of the
Merger Agreement and to negotiate the terms of the Merger Agreement. Following
such negotiations, the Independent Committee unanimously concluded that the
Merger Agreement as negotiated is fair to, and in the best interests of, the
Company and its stockholders other than Parent and the Blount family, and
recommended that the Board of Directors of the Company approve the Merger
Agreement and recommend to the stockholders of the Company that they adopt the
Merger Agreement. The members of the Board of Directors of the Company present
and voting at the meeting at which the Merger Agreement was considered
unanimously concluded that the Merger Agreement is fair to, and in the best
interests of, the Company and its stockholders other than Parent and the Blount
<PAGE> 5
family, and recommended to the stockholders of the Company that they vote their
shares of Company Common Stock FOR adoption of the Merger Agreement. See "THE
MERGER -- Background of the Merger" in the accompanying Proxy
Statement/Prospectus.
The affirmative vote of the holders of shares possessing a majority of the
votes entitled to be cast by the holders of record of both classes of the common
stock of the Company, voting together as a single class, is required to adopt
the Merger Agreement. Members of the Blount family, who beneficially own shares
of the common stock of the Company possessing aggregate votes in excess of a
majority of the votes entitled to be cast by the holders of all outstanding
shares of both classes of the common stock of the Company when voting together
as a single class, have stated an intention to be represented at the Special
Meeting and to vote for adoption of the Merger Agreement, in which case adoption
of the Merger Agreement is assured.
Only stockholders of the Company of record at the close of business on
September 20, 1995 are entitled to notice of, and to vote at, the Special
Meeting and any adjournment thereof. A Notice of the Special Meeting, a Proxy
Statement/Prospectus relating to the Special Meeting and a form of Proxy for use
in connection with the Special Meeting are enclosed. Regardless of whether you
plan to attend the Special Meeting, please complete, sign and date the
accompanying Proxy and return it in the enclosed prepaid envelope. If you attend
the Special Meeting, you may revoke such Proxy and vote in person if you wish,
even if you have previously returned a Proxy. Your prompt cooperation will be
greatly appreciated.
Very truly yours,
/s/ John M. Panettiere
----------------------
JOHN M. PANETTIERE
President and Chief Executive Officer
<PAGE> 6
BLOUNT, INC.
4520 EXECUTIVE PARK DRIVE
MONTGOMERY, ALABAMA 36116-1602
(334) 244-4000
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 3, 1995
---------------------
To The Stockholders of Blount, Inc.:
Notice is hereby given that a Special Meeting of the Stockholders of Blount
Inc., a Delaware corporation (the "Company"), will be held on Friday, November
3, 1995, at 10:00 a.m., local time, at the Company's principal executive
offices, 4520 Executive Park Drive, Montgomery, Alabama 36116, for the following
purposes (the "Special Meeting"):
1. To consider and vote upon adoption of a Plan and Agreement of
Merger, dated August 17, 1995 (the "Merger Agreement"), a copy of which
(including all Exhibits thereto) is included as Appendix A to the
accompanying Proxy Statement/Prospectus, among Blount International, Inc.
(formerly named HBC, Incorporated) ("Parent"), HBC Transaction Subsidiary,
Inc., a wholly-owned subsidiary of Parent ("the Subsidiary"), and the
Company, pursuant to which the Subsidiary will be merged with and into the
Company, each share of the Class A Common Stock of the Company (other than
shares held by Parent) outstanding immediately prior to the Effective Time
of the Merger (as defined in the attached Proxy Statement/Prospectus) will
be converted into 1.5 shares of the Class A Common Stock of Parent, each
share of Class B Common Stock of the Company (other than shares held by
Parent) outstanding immediately prior to the Effective Time of the Merger
will be converted into 1.5 shares of the Class B Common Stock of Parent,
the Company will become a wholly-owned subsidiary of Parent, and the
adoption of which Merger Agreement will also constitute approval, and
approval of the assumption by Parent of, the 1992 Blount Incentive Stock
Option Plan, the 1994 Blount Executive Stock Option Plan and the 1995
Blount Long-Term Executive Stock Option Plan; and
2. To consider and act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Only those persons who were holders of record of the Class A Common Stock
or Class B Common Stock of the Company at the close of business on September 20,
1995, are entitled to notice of and to vote at the Special Meeting and any
adjournment thereof. A list of the stockholders entitled to vote at the Special
Meeting will be open to examination by any stockholders, for any purpose germane
to the meeting, during ordinary business hours, for a period of at least ten
days prior to the Special Meeting at the principal executive offices of the
Company in Montgomery, Alabama.
A Proxy Statement/Prospectus relating to, and a proxy for use in connection
with, the Special Meeting are enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ D. Joseph McInnes
-----------------------------------
D. JOSEPH MCINNES
Senior Vice
President -- Administration and
Secretary
Montgomery, Alabama
October 4, 1995
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN
AND RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE> 7
PROXY STATEMENT/PROSPECTUS
PROXY STATEMENT OF
BLOUNT, INC.
FOR A SPECIAL MEETING OF ITS STOCKHOLDERS
TO BE HELD NOVEMBER 3, 1995
---------------------
PROSPECTUS OF
BLOUNT INTERNATIONAL, INC.,
(FORMERLY NAMED HBC, INCORPORATED)
RELATING TO UP TO 11,922,377 SHARES OF CLASS A COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
(INCLUDING 1,721,241 SHARES ISSUABLE UPON CONVERSION OF CLASS B COMMON STOCK)
AND
UP TO 1,721,241 SHARES OF CLASS B COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
TO BE ISSUED IN CONNECTION WITH A PROPOSED MERGER OF
HBC TRANSACTION SUBSIDIARY, INC., A WHOLLY-OWNED SUBSIDIARY OF
BLOUNT INTERNATIONAL, INC., INTO BLOUNT, INC.
---------------------
This Proxy Statement/Prospectus is being furnished to holders of the Class
A Common Stock, par value $1.00 per share (the "Company Class A Common Stock"),
and the Class B Common Stock, par value $1.00 per share (the "Company Class B
Common Stock," and, together with the Company Class A Common Stock, the "Company
Common Stock"), of Blount, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at a special meeting of stockholders of the Company to be held
on Friday, November 3, 1995, at the Company's principal executive offices, 4520
Executive Park Drive, Montgomery, Alabama 36116, commencing at 10:00 a.m. local
time, and at any adjournment thereof (the "Special Meeting").
The Special Meeting has been called to consider and vote upon a proposal to
adopt a Plan and Agreement of Merger, dated August 17, 1995 (the "Merger
Agreement"), by and among Blount International, Inc., a Delaware corporation
formerly named HBC, Incorporated ("Parent") controlled by Winton M. Blount and
his children (such persons, together with the spouse of Winton M. Blount, being
referred to together in this Proxy Statement/Prospectus as the "Blount Family"),
through which the Blount Family presently holds the majority of the shares of
Company Common Stock owned by them, HBC Transaction Subsidiary, Inc., a Delaware
corporation and wholly-owned subsidiary of Parent (the "Subsidiary"), and the
Company, pursuant to which the Subsidiary will be merged with and into the
Company (the "Merger"). If the Merger is consummated, the Company will be the
surviving company of the Merger and will become a wholly-owned subsidiary of
Parent, each share of the Company Class A Common Stock (except those shares
owned by Parent) outstanding immediately prior to the Effective Time of the
Merger (as defined in the Merger Agreement) will be converted into 1.5 fully
paid and nonassessable shares of the Class A Common Stock, par value $.01 per
share, of Parent ("Parent Class A Common Stock"), and each share of the Company
Class B Common Stock (except those shares owned by Parent) outstanding
immediately prior to the Effective Time of the Merger will be converted into 1.5
fully paid and nonassessable shares of the Class B Common Stock, par value $.01
per share, of Parent ("Parent Class B Common Stock" and, together with Parent
Class A Common Stock, "Parent Common Stock"). See "THE MERGER."
This Proxy Statement/Prospectus also constitutes the prospectus of Parent
with respect to the shares of Parent Common Stock issuable to the stockholders
of the Company upon consummation of the Merger.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of Blount, Inc. on or about October 4, 1995.
---------------------
THE SECURITIES OF BLOUNT INTERNATIONAL, INC. OFFERED IN CONNECTION WITH THE
MERGER DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is October 4, 1995.
<PAGE> 8
AVAILABLE INFORMATION
Blount, Inc., a Delaware corporation (the "Company"), is subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Seven World Trade Center, Suite 1300, New York,
New York 10048 and Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
Blount International, Inc., a Delaware corporation formerly named HBC,
Incorporated ("Parent"), has filed a Registration Statement on Form S-4 (herein,
together with all amendments thereto, called the "Registration Statement") with
the Commission under the Securities Act of 1933 (the "Securities Act"), with
respect to the shares of the common stock of Parent offered hereby. This Proxy
Statement/Prospectus does not contain all of the information and undertakings
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to Parent and the shares of Parent Common
Stock, reference is made to the Registration Statement and the exhibits and
schedules thereto. Certain statements are contained in this Proxy
Statement/Prospectus as to the contents of contracts or other documents,
including all of the material terms of all of the Company's material contracts,
either set forth as an Appendix to this Proxy Statement/Prospectus or as an
exhibit to the Registration Statement. Stockholders are referred to the copies
of such contract or other document either set forth as an Appendix to this Proxy
Statement/Prospectus or filed as an exhibit to the Registration Statement. The
Registration Statement and the exhibits and schedules thereto may be inspected
at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies thereof may be obtained from the Public Reference Section of the
Commission at such address at prescribed rates. Parent is not presently, and has
not been, subject to the reporting requirements of the Exchange Act on the date
of this Proxy Statement/Prospectus, but will be subject to the Exchange Act if
the Merger is consummated. Parent intends to furnish its stockholders with
annual reports containing financial statements audited by Parent's independent
public accountants and quarterly reports for the first three quarters of each
fiscal year containing unaudited interim financial information.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
RELATING TO BLOUNT, INC. WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS ARE AVAILABLE ON REQUEST WITHOUT CHARGE FROM D. JOSEPH MCINNES,
4520 EXECUTIVE PARK DRIVE, MONTGOMERY, ALABAMA 36116-1602, TELEPHONE NUMBER
(334) 244-4000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY OCTOBER 27, 1995. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION
WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PARENT, HBC TRANSACTION
SUBSIDIARY, INC. (THE "SUBSIDIARY") OR THE COMPANY. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THE SHARES TO WHICH IT RELATES OR AN OFFER OF ANY KIND TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ALL INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS RELATING TO PARENT AND THE SUBSIDIARY HAS BEEN
SUPPLIED BY PARENT AND ALL INFORMATION RELATING TO THE COMPANY AND ITS
SUBSIDIARIES HAS BEEN SUPPLIED BY THE COMPANY.
2
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information............................................................... 2
Introduction........................................................................ 5
General........................................................................... 5
Voting at the Special Meeting..................................................... 7
Summary............................................................................. 9
The Merger.......................................................................... 20
Terms of the Merger............................................................... 20
Background of the Merger.......................................................... 20
Reasons of Company and Parent for the Merger...................................... 25
Recommendation of the Board of Directors of the Company........................... 28
Opinion of Financial Advisor...................................................... 28
Interests of Certain Named Persons in the Merger.................................. 30
Indemnification by Parent and the Blount Partnership.............................. 31
Registration Rights and Stock Transfer Restriction Agreement...................... 33
Effective Time of the Merger...................................................... 36
Accounting Treatment.............................................................. 37
Certain Conditions to the Merger; Waiver and Amendment............................ 37
Termination....................................................................... 38
Amendment and Waiver.............................................................. 38
Absence of Rights of Dissent and Appraisal........................................ 38
Conduct of Business by Parent Pending the Merger.................................. 38
Business and Management of Parent and the Company Following the Merger............ 39
Certificates for Parent Common Stock.............................................. 39
Fractional Shares................................................................. 39
Effect of the Merger on Company Stock Options..................................... 39
Certain Federal Income Tax Considerations........................................... 41
Description of Parent Capital Stock................................................. 43
Parent Common Stock............................................................... 43
Reports to Stockholders........................................................... 46
Stockholders...................................................................... 46
Parent Preferred Stock............................................................ 46
Comparison of the Capital Stock of Parent and the Company........................... 47
Mandatory Conversion of Parent Class B Common Stock Upon Occurrence of
Certain Events................................................................. 47
Increase in Number of Shares of Common Stock Authorized to be Issued.............. 47
Listing on NYSE................................................................... 48
Pro Forma Condensed Consolidated Financial Statements............................... 49
Market and Dividend Information Respecting the Common Stock of Parent and the
Company........................................................................... 54
Comparative Stock Prices Per Share................................................ 54
Dividends and Dividend Policy..................................................... 55
Certain Information Concerning the Business of Parent............................... 56
Historical Operations of Parent................................................... 56
Operations Following the Effective Time of the Merger............................. 57
Employees......................................................................... 57
Description of Property........................................................... 57
Legal Proceedings................................................................. 57
Management of Parent Following the Merger........................................... 57
Directors and Officers............................................................ 58
Executive Compensation............................................................ 61
Pension Plans..................................................................... 64
</TABLE>
3
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements................................................................... 64
Compensation of Directors......................................................... 66
Compensation Plans................................................................ 67
Selected Financial Data of Parent and the Company................................... 72
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Parent.............................................................. 74
Principal Stockholders of Parent.................................................... 80
Incorporation of Certain Documents by Reference..................................... 83
Legal Matters....................................................................... 83
Experts............................................................................. 84
Additional Information.............................................................. 84
Delisting and Deregistration...................................................... 84
Other Business.................................................................... 84
Stockholder Proposals............................................................. 84
Index to the Consolidated Financial Statements of Blount International, Inc.
(formerly HBC, Incorporated)...................................................... F-1
Appendix A -- Plan and Agreement of Merger......................................... A-1
Exhibit I -- Form of Certificate of Incorporation of Parent....................... A-I-1
Exhibit II -- Form of By-Laws of Parent............................................ A-II-1
Exhibit III -- Form of Indemnification Agreement.................................... A-III-1
Form of Registration Rights and Stock Transfer Restriction A-IV-1
Exhibit IV -- Agreement............................................................
Exhibit V -- Form of Opinion of Counsel for Parent................................ A-V-1
Appendix B -- Opinion of J.P. Morgan Securities Inc................................ B-1
Appendix C -- 1992 Blount Incentive Stock Option Plan.............................. C-1
Appendix D -- 1994 Blount Executive Stock Option Plan.............................. D-1
Appendix E -- 1995 Blount Long-Term Executive Stock Option Plan.................... E-1
</TABLE>
4
<PAGE> 11
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of the
Class A Common Stock, par value $1.00 per share (the "Company Class A Common
Stock"), and the Class B Common Stock, par value $1.00 per share (the "Company
Class B Common Stock" and, together with the Company Class A Common Stock,
sometimes referred to in this Proxy Statement/Prospectus as the "Company Common
Stock"), of Blount, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at a special meeting of stockholders of the Company to be held on Friday,
November 3, 1995, at 10:00 a.m., local time, at the Company's principal
executive offices, 4520 Executive Park Drive, Montgomery, Alabama 36116, and at
any adjournment thereof (the "Special Meeting").
The Special Meeting has been called to consider and vote upon adoption of a
Plan and Agreement of Merger, dated August 17, 1995 (the "Merger Agreement"),
among Blount International, Inc., a Delaware corporation formerly named HBC,
Incorporated ("Parent") controlled by Winton M. Blount and his children (such
persons, together with the spouse of Winton M. Blount, being referred to
together in this Proxy Statement/Prospectus as the "Blount Family"), HBC
Transaction Subsidiary, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Subsidiary"), and the Company, which provides for the
merger of the Subsidiary with and into the Company (the "Merger"). Subject to
the adoption of the Merger Agreement by the stockholders of the Company and the
satisfaction or waiver of the other conditions contained in the Merger
Agreement, the Merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware (the "Effective Time
of the Merger"). Such filing is required by the General Corporation Law of the
State of Delaware (the "DGCL") in connection with the Merger and will be made as
soon as practicable after the adoption by the stockholders of the Company of the
Merger Agreement and the satisfaction or waiver of the other conditions to the
Merger.
At the Effective Time of the Merger, each outstanding share of the Company
Class A Common Stock (except those shares owned by Parent) will be converted
into 1.5 shares of the Class A Common Stock, par value $.01 per share, of Parent
("Parent Class A Common Stock"), and each outstanding share of the Company Class
B Common Stock (except those shares owned by Parent) will be converted into 1.5
shares of the Class B Common Stock, par value $.01 per share, of Parent ("Parent
Class B Common Stock," and, together with Parent Class A Common Stock, "Parent
Common Stock") pursuant to the Merger Agreement (the ratio of 1.5 shares of
Parent Common Stock for each 1 share of Company Common Stock being referred to
herein as the "Exchange Ratio") in the manner specified in the Merger Agreement.
See "THE MERGER -- Terms of the Merger." Parent does not currently anticipate
that its dividend policy will be different from the current dividend policy of
the Company, except for adjustments in the per share dividend rate necessary to
reflect the Exchange Ratio. See "MARKET AND DIVIDEND INFORMATION RESPECTING THE
COMMON STOCK OF PARENT AND THE COMPANY -- Dividends and Dividend Policy." At the
Effective Time of the Merger, Parent will enter into a Registration Rights and
Stock Transfer Restriction Agreement with the members of the Blount Family and
the Blount Partnership (as defined herein) providing for, among other things,
restrictions on the ability of the parties to such agreement to sell or transfer
Parent Common Stock. See "THE MERGER -- Registration Rights and Stock Transfer
Restriction Agreement."
In connection with the Merger, a three-for-two split of Company Common
Stock will be effected, as a practical matter, as a result of the Exchange Ratio
of Company Common Stock for Parent Common Stock in the Merger. The Company is
also effectively changing the listing of the Company Common Stock from the
American Stock Exchange ("AMEX"), on which exchange the Company Common Stock is
presently listed, to the New York Stock Exchange, Inc. ("NYSE"), on which
exchange the Parent Common Stock will be listed following the Effective Time of
the Merger. The Board of Directors of the Company in all likelihood would have
effected the three-for-two stock split and the NYSE listing regardless of the
Merger. In addition, adoption of the Merger Agreement at the Special Meeting
will be deemed to constitute approval by the holders of Parent Common Stock of,
and approval of the assumption by Parent of, the 1992 Blount Incentive
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Stock Option Plan, the 1994 Blount Executive Stock Option Plan and the 1995
Blount Long-Term Executive Stock Option Plan (the "Compensation Plans"). See
"MANAGEMENT OF PARENT FOLLOWING THE MERGER -- Compensation Plans."
Following the Merger, the number of authorized shares of Parent Class A
Common Stock and Parent Class B Common Stock available for issuance by the Board
of Directors of Parent for such purposes as the Board of Directors deems
appropriate without further action by the stockholders (except as may be
required by law or by the terms of any listing agreement pursuant to which
Parent Common Stock is listed on an exchange) will be 37,858,313 and 8,073,911,
respectively, as compared with 25,238,876 shares of Company Class A Common Stock
and 8,049,274 shares of Company Class B Common Stock currently so available for
issuance. Presently, the Restated Certificate of Incorporation of the Company
presently authorizes forty million shares of Company Class A Common Stock and
twelve million shares of Company Class B Common Stock. Of the forty million
shares of Company Class A Common Stock authorized, 8,734,368 shares are
presently outstanding, 1,505,761 shares are reserved for issuance pursuant to
existing stock option plans, 43,144 shares are reserved for issuance pursuant to
the Company's dividend reinvestment program, 527,125 are reserved for matching
purposes under the Company's 401(k) plan and 815,467 shares are reserved for
issuance upon conversion of Company Class B Common Stock (and an additional
3,135,259 shares of Company Class A Common Stock would be required to be issued
if all shares of Company Class B Common Stock were converted). 3,950,726 shares
of Company Class B Common Stock are presently outstanding. Following the Merger,
Parent will be authorized to issue sixty million shares of Parent Class A Common
Stock and fourteen million shares of Parent Class B Common Stock. Immediately
following the Effective Time of the Merger, of these authorized shares of Parent
Class A Common Stock, 13,101,552 shares will be issued and outstanding,
2,258,642 shares will be reserved for issuance pursuant to existing stock option
plans to be assumed by Parent in the Merger, 64,716 shares will be reserved for
issuance pursuant to the dividend reinvestment program of the Company (which
will be continued by Parent), 790,688 will be reserved for matching purposes
under the Company's 401(k) plan (which will be continued by Parent) and
1,223,200 shares will be reserved for issuance upon conversion of the Parent
Class B Common Stock (and an additional 4,702,889 shares of Parent Class A
Common Stock would be required to be issued if all shares of Parent Class B
Common Stock were converted). Immediately following the Effective Time of the
Merger, 5,926,089 shares of Parent Class B Common Stock will be issued and
outstanding. The increase in the number of authorized shares of Parent Common
Stock over the number of shares of Company Common Stock authorized to be issued
will afford Parent greater flexibility in financial matters and will insure that
sufficient shares of capital stock are available for issuance by the Board of
Directors of Parent for such purposes as the Board determines to be in the best
interests of Parent following the Merger without further action by stockholders
(except as may be required by law or by the terms of any listing agreement
pursuant to which the Parent Common Stock is listed on an exchange). Except for
the issuance of shares pursuant to the Merger Agreement, including the effective
increase in the number of shares to be outstanding as a result of the Exchange
Ratio, and the issuance of shares of Parent Common Stock pursuant to the
dividend reinvestment plan of the Company which will be assumed by Parent
following the Merger or in connection with the Compensation Plans or the
Company's 401(k) plan, the Board of Directors of Parent and the Board of
Directors of the Company have no commitments or understandings relating to the
issuance of additional shares of Parent Common Stock following the Merger.
Immediately following the Effective Time of the Merger, The Blount Holding
Company, L.P., a Delaware limited partnership (the "Blount Partnership"), will
own 1,446,072 shares of Parent Class A Common Stock and 4,204,848 shares of
Parent Class B Common Stock, together representing approximately 60% of the
votes entitled to be cast by all holders of Parent Common Stock, when voting
together as a single class. Following the consummation of the Merger, therefore,
the Blount Partnership will be entitled to elect a majority of the board of
directors of Parent and will be able to control the outcome of any issue voted
upon by the stockholders of Parent, other than the election of directors
representing holders of Parent Class A Common Stock. In addition, immediately
following the consummation of the Merger, the Blount Family will beneficially
own, exclusive of shares of Parent Company Stock owned by the Blount
Partnership, approximately 1,858,512 additional shares of Parent Class A Common
Stock and 1,311,987 additional shares of
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<PAGE> 13
Parent Class B Common Stock, together representing an additional 21% of the
votes entitled to be cast by all holders of Parent Common Stock, when voting
together as a single class.
The Merger Agreement is the result of a proposal made by the Blount Family
to combine Parent, which is presently controlled by the Blount Family, with the
Company, which combination would afford certain benefits to the Blount Family.
See "THE MERGER -- Interests of Certain Named Persons in the Merger." As a
result of the Merger, the capital stock of Parent will become the publicly
traded stock through which ownership of the Company is represented, with the
capital structure and ownership of Parent mirroring the capital structure and
ownership of the Company as in effect prior to the Merger.
Immediately prior to the Effective Time of the Merger, the Blount
Partnership, together with the adult children of Winton M. Blount, will own all
of the issued and outstanding capital stock of Parent. BHP, Inc., a Delaware
corporation and the sole general partner of the Blount Partnership ("BHP"), will
have sole voting and dispositive power with respect to the shares of Parent
Common Stock owned by the Blount Partnership. All of the issued and outstanding
capital stock of BHP will be owned by Winton M. Blount. Winton M. Blount,
therefore, will control the Blount Partnership. Winton M. Blount and his
children, or trusts of which his children are beneficiaries, will own all of the
limited partnership interests in the Blount Partnership.
A copy of the Merger Agreement, including the Certificate of Incorporation
and By-Laws of Parent as they will be in effect following the Merger and the
Indemnification Agreement and Registration Rights and Stock Transfer Restriction
Agreement to be executed in connection with the consummation of the Merger, is
attached hereto as Appendix A, and the description thereof contained in this
Proxy Statement/Prospectus is qualified in its entirety by reference to such
Appendix A. The Merger Agreement, and each of the Exhibits to the Merger
Agreement, are hereby incorporated by reference into this Proxy
Statement/Prospectus.
VOTING AT THE SPECIAL MEETING
The Board of Directors of the Company has fixed the close of business on
September 20, 1995 as the record date (the "Record Date") for the determination
of holders of shares of the Company Class A Common Stock and the Company Class B
Common Stock entitled to notice of and to vote at the Special Meeting. Only
holders of Company Common Stock as of the Record Date are entitled to notice of
and vote at the Special Meeting. On the Record Date, there were issued,
outstanding and entitled to vote 8,734,368 shares of the Company Class A Common
Stock and 3,950,726 shares of the Company Class B Common Stock. Each issued and
outstanding share of the Company Class A Common Stock is entitled to one-tenth
of one ( 1/10th of 1) vote and each issued and outstanding share of the Company
Class B Common Stock is entitled to one (1) vote on each matter to be presented
at the Special Meeting. The presence, in person or by proxy, of the holders of
shares of Company Common Stock possessing a majority of the votes entitled to be
cast at the Special Meeting will constitute a quorum at the Special Meeting. The
affirmative vote of the holders of shares possessing a majority of the votes
entitled to be cast by the holders of record of the Company Class A Common Stock
and the Company Class B Common Stock, voting together as a single class, is
required to adopt the Merger Agreement.
As of the Record Date, directors and executive officers of the Company and
their affiliates (including the Blount Family and Parent) beneficially owned an
aggregate of 2,386,181 shares of the Company Class A Common Stock (excluding
shares which may be acquired upon exercise of options and convertible
securities), or approximately 27% of the shares of the Company Class A Common
Stock outstanding on such date, and 3,679,222 shares of the Company Class B
Common Stock, or approximately 93% of the shares of the Company Class B Common
Stock outstanding on such date. Accordingly, of the 4,824,163 votes entitled to
be cast with respect to adoption of the Merger Agreement by the holders of the
Company Class A Common Stock and the Company Class B Common Stock, voting
together as a single class, the directors and executive officers of the Company
and their affiliates (including the Blount Family and Parent) beneficially owned
shares of Company Common Stock entitled to cast 3,917,840, or approximately 81%,
of such votes, or sufficient votes to adopt the Merger Agreement.
Of the shares so owned, as of the Record Date, the Blount Family and Parent
beneficially owned an aggregate of 2,314,687 shares of the Company Class A
Common Stock (excluding shares which may be
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<PAGE> 14
acquired upon exercise of convertible securities), or approximately 27% of the
shares of the Company Class A Common Stock outstanding on such date, and
3,677,890 shares of the Company Class B Common Stock, or approximately 93% of
the shares of the Company Class B Common Stock outstanding on such date.
Accordingly, the Blount Family and Parent beneficially own shares of Company
Common Stock entitled to cast 3,909,359, or approximately 81%, of such votes, or
sufficient votes to adopt the Merger Agreement. The members of the Blount Family
and Parent have stated their intention to vote all such shares in favor of
adoption of the Merger Agreement, in which case adoption of the Merger Agreement
is assured.
THE MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY PRESENT AT THE MEETING
AT WHICH THE MERGER AGREEMENT WAS CONSIDERED (WITH WINTON M. BLOUNT AND HIS
BROTHER W. HOUSTON BLOUNT NOT PRESENT DURING THE PORTION OF THE MEETING AT WHICH
THE MERGER AGREEMENT WAS CONSIDERED) HAVE UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMEND THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER
AGREEMENT. TWO DIRECTORS, OTHER THAN WINTON M. BLOUNT AND W. HOUSTON BLOUNT,
WERE NOT PRESENT AT THIS MEETING OF THE BOARD OF DIRECTORS. SEE "THE
MERGER -- BACKGROUND OF THE MERGER; -- REASONS OF COMPANY AND PARENT FOR THE
MERGER; -- RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY."
A Proxy in the form enclosed, properly completed and returned in time for
the voting thereof at the Special Meeting, with instructions specified thereon,
will be voted in accordance with such instructions. Only votes FOR adoption of
the Merger Agreement constitute affirmative votes. Votes that are withheld or
abstain, including broker non-votes, with respect to adoption of the Merger
Agreement are counted for quorum purposes, but such votes have the same effect
as negative votes with respect to the proposal regarding the Merger Agreement.
If no specification is made, a signed proxy will be voted FOR adoption of the
Merger Agreement. A proxy may be revoked at any time prior to its exercise (i)
by filing with the Secretary of the Company either an instrument revoking the
proxy or a duly executed proxy bearing a later date or (ii) by attending the
Special Meeting and voting in person. Attendance at the Special Meeting will not
in itself revoke a proxy.
The solicitation subject to this Proxy Statement/Prospectus is made on
behalf of the Board of Directors of the Company. In addition to the use of the
mail, proxies may be solicited by telephone, telecopy or personally by the
directors, executive officers and employees of the Company, who will receive no
extra compensation for their services. The expenses of such solicitation will be
paid by Parent. The Company will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy soliciting material to the beneficial owners of shares of Company
Common Stock.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
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SUMMARY
The following is a brief summary of certain information contained
in or incorporated by reference into this Proxy Statement/Prospectus
with respect to the Company, Parent, the Subsidiary and the terms and
conditions of the Merger. The following summary is not intended to be
complete and is qualified in all respects by the information appearing
elsewhere herein or incorporated by reference into this Proxy
Statement/Prospectus, the Appendices hereto and the documents referred
to herein.
The Company's pro forma equivalent dividends and earnings per
share have been adjusted in this Proxy Statement/Prospectus to reflect
the Exchange Ratio.
PARTIES TO THE MERGER
Blount International, Inc. (formerly HBC, Incorporated)
Parent, a Delaware corporation, is headquartered in Montgomery, Alabama. On
the date of this Proxy Statement/Prospectus, all of the issued and outstanding
capital stock of Parent was owned or controlled directly by Winton M. Blount,
the founder and Chairman of the Board of the Company, together with his spouse
and adult children or trusts of which they are beneficiaries. As of such date,
Parent owned 2,075,048 shares (or approximately 24%) of the issued and
outstanding shares of the Company Class A Common Stock and 2,803,232 shares (or
approximately 71%) of the issued and outstanding shares of the Company Class B
Common Stock. Together, these shares of Company Common Stock held by Parent
represent approximately 62% of the votes entitled to be cast at the Special
Meeting by all holders of Company Common Stock, voting together as a single
class. Other than these shares of Company Common Stock, since February 1993,
Parent has had no significant assets and has not actively engaged in any
business. Prior to February 1993, Parent was engaged in several businesses. See
"CERTAIN INFORMATION CONCERN-
ING THE BUSINESS OF PARENT."
Immediately prior to the Effective Time of the Merger, the Blount
Partnership, together with the adult children of Winton M. Blount, will own all
of the issued and outstanding capital stock of Parent. BHP, the sole general
partner of the Blount Partnership, will have sole voting and dispositive power
with respect to the shares of Parent Common Stock owned by the Blount
Partnership. All of the issued and outstanding capital stock of BHP will be
owned immediately prior to the Effective Time of the Merger by Winton M. Blount.
Winton M. Blount, therefore, will control the Blount Partnership and Parent
immediately prior to the Effective Time of the Merger.
The principal executive offices of Parent are located at 4520 Executive
Park Drive, Montgomery, Alabama 36116-1602, and the telephone number of Parent
at such offices is (334) 244-6333. Following the Effective Time of the Merger,
the telephone number of Parent will be (334) 244-4000.
Blount, Inc.
The Company is an international industrial company with operations in three
business segments: Outdoor Products, Industrial and Power Equipment and Sporting
Equipment. The Company's current manufacturing operations date largely from the
acquisition of Omark Industries, Inc. in 1985. The Company was founded in 1946
as a general construction company and, over the succeeding years, grew into one
of the largest construction companies in the United States. In February 1994,
the Company discontinued its construction business.
The Company maintains its principal executive offices at 4520 Executive
Park Drive, Montgomery, Alabama 36116-1602, and the telephone number of the
Company at such offices is (334) 244-4000.
HBC Transaction Subsidiary, Inc.
The Subsidiary, a Delaware corporation, is a direct, wholly-owned
subsidiary of Parent formed solely for the purposes of the Merger. The
Subsidiary has not engaged in any business activity unrelated to the Merger
prior to the date of this Proxy Statement/Prospectus.
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<PAGE> 16
THE SPECIAL MEETING
Date, Time and Place
The Special Meeting will be held on Friday, November 3, 1995, at 10:00
a.m., local time, at the Company's principal executive offices, 4520 Executive
Park Drive, Montgomery, Alabama 36116, to consider and vote upon adoption of the
Merger Agreement.
Record Date; Quorum
The Board of Directors of the Company has fixed the close of business on
September 20, 1995 as the Record Date for the determination of holders of the
Company Class A Common Stock and the Company Class B Common Stock entitled to
notice of and to vote at the Special Meeting. Only the holders of the
outstanding Company Class A Common Stock and the Company Class B Common Stock as
of the Record Date are entitled to notice of and to vote at the Special Meeting.
The presence, in person or by proxy, of the holders of shares of Company Common
Stock possessing a majority of the votes entitled to be cast at the Special
Meeting will constitute a quorum at the Special Meeting.
Vote Required
As of the Record Date, there were issued, outstanding and entitled to vote
8,734,368 shares of the Company Class A Common Stock and 3,950,726 shares of the
Company Class B Common Stock. Each issued and outstanding share of the Company
Class A Common Stock is entitled to one-tenth of one ( 1/10th of 1) vote and
each issued and outstanding share of the Company Class B Common Stock is
entitled to one (1) vote on each matter to be presented at the Special Meeting.
The affirmative vote of the holders of shares possessing a majority of the votes
entitled to be cast by the holders of record of the Company Class A Common Stock
and the Company Class B Common Stock, voting together as a single class, is
required to adopt the Merger Agreement.
As of the Record Date, directors and executive officers of the Company and
their affiliates (including the Blount Family and Parent) beneficially owned an
aggregate of 2,386,181 shares of the Company Class A Common Stock (excluding
shares which may be acquired upon exercise of options and convertible
securities), or approximately 27% of the shares of the Company Class A Common
Stock outstanding on such date, and 3,679,222 shares of the Company Class B
Common Stock, or approximately 93% of the shares of the Company Class B Common
Stock outstanding on such date. Accordingly, of the 4,824,163 votes entitled to
be cast with respect to the adoption of the Merger Agreement by the holders of
the Company Class A Common Stock and the Company Class B Common Stock, voting
together as a single class, the directors and executive officers of the Company
and their affiliates (including the Blount Family and Parent) beneficially owned
shares of Company Common Stock entitled to cast 3,917,840, or approximately 81%,
of such votes, or sufficient votes to approve the Merger Agreement.
Of the shares so owned, as of the Record Date, the Blount Family and Parent
beneficially owned an aggregate of 2,314,687 shares of the Company Class A
Common Stock (excluding shares which may be acquired upon conversion of
convertible securities), or approximately 27% of the shares of the Company Class
A Common Stock outstanding on such date, and 3,677,890 shares of the Company
Class B Common Stock, or approximately 93% of the shares of the Company Class B
Common Stock outstanding on such date. Accordingly, the Blount Family and Parent
beneficially own shares of Company Common Stock entitled to cast 3,909,359, or
approximately 81%, of such votes, or sufficient votes to adopt the Merger
Agreement. The members of the Blount Family and Parent have stated their
intention to vote all such shares in favor of adoption of the Merger Agreement,
in which case adoption of the Merger Agreement is assured.
THE MERGER
Terms of the Merger
Subject to adoption of the Merger Agreement by the stockholders of the
Company at the Special Meeting and the satisfaction or waiver of the other
conditions contained in the Merger Agreement, the
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<PAGE> 17
Subsidiary will be merged into the Company pursuant to the Merger Agreement, and
the Company will be the surviving corporation of the Merger (the "Surviving
Corporation"). At the Effective Time of the Merger, each outstanding share of
the Company Class A Common Stock (other than shares owned by Parent) will be
converted into 1.5 shares of Parent Class A Common Stock and each outstanding
share of the Company Class B Common Stock (other than shares owned by Parent)
will be converted into 1.5 shares of Parent Class B Common Stock. Fractional
shares of Parent Common Stock will not be issued in connection with the Merger.
Holders of the Company Class A Common Stock and the Company Class B Common Stock
otherwise entitled to fractional shares of Parent Class A Common Stock or Parent
Class B Common Stock will be paid cash in lieu of such fractional shares
determined as described herein. See "THE MERGER."
Effective Time of the Merger
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware. Such filing will be made
as soon as practicable after the adoption of the Merger Agreement by the
stockholders of the Company and the satisfaction or waiver of the other
conditions to the Merger. See "THE MERGER -- Effective Time of the Merger."
Certificates for Parent Common Stock
Upon the consummation of the Merger, it will not be necessary for holders
of Company Common Stock to surrender their existing stock certificates for new
stock certificates issued by Parent. Instead, the holders of Company Class A
Common Stock and Company Class B Common Stock will automatically become holders
of Parent Class A Common Stock and Parent Class B Common Stock, respectively,
and the present stock certificates representing shares of Company Class A Common
Stock or Company Class B Common Stock will automatically represent an equivalent
number of shares of Parent Class A Common Stock or Parent Class B Common Stock,
respectively. In addition, each holder of Company Common Stock will receive new
stock certificates from Parent representing additional shares of Parent Class A
Common Stock equal to one-half ( 1/2) of the number of shares of Company Class A
Common Stock held by such holder and additional shares of Parent Class B Common
Stock equal to one-half ( 1/2) of the number of shares of Company Class B Common
Stock held by such holder immediately prior to the Effective Time of the Merger.
After the Effective Time of the Merger, when presently outstanding stock
certificates issued by the Company for Company Common Stock prior to the Merger
are presented for transfer, new stock certificates for Parent Common Stock will
be issued. See "THE MERGER -- Certificates for Parent Common Stock."
Fractional Shares
No certificates representing fractional shares of Parent Common Stock will
be issued in connection with the Merger. Instead, each holder of Company Class A
Common Stock otherwise entitled to receive a fractional share of Parent Class A
Common Stock will receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Parent Class A Common Stock, and
each holder of Company Class B Common Stock otherwise entitled to receive a
fractional share of Parent Class B Common Stock will receive, in lieu thereof,
cash (without interest) in an amount equal to such fractional part of a share of
Parent Class B Common Stock. The amount of cash payable in lieu of a fractional
share of Parent Class A Common Stock will be equal to one-third of the closing
price per share of Company Class A Common Stock on the trading day immediately
preceding the date of the Effective Time of the Merger for AMEX -- Composite
Transactions as reported by the AMEX, or, if there are no transactions in the
Company Class A Common Stock on such date, the closing price per share of
Company Class A Common Stock on the trading day next preceding the date of the
Effective Time of the Merger on which a transaction in Company Class A Common
Stock occurred, as so reported by the AMEX. The amount of cash payable in lieu
of a fractional share of Parent Class B Common Stock shall be an amount equal to
one-third of the closing price per share of Company Class B Common Stock on the
trading day immediately preceding the date of the Effective Time of the Merger
for AMEX -- Composite Transactions as reported by AMEX, or, if there are no
transactions in the Company Class B Common Stock on such date, the closing price
per share of Company Class B Common Stock on the trading day next preceding the
date of the Effective Time of the Merger on which a transaction in
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Company Class B Common Stock occurred, as so reported by AMEX. See "THE
MERGER -- Fractional Shares."
Effect of the Merger on Company Stock Options
At the Effective Time of the Merger, Parent will assume the obligations of
the Company under the 1992 Blount Incentive Stock Option Plan, the 1994 Blount
Executive Stock Option Plan and the 1995 Blount Long-Term Executive Stock Option
Plan (collectively, the "Compensation Plans"), and each outstanding option to
purchase shares of the Company Class A Common Stock granted under the
Compensation Plans will become an option to acquire shares of Parent Class A
Common Stock on the same terms and conditions as were applicable under the
Compensation Plans and the stock option agreements granting such options, except
that the number of shares subject to each option and the exercise price will be
appropriately adjusted to give effect to the Exchange Ratio in accordance with
the terms of the Compensation Plans. Adoption of the Merger Agreement at the
Special Meeting will also be deemed to constitute approval of, and approval of
the assumption by Parent of, the Compensation Plans, all of which have been
approved previously by the stockholders of the Company. See "THE
MERGER -- Effect of the Merger on Company Stock Options."
BACKGROUND OF THE MERGER; REASONS OF COMPANY AND PARENT FOR THE MERGER
The Merger was proposed to the Company by the Blount Family. In connection
with the Merger, the Blount Family will contribute their current holdings of
Parent preferred stock and common stock (for which there is no public market) to
the Blount Partnership and cause such holdings to be exchanged for new Parent
Common Stock. As a result of the Merger, the Parent Common Stock received in
such exchange will be publicly-traded, enabling the Blount Family over time to
make gifts or sales of their interests in a tax efficient manner and eliminating
a level of taxation presently applicable to dividends paid on Company Common
Stock held by Parent.
An independent committee of the Board of Directors of the Company (the
"Board"), comprised of three non-employee directors, Alfred M. Gleason, R.
Eugene Cartledge and H. Corbin Day (the "Independent Committee"), was formed to
review the Merger and the related transactions. For a description of the
background of Messrs. Gleason, Cartledge and Day, see "MANAGEMENT OF PARENT
FOLLOWING THE MERGER -- Directors and Officers."
The Independent Committee retained a financial advisor and legal counsel
and, with the assistance of such advisors, negotiated the terms of the Merger,
the Merger Agreement, the Registration Rights and Stock Transfer Restriction
Agreement and the Indemnification Agreement (collectively, the "Agreements")
with representatives of Parent and the Blount Family. The Independent Committee
viewed the Blount Family's proposal as giving it an opportunity at reasonable
cost to the Company to obtain agreements from the Blount Family that, to the
extent practicable, would promote increased liquidity in the market for the
Company's Common Stock and an orderly transition from Blount Family control to
public control of the Company following the death of Winton M. Blount and would
provide an opportunity for stockholders of the Company other than Parent and the
Blount Family (the "Public Stockholders") to participate in transactions by the
Blount Family that might result in a change in control. In the course of
negotiations, the Independent Committee obtained provisions in the Agreements
for the benefit of the Company and the Public Stockholders that were not
contemplated by the Blount Family's original proposal. Such provisions include,
among other things, certain restrictions on the ability of the Blount Family and
the Blount Partnership to dispose of shares of Parent Common Stock, specific
rights for the Public Stockholders in connection with certain sales of Parent
Common Stock by the Blount Family or the Blount Partnership to persons who,
giving effect to the sale, would be entitled to cast five percent or more of the
total votes entitled to be cast by holders of all Parent Common Stock and
certain provisions regarding the equalization, under certain circumstances, of
the voting rights of holders of Parent Class A Common Stock and Parent Class B
Common Stock. See "THE MERGER -- Background of the Merger; -- Reasons of Company
and Parent for the Merger."
At a meeting held on July 28, 1995, the Independent Committee unanimously
concluded that the Merger is fair to, and in the best interests of, the Company
and the Public Stockholders and approved the terms of the
12
<PAGE> 19
Merger Agreement, the Registration Rights and Stock Transfer Restriction
Agreement and the Indemnification Agreement. The Independent Committee also
recommended that the Board (i) approve the Agreements, and (ii) recommend to the
stockholders of the Company that they adopt the Merger Agreement. At a meeting
held on July 31, 1995, the members of the Board present, with Winton M. Blount
and W. Houston Blount absent during the portion of the meeting in which the
Merger was considered, based in part on the recommendation of the Independent
Committee, unanimously approved the Agreements, determined that the Merger is
fair to, and in the best interests of, the Company and the Public Stockholders
and recommended to the stockholders of the Company that they adopt the Merger
Agreement. Two directors of the Company, in addition to Winton M. Blount and W.
Houston Blount, did not attend the July 31, 1995 meeting of the Board. W.
Houston Blount, a director of the Company who is the brother of Winton M.
Blount, is not affiliated with Parent and is not a party to the Registration
Rights and Stock Transfer Restriction Agreement or the Indemnification
Agreement. See "THE MERGER -- Background of the Merger; -- Reasons of Company
and Parent for the Merger."
The Independent Committee and the Board considered a number of factors in
reaching their conclusions, including those factors set forth in "THE
MERGER -- Reasons of Company and Parent for the Merger; Recommendation of the
Board of Directors of the Company." The Board of Directors of Parent also
considered a number of factors in reaching its conclusion, including those
factors set forth in "THE MERGER -- Reasons of Company and Parent for the
Merger; -- Recommendation of the Board of Directors of the Company."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY PRESENT AT ITS JULY
31, 1995 MEETING UNANIMOUSLY CONCLUDED (WITH WINTON M. BLOUNT AND W. HOUSTON
BLOUNT ABSENT DURING THE PORTION OF THE MEETING IN WHICH THE MERGER WAS
CONSIDERED) THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND THE PUBLIC STOCKHOLDERS AND TO RECOMMEND TO THE STOCKHOLDERS OF THE
COMPANY THAT THEY VOTE FOR ADOPTION OF THE MERGER AGREEMENT. TWO DIRECTORS OF
THE COMPANY, IN ADDITION TO WINTON M. BLOUNT AND W. HOUSTON BLOUNT, DID NOT
ATTEND THE JULY 31, 1995 MEETING OF THE BOARD.
OPINION OF FINANCIAL ADVISOR
On July 28, 1995, J.P. Morgan Securities Inc. ("J.P. Morgan"), the
Independent Committee's independent financial advisor, delivered its oral
opinion, subsequently confirmed in writing, to the Independent Committee to the
effect that, as of such date, the terms of the exchange in the proposed Merger
are fair, from a financial point of view, to the Public Stockholders of the
Company. A copy of the opinion, which sets forth the assumptions made, matters
considered and limitations on the review undertaken by J.P. Morgan, is attached
to this Proxy Statement/Prospectus as Appendix B and should be read in its
entirety. See "THE MERGER -- Opinion of Financial Advisor."
INTERESTS OF CERTAIN NAMED PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of the Company
with respect to adopting the Merger Agreement and the transactions contemplated
thereby, stockholders of the Company should be aware that certain stockholders,
employees, officers and directors of the Company have certain interests in the
Merger that are in addition to the interests of stockholders of the Company
generally.
Ownership. As of the Record Date, Parent owned an aggregate of 2,075,048
shares of the Company Class A Common Stock, or approximately 24% of the shares
of the Company Class A Common Stock outstanding on such date (excluding shares
which may be acquired upon conversion of convertible securities), and 2,803,232
shares of the Company Class B Common Stock, or approximately 71% of the shares
of the Company Class B Common Stock outstanding on such date. In addition, as of
such date, the Blount Family beneficially owns, exclusive of shares of Company
Common Stock owned by Parent, 239,639 additional shares of Company Class A
Common Stock (excluding shares which may be acquired upon conversion of
convertible securities), or approximately 3% of the shares of the Company Class
A Common Stock outstanding on such
13
<PAGE> 20
date, and 874,658 additional shares of the Company Class B Common Stock, or
approximately 22% of the shares of the Company Class B Common Stock outstanding
on such date. In addition, Winton M. Blount, the founder of the Company, is the
Chairman of the Board and a director of the Company and his brother, W. Houston
Blount, is a director of the Company. By virtue of the foregoing relationships,
the Merger presented a conflict of interest on the part of Winton M. Blount and
a potential conflict of interest on the part of his brother in determining the
terms of the Merger Agreement. Accordingly, Winton M. Blount and W. Houston
Blount excused themselves from all meetings or portions of meetings of the Board
at which the Merger was discussed and did not vote in connection with the
approval by the Board of Directors of the Merger Agreement.
Existing Employment Agreements. Although no substantive changes in the
terms or conditions of such agreements will be made, Parent will assume or
guarantee, at the Effective Time of the Merger, employment agreements between
the Company and certain of its executive officers and other employees.
Benefits to Blount Family. The Merger may also result in substantial tax
benefits to the Blount Family. At present, because Parent holds less than 80% of
the outstanding Company Common Stock, any dividends paid by the Company to
Parent are (albeit subject to an 80% dividends received deduction under the
Internal Revenue Code of 1986, as amended (the "Code")) taxed first at Parent
corporate level and, assuming that Parent makes a further distribution of the
proceeds of Company dividends to its stockholders, such amounts would be taxed a
second time upon receipt by the Blount Family. In addition, at present the
proceeds of any sale by Parent of Company Class A Common Stock or Company Class
B Common Stock would be taxed first at the Parent corporate level and, assuming
Parent distributed the proceeds of such sale to its stockholders, would be taxed
a second time upon receipt by the Blount Family. As a result of the Merger, any
dividends paid by Parent and received by the Blount Partnership would be taxed
only once, and the Blount Family would be able to dispose of its interests in
the Company through the sale of publicly traded Parent Common Stock.
Pursuant to the Merger Agreement, Parent is required to, and is required to
cause the Surviving Corporation to, jointly and severally indemnify, defend and
hold harmless the present and former officers and directors of Parent, including
certain members of the Blount Family (collectively, the "Indemnified Parties"),
against all losses, expenses (including attorneys' fees), claims, damages,
costs, liabilities or judgments or amounts that are paid in settlement with the
approval of Parent (which approval shall not be unreasonably withheld) arising
out of actions or omissions occurring at or prior to the Effective Time of
Merger or required under the DGCL (and shall also pay expenses in advance of the
final disposition of any claim to each Indemnified Party) to the fullest extent
permitted, under the terms and conditions provided by, the DGCL. Parent is also
required to use its best efforts to arrange to have the Indemnified Parties
named as insureds under, or otherwise covered by, the Company's officers and
directors liability insurance policy which will be continued by Parent (as long
as any such policy shall be in force), provided that such action shall not
involve unreasonable cost to Parent. As part of the expenses of the Merger to be
borne by Parent, Parent will pay or make provision for payment of the increased
cost associated with providing the required insurance coverage for the
Indemnified Parties.
The Merger will provide certain additional benefits to the Blount Family
and the Blount Partnership, including certain registration rights with respect
to the shares of Parent Common Stock that it will hold following the Effective
Time of the Merger. See "THE MERGER -- Registration Rights and Stock Transfer
Restriction Agreement."
See "THE MERGER -- Interests of Certain Named Persons in the Merger."
INDEMNIFICATION BY PARENT AND THE BLOUNT PARTNERSHIP
Merger Agreement. In the Merger Agreement, Parent has agreed, subject to
certain limitations, to indemnify the Company and its officers and directors
(collectively, the "Indemnitees"), and to hold the Indemnitees harmless, from
all damages and liabilities incurred by any Indemnitee which arise out of or
relate to the Merger. The obligations of Parent to indemnify and to hold the
Indemnitees harmless are specifically limited in the Merger Agreement.
14
<PAGE> 21
Indemnification Agreement. As a condition to the consummation of the
Merger, the Blount Partnership has agreed to execute and deliver to Parent on
the Closing Date (as defined in the Merger Agreement) an Indemnification
Agreement (the "Indemnification Agreement") pursuant to which the Blount
Partnership will be obligated, subject to certain limitations, to indemnify
Parent, the Company and their respective officers and directors (collectively,
the "Blount Indemnified Persons") and to hold the Blount Indemnified Persons
harmless from all damages and liabilities incurred by any Blount Indemnified
Person as a result of any claims made against any Blount Indemnified Person
which arise out of or relate to the Merger (other than claims relating to the
treatment of the Merger for tax purposes) or the acts or omissions of, or states
of fact relating to, Parent, its employees or agents, or any of its past
subsidiaries or employees or agents prior to the Effective Time of the Merger.
The obligations of the Blount Partnership to indemnify and to hold the Blount
Indemnified Persons harmless are specifically limited in the Indemnification
Agreement.
A copy of the Indemnification Agreement is attached hereto as Exhibit III
to the Merger Agreement. The Merger Agreement is attached as Appendix A to this
Proxy Statement/Prospectus. The description of the Indemnification Agreement in
this Proxy Statement/Prospectus is qualified in its entirety by reference to the
Indemnification Agreement attached as Exhibit III to such Appendix A.
See "THE MERGER -- Indemnification by Parent and the Blount Partnership."
CERTAIN EXPENSES OF THE MERGER
The Merger Agreement provides that, subject to the limitations on the
indemnification obligations set forth in the Merger Agreement and the
Indemnification Agreement (See "THE MERGER -- Indemnification by Parent and the
Blount Partnership"), all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby (other than expenses
relating to listing of Parent Common Stock on the NYSE and effecting, as a
practical matter in the Merger, a split of Company Common Stock, which shall be
paid by the Company) shall be paid by, or reimbursed to the Company by, Parent.
The Merger Agreement provides that, in the event the Merger is not consummated,
Parent will pay or reimburse such expenses, and, in the event the Merger is
consummated, Parent will, at the closing, establish reserves sufficient, in the
reasonable estimation of the Company and Parent, to pay the expenses which
Parent is obligated to pay pursuant to the Merger Agreement, which reserves
shall be deducted from the net worth of Parent in determining whether Parent has
the minimum net worth required as a condition to the obligations of the Company
to consummate the Merger. See "THE MERGER -- Certain Conditions to the Merger;
Waiver and Amendment." The establishment of such reserves will constitute full
satisfaction of the obligation of Parent to the Company, as between the parties
to the Merger Agreement, to pay or provide for the payment of such expenses.
REGISTRATION RIGHTS AND STOCK TRANSFER RESTRICTION AGREEMENT
One of the conditions to the obligation of the Company to consummate the
Merger is that members of the Blount Family, the Blount Partnership and Parent
enter into a Registration Rights and Stock Transfer Restriction Agreement (the
"Registration Rights and Stock Transfer Restriction Agreement") pursuant to
which the members of the Blount Family and the Blount Partnership will agree to
certain restrictions on their ability to sell or transfer, following the
Effective Time of the Merger, shares of Parent Common Stock which are owned or
later acquired by such persons, and, subject to certain exceptions, requiring
the conversion of Parent Class B Common Stock into Parent Class A Common Stock
prior to such permitted sales or transfers, and Parent will agree to provide
registration rights for the shares of Parent Common Stock held by the Blount
Family and certain transferees of the Blount Family.
A copy of the Registration Rights and Stock Transfer Restriction Agreement
is attached hereto as Exhibit IV to the Merger Agreement. The Merger Agreement
is attached as Appendix A to this Proxy Statement/Prospectus. The description of
the Registration Rights and Stock Transfer Restriction Agreement contained in
this Proxy Statement/Prospectus is qualified in its entirety by reference to the
Registration Rights and Stock Transfer Restriction Agreement attached as Exhibit
IV to such Appendix A.
See "THE MERGER -- Registration Rights and Stock Transfer Restriction
Agreement."
15
<PAGE> 22
CERTAIN CONDITIONS TO THE MERGER; WAIVER AND AMENDMENT
The respective obligations of Parent, the Subsidiary and the Company to
consummate the Merger are subject to the satisfaction or waiver of certain
conditions, including, among others, the adoption of the Merger Agreement by the
requisite vote of the stockholders of the Company, and certain other conditions
customary in transactions of this kind. No federal or state regulatory approval
must be obtained in connection with the Merger. At any time before the Merger
becomes effective, any party to the Merger Agreement may waive conditions
contained therein to its own obligations, to the extent that such obligations,
agreements and conditions are intended for its own benefit. In addition, the
Merger Agreement may be amended by written instrument signed on behalf of each
of the parties thereto. See "THE MERGER -- Certain Conditions to the Merger;
Waiver and Amendment."
ABSENCE OF RIGHTS OF DISSENT OR APPRAISAL
Under the DGCL, the stockholders of the Company will not have dissenters or
appraisal rights with respect to the Merger. See "THE MERGER -- Absence of
Rights of Dissent and Appraisal."
TERMINATION
The Merger Agreement provides that it may be terminated, without liability
or obligation except for the obligations of Parent with respect to the payment
of the expenses of the Merger Agreement and indemnification of the Indemnitees,
upon certain conditions, including by the mutual written consent of Parent, the
Subsidiary and the Company; by Parent and the Subsidiary upon the occurrence or
nonoccurrence of certain specified events; and by the Company upon the
occurrence or nonoccurrence of certain specified events. The Merger Agreement
also provides that it may be terminated by either Parent or the Company if the
Merger is not consummated before January 1, 1996, as such date may be extended
pursuant to the Merger Agreement. See "THE MERGER -- Termination."
DIFFERENCES IN RIGHTS OF THE COMPANY STOCKHOLDERS
At the Effective Time of the Merger, the Company stockholders will become
stockholders of Parent. As a result, their rights as stockholders will continue
to be governed by the DGCL, but will be subject to the Restated Certificate of
Incorporation and By-Laws of Parent, not those of the Company. While the
Restated Certificate of Incorporation and By-Laws of Parent following the
Effective Time of the Merger will be substantially identical to the present
Restated Certificate of Incorporation and amended Bylaws of the Company (other
than for changes therein made to reflect adjustments necessitated by the
effective three-for-two stock split of Company Common Stock being effected as
part of the Merger), the Restated Certificate of Incorporation of Parent will
(i) provide for the mandatory conversion of all outstanding shares of Parent
Class B Common Stock into shares of Parent Class A Common Stock if, at any time
following the death of Winton M. Blount, the number of shares of Parent Class A
Common Stock into which the shares of Parent Class B Common Stock then remaining
outstanding are convertible equals less than ten percent (10%) of the aggregate
number of shares of Parent Class A Common Stock which would be outstanding
following the conversion of all such shares of Parent Class B Common Stock, and
(ii) increase the number of shares of Parent Class A Common Stock and Parent
Class B Common Stock authorized to be issued above the number of shares of
Company Class A Common Stock and Company Class B Common Stock presently
authorized to be issued. Immediately following the Effective Time of the Merger,
the outstanding Parent Class B Common Stock will constitute approximately 31% of
the outstanding Parent Common Stock, but will be entitled to cast 82% of the
votes entitled to be cast by the holders of the Parent Common Stock and elect
75% of the members of the Board of Directors of Parent. The foregoing provision
requiring mandatory conversion of Parent Class B Common Stock is designed to
insure that the holders of Parent Class B Common Stock do not continue to
control Parent when their economic interest in Parent becomes substantially
disproportionate to the voting rights of the Parent Class B Common Stock and was
a material factor in the favorable recommendation of the Independent Committee.
See "COMPARISON OF THE CAPITAL STOCK OF PARENT AND THE COMPANY" and "THE
MERGER -- Reasons of Company and Parent for the Merger."
16
<PAGE> 23
ACCOUNTING TREATMENT
The Merger will be accounted for in a manner similar to that in pooling of
interests accounting. See "THE MERGER -- Accounting Treatment."
TAX TREATMENT
The Company has received the opinions of Bradley, Arant, Rose & White,
counsel to Parent, and Sutherland, Asbill & Brennan, special counsel to Parent,
to the effect that, for federal income tax purposes and based upon certain
assumptions, representations and warranties: (i) the Merger will qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) no gain or loss will be
recognized by holders of Company Common Stock who receive Parent Common Stock in
the Merger (except in connection with the receipt of cash in lieu of fractional
interests in shares of Parent Common Stock); and (iii) the basis of Parent
Common Stock received by the stockholders of the Company pursuant to the Merger
and the holding period therefor will be the same as the basis and holding period
of Company Common Stock surrendered in exchange therefor, provided that such
stock was held as a capital asset. See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS."
THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES MAY VARY FOR EACH HOLDER OF
SHARES OF COMPANY COMMON STOCK. THE COMPANY STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF INCOME TAX AND OTHER
TAX CONSEQUENCES ON THEIR OWN PARTICULAR FACTS.
BUSINESS AND MANAGEMENT OF PARENT AND THE COMPANY FOLLOWING THE MERGER
After consummation of the Merger, the Company will be a wholly-owned
subsidiary of Parent. Parent will operate as a holding company for the
operations of the Company under the name "Blount International, Inc." The
Company will continue to operate its businesses as they are presently conducted
under the name "Blount, Inc."
The Merger Agreement provides that, following the Merger, the Board of
Directors and the officers of Parent shall be those persons serving as Directors
and officers of the Company immediately prior to the Effective Time of Merger.
See "THE MERGER -- Business and Management of Parent and the Company
Following the Merger" and "MANAGEMENT OF PARENT FOLLOWING THE MERGER."
17
<PAGE> 24
SUMMARY PRO FORMA CONSOLIDATED SELECTED FINANCIAL INFORMATION
The following presents selected pro forma consolidated financial
information reflecting the Merger and the conversion of Company Common Stock
into Parent Common Stock and historical audited February 28, 1995 and unaudited
May 31, 1995 consolidated financial information of the Company. The unaudited
pro forma balance sheet data gives effect to the Merger as if it had been
effective on May 31, 1995. The pro forma income statement data and other data
give effect to the Merger as if it has been effective on March 1, 1994.
The selected pro forma consolidated financial information may not be
indicative of the results that actually would have been achieved if the Merger
had been in effect as of the date and for the periods indicated or which may be
obtained in the future.
For additional information see "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
FEBRUARY 28, 1995 MAY 31, 1995
----------------------- -----------------------
PRO FORMA PRO FORMA
COMPANY COMBINED COMPANY COMBINED
---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales........................................... $ 588,419 $ 588,419 $ 164,189 $ 164,189
Operating income from segments.................. 101,887 101,887 30,446 30,446
Income (loss) from continuing operations before
minority interest, extraordinary gain and
cumulative effect of accounting changes....... 40,090 40,971 14,279 14,529
Net Income...................................... 40,090 40,971 14,279 14,529
Net income per share............................ 3.10 2.11 1.10 .75
OTHER DATA:
Per common share dividends
Class A....................................... $ .5175 $ .3450 $ .1425 $ .0950
Class B....................................... .4675 .3117 .13 .0867
Weighted average common shares outstanding...... 12,931,020 19,396,530 12,954,389 19,431,584
</TABLE>
<TABLE>
<CAPTION>
AT MAY 31, 1995
--------------------------
PRO FORMA
COMPANY COMBINED
-------- ---------
(DOLLAR AMOUNTS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets....................................................... $499,768 $ 501,942
Working capital.................................................... 137,805 138,235
Long-term debt..................................................... 97,170 95,670
Total debt......................................................... 102,781 101,281
Shareholders' equity............................................... 216,269 218,193
</TABLE>
18
<PAGE> 25
EQUIVALENT SHARE DATA
The following table presents comparative historical unaudited per share
data for both Parent and the Company, pro forma unaudited per share data for
Parent and pro forma equivalent unaudited per share data for the Company. The
pro forma amounts assume the Merger had been effective during the periods
presented and had been accounted for in a manner similar to that in "pooling of
interests" accounting. Parent pro forma amounts represent the combined pro forma
results, and the Company pro forma equivalent amounts reflect the Exchange Ratio
in the Merger of 1.5 shares of Parent Class A Common Stock for each share of the
Company Class A Common Stock and 1.5 shares of Parent Class B Common Stock for
each share of the Company Class B Common Stock. The data presented should be
read in conjunction with the Pro Forma Condensed Consolidated Financial
Statements and the historical financial statements of Parent and Company and the
related notes thereto included elsewhere herein or incorporated herein by
reference.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED LAST DAY OF THREE MONTHS ENDED
FEBRUARY, MAY 31,
------------------------------- -------------------
1995 1994 1993 1995 1994
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income per common share:
Parent Common Stock....................... $1,485.01 $ 117.97 $ 916.48 $ 485.44 $ 415.68
Company Common Stock(1)................... $ 3.10 $ 1.92 $ .97 $ 1.10 $ .70
Parent Common Stock pro forma combined.... $ 2.11 $ 1.13 $ .56 $ .75 $ .51
Company Common Stock pro forma
equivalent(2).......................... $ 3.17 $ 1.69 $ .84 $ 1.12 $ .77
Cash dividends per common share:
Parent Common Stock....................... $ 73.6600 $40.1600 $35.3600 $16.0100 $13.9400
Company Class A Common Stock.............. $ .5175 $ .4625 $ .4500 $ .1425 $ .1250
Company Class B Common Stock.............. $ .4675 $ .4125 $ .4000 $ .1300 $ .1125
Parent Class A Common Stock pro forma
combined............................... $ .3450 $ .3083 $ .3000 $ .0950 $ .0833
Parent Class B Common Stock pro forma
combined............................... $ .3117 $ .2750 $ .2667 $ .0867 $ .0750
Company Class A Common Stock pro forma
equivalent(2).......................... $ .5175 $ .4625 $ .4500 $ .1425 $ .1250
Company Class B Common Stock pro forma
equivalent(2).......................... $ .4675 $ .4125 $ .4000 $ .1300 $ .1125
</TABLE>
<TABLE>
<CAPTION>
AT FEBRUARY 28, 1995 AT MAY 31, 1995
--------------------- ----------------
(UNAUDITED)
<S> <C> <C>
Book value per common share:
Parent Common Stock........................................ $6,463.89 $ 6,933.44
Company Common Stock....................................... $ 16.13 $ 17.13
Parent Common Stock pro forma combined..................... $ 11.00 $ 11.64
Company Common Stock pro forma equivalent(2)............... $ 16.50 $ 17.46
</TABLE>
- ---------------
(1) Income from continuing operations.
(2) Company pro forma equivalent share data is computed by multiplying the
Parent pro forma share data by the Exchange Ratio of 1.5.
19
<PAGE> 26
THE MERGER
The terms of the Merger are set forth in the Merger Agreement.
The description of the Merger which follows summarizes the principal
provisions of the Merger Agreement, a copy of which, including all
Exhibits thereto, is attached hereto as Appendix A and is incorporated
herein by reference. Reference is made thereto for a complete
description of the terms of the Merger.
TERMS OF THE MERGER
The Merger Agreement has been approved by the members of the Boards of
Directors of the Company, Parent and the Subsidiary, by Parent as the sole
stockholder of the Subsidiary and by the stockholders of Parent.
Pursuant to the Merger Agreement and the DGCL, the Subsidiary will be
merged with and into the Company, and the Company shall be the Surviving
Corporation in the Merger. At the Effective Time of the Merger each outstanding
share of the Company Class A Common Stock (other than shares owned by Parent)
will be converted into 1.5 shares of Parent Class A Common Stock, and each
outstanding share of the Company Class B Common Stock (other than shares owned
by Parent) will be converted into 1.5 shares of Parent Class B Common Stock.
If the Merger Agreement is adopted by the requisite vote of the
stockholders of the Company and the other conditions to the Merger are satisfied
(or waived to the extent permitted), the Merger will be consummated and effected
at the time a certificate of merger is filed with the Secretary of State of the
State of Delaware.
BACKGROUND OF THE MERGER
The terms of the Agreements are the result of arm's-length negotiations
between the Independent Committee, with the assistance of its financial advisor
and legal counsel, on the one hand, and Parent, the Blount Family and their
legal counsel, on the other hand. The following is a brief discussion of the
background of these negotiations, the Merger and related transactions.
Prior to October 1979, Winton M. Blount and his family, by reason of their
collective ownership of shares of Company Common Stock, directly controlled the
Company. During October 1979, Mr. Blount and his family formed Parent and
contributed most of the shares of Company Common Stock which they then owned to
Parent. Due to the capital structure of Parent, and because Winton M. Blount
owned shares of Parent with superior voting rights, Mr. Blount controlled
Parent. As a result of these actions, Parent became the controlling stockholder
of the Company and Mr. Blount remained the ultimate controlling person of the
Company. This control by Mr. Blount of the Company has continued since that time
and exists on the date of this Proxy Statement/Prospectus.
Parent was created by Mr. Blount and his family for a variety of purposes.
Parent was also viewed as a vehicle for family investment and business
ownership, and as a possible means of retaining wealth in a family controlled
entity where control of the Company by the descendants of Mr. Blount was more
likely to continue following his death.
Since the formation of Parent, various changes have occurred which have
resulted in the decision by the Blount Family to propose to the Company that
Parent be combined with the Company. First, in 1986, additional income taxes
were imposed on Parent by reason of the reduction of the dividends received
deduction. The impact of this change was significant to Parent and its
stockholders because for many years most or all of the income of Parent came
from dividends on the Company Common Stock. Second, in 1986, additional taxes
were imposed upon the distribution of appreciated property by corporations and,
as a result, Parent was effectively precluded or discouraged from making
distributions of its Company Common Stock to its stockholders. In addition,
similar changes in the federal tax laws regarding the imposition of taxes on
liquidations, including the distribution of appreciated property, also make the
possibility of a liquidation of Parent less likely.
20
<PAGE> 27
Since its formation, Parent has been engaged in a number of businesses
other than those related directly to the Company. These businesses were
supervised by Samuel R. Blount, one of the sons of Winton M. Blount, who was the
principal chief operating officer of Parent for a number of years. In January
1985, however, Samuel R. Blount, through a separate corporate entity, acquired
some of these businesses from Parent and thereafter devoted most of his business
attention to that separate corporate entity. Principally as a result of this
change in the role of Samuel R. Blount, Parent ceased to make any acquisitions
and by February 1993 had disposed of all its business operations other than its
ownership of Company Common Stock. See "CERTAIN INFORMATION CONCERNING THE
BUSINESS OF PARENT."
When Parent was created, another of the sons of Winton M. Blount, Winton M.
Blount III, was an employee and officer of the Company. In 1989, however, Winton
M. Blount III withdrew from his position with the Company in order to acquire
separate businesses and to pursue political interests. In 1993 and 1994 he
campaigned for election as Governor of the State of Alabama. In addition, Winton
M. Blount III owns eight businesses to which he devotes his business attention.
A third son, Joseph W. Blount, also has his own business in Atlanta.
Principally for these reasons, the Blount Family, together with their
advisors, have concluded that the existence of Parent, solely as a holding
company for shares of Company Common Stock owned by the Blount Family, no longer
serves the purposes of the Blount Family. During the last several years, the
Blount Family and its advisors have discussed specific, alternative structures
for the Blount Family's ownership of its Company Common Stock.
On June 1, 1995, representatives of the Blount Family contacted certain
officers of the Company to discuss the possibility of a combination of Parent
and the Company which would result in the Company becoming a wholly-owned
subsidiary of Parent. The proposal would permit members of the Blount Family to
contribute their current holdings of Parent preferred stock and common stock
(for which there is no public market) to the Blount Family Partnership and to
cause such holdings to be exchanged for new Parent Common Stock, which following
the Merger would be publicly-traded, thereby enabling the Blount Family over
time to make gifts or sales of their interests in a tax efficient manner and
eliminating a level of taxation on the dividends now paid on Company Common
Stock held by Parent.
Also on June 1, 1995, the Executive Committee of the Board, consisting of
Winton M. Blount, W. Houston Blount, Alfred M. Gleason and John M. Panettiere
(the "Executive Committee"), met by conference telephone call to appoint a
special committee to consider a possible transaction with Parent and the Blount
Family. The Executive Committee appointed Alfred M. Gleason, R. Eugene Cartledge
and H. Corbin Day as the Independent Committee. The appointment of the
Independent Committee was ratified by the Board on June 26, 1995. The Board is
composed of four directors elected by holders of Company Class A Common Stock
(the "Class A Directors") and nine directors elected by holders of Company Class
B Common Stock (the "Class B Directors"). Mr. Gleason is a Class A Director and
Messrs. Cartledge and Day are Class B Directors. Winton M. Blount, either
directly or through control of Parent, controls approximately 24 percent of the
outstanding Company Class A Common Stock and approximately 84 percent of the
outstanding Company Class B Common Stock. None of the members of the Independent
Committee is employed by or otherwise affiliated with the Company, Parent or the
Blount Family. For a description of the background of Messrs. Gleason, Cartledge
and Day, see "MANAGEMENT OF PARENT FOLLOWING THE MERGER -- Directors and
Executive Officers."
On June 2, 1995, counsel for Parent and the Blount Family met with the
Independent Committee, representatives of J.P. Morgan, John M. Panettiere,
Richard H. Irving, Harold E. Layman and D. Joseph McInnes, President and Chief
Executive Officer, Senior Vice president and General Counsel, Senior Vice
President and Chief Financial Officer and Senior Vice President, Administration
and Corporate Secretary of the Company, respectively, and representatives of the
law firm of Cleary, Gottlieb, Steen & Hamilton ("Cleary, Gottlieb"). Counsel for
Parent and the Blount Family described the proposed Merger. Thereafter, the
Independent Committee, after meeting in executive session, engaged Cleary,
Gottlieb as its legal advisor and J.P. Morgan as its financial advisor. Prior to
engaging Cleary, Gottlieb and J.P. Morgan, the Independent Committee considered
certain information regarding the relationships of such professionals with the
Com-
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pany. Cleary, Gottlieb has represented the Company from time to time in
connection with various matters, the principal matters in recent years being the
1993 issuance of 9% Senior Subordinated Notes, and, in 1988, the sale of the
Company's Washington Steel Division. For a discussion of the relationship of
J.P. Morgan with the Company, see "Opinion of Financial Advisor."
Subsequent to June 2, 1995, the Independent Committee's legal and financial
advisors engaged in discussions with counsel for Parent and the Blount Family
concerning the terms of the Merger. On June 23, 1995, the Independent Committee
met with its advisors to discuss the Merger, the tax effects thereof, certain
terms which had been proposed by counsel for Parent and the Blount Family and
the estimated costs of the Merger and its potential effects on the Company. At
this time, J.P. Morgan also presented the Independent Committee with information
concerning the terms of certain comparable transactions undertaken in recent
years by other companies. The Independent Committee viewed the Blount Family's
proposal as giving it an opportunity at reasonable cost to the Company to obtain
agreements from the Blount Family that, to the extent practicable, would promote
increased liquidity in the market for the Company's Common Stock and an orderly
transition from Blount Family control to public control of the Company following
the death of Winton M. Blount and would provide an opportunity for the Public
Stockholders to participate in transactions that might result in a change in
control of the Company. The Independent Committee directed its legal advisors to
obtain from Parent and the Blount Family a proposed term sheet with regard to
the Merger that would respond to the Committee's concerns.
Counsel for Parent and the Blount Family presented a preliminary term sheet
to the Independent Committee's legal advisors on June 28, 1995 and this term
sheet was distributed to the members of the Independent Committee. On July 6,
1995, counsel for Parent and the Blount Family presented a revised preliminary
term sheet to the Independent Committee's legal advisors, containing certain
changes that resulted from discussions between the Blount Family and its legal
advisors. The revised term sheet was distributed to the members of the
Independent Committee and discussed at a meeting of the Independent Committee on
July 10, 1995.
The principal terms of the revised proposal by Parent and the Blount Family
were as follows:
(i) Subsidiary would merge with and into the Company and the Company
would become a wholly-owned subsidiary of Parent. Prior to the Merger,
Parent would be recapitalized so as to create two classes of common stock
with terms substantially identical to the Company Class A Common Stock and
Company Class B Common Stock. The relative proportions of ownership of each
class of new Parent Common Stock by the Public Stockholders and the members
of Blount Family (including Parent Common Stock held through the Blount
Partnership) would be identical to the relative proportions of ownership of
each class of Company Common Stock currently held by the Public
Stockholders and the Blount Family (including Company Common Stock held
through Parent).
(ii) If the Merger were consummated, Parent would have sufficient net
worth at the Effective Time of the Merger (excluding the value of Company
Common Stock owned by Parent) to pay up to $1,250,000 in expenses of Parent
and the Company attributable to the Merger. If the Merger were not
consummated, each of Parent, the Blount Family and the Company would bear
its own expenses.
(iii) Immediately prior to the closing of the Merger, and after
provision for the payment of the Company's and Parent's expenses related to
the Merger, Parent would have a net worth of $500,000 (excluding the value
of Company Common Stock owned by Parent).
(iv) The Blount Partnership would indemnify Parent for liabilities for
which no reserve had been made on Parent's balance sheet arising out of
facts and circumstances occurring prior to the Effective Time of the
Merger, to the extent that all such liabilities exceeded $500,000. The
indemnity would survive for five years with respect to environmental
liabilities, three years with respect to liabilities for taxes and two
years with respect to any other liabilities.
(v) An unspecified portion of the Parent Class B Common Stock held by
the Blount Partnership and the Blount Family would be converted to Parent
Class A Common Stock at the Effective Time of the Merger. Within three
years following the death of Winton M. Blount and upon payment of
consideration
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<PAGE> 29
to the Blount Partnership, the Blount Partnership would convert all Parent
Class B Common Stock held by it into Parent Class A Common Stock.
(vi) The Blount Partnership and the Blount Family would agree to
certain quantity restrictions on sales or transfers of Parent Common Stock
and a requirement that shares of Parent Class B Common Stock sold pursuant
to such restrictions would be converted into Parent Class A Common Stock.
(vii) The Blount Partnership and Blount Family would agree not to sell
Parent Common Stock to any purchaser who, as a result of such sale, would
be able to elect a majority of the Board of Directors of Parent, unless
such transaction would provide the opportunity for all stockholders to
participate on equal terms.
(viii) Parent would provide the Blount Partnership and Blount Family
with certain rights to have shares of Parent Common Stock held by them
after the Effective Time of the Merger registered under the Securities Act.
The Independent Committee, after consultation with its legal and financial
advisors, determined that the proposed terms were inadequate in certain respects
and directed its legal advisors to continue negotiations with representatives of
the Blount Family, looking to generation of a new term sheet that would reflect
the concerns of the Independent Committee.
From July 10 through July 17, 1995, the Independent Committee's legal
advisors continued to negotiate with counsel for Parent and the Blount Family,
resulting in the production of a new term sheet. On July 17, 1995, the
Independent Committee reviewed the new term sheet and directed its legal
advisors to continue negotiations with respect to certain unresolved issues. The
term sheet resolving such matters, with certain further changes, was
incorporated into the Agreements.
As a result of its negotiations, the Independent Committee obtained the
following principal concessions from Parent and the members of the Blount
Family:
(i) Whether or not the Merger is consummated, Parent is to pay for all
out-of-pocket expenses incurred by it and the Company in connection with
the negotiation of the Merger, the Agreements and the consummation of the
Merger, including the fees and expenses of the Independent Committee's
legal counsel and financial advisor and the cost of this Proxy
Statement/Prospectus. If the Merger is consummated, Parent will establish
reserves to pay for such expenses prior to the Effective Time of the
Merger.
(ii) Parent will have a net worth of $500,000 at the Effective Time
the Merger (excluding the value of Company Common Stock owned by Parent)
and will also have a charitable contribution deduction carryforward of
approximately $4.8 million (with a value to the Company of approximately
$1.7 million).
(iii) The Blount Partnership will indemnify the Company, Parent and
their respective officers, directors or employees without time limits with
respect to all liabilities (a) resulting from any pre-merger acts,
omissions or states of fact relating to Parent or its past subsidiaries and
(b) incurred as a result of any claim, action or proceeding arising out of
or related to the Merger. However, the indemnity for pre-Merger liabilities
will not cover the first $250,000 of such liabilities or the amounts
reserved for any such liability on Parent's balance sheet. Furthermore, the
indemnity for Merger-related claims excludes taxes arising from the Merger,
will not cover the first $500,000 of liabilities and then applies only to
50% of such liabilities in excess of $500,000.
(iv) Except under certain limited circumstances permitted under the
Agreements, the Blount Partnership and Blount Family will not transfer
shares of Parent Common Stock to any person who will hold shares of Parent
Common Stock having the right to cast 5% or more of the total votes
entitled to be cast by the holders of all Parent Common Stock unless the
transferee agrees to make a tender offer or engage in a similar transaction
to acquire any and all shares of Parent Common Stock at the highest price
per share paid to any such transferor.
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<PAGE> 30
(v) All shares of Parent Class B Common Stock will convert
automatically to shares of Parent Class A Common Stock at such time, after
the death of Winton M. Blount, as the total number of shares of Parent
Class B Common Stock outstanding is less than 10% of the aggregate number
of shares of Parent Common Stock then outstanding.
On July 28, 1995, the Independent Committee met with its legal counsel and
J.P. Morgan to review the terms of drafts of the Merger Agreement, the
Registration Rights and Stock Transfer Restriction Agreement and the
Indemnification Agreement. At that time, the Independent Committee received the
oral opinion of J.P. Morgan that, as of such date, the terms of the exchange in
the proposed Merger were fair, from a financial point of view, to the Public
Stockholders. The Independent Committee unanimously concluded that the Merger is
fair to, and in the best interests of, the Company and the Public Stockholders
and approved the terms of the Merger Agreement, the Registration Rights and
Stock Transfer Restriction Agreement and the Indemnification Agreement. The
Independent Committee also recommended that the Board (i) approve the Merger
Agreement, the Registration Rights and Stock Transfer Restriction Agreement and
the Indemnification Agreement and (ii) recommend to the stockholders of the
Company that they adopt the Merger Agreement. J.P. Morgan's oral opinion and the
Independent Committee's conclusion and recommendation were subject to
verification that the final documentation supports J.P. Morgan's understanding
of the proposed transaction.
The Board met on July 31, 1995. With Winton M. Blount and W. Houston Blount
absent during the portion of the meeting concerning such matters, the Board
reviewed the terms of the Agreements, consulted with the Independent Committee's
legal counsel and J.P. Morgan concerning the Agreements and the transactions
contemplated thereby, reviewed the recommendation of the Independent Committee
and received the oral opinion of J.P. Morgan to the effect that, as of such
date, the terms of the exchange in the proposed Merger were fair, from a
financial point of view, to the Public Stockholders. Based in part on the
recommendation of the Independent Committee, the members of the Board present
during the portion of the meeting at which the Merger was considered unanimously
approved the terms of the Merger Agreement, the Registration Rights and Stock
Transfer Restriction Agreement and the Indemnification Agreement, determined
that the Merger is fair to, and in the best interests of, the Company and the
Public Stockholders and recommended to the stockholders of the Company that they
adopt the Merger Agreement. Two directors of the Company, in addition to Winton
M. Blount and W. Houston Blount, did not attend the July 31, 1995 meeting of the
Board. W. Houston Blount, a director who is the brother of Winton M. Blount, is
not affiliated with Parent and is not a party to the Registration Rights and
Stock Transfer Restriction Agreement or the Indemnification Agreement.
The Board's approval of the Agreements was subject to satisfaction on the
part of the Independent Committee that (i) certain matters disclosed by Parent
to the Company in a disclosure schedule delivered by Parent pursuant to Section
6.6 of the Merger Agreement would not involve significant risk to Parent after
consummation of the Merger, and (ii) changes to be made in the language of the
Merger Agreement and other documents from the drafts submitted to the Board
accurately reflected the agreements described to the Board. On August 17, 1995,
the Independent Committee met and reviewed with its legal counsel and J.P.
Morgan the matters described in the disclosure schedule and the final versions
of the Merger Agreement and related documents. The Independent Committee
unanimously concluded that, in view of the reserves to be set aside by Parent
under the Merger Agreement and the indemnity provided by the Indemnification
Agreement, the matters described in the disclosure schedule would not involve
significant risk to Parent following consummation of the Merger. The Independent
Committee also unanimously concluded that the Merger Agreement and other
documents as changed from the forms of such papers submitted to the Board
accurately reflected the agreements described to the Board.
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<PAGE> 31
REASONS OF COMPANY AND PARENT FOR THE MERGER
In making their decisions to approve the Merger Agreement, the Registration
Rights and Stock Transfer Restriction Agreement and the Indemnification
Agreement and to recommend the adoption of the Merger Agreement, the Independent
Committee and the Board considered, and based their beliefs regarding the
fairness of the terms of the Merger on, among other things, the following
factors:
1. Opinion of Financial Advisor. The Independent Committee and the
Board considered J.P. Morgan's opinion, provided orally at the July 31,
1995 meeting and thereafter confirmed in writing, that, as of such date,
the terms of the exchange in the proposed Merger are fair, from a financial
point of view, to the Public Stockholders. For a summary thereof, see
"Opinion of Financial Advisor." The written opinion of J.P. Morgan, dated
July 31, 1995, is attached as Appendix B to this Proxy Statement/
Prospectus. Stockholders are urged to read the opinion in its entirety for
a description of the assumptions made, matters considered and limitations
on the review undertaken by J.P. Morgan.
2. State of Market for Company Common Stock. The Independent
Committee and the Board considered the current state of the market for the
Company's Common Stock, which is characterized by levels of trading and of
investment by institutional investors that are relatively lower than those
of comparable companies. They considered that more active trading and
greater investment by institutions might result in better market
performance of the Company's Common Stock and enhance the ability of the
Company to raise capital in the public markets. They considered the effect
on the market for the Company's stock of the control of the Company by
Parent and the Blount Family and the lack of liquidity of the shares held
by Parent as a result of restrictions on their disposition under the
Securities Act and the fact that disposition of any of such shares would
result in taxation both on the gain realized by Parent and on distribution
of the net proceeds by Parent to the Blount Family. They considered the
desirability to the Company of the Merger as a means of facilitating
disposition by the Blount Family of portions of their holdings.
3. Orderly Transition of Control; Participation of Public
Shareholders. The Independent Committee and the Board considered the
possibility that the Blount Family might decide to reduce its control over
the Company and the need to promote an orderly transition from family
control. They also considered the need to protect the Public Stockholders
from a potential transfer of control to third parties should the Blount
Family sell significant portions of its holdings without the Public
Stockholders being able to participate in such transactions and the effects
of a potential change in control on the Company's ability to attract and
retain management and to successfully broaden its business through
acquisitions. They considered the Merger as a means of providing the Blount
Family with the ability to dispose of portions of its holdings without
transferring control to another party.
4. Stability of Market for Company Securities; Transfer and Sale
Restrictions; Registration Rights. The Independent Committee and the Board
considered the terms of stock transfer and sale restrictions and the
registration rights contained in the Registration Rights and Stock Transfer
Restriction Agreement, which are intended to permit the Blount Family to
dispose of portions of their holdings of Parent Common Stock while
providing protection to the Company and the Public Stockholders by (a)
minimizing the disruption caused by such transactions on the market for
Parent Common Stock, (b) protecting the ability of the Parent to raise
capital in the public markets and (c) protecting the Public Stockholders
against a transfer of control of Parent. In this regard, they concluded
that the terms of the Registration Rights and Stock Transfer Restriction
Agreement were likely to encourage the orderly and broad distribution of
Parent Common Stock by the Blount Family and would provide the Public
Stockholders the opportunity to participate in sales of control by the
Blount Family to third parties at the same price as that received by the
Blount Family. The Independent Committee and the Board also considered the
burdens that might be placed on Parent by providing the registration
rights, including the likely expenses to be incurred with respect to
registration. The Independent Committee and the Board concluded that any
such burdens were mitigated by the fact that such registration rights are
designed to (i) result in broader distribution of, and greater liquidity
for, Parent Common Stock; (ii) help create a
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<PAGE> 32
more orderly trading market for Parent Common Stock and (iii) facilitate an
orderly transition from Blount Family to public control of Parent.
5. Equalization of Voting Power; Conversion of Parent Class B Common
Stock. The Independent Committee and the Board considered the provisions
of the Registration Rights and Stock Transfer Restriction Agreement and
Parent's Certificate of Incorporation which will result in the equalization
of the voting rights of holders of Parent Class B Common Stock and Parent
Class A Common Stock by requiring Parent Class B Common Stock to be
converted to Parent Class A Common Stock (i) prior to certain stock
transfers or sales and (ii) at such time as, after the death of Winton M.
Blount, the total number of outstanding shares of Parent Class B Common
Stock constitutes less than 10% of the total number of outstanding shares
of Parent Common Stock. In this connection, the Independent Committee
considered that the Company's two-class, low vote-high vote common stock
capitalization had been instituted to insure voting control by the Blount
Family. The Independent Committee considered it desirable that, after the
death of Winton M. Blount, the voting rights of all shares of Parent Common
Stock be equalized so that control by a third party would not be
substituted for Blount Family control. The Independent Committee was
informed that a number of other corporations having high vote-low vote
common stocks had provisions equalizing voting rights when the high vote
class became a relatively small minority of total common equity. The Board
of Directors considered that the Independent Committee regarded
equalization of the voting rights of the Parent Common Stock as being of
particular importance in its negotiations of the terms of the Merger. The
Independent Committee and the Board did not specifically consider whether
the potential loss of the special voting rights associated with the Parent
Class B Common Stock, in the event such mandatory conversion of Parent
Class B Common Stock were to occur, by the holders of Parent Class B Common
Stock (other than members of the Blount Family) would diminish the value of
such shares. The Company believes that any such diminution in value is not
material because the Independent Committee and the Board would not have
sought, nor would the Blount Family have agreed to, such mandatory
conversion of the Parent Class B Common Stock owned by the Blount Family
while leaving the approximately 7% of the Parent Class B Common Stock now
owned by persons other than the Blount Family outstanding and available for
others to use as a means of acquiring control of Parent with a
disproportionately small percentage of the equity of Parent. The Company
further believes any such diminution in value is not material because (a)
the disparate voting rights now afforded the Company Class B Common Stock
were created by means of a stock dividend to all stockholders of the
Company at a time when the Blount Family was in voting control of the
Company, (b) the Blount Family has at all times since that date been in
voting control of the Company, and (c) accordingly, in the view of the
Company, none of the holders of the Company Class B Common Stock, including
those persons who acquired such stock after the stock dividend, could
reasonably have acquired such stock with a view to effectively utilize the
special voting rights associated with such stock. In this regard, the
Company notes the steady conversion of Company Class B Common Stock into
Company Class A Common Stock by the holders of the Company Class B Common
Stock (other than the members of the Blount Family) which has occurred
since the dual class structure was created.
6. Terms of Comparable Transactions. The Independent Committee and
the Board considered the terms of certain comparable transactions
undertaken in recent years by other companies, and compared them to the
terms of the Merger. They considered that such transactions each involved
limitations by the controlling stockholders on disposition of their shares,
a payment made or consideration given by the controlling stockholders to
the public company involved, payment of costs of the transaction by the
controlling stockholders, and indemnification by the controlling
stockholders for liabilities preexisting on their part or arising from the
transaction.
7. Net Worth of Parent and Charitable Contribution Deduction
Carryforward. The Independent Committee and the Board considered that
Parent would have net worth of $500,000 at the closing of the Merger
(excluding the value of Company Common Stock owned by Parent). The
Independent Committee and the Board also considered that Parent would have
a charitable contribution deduction carryforward of $4.8 million which,
they were informed, would be worth approximately $1.7 million to
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<PAGE> 33
Parent at the time of the Merger in respect of its federal income taxes for
fiscal 1996. The total value of these items to the Parent after the Merger
would be approximately $2.2 million.
8. Payment of Transaction Expenses. The Independent Committee and the
Board considered that Parent will pay, or establish reserves prior to the
Effective Time of the Merger for, all out-of-pocket expenses incurred by it
and the Company in connection with the Merger, including the fees and
expenses of the Independent Committee's financial advisor and legal counsel
and the costs of this Proxy Statement/Prospectus.
9. Indemnification. The Independent Committee and the Board
considered that the Blount Partnership will indemnify the Company, Parent
and their respective officers, directors and employees with respect to all
liabilities (a) resulting from any pre-merger acts, omissions or states of
fact relating to Parent or its past subsidiaries and (b) incurred as a
result of any claim, action or proceeding related to the Merger (other than
tax liabilities arising from the Merger). They also considered that the
indemnity for pre-merger liabilities does not cover the first $250,000 of
such liabilities or any liabilities to the extent reserved for on Parent's
balance sheet prior to the Effective Time of the Merger and that the
indemnity for Merger-related claims does not cover the first $500,000 of
such liabilities and covers only 50% of such liabilities in excess of
$500,000. The Independent Committee and the Board regarded the deductibles
and sharing provisions as potential offsets against the combined $2.2
million value of the $500,000 guarantee of Parent's net worth and the $1.7
million estimated cash value of the charitable deduction carryforward.
10. Parent Liabilities. The Independent Committee and the Board
considered a balance sheet of Parent at February 28, 1995, audited by
Coopers & Lybrand L.L.P., the unaudited financial statements of Parent at
May 31, 1995 and the pro forma combined financial statements of Parent and
the Company set forth in this Proxy Statement/Prospectus. See "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS." They also considered, with
the assistance of the Independent Committee's legal counsel, the
liabilities of Parent described in the disclosure statement delivered by
Parent pursuant to Section 6.6 of the Merger Agreement and the provisions
of the Merger Agreement requiring Parent to set aside reserves with respect
to such liabilities prior to the Effective Time of the Merger.
11. Tax Treatment of Merger. The Independent Committee and the Board
considered that the opinions of Bradley, Arant, Rose & White and
Sutherland, Asbill & Brennan as to the tax free status of the Merger under
Section 368(a)(1)(B) of the Code were required as a condition to the
consummation of the Merger. See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS."
12. Accounting Treatment of Merger. The Independent Committee and the
Board considered that the Merger would be accounted for in a manner similar
to that in pooling of interests accounting and, accordingly, would not
result in the creation of goodwill on the part of Parent following the
Merger.
13. Structure of the Company after the Merger. The Independent
Committee and the Board considered that the Merger would not itself alter
the relative ownership and voting power of the Blount Family and the Public
Stockholders and that the business and management of the Company would be
unchanged by the Merger. The Independent Committee and the Board also
considered that the holding company structure resulting from the Merger
would not be likely to adversely affect the market for Parent Common Stock
or the Company's future cost of capital.
14. Report of Independent Committee. The Board also considered and
took into account the recommendation of the Independent Committee.
The foregoing discussion of the information and factors considered by the
Independent Committee and the Board is not intended to be exhaustive but is
believed to include all material factors considered by the Independent Committee
and the Board. In reaching their determinations to approve and recommend the
Merger, the Independent Committee and the Board did not assign any relative or
specific weights to the foregoing factors, although the Independent Committee
reported to the Board that it had relied on the opinion of J.P. Morgan, the
first-numbered factor, and had considered the factors numbered 2 through 5 as
being of particular importance to it in reaching its conclusions. Individual
directors may have given differing weights to different factors.
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<PAGE> 34
The decision of the Board of Directors of Parent to approve the Merger
Agreement was based upon, among other things including the benefits likely to be
afforded to the stockholders of Parent (see "Interests of Certain Named Persons
in the Merger"), the following considerations:
1. Consolidation of Control of the Company. The consummation of the
transactions contemplated by the Merger Agreement will increase Parent's
ownership and voting control of the Company to 100%, and following the
Merger the Company will be a wholly-owned subsidiary of Parent.
2. Create a Public Market for Parent Common Stock. The Merger will
result in Parent Common Stock becoming publicly-traded and listed on the
NYSE, thereby resulting in a public market for Parent Common Stock, which
previously was closely held by the Blount Family.
3. Reduce Administrative Costs. The Merger will eliminate the need
for certain administrative services at the Parent level which would be
duplicative of services provided by the Company. See "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS".
4. Registration Rights. In connection with the consummation of the
Merger, the Blount Partnership, members of the Blount Family and certain
related persons will, under the Registration Rights and Stock Transfer
Restriction Agreement, be afforded certain rights obligating Parent to
register under the Securities Act sales by such persons of Parent Common
Stock and pay certain of the expenses associated with such registrations.
See "Registration Rights and Stock Transfer Restriction Agreement."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY PRESENT AT THE MEETING
HELD JULY 31, 1995 UNANIMOUSLY CONCLUDED (WITH WINTON M. BLOUNT AND W. HOUSTON
BLOUNT ABSENT FROM THE PORTION OF THE MEETING AT WHICH THE MATTER WAS
CONSIDERED) THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF THE COMPANY
AND THE PUBLIC STOCKHOLDERS AND RECOMMENDED TO THE STOCKHOLDERS OF THE COMPANY
THAT THEY VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT. TWO DIRECTORS OF THE
COMPANY, IN ADDITION TO WINTON M. BLOUNT AND W. HOUSTON BLOUNT, DID NOT ATTEND
THE JULY 31, 1995 MEETING OF THE BOARD.
OPINION OF FINANCIAL ADVISOR
Pursuant to an agreement dated June 16, 1995 (the "Engagement Agreement"),
J.P. Morgan was retained by the Independent Committee to act as financial
advisor and render an opinion to the Independent Committee and the Board of
Directors with respect to the fairness from a financial point of view to the
Public Stockholders of the Company of the terms of the exchange in the Merger.
At meetings of the Independent Committee on July 28, 1995 and of the Company's
Board of Directors on July 31, 1995, J.P. Morgan advised the Independent
Committee and the Board of Directors that, as of those dates, in J.P. Morgan's
opinion, the terms of the exchange in the proposed Merger were fair, from a
financial point of view, to the Public Stockholders of the Company. J.P. Morgan
subsequently furnished to the Independent Committee its written opinion dated
July 31, 1995 (the "J.P. Morgan Opinion") to that effect, confirming its July
31, 1995 oral opinion. The J.P. Morgan Opinion was based upon and subject to the
matters set forth below.
A COPY OF THE J.P. MORGAN OPINION DATED JULY 31, 1995, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE J.P.
MORGAN OPINION IN ITS ENTIRETY. THE J.P. MORGAN OPINION IS ADDRESSED ONLY TO THE
INDEPENDENT COMMITTEE AND THE BOARD OF DIRECTORS, IS DIRECTED ONLY TO THE TERMS
OF THE EXCHANGE IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER OF THE COMPANY AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL
MEETING.
In connection with rendering the J.P. Morgan Opinion, J.P. Morgan reviewed,
among other things: (i) the Merger Agreement, including the Registration Rights
and Stock Transfer Restriction Agreement and the Indemnification Agreement
attached as exhibits thereto; (ii) a draft of this Proxy Statement/Prospectus;
(iii) publicly available terms of certain transactions comparable to the Merger
and the terms of those transactions; (iv) publicly available information on
companies who have established holding companies in the
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<PAGE> 35
absence of a specific transaction; (v) the audited financial statements of the
Company and the Parent for the fiscal year ended February 28, 1995, and the
unaudited financial statements of the Company and the Parent for the period
ended May 31, 1995; (vi) information relating to the past operations and
financial results of Parent; and (vii) such other financial studies and analyses
and such other information as it deemed relevant and appropriate.
J.P. Morgan's review of comparable transactions included certain publicly
available information on the terms of transactions that, due to characteristics
of the transactions, were deemed by J.P. Morgan to be similar in certain
respects to the transactions contemplated by the Merger Agreement. This review
was conducted to assess the general parameters of transactions of this type. The
transactions which J.P. Morgan judged to be most comparable were the exchange of
the common shares of Wal-Mart Stores, Inc., a publicly-held corporation, held by
Walton Enterprises, Inc., a closely-held corporation, resulting in the exchanged
shares being held by a limited partnership owned by the former owners of Walton
Enterprises, Inc. and the merger of Heco, Inc., a closely-held corporation, with
and into Hechinger Company, a publicly-held corporation, resulting in the shares
of the surviving corporation being held directly by certain individuals,
partnerships and trusts which were shareholders of Heco, Inc. prior to the
merger. These transactions each involved limitations by the controlling
stockholders on disposition of their shares, a payment made or consideration
given by the controlling stockholders to the publicly-held corporation involved,
payment of costs of the transaction by the controlling stockholders, and
indemnification by the controlling stockholders for the liabilities preexisting
on their part or arising from the transaction.
Under the Parent's Certificate of Incorporation, at such time as, after the
death of Winton M. Blount, the total number of outstanding shares of Parent
Class B Common Stock constitutes less than 10% of the total number of
outstanding shares of Parent Common Stock, all shares of Parent Class B Common
Stock will automatically convert to Parent Class A Common Stock. J.P. Morgan
regarded this equalization of the voting rights of the Parent Common Stock as
being of importance in determining the fairness to the Public Stockholders, from
a financial point of view, of the terms of the exchange in the Merger because,
under the circumstances outlined in the preceding sentence, the Blount Family
would relinquish its super-voting rights. J.P. Morgan also considered the fact
that a number of corporations having dual classes of high and low vote common
stock have provisions equalizing voting rights when the high vote class becomes
a relatively small minority of the two classes combined. J.P. Morgan did not
differentiate, in its analysis of the terms of the exchange in the proposed
Merger, between the benefits to the Public Stockholders holding Company Class A
Common Stock versus the benefits to the Public Stockholders holding Company
Class B Common Stock, including the possible effect of any conversion of shares
of Parent Class B Common Stock held by the Public Stockholders into shares of
Parent Class A Common Stock pursuant to the provision in the Parent's
Certificate of Incorporation referred to above. Since immediately following the
Merger, the Blount Partnership and the Blount Family will own, directly or
indirectly, an aggregate of approximately 93% of the Parent Class B Common Stock
(representing approximately 76% of the aggregate voting power of all Parent
Common Stock to be outstanding immediately after the Merger), the likely effect
of the conversion of all shares of Parent Class B Common Stock into shares of
Parent Class A Common Stock would be to reduce significantly the voting control
to be held by the Blount Partnership and the Blount Family immediately following
the Merger. J.P. Morgan has advised the Company that consideration of the
possible effect of any such conversion would not affect its opinion that the
terms of exchange in the proposed Merger are fair, from a financial point of
view, to the Public Stockholders of the Company.
In addition, J.P. Morgan held discussions with members of the management
and agents of the Company with respect to certain aspects of the Merger, the
past and current business operations of the Parent, Parent's financial condition
and future prospects and operations, the effects of the Merger on the financial
condition and future prospects of the Company and Parent and certain other
matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or was furnished to it by the
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Company and the Parent or otherwise reviewed by it, and J.P. Morgan did not
assume any responsibility or liability therefor. J.P. Morgan did not conduct a
valuation of the Company or Parent and did not state any opinion on the absolute
value of either. J.P. Morgan did not conduct any valuation or appraisal of any
assets or liabilities, nor were any such valuations or appraisals provided to
J.P. Morgan. In relying on financial analyses and estimates of expenses
provided, J.P. Morgan assumed that they had been reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of the Company and Parent to which such analyses or estimates of
expenses relate. J.P. Morgan also assumed the accuracy of Parent's
representations and warranties set forth in the Merger Agreement, that the
Merger will have the tax and accounting consequences described in this Proxy
Statement, and in discussions with, and materials furnished to J.P. Morgan by,
representatives of the Company, and that the transactions contemplated by the
Merger Agreement will be consummated as described in the Merger Agreement and
this Proxy Statement. J.P. Morgan was engaged to opine only on the fairness of
the Merger from a financial point of view and was not involved in the
structuring of the Merger. J.P. Morgan relied as to all legal matters relevant
to rendering its opinion upon the advice of counsel.
The J.P. Morgan Opinion indicates that it is based on economic, market and
other conditions as in effect on, and the information available to J.P. Morgan
as of, the date thereof. The J.P. Morgan Opinion also states that subsequent
developments may affect the opinion and that J.P. Morgan has no obligation to
update, revise, or reaffirm the J.P. Morgan Opinion.
J.P. Morgan has also expressed no opinion as to the price at which Parent
Common Stock will trade if and when issued or at any future time. The J.P.
Morgan opinion states that other factors after the date thereof may affect such
prices and the value of the businesses of the Company and Parent after
consummation of the Merger, including but not limited to (i) the disposition of
Parent Common Stock by stockholders of Parent after the effective date of the
Merger, (ii) changes in prevailing interest rates and other factors which
generally influence the price of securities, (iii) changes in the current
capital markets and (iv) the occurrence of adverse changes in the financial
condition, business, assets, results of operations or prospects of the Company
or of Parent.
The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description, J.P. Morgan believes that its analyses must be
considered as a whole and that selecting portions thereof could create an
incomplete view of the processes underlying its analyses and opinion. J.P.
Morgan based its analyses on assumptions that it considered reasonable,
including assumptions concerning general business and economic conditions and
industry specific factors. As noted above, J.P. Morgan did not independently
verify any information supplied by the Company and Parent and assumed that the
estimates of expenses had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company and
Parent as to expected future financial results and conditions of the Company and
Parent. J.P. Morgan's analyses are not necessarily indicative of actual values
or actual future results that might be achieved. Moreover, J.P. Morgan's
analyses are not and do not purport to be appraisals or otherwise reflective of
the prices at which businesses actually could be sold.
The J.P. Morgan Opinion is provided for the benefit of the Independent
Committee and the Board of Directors of the Company in connection with and for
purposes of their evaluation of the Merger, is not on behalf of any stockholders
of the Company or any other person other than the Independent Committee and the
Board of Directors of the Company and may not be used or relied on for any other
purpose.
J.P. Morgan is an internationally recognized investment banking firm, and
as a part of its investment banking business, J.P. Morgan and its affiliates are
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, competitive bidding, secondary distributions
of listed and unlisted securities, private placements and valuations for estate,
corporate, and other purposes.
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Pursuant to the Engagement Agreement, the Company has paid J.P. Morgan a
fee of $350,000 for its financial advisory services, including the rendering of
its opinion. In addition, the Company has agreed to reimburse J.P. Morgan for
its expenses (including the reasonable fees and expenses of counsel), estimated
to be $40,000, and to indemnify J.P. Morgan against certain liabilities and
expenses in connection with its engagement, including liabilities under the
federal securities laws.
The Company has been advised that in the ordinary course of their
businesses, affiliates of J.P. Morgan may actively trade the debt and equity
securities of the Company for their own accounts, or for the accounts of
customers, and, accordingly, may at any time hold a long or short position in
such securities.
Excluding its fee for acting as financial advisor, J.P. Morgan and its
affiliates have received fees from the Company totaling approximately $1.9
million since January 1993, the majority of which related to the Company's
issuance of high yield debt securities in 1993 and credit-related fees. An
affiliate of J.P. Morgan is one of the Company's commercial lenders and acts as
agent bank under the Company's principal credit facility.
INTERESTS OF CERTAIN NAMED PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of the Company
with respect to adopting the Merger Agreement and the transactions contemplated
thereby, stockholders of the Company should be aware that certain stockholders,
employees, officers and directors of the Company have certain interests in the
Merger that are in addition to the interests of stockholders of the Company
generally.
Ownership. As of the Record Date, Parent owned an aggregate of 2,075,048
shares of the Company Class A Common Stock (excluding shares which may be
acquired upon conversion of convertible securities), or approximately 24% of the
shares of the Company Class A Common Stock outstanding on such date, and
2,803,232 shares of the Company Class B Common Stock, or approximately 71% of
the shares of the Company Class B Common Stock outstanding on such date. In
addition, as of such date, the Blount Family beneficially owns, exclusive of
shares of Company Common Stock owned by Parent, 239,639 additional shares of
Company Class A Common Stock (excluding shares which may be acquired upon
conversion of convertible securities), or approximately 3% of the shares of the
Company Class A Common Stock outstanding on such date, and 874,658 additional
shares of the Company Class B Common Stock, or approximately 22% of the shares
of the Company Class B Common Stock outstanding on such date. In addition,
Winton M. Blount, the founder of the Company, is the Chairman of the Board and a
director of the Company and his brother, W. Houston Blount, is a director of the
Company. By virtue of the foregoing relationships, the Merger presented a
conflict of interest on the part of Winton M. Blount and a potential conflict of
interest on the part of his brother in determining the terms of the Merger
Agreement. Accordingly, Winton M. Blount and W. Houston Blount excused
themselves from all meetings or portions of meetings of the Board at which the
Merger was discussed and did not vote in connection with the approval by the
Board of Directors of Merger Agreement.
Existing Employment Agreements. Although no substantive changes in the
terms or conditions of such agreements will be made, Parent will assume or
guarantee, at the Effective Time of the Merger, employment agreements between
the Company and certain of its executive officers and other employees.
Benefits to Blount Family. The Merger may also result in substantial tax
benefits to the Blount Family. At present, because Parent holds less than 80% of
the Company Common Stock outstanding, any dividends paid by the Company to
Parent are (albeit it subject to an 80% dividends received deduction under the
Code taxed first at Parent corporate level and, assuming that Parent makes a
further distribution of the proceeds of Company dividends to its stockholders,
such amounts would be taxed a second time upon receipt by the Blount Family. In
addition, the proceeds of any sale by Parent of Company Class A Common Stock or
Company Class B Common Stock would be taxed first at Parent corporate level and,
assuming Parent distributed the proceeds of such sale to its stockholders, would
be taxed a second time upon receipt by the Blount Family. As a result of the
Merger, any dividends paid by Parent and received by the Blount Partnership
would be taxed only once, and the Blount Family would be able to dispose of its
interests in the Company through the sale of publicly traded Parent Common
Stock.
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Pursuant to the Merger Agreement, Parent is required to, and is required to
cause the Surviving Corporation to, jointly and severally indemnify, defend and
hold harmless the present and former officers and directors of Parent, including
certain members of the Blount Family, against all losses, expenses (including
attorneys' fees), claims, damages, costs, liabilities or judgements or amounts
that are paid in settlement with the approval of Parent (which approval shall
not be unreasonably withheld) arising out of actions or omissions occurring at
or prior to the Effective Time of Merger or required under the DGCL (and shall
also pay expenses in advance of the final disposition of any claim to each
Indemnified Party) to the fullest extent permitted, and under the terms and
conditions provided by, the DGCL. Parent is also required to use its best
efforts to arrange to have the Indemnified Parties named as insureds under, or
otherwise covered by, the Company's officers and directors liability insurance
policy which will be continued by Parent (as long as any such policy shall be in
force), provided that such action shall not involve unreasonable cost to Parent.
As part of the expenses of the Merger to be borne by Parent, Parent will pay or
make provision for payment of the increased cost associated with providing the
required insurance coverage for the Indemnified Parties.
The Merger will provide certain additional benefits to the Blount Family
and the Blount Partnership, including certain registration rights with respect
to the shares of Parent Common Stock that it will hold following the
consummation of the Merger. See "Registration Rights and Stock Transfer
Restriction Agreement."
INDEMNIFICATION BY PARENT AND THE BLOUNT PARTNERSHIP
Merger Agreement. In the Merger Agreement, Parent has agreed, subject to
certain limitations, to indemnify the Indemnitees and to hold the Indemnitees
harmless from all damages and liabilities incurred by any Indemnitee as a result
of any claims made against any Indemnitee which arise out of or relate to the
Merger, including claims made by J.P. Morgan pursuant to certain of the terms of
the Engagement Agreement. The obligations of Parent to indemnify and to hold the
Indemnitees harmless are specifically limited in the Merger Agreement.
Limitation on Indemnification in the Merger Agreement. The Merger
Agreement provides that Parent has no obligation to the Indemnitees for (i) any
liability or damage incurred which arises out of or relates to the enforcement,
application or interpretation of any law, rule, statute, regulation or other
pronouncement or finding concerning the treatment of the Merger for tax
purposes; (ii) the first $500,000 of aggregate liabilities or damages incurred
by the Indemnitees as a result of claims which arise out of or relate to the
Merger (other than claims relating to treatment of the Merger for tax purposes),
or for greater than fifty percent (50%) of the liabilities or damages in excess
of such $500,000 aggregate amount; (iii) for consequential or punitive damages
as a result of Parent's breach or violation of the indemnification provisions of
the Merger Agreement; or (iv) any liability or damage arising from acts or
omissions of the Company that is imposed upon Parent cbecause of Parent's
ownership of the stock of, or alleged control of, the Company (other than claims
against the Company with respect to the Merger). The indemnification obligations
of Parent under the Merger Agreement are replaced by those under the
Indemnification Agreement upon the consummation of the Merger.
Stockholders are urged to read carefully the indemnification provisions set
forth in the Merger Agreement attached as Appendix A to this Proxy
Statement/Prospectus.
Indemnification Agreement. As a condition to the consummation of the
Merger, the Blount Partnership has agreed to execute and deliver to Parent on
the Closing Date the Indemnification Agreement pursuant to which the Blount
Partnership will be obligated, subject to certain limitations, to indemnify the
Blount Indemnified Persons and to hold the Blount Indemnified Persons harmless
from all damages and liabilities incurred by any Blount Indemnified Person as a
result of any claims made against any Blount Indemnified Person which arise out
of or relate to the Merger (other than claims relating to the treatment of the
Merger for tax purposes), including claims made by J.P. Morgan pursuant to
certain of the terms of the Engagement Agreement, or the acts or omissions of,
or states of fact relating to, Parent, its employees or agents, or any past
subsidiaries or any employees or agents of past subsidiaries of Parent prior to
the Effective Time of the
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Merger. The obligations of the Blount Partnership to indemnify and to hold the
Blount Indemnified Persons harmless are specifically limited in the
Indemnification Agreement.
Limitations of the Indemnification Agreement. The Indemnification
Agreement provides that the Blount Partnership has no obligation to the Blount
Indemnified Persons for (i) any liability or damage which arises out of or
relates to the enforcement, application or interpretation of any law, rule,
statute, regulation or other pronouncement or finding concerning the treatment
of the Merger for tax purposes; (ii) the first $500,000 of aggregate liabilities
or damages incurred by the Blount Indemnified Persons as a result of claims
which arise out of or relate to the Merger (other than claims relating to the
treatment of the Merger for tax purposes), or for greater than fifty percent
(50%) of such liabilities or damages in excess of such $500,000 aggregate
amount; (iii) the first $250,000 of aggregate liabilities or damages incurred by
the Blount Indemnified Persons as a result of the acts or omissions of, or
states of fact relating to, Parent, its employees or agents, or any past
subsidiaries or any employees or agents of any past subsidiaries of Parent,
prior to the Effective Time of the Merger to the extent such liabilities or
damages exceed the aggregate reserves for such liabilities on the financial
statements of Parent (other than reserves established pursuant to the Merger
Agreement for expenses related to the Merger) as in existence immediately prior
to the Effective Time of the Merger; (iv) for consequential or punitive damages
as a result of its breach or violation of the Indemnification Agreement; or (v)
any liability or damage arising from acts or omissions of the Company that is
imposed upon Parent because of Parent's ownership of the stock of, or alleged
control of, the Company (other than claims against Parent with respect to the
Merger).
The Indemnification Agreement also provides that the future obligations of
the Blount Partnership thereunder will immediately cease, and the existing
obligations of the Blount Partnership thereunder shall be deemed fully
satisfied, upon the date and time (the "Termination Date") that the Blount
Partnership establishes an escrow account with an institution and on terms
reasonably satisfactory to Parent (the "Escrow Account") intended by the Blount
Partnership to satisfy any claims made against the Blount Partnership under the
Indemnification Agreement for which notice has been given to the Blount
Partnership prior to the Termination Date or which the parties to the
Indemnification Agreement are then aware of grounds for the assertion of which
against the Blount Partnership may exist; provided, however, that the
Termination Date may not occur until the earlier of the three year anniversary
of the execution and delivery of the Merger Agreement, or two years following
the death of Winton M. Blount; and provided further, that the Blount Partnership
must establish an Escrow Account prior to making any distribution which would
cause the Blount Partnership to have net assets with a fair market value of less
than $10,000,000 or promptly upon the Blount Partnership otherwise ceasing to
have net assets with a fair market value of at least $10,000,000. The Escrow
Account must consist of cash, shares of Parent Common Stock, certificates of
deposit, obligations of the United States government, commercial paper or other
low-risk, highly liquid securities, the fair market value of which is determined
by arbitration to be sufficient in amount (taking into account the stability of
the fair market value of the assets to be held in the Escrow Account) to satisfy
any claims made against the Blount Partnership by any Blount Indemnified Persons
under the Indemnification Agreement or which the parties to the Indemnification
Agreement are then aware of grounds for the assertion of which against the
Blount Partnership may exist. Following the Termination Date and the
establishment of the Escrow Account, the liability of the Blount Partnership
under the Indemnification Agreement is limited to the assets contained in the
Escrow Account.
A copy of the Indemnification Agreement is attached hereto as Exhibit III
to the Merger Agreement which Merger Agreement is attached as Appendix A to this
Proxy Statement/Prospectus, and stockholders are urged to review carefully the
Indemnification Agreement.
REGISTRATION RIGHTS AND STOCK TRANSFER RESTRICTION AGREEMENT
Stock Transfer Restrictions. As a condition to consummation of the Merger,
members of the Blount Family, the Blount Partnership and Parent will enter into
the Registration Rights and Stock Transfer Restriction Agreement pursuant to
which the members of the Blount Family and the Blount Partnership will agree to
certain restrictions on their ability to sell or transfer, following the
Effective Time of the Merger, shares of Parent Common Stock which are owned or
later acquired by such persons, and Parent will agree to
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provide registration rights for the shares of Parent Common Stock held by the
Blount Family and certain transferees of the Blount Family.
Subject to certain specific exceptions, in order to transfer shares of
Parent Class B Common Stock to any person other than a Permitted Transferee, a
holder of such shares subject to the Registration Rights and Stock Transfer
Restriction Agreement must first convert the shares of Parent Class B Common
Stock to be transferred into shares of Parent Class A Common Stock. As defined
in the Registration Rights and Stock Transfer Restriction Agreement, a
"Permitted Transferee" includes, among others, any of the lineal descendants,
spouses of lineal descendants and lineal descendants of such spouses, including
adopted children of each of such persons, of the parents of Winton M. Blount
(each a "Family Transferee"); the custodian under any Uniform Transfers to
Minors Act or similar law for a minor who is a Family Transferee; the trustee of
a trust created principally for the benefit of one or more Family Transferees;
certain split-interest trusts of which at least one Family Transferee is a
beneficiary; corporations, partnerships and limited liability companies
controlled by one or more Family Transferees or the Permitted Transferees of
such Family Transferees; the estate of a Family Transferee; the guardian,
conservator or custodian of any disabled Family Transferee; a nominee of any
Family Transferee (provided that such Family Transferee retains the power to
vote and dispose of the shares held in the nominee's name); and Parent or any
subsidiary of Parent.
In addition to the requirement that shares of Parent Class B Common Stock
subject to the Registration Rights and Stock Transfer Restriction Agreement
must, subject to certain specific exceptions, be converted into shares of Parent
Class A Common Stock before being transferred to any person other than a
Permitted Transferee, the Primary Holders (as defined herein) will agree in the
Registration Rights and Stock Transfer Restriction Agreement that they would not
sell, transfer, pledge, hypothecate or otherwise dispose of any shares of Parent
Common Stock except: (i) to a Permitted Transferee; (ii) to any organization to
which contributions are deductible for federal income, estate, or gift tax
purposes; (iii) pursuant to sales on a national securities exchange or by means
of an inter-dealer quotation system maintained by a registered securities
association, provided that each Primary Holder, on an aggregated basis with
sales by Permitted Transferees to which it has transferred shares of Parent
Common Stock after August 17, 1995, may only sell that number of shares of
Parent Common Stock as would be permitted to be sold by an affiliate of the
Company pursuant to Rule 144 under the Securities Act (in any three-month
period, 1% of the outstanding class of Parent Common Stock), whether or not such
Primary Holder is an affiliate of Parent or otherwise subject to the provisions
of Rule 144; (iv) transfers or sales effected without registration on terms and
under circumstances corresponding to the terms and circumstances on and under
which exempt private placements may be made by the Company, provided that, with
certain exceptions, the transferee together with any group (within the meaning
of Section 13(d)(3) under the Exchange Act) of which such transferee is a member
would not hold shares of Parent Common Stock having the right to cast 5% or more
of the total votes entitled to be cast by the holders of Parent Common Stock
when voting together as a single class unless the transferee agrees to offer to
acquire, within 180 days of its agreement to purchase such shares, any and all
shares of Parent Common Stock then outstanding at the highest price per share
paid by the transferee to the transferor by means of a tender offer, merger or
other similar transaction; (v) pursuant to offerings registered under the
Securities Act and made pursuant to the registration rights provisions of the
Registration Rights and Stock Transfer Restriction Agreement; (vi) to a pledgee
pursuant to a bona fide pledge of shares of Parent Common Stock as collateral
security for indebtedness due to the pledgee; (vii) sales, transfers or
exchanges pursuant to tender or exchange offers for Parent Common Stock extended
equally to all stockholders of Parent on a pro rata basis, provided, that (A)
the per share consideration received in such transaction by Restricted Holders
is the same as that offered to other holders of Parent Common Stock, (B) unless
Restricted Holders no longer beneficially own in the aggregate shares of Parent
Common Stock subject to the provisions of the Registration Rights and Stock
Transfer Restriction Agreement having the right to cast 15% or more of the total
votes entitled to be cast by the holders of Parent Common Stock when voting
together as a single class or a person or group (within the meaning of Section
13(d)(3) under the Exchange Act) who is not or does not include a Restricted
Holder beneficially owns shares of Parent Common Stock having the right to cast
the majority of the votes entitled to be cast by the holders of Parent Common
Stock when voting together as a single class, such offer must be to acquire all
of the outstanding Parent Common Stock, (C) unless such offer is to acquire all
of the outstanding Parent Common Stock, Restricted Holders may only tender
Parent Class A
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Common Stock pursuant to such offer and (D) if, as a result of such offer, the
holders of shares of Parent Common Stock immediately prior to such offer, in
their capacity as such stockholders, receive capital stock of the entity making
such offer having 50% or more of the combined voting power of the capital stock
of such entity, then the provisions of the Registration Rights and Stock
Transfer Restriction Agreement remain in effect with respect to the capital
stock of such entity received by the Restricted Holders pursuant to such offer;
(viii) transfers, exchanges or other dispositions of Parent Common Stock
pursuant to any merger or consolidation involving Parent, provided, that the per
share consideration received in such transaction by Restricted Holders is the
same as the per share consideration received by the other holders of Parent
Common Stock and, unless as a result of such transaction the holders of shares
of Parent Common Stock immediately prior to such transaction in their capacity
as such holders, receive less than 50% of the combined voting power of the
surviving or resulting entity, the provisions of the Registration Rights and
Stock Transfer Restriction Agreement shall remain in effect with respect to the
capital stock of the surviving or resulting entity in such transaction; and (ix)
transfers, exchanges or other dispositions of Parent Common Stock pursuant to
any recapitalization, reorganization, reclassification, change of domicile
merger or other similar transaction in which there is no change in the relative
percentages of ownership among the holders of the capital stock of the resulting
or surviving entity from the percentages of ownership of Parent Common Stock
existing immediately prior to such transaction, provided, that the provisions of
the Registration Rights and Stock Transfer Restriction Agreement remain in
effect with respect to the capital stock of such surviving or resulting entity.
The restriction on the number of shares which may be sold pursuant to clause
(iii) of the immediately preceding sentence terminates four years following the
date of the Registration Rights and Stock Transfer Restriction Agreement, and
the restriction described in clause (iv) of the immediately preceding sentence
terminates at any time after (i) the Restricted Holders beneficially own in the
aggregate shares of Parent Common Stock subject to the provisions of such
agreement having the right to cast less than 15% of the total votes entitled to
be cast by the holders of Parent Common Stock voting together as a single class
or constituting less than 15% of the aggregate number of the outstanding shares
of Parent Common Stock, whichever shall first occur, or (ii) a person or group
(within the meaning of Section 13(d)(3) under the Exchange Act) who is not or
does not include a Restricted Holder beneficially owns shares of Parent Common
Stock having the right to cast a majority of the votes entitled to be cast by
the holders of Parent Common Stock when voting together as a single class. As
defined in the Registration Rights and Stock Transfer Restriction Agreement, the
term "Primary Holder" refers to the Blount Family together with the Blount
Partnership, and the term "Restricted Holder" refers to a Primary Holder and any
person or legal entity which from time to time becomes subject to the
restrictions on transfer of Company Common Stock set forth in certain sections
of the Registration Rights and Stock Transfer Restriction Agreement.
The Registration Rights and Stock Transfer Restriction Agreement sets forth
exceptions to the general requirement that shares of Parent Class B Common Stock
may not be transferred by a Primary Holder to any person other than a Permitted
Transferee without first converting the shares of Parent Class B Common Stock to
be transferred into shares of Parent Class A Common Stock. A Primary Holder or
any transferee of a Primary Holder that has become subject to the Registration
Rights and Stock Transfer Restriction Agreement may transfer shares of Parent
Class B Common Stock, without converting such shares, if as a result of, and
after giving effect to such transfer, the transferee, together with any group
(within the meaning of Section 13(d)(3) under the Exchange Act) of which such
transferee is a member, would not hold shares of Parent Common Stock having the
right to cast five percent (5%) or more of the total votes entitled to be cast
by the holders of Parent Common Stock when voting together as a single class;
the transferee agrees (i) to offer to acquire any and all shares of Parent
Common Stock then outstanding at the highest price per share paid by the
transferee to the transferor, and (ii) unless such transferee thereafter makes
such offer and acquires all shares of Parent Common Stock tendered to it within
180 days of the initial transfer to it of shares of Parent Class B Common Stock,
such transferee shall have no voting rights with respect to, and may be enjoined
from exercising any voting rights with respect to, any shares of Parent Common
Stock beneficially owned by such transferee, and any shares of Parent Class B
Common Stock acquired by such transferee pursuant to such transaction shall,
upon the expiration of such 180 day period, be converted automatically into
shares of Parent Class A Common Stock; if the transferee is a Primary Holder or
a Permitted Transferee who agrees to become subject to the Registration Rights
and Stock Transfer Restriction Agreement; or if the
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transaction is one described in clauses (vii), (viii) or (ix) of the first
sentence of the immediately preceding paragraph.
The Registration Rights and Stock Transfer Restriction Agreement provides
that if, by reason of any proposed change in the ownership of the stock,
partnership interests or member interests, or the identity or ownership
interests of the managers of a Permitted Transferee (other than the Blount
Partnership) which is a corporation, partnership or limited liability company,
such entity would no longer qualify as a Permitted Transferee, then the event by
which such proposed change of ownership shall occur shall be deemed to be a
disposition of all of the Parent Common Stock previously transferred to such
entity as a Permitted Transferee which is then held by such entity which
disposition must comply with the provisions of the Registration Rights and Stock
Transfer Restriction Agreement. Notwithstanding the provisions the Registration
Rights and Stock Transfer Restriction Agreement described in the immediately
preceding sentence, pledges may be made of the stock, partnership interests or
member interests in, or the ownership interests in the managers of, such
Permitted Transferee, provided, such Permitted Transferee has agreed in
connection with such pledge that, in the event of foreclosure or other similar
action by the pledgee, any shares of Parent Class B Common Stock owned by such
Permitted Transferee will either be (i) transferred to a Permitted Transferee of
the pledgor who, if not a Primary Holder, becomes a Restricted Holder with
respect to such shares of Parent Class B Common Stock or (ii) converted into
shares of Parent Class A Common Stock.
The Registration Rights and Stock Transfer Restriction Agreement provides
that no general or limited partnership interest in, and no stock of any
corporate general partner of, the Blount Partnership may be transferred to any
person who is not a Primary Holder, a Family Transferee, a Permitted Transferee
or an organization to which contributions are deductible for federal income,
estate or gift tax purposes without the prior written consent of Parent. The
provisions of the Registration Rights and Stock Transfer Restriction Agreement
described in the immediately preceding sentence cease to be applicable at any
time after either (i) the Restricted Holders no longer beneficially own,
directly or indirectly, in the aggregate shares of Parent Common Stock which are
subject to the provisions of the Registration Rights and Stock Transfer
Restriction Agreement having the right to cast 15% or more of the total votes
entitled to be cast by the holders of the Parent Common Stock voting together as
a single class or (ii) a person or group (within the meaning of Section 13(d)(3)
of the Exchange Act) who is not or does not include a Restricted Holder
beneficially owns, directly or indirectly, shares of Parent Common Stock having
the right to cast a majority of the votes entitled to be cast by the holders of
Parent Common Stock when voting together as a single class, whichever shall
first occur.
Upon the liquidation or dissolution of Parent or upon the occurrence of any
reorganization, merger or other transaction in which holders of shares of Parent
Common Stock immediately prior to such event, in their capacity as such holders,
receive less than 50% of the combined voting power of the surviving or resulting
entity, the provisions of the Registration Rights and Stock Transfer Restriction
Agreement restricting the sale or transfer by the Restricted Holders of Parent
Common Stock terminate.
Registration Rights. Pursuant to the Registration Rights and Stock
Transfer Restriction Agreement, if Parent receives at any time a written request
from a Primary Holder requesting that Parent file a registration statement under
the Securities Act covering the registration for sale (which must be by means of
an underwritten offering unless otherwise agreed by Parent) in the aggregate of
not less than 600,000 shares of Parent Common Stock (subject to adjustments for
changes in the capital structure of Parent) or shares of Parent Common Stock
(subject to adjustment for changes in the capital structure of Parent) or shares
of Parent Common Stock having a minimum value of $20,000,000, then Parent must
give written notice of such request to all Holders (as defined herein) and must
effect the registration under the Securities Act of all Registrable Securities
(as defined herein) which the Holders request to be registered (subject to
reduction in certain circumstances); provided that Parent may delay the filing
of such registration for specified periods if, as a result of such registration,
Parent would be required to disclose nonpublic information as to which Parent
has a valid business reason for deferring disclosure. Parent is obligated under
the Registration Rights and Stock Transfer Restriction Agreement to effect no
more than three such registrations, and is not obligated to take any action in
response to a written request for registration prior to 18 months following the
effective date of a registration filed by Parent pursuant to a previous written
request of a Primary Holder. As defined in the
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Registration Rights and Stock Transfer Restriction Agreement, the term "Holder"
refers to the Primary Holders together with the Permitted Transferees, and the
term "Registrable Securities" means any shares of Parent Common Stock owned by
any of the Holders.
In addition, if Parent proposes to register any of its stock under the
Securities Act in connection with the public offering of such securities solely
for cash, then Parent must promptly give written notice of such registration to
each Holder. Subject to the restrictions of the Registration Rights and Stock
Transfer Restriction Agreement, Parent must cause to be registered under the
Securities Act the Registrable Securities that each such Holder may request to
register. Parent is also obligated to file a registration statement on Form S-3
under the Securities Act under certain circumstances and subject to certain
limitations in the event that one or more Holders are not able to sell shares of
Registrable Securities under the provisions of Rule 144 or Rule 145 during the
two-year period following the consummation of the Merger because of the holding
period restriction under Rule 144 (including the application thereof under Rule
145).
Other than underwriting discounts, commissions and the fees and
disbursements of counsel for the selling stockholders, Parent is obligated under
the Registration Rights and Stock Transfer Restriction Agreement to pay all fees
incurred in connection with the registration rights granted; provided that
Parent shall not be obligated to pay for any expenses of any registration first
requested by a Primary Holder if Parent has previously undertaken two prior such
registrations and such registrations have been declared or ordered effective.
A copy of the Registration Rights and Stock Transfer Restriction Agreement
is attached hereto as Exhibit IV to the Merger Agreement, which Merger Agreement
is attached as Appendix A to this Proxy Statement/Prospectus, and stockholders
are urged to review carefully the Registration Rights and Stock Transfer
Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the date and at the time on which a
certificate of merger relating to the Merger is filed with the Secretary of
State of the State of Delaware. The Merger Agreement provides that the parties
thereto will cause a certificate of merger to be filed as soon as practicable
after each of the conditions to consummation of the Merger has been satisfied or
waived. The Merger cannot become effective until the stockholders of the Company
have approved the Merger Agreement and all required regulatory approvals and
actions have been obtained and taken and any requisite waiting period shall have
expired. Subject to satisfaction of the conditions contained in the Merger
Agreement, the parties currently anticipate that the Merger will become
effective promptly following the Special Meeting, although there can be no
assurance as to whether or when the Merger will become effective.
ACCOUNTING TREATMENT
The Merger will be accounted for by Parent in a manner similar to that in
pooling of interests accounting. Under this method of accounting, the recorded
amounts of the assets and liabilities of the Company and Parent will be carried
forward at their previously recorded amounts.
CERTAIN CONDITIONS TO THE MERGER; WAIVER AND AMENDMENT
Each party's respective obligations to effect the Merger are subject to
various conditions (any or all of which may be waived to the extent permitted by
applicable law), including (i) the effectiveness of the Registration Statement
of which this Proxy Statement/Prospectus is a part, and the absence of any stop
order suspending the effectiveness thereof; (ii) the adoption of the Merger
Agreement by the requisite vote of holders of Company Common Stock; (iii) the
absence of any order, decree or injunction by a court of competent jurisdiction
which (a) prevents the consummation of the Merger or (b) would impose any
material limitation on the ability of Parent effectively to exercise full rights
of ownership of the common stock of the Surviving Corporation or any material
portion of the assets or business of the Company; (iv) the absence of any
statute, rule or regulation that makes the consummation of the Merger or any
other transaction contemplated by the Merger Agreement illegal; (v) the approval
for listing on the NYSE, upon official notice
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of issuance, of the shares of Parent Common Stock to be issued in connection
with the Merger; (vi) the absence of any goodwill generated by the Merger, the
qualification of the Merger to be accounted for in a manner similar to that in
pooling of interests accounting and the receipt of the favorable opinion of
Coopers & Lybrand L.L.P. to such effects; (vii) the treatment of the Merger as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code, and the
receipt to such effect of the favorable opinions of Bradley, Arant, Rose & White
and Sutherland, Asbill & Brennan; and (viii) the receipt by the parties of all
consents, approvals and authorizations of third parties with respect to all
agreements to which any of the parties is a party which are reasonably
determined by the parties to be material and which are required of such third
parties by such documents, in form and substance acceptable to each of the
parties, except where the failure to obtain such consent, approval or
authorization would not have a material adverse effect on the business of Parent
and the Company following the Effective Time of the Merger, taken as a whole.
The obligation of Parent and the Subsidiary to effect the Merger is also
subject to the satisfaction (or waiver) of certain additional conditions,
including (i) the accuracy of representations and warranties of the Company set
forth in the Merger Agreement (provided that neither Parent nor the Subsidiary
may terminate the Merger Agreement as a result of the failure of this condition
unless such failure would have a material adverse effect on the business of the
Company); (ii) the performance in all material respects of all agreements
required by the Merger Agreement to be performed by the Company at or prior to
the Closing Date (as defined in the Merger Agreement); (iii) the inapplicability
of Section 203 of the DGCL to the Merger; (iv) the execution and delivery of the
Registration Rights and Stock Transfer Restriction Agreement; and (v) the
effectuation of the HBC Recapitalization (as defined in the Merger Agreement) by
Parent and the Blount Partnership in the manner and with the effect contemplated
by the Blount Family.
The obligation of the Company to effect the Merger is also subject to the
satisfaction (or waiver) of certain other conditions, including (i) that the
Certificate of Incorporation, By-Laws, capitalization, directors and executive
officers of Parent shall be as set forth in the Merger Agreement; (ii) the
performance in all material respects of all agreements required by the Merger
Agreement to be performed by Parent or the Subsidiary at or prior to the Closing
Date; (iii) the accuracy of the representations and warranties of Parent set
forth in the Merger Agreement; (iv) the execution and delivery of the
Indemnification Agreement; (v) the ownership by Parent of, immediately prior to
the Effective Time of the Merger, 2,075,048 shares of Company Class A Common
Stock and 2,803,232 shares of Company Class B Common Stock; (vi) the delivery of
the legal opinion of Bradley, Arant, Rose & White substantially to the effect
set forth in Exhibit V to the Merger Agreement; (vii) the execution and delivery
of the Registration Rights and Stock Transfer Restriction Agreement; and (viii)
Parent having, at the Closing Date immediately prior to the Effective Time of
the Merger, an unused charitable deduction carryforward for federal income tax
purposes of not less than $4,800,000 and a net worth of not less than $500,000,
determined in accordance with the terms of the Merger Agreement.
At any time before the Effective Time of the Merger, any party to the
Merger Agreement may waive any of the conditions contained therein to its own
obligations, to the extent that such conditions are intended for its own
benefit. In addition the Merger Agreement may be amended by written instruments
signed on behalf of each of the parties thereto.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time of the Merger, whether before or after adoption of the Merger Agreement by
the holders of Company Common Stock, (i) by mutual written consent of Parent,
the Subsidiary and the Company; (ii) by either Parent or the Company (a) if the
holders of Company Common Stock fail to approve the Merger Agreement at any duly
held meeting of such stockholders, (b) if the Merger is not consummated before
January 1, 1996, provided that the passage of such period will be tolled for any
part thereof (but not exceeding 60 days in the aggregate) during which any party
is subject to a nonfinal order, decree, ruling or action restraining, enjoining
or otherwise prohibiting the consummation of the Merger or the calling or
holding of a meeting of stockholders, (c) if any court of competent jurisdiction
or any other governmental entity has issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action has become final and
non-appealable, (d) in the event of a breach by the other party of
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any representation, warranty, covenant or other agreement contained in the
Merger Agreement which (A) would give rise to the failure of a condition of
closing set forth in the Merger Agreement, and (B) cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach (provided the terminating party is not then guilty of such a
breach); (iii) by either Parent or the Company if (A) all of the conditions to
the obligations of such party to effect the Merger have been satisfied and (B)
any condition to the obligation of such other party to effect the Merger set
forth in the Merger Agreement is not capable of being satisfied prior to January
1, 1996 (as extended pursuant to the Merger Agreement); and (iv) by the Company,
if the Board of Directors of the Company shall have determined in the exercise
of its fiduciary duties not to recommend the Merger for approval to the holders
of Company Common Stock, or shall have withdrawn such recommendation.
In the event the Merger Agreement is terminated pursuant to its terms, then
the Merger Agreement will be void and have no effect, and no party will have any
liability or obligation under the Merger Agreement, other than the obligation of
Parent with respect to the payment of expenses and indemnification of the
Company and its officers and directors. See "Indemnification by Parent and the
Blount Partnership."
AMENDMENT AND WAIVER
The Merger Agreement provides that it may be amended by the parties at any
time, whether before or after the approval of the Merger Agreement by the
holders of Company Common Stock, provided that no amendment can be made if
Section 251(d) of the DGCL requires that such amendment be approved by the
holders of Company Common Stock, unless such holders approve the amendment. At
any time prior to the Effective Time of the Merger, the parties to the Merger
Agreement may (i) extend the time for the performance of any of the obligations
or other acts of the other parties; (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement; or (iii) subject to the
terms of the Merger Agreement, waive compliance with any of the agreements or
conditions contained in the Merger Agreement.
ABSENCE OF RIGHTS OF DISSENT AND APPRAISAL
Pursuant to Section 262 of the DGCL, the holders of the Company Class A
Common Stock and Company Class B Common Stock will not have dissenters' or
appraisal rights with respect to the Merger.
CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER
The Merger Agreement provides that Parent will not prior to the Effective
Time of the Merger, without the prior consent of the Company or as contemplated
by or authorized in the Merger Agreement, (i) engage in any business activities;
(ii) amend its Certificate of Incorporation or By-Laws, except as contemplated
by the Merger Agreement; or (iii) sell or dispose of any of the shares of
Company Common Stock owned by it.
BUSINESS AND MANAGEMENT OF PARENT AND THE COMPANY FOLLOWING THE MERGER
From and after the Effective Time of the Merger, it is anticipated that the
Board of Directors of Parent will consist of those persons who are serving as
directors of the Company immediately prior to the Effective Time of the Merger.
It is further anticipated that the officers of Parent will be those persons
serving as officers of the Company immediately prior to the Effective Time of
the Merger. The directors of the Company following the Merger will be those
persons who were directors of the Company immediately prior to the Effective
Time of the Merger, and the officers of the Company following the Merger will be
those persons who were officers of the Company immediately prior to the
Effective Time of the Merger. See "MANAGEMENT OF PARENT FOLLOWING THE MERGER."
It is currently anticipated that the business of the Company following the
Merger will be conducted in the same manner as prior to the Effective Time of
the Merger.
CERTIFICATES FOR PARENT COMMON STOCK
Upon the consummation of the Merger, it will not be necessary for holders
of Company Common Stock to surrender their existing stock certificates for new
stock certificates issued by Parent. Instead, the holders of Company Class A
Common Stock and Company Class B Common Stock will automatically become holders
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of Parent Class A Common Stock and Parent Class B Common Stock, respectively,
and the present stock certificates representing shares of Company Class A Common
Stock or Company Class B Common Stock will automatically represent an equivalent
number of shares of Parent Class A Common Stock or Parent Class B Common Stock,
respectively. In addition, each holder of Company Common Stock will receive new
stock certificates from Parent representing additional shares of Parent Class A
Common Stock equal to one-half ( 1/2) of the number of shares of Company Class A
Common Stock held by such holder and additional shares of Parent Class B Common
Stock equal to one-half ( 1/2) of the number of shares of Company Class B Common
Stock held by such holder immediately prior to the Effective Time of the Merger.
After the Effective Time of the Merger, when presently outstanding stock
certificates issued by the Company for Company Common Stock prior to the Merger
are presented for transfer, new stock certificates for Parent Common Stock will
be issued.
FRACTIONAL SHARES
No certificates representing fractional shares of Parent Common Stock will
be issued in connection with the Merger. Instead, each holder of Company Class A
Common Stock otherwise entitled to receive a fractional share of Parent Class A
Common Stock will receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Parent Class A Common Stock, and
each holder of Company Class B Common Stock otherwise entitled to receive a
fractional share of Parent Class B Common Stock will receive, in lieu thereof,
cash (without interest) in an amount equal to such fractional part of a share of
Parent Class B Common Stock. The amount of cash payable in lieu of a fractional
share of Parent Class A Common Stock will be equal to one-third of the closing
price per share of Company Class A Common Stock on the trading day immediately
preceding the date of the Effective Time of the Merger for AMEX -- Composite
Transactions as reported by the AMEX, or, if there are no transactions in the
Company Class A Common Stock on such date, the closing price per share of
Company Class A Common Stock on the trading day next preceding the date of the
Effective Time of the Merger on which a transaction in Company Class A Common
Stock occurred, as so reported by the AMEX. The amount of cash payable in lieu
of a fractional share of Parent Class B Common Stock shall be an amount equal to
one-third of the closing price per share of Company Class B Common Stock on the
trading day immediately preceding the date of the Effective Time of the Merger
for AMEX -- Composite Transactions as reported by AMEX, or, if there are no
transactions in the Company Class B Common Stock on such date, the closing price
per share of Company Class B Common Stock on the trading day next preceding the
date of the Effective Time of the Merger on which a transaction in Company Class
B Common Stock occurred, as so reported by AMEX.
EFFECT OF THE MERGER ON COMPANY STOCK OPTIONS
At the Effective Time of the Merger, Parent will assume the obligations of
the Company under the 1992 Blount Incentive Stock Option Plan, the 1994 Blount
Executive Stock Option Plan and the 1995 Blount Long-Term Executive Stock Option
Plan, and each outstanding option to purchase shares of the Company Class A
Common Stock granted under the Compensation Plans will become an option to
acquire shares of Parent Class A Common Stock on the same terms and conditions
as were applicable under the Compensation Plans and the stock option agreements
granting such options, except that the number of shares subject to each option
and the exercise price will be appropriately adjusted to give effect to the
Exchange Ratio. Adoption of the Merger Agreement at the Special Meeting will
also be deemed to constitute approval of the terms and conditions of, and the
assumption by Parent of, the Compensation Plans, all of which have been approved
previously by the stockholders of the Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated
federal income tax consequences of the Merger to holders of Company
Common Stock. It does not discuss all the tax consequences that may be
relevant to holders of Company Common Stock entitled to special
treatment under the Code (such as insurance companies, dealers in
securities, tax-exempt organizations or foreign persons) or to holders
of Company Common Stock who acquired their Company Common Stock as
compensation. The summary set forth below does not purport to be a
complete analysis of all potential tax effects of the transactions
contemplated by the Merger Agreement or the Merger itself.
Parent and the Company expect that the Merger will be treated as a tax-free
reorganization and that, for federal income tax purposes, no gain or loss will
be recognized by any holder of Company Common Stock upon receipt of Parent
Common Stock pursuant to the Merger, except upon the receipt of cash in lieu of
fractional shares of Parent Common Stock. The Internal Revenue Service (the
"Service") has not been requested to rule upon the tax consequences of the
Merger, and no such request will be made. Instead, the Company will rely upon
the opinions of Bradley, Arant, Rose & White and Sutherland, Asbill & Brennan,
special tax counsel to the Company and Parent, as to certain federal income tax
consequences of the Merger. It is a condition to the consummation of the Merger
that the Company receive such opinions. The opinions of Bradley, Arant, Rose &
White and Sutherland, Asbill & Brennan are based upon the facts which are
described herein and upon certain representations, warranties and covenants made
by the Company and Parent. The opinions of Bradley, Arant, Rose & White and
Sutherland, Asbill & Brennan are also based upon the Code, regulations in effect
thereunder on the date of this Proxy Statement/Prospectus, current
administrative rulings and practice, and judicial authority, all of which are
subject to change. An opinion of counsel is not binding on the Service, and
there can be no assurance, and none is hereby given, that the Service will not
take a position contrary to one or more positions reflected herein or that the
opinions will be upheld by the courts if challenged by the Service. EACH HOLDER
OF COMPANY COMMON STOCK IS URGED TO CONSULT HIS OR HER OWN PERSONAL TAX AND
FINANCIAL ADVISORS AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX CONSEQUENCES ON
HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES AND ALSO AS TO ANY STATE,
LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT OF THE MERGER.
Bradley, Arant, Rose & White and Sutherland, Asbill & Brennan have opined
that the following federal income tax consequences to holders of Company Common
Stock will result from the Merger:
1. For federal income tax purposes the transitory existence of the
Subsidiary will be ignored, and the Merger will be viewed as an acquisition
by Parent of Company Common Stock solely in exchange for Parent Common
Stock.
2. The acquisition by Parent of all of the outstanding Company Common
Stock not previously owned by Parent in exchange solely for shares of
Parent Common Stock, as described above, will constitute a reorganization
within the meaning of Section 368(a)(1)(B) of the Code. Parent and Company
each will be a "party to a reorganization" within the meaning of Section
368(b) of the Code.
3. No gain or loss will be recognized by Parent upon the receipt by
Parent of the Company Common Stock from the holders of Company Common Stock
in exchange for Parent Common Stock pursuant to the Merger Agreement.
4. No gain or loss will be realized by the Company or by the
Subsidiary as a result of the Merger.
5. No gain or loss will be recognized by the stockholders of the
Company upon the receipt of Parent Common Stock (including any fractional
share interests to which they may be entitled) solely in exchange for their
shares of Company Common Stock.
6. The basis of the Parent Common Stock to be received by the Company
stockholders (including any fractional share interest to which they may be
entitled) will be the same as the basis of the Company Common Stock
surrendered in the exchange.
7. The holding period of the shares of Parent Common Stock (including
any fractional share interests to which they may be entitled) received by
the stockholders of Company will include the period
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during which the shares of the Company Common Stock surrendered in exchange
therefor was held, provided that the shares of the Company Common Stock
were held as capital assets within the meaning of Section 1221 of the Code
as of the Effective Time of the Merger.
8. The payment of cash to a Company stockholder in lieu of issuing a
fractional share interest in Parent Common Stock will be treated for
federal income tax purposes as if the fractional share actually was issued
as part of the Merger and then was redeemed by Parent. This cash payment
will be treated as having been received as a distribution in full payment
in exchange for the stock redeemed as provided in Section 302(a) of the
Code.
The opinions of Bradley, Arant, Rose & White and of Sutherland, Asbill &
Brennan described above are based upon certain facts, representations,
warranties and covenants of the Company and Parent, and are subject to various
assumptions and qualifications stated respectively therein. Furthermore, the
foregoing is only a general description of certain anticipated federal income
tax consequences of the Merger without regard to the particular facts and
circumstances of the tax situation of each holder of Company Common Stock. It
does not discuss all of the consequences that may be relevant to holders of
Company Common Stock entitled to special treatment under the Code (such as
insurance companies, dealers in securities, exempt organizations or foreign
persons) or to holders of Company Common Stock who acquired their Company Common
Stock pursuant to the exercise of employee stock options, other options or
otherwise as compensation; nor does it address the federal and state tax
consequences to holders of options to purchase Company Common Stock of the
proposed assumption and conversion of such options into equivalent options to
acquire Parent Common Stock. The summary set forth above does not purport to be
a complete analysis of all potential tax effects of the transactions
contemplated by the Merger Agreement or the Merger itself. No information is
provided herein with respect to the tax consequences, if any, of the Merger
under state, local, foreign or other tax laws. Parent and the Company have
agreed in the Merger Agreement not to take any action which would disqualify the
Merger as a reorganization that would be tax free to the holders of Company
Common Stock pursuant to Section 368(a)(1)(B) of the Code.
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DESCRIPTION OF PARENT CAPITAL STOCK
At the Effective Time of the Merger, the authorized capital stock of Parent
will consist of 60,000,000 shares of Parent Class A Common Stock, 14,000,000
shares of Parent Class B Common Stock, and 4,456,855 shares of Preferred Stock,
par value $0.01 per share ("Parent Preferred Stock"). Immediately prior to the
Effective Time of the Merger, 3,112,572 shares of Parent Class A Common Stock
will be issued and outstanding, 4,204,848 shares of Parent Class B Common Stock
will be issued and outstanding, and no shares of Parent Preferred Stock will be
issued or outstanding.
The following summary description of the capital stock of Parent is
qualified in its entirety by reference to the Restated Certificate of
Incorporation of Parent which will be in effect following the Effective Time of
the Merger, a copy of which is annexed as Exhibit I to Appendix A of this Proxy
Statement/Prospectus (the "Parent Certificate of Incorporation") and to the
applicable provisions of the DGCL.
PARENT COMMON STOCK
Dividends and Related Matters
Following the Effective Time of the Merger, the Parent Certificate of
Incorporation will provide that the Board of Directors of Parent may, subject to
the limitations on payments of dividends described below, declare cash or
property dividends (other than those payable in equity securities of Parent)
respecting Parent Class A Common Stock in excess of such dividends declared
respecting Parent Class B Common Stock or without declaring any such dividends
respecting Parent Class B Common Stock. However, the Parent Certificate of
Incorporation will provide that if quarterly cash dividends are declared
respecting Parent Class B Common Stock, the Board of Directors of Parent will be
required to declare an equal quarterly cash dividend on Parent Class A Common
Stock plus an additional cash dividend of $0.0083 1/3 per share (adjusted from
the $0.0125 per share presently in effect with respect to the Company Class A
Common Stock to reflect the three-for-two stock split of Company Common Stock
that will result from the Merger) respecting Parent Class A Common Stock and if
property dividends (other than those payable in equity securities of Parent) are
declared respecting Parent Class B Common Stock, an equivalent property dividend
is required to be declared respecting Parent Class A Common Stock. The
additional cash dividend respecting Parent Class A Common Stock is noncumulative
and will not be paid in any quarter in which no cash dividend respecting Parent
Class B Common Stock is declared. Such additional cash dividend is also subject
to adjustment if the Board of Directors of Parent declares a dividend on other
than a quarterly basis. Thus, if the Board of Directors of Parent were to
declare cash dividends on a semi-annual basis, the additional cash dividend
respecting Parent Class A Common Stock would be $0.0166 2/3 per share, and if
cash dividends were to be declared on an annual basis, such additional cash
dividend would be $0.0333 1/3 per share. The additional cash dividend is subject
to adjustment in the event of a stock split, stock dividend or combination, and
in such case, it will be appropriately increased or decreased. However, no
adjustment in such additional cash dividend is required if the stock dividend or
stock split is less than one (1) share for each ten (10) shares of outstanding
Common Stock.
Among other limitations under Delaware law, cash dividends may only be paid
(a) out of "surplus," which consists of the excess of the net assets of the
corporation over its capital; or (b) if there is no surplus, out of net profits
for the fiscal year in which the dividend is declared, net profits for the
immediately preceding fiscal year, or net profits for both of such years.
Because, following the Effective Time of the Merger, Parent will act as a
holding company for the Company and will not have any independent operations of
its own, the ability of Parent to pay dividends will be limited by the ability
of the Company to pay dividends to Parent. Following the Merger, there will be
certain limitations on payment of dividends by the Company to Parent. In
addition to the limitations under Delaware law previously described in this
paragraph which are also applicable to the Company, the Company is subject to
certain restrictions on the payment of dividends contained in various debt
instruments. Under the most restrictive of these covenants, at May 31, 1995,
approximately $45.7 million was available for the payment of dividends by the
Company to Parent.
The Parent Certificate of Incorporation will provide that only the
following types of stock dividends, stock splits and similar distributions may
be effected: (i) shares of Parent Class A Common Stock respecting Parent
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Class A Common Stock only; (ii) shares of Parent Class A Common Stock respecting
Parent Class A Common Stock and Parent Class B Common Stock; (iii) shares of
Parent Class B Common Stock or shares of Parent Class A Common Stock and Parent
Class B Common Stock respecting Parent Class B Common Stock, provided that an
equivalent distribution (on a per share basis) in shares of Parent Class A
Common Stock also is effected respecting Parent Class A Common Stock; and (iv)
distributions payable in shares of any other class of equity securities of
Parent may be effected respecting such class of equity securities or such class
of equity security and the outstanding Parent Class A Common Stock and Parent
Class B Common Stock.
Voting Rights
Holders of Parent Class A Common Stock will be entitled to elect 25% of the
Board of Directors of Parent (rounded up to the nearest whole number) so long as
the number of outstanding shares of Parent Class A Common Stock is at least 10%
of the number of shares of all classes of outstanding Parent Common Stock.
Assuming that the Board of Directors of Parent consists of thirteen (13)
persons, the holders of Parent Class A Common Stock will be entitled to elect
four (4) directors and the remaining directors will be elected by the holders of
Parent Class B Common Stock. Directors may be removed with or without cause but
such removal may be effected only by the holders of the class of Parent Common
Stock that elected such directors. Vacancies in the Board of Directors of Parent
will be filled by the holders of the particular class of Parent Common Stock
which elected such director or by a majority of the directors elected by such
class, or by a sole remaining director so elected.
Except for the election or removal of directors, including, under certain
circumstances, filling any vacancy in the Board of Directors of Parent, and
except for class voting as required by Delaware law, the holders of all classes
of Parent Common Stock will vote or consent as a single class on all matters
coming before any meeting of the stockholders of Parent or with respect to any
action taken by written consent of the stockholders of Parent, with each share
of Parent Class A Common Stock having one-tenth of one ( 1/10th of 1) vote per
share and each share of Parent Class B Common Stock having one (1) vote per
share. Under Delaware law, the holders of each outstanding class of Parent
Common Stock will be entitled to vote as a class on any proposed amendment to
the Parent Certificate of Incorporation if such amendment would: (i) increase or
decrease the aggregate number of authorized shares of such class, (ii) increase
or decrease the par value of the shares of such class, or (iii) alter or change
the powers, preferences or special rights of the shares of such class so as to
affect such holders adversely.
If the number of outstanding shares of Parent Class A Common Stock were to
be less than 10% of the total number of shares of all outstanding classes of
Parent Common Stock as of the record date of any meeting of the stockholders of
Parent, the holders of Parent Class A Common Stock and Parent Class B Common
Stock would vote together as a single class on all matters arising at such
meeting, including the election of directors. Under such circumstances, the
holders of Parent Class A Common Stock would be entitled to one-tenth of one
( 1/10th of 1) vote per share and the holders of Parent Class B Common Stock
would be entitled to one (1) vote per share. If the total number of outstanding
shares of Parent Class B Common Stock were to be less than 2,100,000 (as
hereafter adjusted from time to time pursuant to the Parent Certificate of
Incorporation) shares as of the record date of any meeting of the stockholders
of Parent, the holders of Parent Class A Common Stock would be entitled to elect
25% (rounded up to the nearest whole number) of the Board of Directors of
Parent, and the holders of Parent Class A Common Stock and Parent Class B Common
Stock would vote as a single class on all other matters arising at such meeting,
including the election of the remaining directors. In the latter situation, the
holders of Parent Class A Common Stock would be entitled to one-tenth of one
( 1/10th of 1) vote per share and the holders of Parent Class B Common Stock
would be entitled to one (1) vote per share.
Immediately following the Effective Time of the Merger, the above-described
limitation on the right of the holders of Parent Class A Common Stock to elect
25% of the directors would not apply. Such limitation could in the future come
into effect if the Company were to (i) issue substantial amounts of Parent Class
B Common Stock without issuing sufficient shares of Parent Class A Common Stock
to maintain the number of
44
<PAGE> 51
shares of Parent Class A Common Stock outstanding at a level in excess of 10% of
all outstanding classes of Common Stock or (ii) repurchase a substantial number
of shares of Parent Class A Common Stock.
At the Effective Time of the Merger, Parent will be authorized to issue
Preferred Stock in series, and in connection with such issuance, the Board of
Directors of Parent will be authorized to establish the relative rights,
preferences and limitations of each such series, including the voting rights of
the holders of such series. As of the Effective Time of the Merger, no Parent
Preferred Stock will be issued or outstanding. The Parent Certificate of
Incorporation will provide that the Board of Directors of Parent may not in the
future create any series of Parent Preferred Stock that would deny or adversely
affect the ability of the holders of Parent Class A Common Stock to elect 25%
(rounded up to the nearest whole number) of the Board of Directors of Parent or
to fill, in the absence of action by the directors of Parent elected by the
holders of Parent Class A Common Stock, any vacancy in the office of a director
elected by such holders.
Conversion
At the option of the holder of record, and subject to the surrender of
stock certificates evidencing Parent Class B Common Stock to Parent or its
transfer agent, each one (1) share of Parent Class B Common Stock will be
convertible at any time into one (1) share of Parent Class A Common Stock.
Shares of Parent Class A Common Stock will not be convertible into any other
security of Parent. The Parent Certificate of Incorporation also provides that
if, at any time following the death of Winton M. Blount, the number of shares of
Parent Class A Common Stock into which the shares of Parent Class B Common Stock
then remaining outstanding are convertible equal less than ten percent (10%) of
the aggregate number of shares of Parent Class A Common Stock which would be
outstanding following the conversion of all such shares of Parent Class B Common
Stock, then, without the need for action by any person, all remaining
outstanding shares of Parent Class B Common Stock would be automatically
converted into shares of Parent Class A Common Stock, each one (1) share of
Parent Class B Common Stock for each one (1) share of Parent Class A Common
Stock (subject to adjustment as set forth in the Parent Certificate of
Incorporation). Such automatic conversion will become effective at the close of
business on such date as may be established by the Board of Directors of Parent,
which date must be within thirty (30) days of the date on which such Board of
Directors determines that the preceding minimum conditions for such automatic
conversion have occurred, provided that the Board of Directors of Parent may
extend such date by not more than thirty additional days if the date to be set
for such conversion would otherwise occur after a record date for determining
the stockholders of Parent previously established by the Board of Directors and
prior to the date upon which the event for which such record date was
established is to occur. Upon such conversion, no further shares of Parent Class
B Common Stock may be issued, and the total number of shares of capital stock
which Parent is authorized to issue, and the number of shares of Parent Class B
Common Stock which Parent is authorized to issue shall be reduced by 14,000,000
shares each.
Other Terms
Stockholders of Parent will have no preemptive or other rights to subscribe
for additional shares of voting securities of Parent and will have no cumulative
voting rights. Upon liquidation, dissolution or winding up of Parent, the assets
legally available for distribution to stockholders will be distributable,
subject to the rights of the holders of any then outstanding series of Parent
Preferred Stock, ratably among the holders of the shares of all class of Parent
Common Stock at the time outstanding. No class of Parent Common Stock will be
subject to redemption. No holder of any shares of class of Parent Common Stock
will have any liability for further calls or assessments respecting such shares.
The shares of Parent Class A Common Stock and Parent Class B Common Stock
outstanding immediately prior to the Effective Time of the Merger will be, and
the shares of Parent Class A Common Stock and Parent Class B Common Stock issued
pursuant to the Merger Agreement when issued will be, fully paid and
nonassessable shares of the capital stock of Parent.
Transfer Agent and Registrar; Listing
The transfer agent and registrar for Parent Class A Common Stock and Parent
Class B Common Stock will be The First National Bank of Boston, P.O. Box 644,
Boston, Massachusetts 02102-0644, Atten-
45
<PAGE> 52
tion: Shareholder Services. It is anticipated that Parent Class A Common Stock
and Parent Class B Common Stock will be listed on the NYSE following the
Effective Time of the Merger.
REPORTS TO STOCKHOLDERS
Company Common Stock is registered under the Exchange Act, and, therefore,
the Company is required to provide annual reports containing audited financial
statements to stockholders and to file other reports with the Commission and
solicit proxies in accordance with the rules of the Commission. The Company also
provides reports to its stockholders on an interim basis containing unaudited
financial information.
Following the Effective Time of the Merger, Parent Common Stock will be
registered under the Exchange Act, and, therefore, Parent will be required to
provide annual reports containing audited financial statements to stockholders
and to file other reports with the Commission and solicit proxies in accordance
with the rules of the Commission. Parent will also provide reports to its
stockholders on an interim basis containing unaudited financial information.
STOCKHOLDERS
As of the Record Date there were approximately 8,800 holders of record of
the Company Class A Common Stock, approximately 700 holders of record of the
Company Class B Common Stock. Immediately prior to the Effective Time of the
Merger, there will be 7 holders of record of Parent Class A Common Stock and one
holder of Parent Class B Common Stock. It is anticipated that the number of
record holders of Parent Class A Common Stock and Parent Class B Common Stock,
respectively, following the Merger will be approximately the same as the number
of record holders of Company Class A Common Stock and Company Class B Common
Stock on the Record Date.
PARENT PREFERRED STOCK
Following the Effective Time of the Merger, Parent will be authorized to
issue up to 4,456,855 shares of Preferred Stock in one or more series, and in
connection with such issuance, the Board of Directors of Parent will be
authorized to establish the relative rights, preferences and limitations of each
such series, including the voting rights of the holders of such series. As of
the date of this Proxy Statement/Prospectus, the Company is also authorized to
issue 4,456,855 shares of preferred stock, the same number of such shares that
the Parent will be authorized to issue following the Effective Time of the
Merger, in the same manner and subject to the same conditions as will be the
case with Parent immediately following the Merger.
It is not possible to state the actual effect of the authorization and
issuance of additional series of Parent Preferred Stock upon the rights of
holders of Parent Common Stock unless and until the Board of Directors of Parent
determines the attributes of the series and the specific rights of its holders.
Such effects might include, however, (i) restrictions on dividends on Parent
Common Stock if dividends on Parent Preferred Stock have not been paid; (ii)
dilution of the voting power of Parent Common Stock to the extent that Parent
Preferred Stock has voting rights, or to the extent that any Parent Preferred
Stock series is convertible into either class of Parent Common Stock; (iii)
dilution of the equity interest of Parent Common Stock unless Parent Preferred
Stock is redeemed by Parent; and (iv) limitation on the right of holders of
Parent Common Stock to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to Parent Preferred Stock.
46
<PAGE> 53
COMPARISON OF THE CAPITAL STOCK
OF
PARENT AND THE COMPANY
The rights of the holders of capital stock of the Company are presently
governed by the laws of the State of Delaware, including the DGCL, and the
Restated Certificate of Incorporation and amended Bylaws of the Company.
Following the Effective Time of the Merger, holders of Company Common Stock, who
will become holders of Parent Common Stock as a result of the Merger, will have
their rights as stockholders of Parent governed by the laws of the State of
Delaware, including the DGCL, and the Parent Certificate of Incorporation and
the By-Laws of Parent (the "Parent By-Laws"), copies of which are included in
this Proxy Statement/Prospectus as Exhibits I and II, respectively, to Appendix
A hereto. Because the Parent Certificate of Incorporation and Parent By-Laws are
substantially identical to the present Restated Certificate of Incorporation and
amended Bylaws of the Company (other than for changes therein made to reflect
adjustments necessitated by the three-for-two stock split of Company Common
Stock being effected as part of the Merger), except as set forth below, there
are no material differences in the rights of the holders of Company Common Stock
and Parent Common Stock.
The following summary comparison of the rights of the capital stock of the
Company and the capital stock of Parent is qualified in its entirety by
reference to the Restated Certificate of Incorporation and amended Bylaws of the
Company, the Parent Certificate of Incorporation, Parent Bylaws and the DGCL.
MANDATORY CONVERSION OF PARENT CLASS B COMMON STOCK UPON OCCURRENCE OF CERTAIN
EVENTS
The Parent Certificate of Incorporation provides that if, at any time
following the death of Winton M. Blount, the number of shares of Parent Class A
Common Stock into which the shares of Parent Class B Common Stock then remaining
outstanding are convertible equals less than ten percent (10%) of the aggregate
number of shares of Parent Class A Common Stock which would be outstanding
following the conversion of all such shares of Parent Class B Common Stock,
then, without the need for action by any person, all remaining outstanding
shares of Parent Class B Common Stock would be automatically converted into
shares of Parent Class A Common Stock, each one (1) shares of Parent Class B
Common Stock for each one (1) shares of Parent Class A Common Stock (subject to
adjustment as set forth in the Parent Certificate of Incorporation). Such
automatic conversion will become effective at the close of business on such date
as may be established by the Board of Directors of Parent, which date must be
within thirty (30) days of the date on which such Board of Directors determines
that the preceding conditions for such automatic conversion have occurred,
provided that the Board of Directors of Parent may extend such date by not more
than thirty additional days if the date to be set would otherwise occur after a
record date for determining the stockholders of Parent previously established by
the Board of Directors and prior to the date upon which the event for which such
record date was established is to occur. Upon such conversion, no further shares
of Parent Class B Common Stock may be issued, and the total number of shares of
capital stock which the Parent shall have authority to issue and the number of
shares of Parent Class B Common Stock which the Parent shall have authority to
issue shall be reduced by 14,000,000 shares each. The Restated Certificate of
Incorporation of the Company contains no such provision.
INCREASE IN NUMBER OF SHARES OF COMMON STOCK AUTHORIZED TO BE ISSUED
Following the Merger, the number of authorized shares of Parent Class A
Common Stock and Parent Class B Common Stock available for issuance by the Board
of Directors of Parent for such purposes as the Board of Directors deems
appropriate without further action by the stockholders (except as may be
required by law or by the terms of any listing agreement pursuant to which
Parent Common Stock is listed on an exchange) will be 37,858,313 and 8,073,911,
respectively, as compared with 25,238,876 shares of Company Class A Common Stock
and 8,049,274 shares of Company Class B Common Stock currently so available for
issuance. Presently, the Restated Certificate of Incorporation of the Company
presently authorizes forty million shares of Company Class A Common Stock and
twelve million shares of Company Class B Common Stock. Of the forty million
shares of Company Class A Common Stock authorized, 8,734,368 shares are
presently outstanding, 1,505,761 shares are reserved for issuance pursuant to
existing stock option plans,
47
<PAGE> 54
43,144 shares are reserved for issuance pursuant to the Company's dividend
reinvestment program, 527,125 are reserved for matching purposes under the
Company's 401(k) plan and 815,467 shares are reserved for issuance upon
conversion of Company Class B Common Stock (and an additional 3,135,259 shares
of Company Class A Common Stock would be required to be issued if all shares of
Company Class B Common Stock were converted). 3,950,726 shares of Company Class
B Common Stock are presently outstanding. As a result of the Merger, Parent will
be authorized to issue sixty million shares of Parent Class A Common Stock and
fourteen million shares of Parent Class B Common Stock. Immediately following
the Effective Time of the Merger, of these authorized shares of Parent Class A
Common Stock, 13,101,552 shares will be issued and outstanding, 2,258,642 shares
will be reserved for issuance pursuant to existing stock option plans to be
assumed by Parent in the Merger, 64,716 shares will be reserved for issuance
pursuant to the dividend reinvestment program of the Company (which will be
continued by Parent), 790,688 will be reserved for matching purposes under the
Company's 401(k) plan (which will be continued by Parent) and 1,223,200 shares
will be reserved for issuance upon conversion of the Parent Class B Common Stock
(and an additional 4,702,889 shares of Parent Class A Common Stock would be
required to be issued if all shares of Parent Class B Common Stock were
converted). Immediately following the Effective Time of the Merger, 5,926,089
shares of Parent Class B Common Stock will be issued and outstanding. The
increase in the number of authorized shares of Parent Common Stock over the
number of shares of Company Common Stock authorized to be issued will afford
Parent greater flexibility in financial matters and will insure that sufficient
shares of capital stock are available for issuance by the Board of Directors of
Parent for such purposes as the Board determines to be in the best interests of
Parent following the Merger without further action by stockholders (except as
may be required by law or by the terms of any listing agreement pursuant to
which the Parent Common Stock is listed on an exchange). Except for the issuance
of shares pursuant to the Merger Agreement, including the effective increase in
the number of shares to be outstanding as a result of the Exchange Ratio, and
the issuance of shares of Parent Common Stock pursuant to the dividend
reinvestment plan of the Company which will be assumed by Parent following the
Merger or in connection with the Compensation Plans or the Company's 401(k)
plan, the Board of Directors of Parent and the Board of Directors of the Company
have no commitments or understandings relating to the issuance of additional
shares of Parent Common Stock following the Merger.
LISTING ON NYSE
Company Common Stock is listed on the AMEX. It is anticipated that Parent
Class A Common Stock and Parent Class B Common Stock will be listed on the NYSE
following the Effective Time of the Merger.
48
<PAGE> 55
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma condensed consolidated financial statements present
the combined financial position of Parent and the Company as of May 31, 1995 and
the combined operations for the year ended February 28, 1995 and the quarter
ended May 31, 1995. The accompanying pro forma condensed consolidated financial
statements reflect the Merger and the conversion of Company Common Stock into
Parent Common Stock. The unaudited pro forma balance sheet gives effect to the
Merger as if it had been effective on the balance sheet date. The pro forma
condensed statements of income give effect to the Merger as if it had been
effective on March 1, 1994. The Merger will be accounted for in a manner similar
to that in pooling of interests accounting. Parent will be the reporting entity
after the consummation of the Merger.
The pro forma condensed financial statements may not be indicative of the
combined results of operations or combined financial position that actually
would have been achieved if the Merger had been in effect as of the date and for
the periods indicated or which may be obtained in the future.
The pro forma condensed financial statements should be read in conjunction
with the notes thereto and with the financial statements (including the related
notes thereto) contained elsewhere herein or incorporated by reference herein.
The following pro forma condensed financial statements reflect Parent's
interest in the Company under the equity method of accounting rather than on a
consolidated basis. This presentation more clearly reflects the amounts to be
combined. The principal differences between the equity method of accounting and
Parent consolidated financial statements appearing elsewhere in this Proxy
Statement/Prospectus are that the Company's assets, liabilities, sales and
expenses are not combined with the Parent under the equity method of accounting.
Instead, the equity method reflects the investment in the Company adjusted for
Parent's share of the net income and dividends of the Company.
49
<PAGE> 56
PARENT AND COMPANY COMBINED
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MAY 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PARENT COMPANY ADJUSTMENTS COMBINED
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................ $ 247 $ 42,945 $ 253(7) $ 43,445
Accounts receivable.............................. 2,168 129,371 (2,168)(7) 129,371
Inventories...................................... 75,212 75,212
Deferred income taxes............................ 370 25,030 1,680(5) 26,710
(370)(7)
Other current assets............................. 6,357 6,357
------- -------- ----------- ---------
Total current assets..................... 2,785 278,915 (605) 281,095
Property, plant and equipment, net................. 79 126,306 (79)(7) 126,306
Cost in excess of net assets of acquired
businesses, net.................................. 67,770 67,770
Investment in Company.............................. 83,366 (83,366)(2)
Other assets....................................... 1,478 26,777 (1,506)(1) 26,771
22(7)
------- -------- ----------- ---------
Total assets....................................... $87,708 $499,768 $ (85,534) $ 501,942
======= ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of long-term
debt.......................................... $ 5,611 $ 5,611
Accounts payable................................. $ 11 39,695 $ (11)(7) 39,695
Accrued expenses................................. 8 93,117 (8)(7) 94,867
1,750(6)
Billings in excess of costs and recognized
profits on uncompleted contracts.............. 2,687 2,687
------- -------- ----------- ---------
Total current liabilities................ 19 141,110 1,731 142,860
Long-term debt, exclusive of current maturities.... 97,170 (1,500)(1) 95,670
Deferred income taxes, exclusive of current
portion.......................................... 19,075 19,075
Other liabilities.................................. 125 26,144 (125)(7) 26,144
------- -------- ----------- ---------
Total liabilities........................ 144 283,499 106 283,749
------- -------- ----------- ---------
Commitments and contingent liabilities.............
Shareholders' equity...............................
Preferred stock.................................. 1 (1)(3)
Common stock..................................... 1 (1)(3)
Class A common stock............................. 8,646 (8,516)(4) 130
Class B common stock............................. 3,979 (3,919)(4) 60
Capital in excess of par value of stock.......... 19,975 11,209 (2,255)(3) 23,644
(17,720)(2)
12,435(4)
Retained earnings................................ 66,883 183,794 (62,691)(2) 185,718
1,680(5)
(1,750)(6)
(2,198)(7)
Accumulated translation adjustment............... 2,961 8,641 (2,961)(2) 8,641
Treasury stock at cost............................. (2,257) 2,257(3)
------- -------- ----------- ---------
Total shareholders' equity............... 87,564 216,269 (85,640) 218,193
------- -------- ----------- ---------
Total liabilities and shareholders'
equity................................. $87,708 $499,768 $ (85,534) $ 501,942
======= ======== ========= ========
</TABLE>
50
<PAGE> 57
PARENT AND COMPANY COMBINED
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(1) Eliminates $1.5 million of the Company's 9% subordinated notes owned by
Parent.
(2) Eliminates Parent investment and equity earnings in the Company.
(3) Eliminates Parent common, preferred and treasury stock.
(4) Reflects the three-for-two stock split to be effected concurrently with the
Merger, and the change in par value to $.01 per share resulting from the
conversion of Company Common Stock into Parent Common Stock.
(5) Records deferred tax benefit on charitable contribution deduction
carryforward of Parent which will be utilized following the Merger.
(6) Reflects anticipated transaction costs.
(7) To record dividend from Parent to stockholders prior to the Merger.
51
<PAGE> 58
PARENT AND COMPANY COMBINED
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PARENT COMPANY ADJUSTMENTS COMBINED
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales......................................... $ 588,419 $ 588,419
Cost of sales................................. 390,818 390,818
---------- -----------
Gross profit.................................. 197,601 197,601
Selling, general and administrative expense... $ 370 120,681 $ (370)(1) 120,681
--------- ---------- ----------- -----------
Income (loss) from operations................. (370) 76,920 370 76,920
Interest expense.............................. (27) (11,186) 135(2) (11,078)
Interest income............................... 402 2,340 (134)(3) 2,608
Equity earnings from the Company.............. 15,124 (15,124)(4)
Other income (expense), net................... 1,483 (2,179) (696)
--------- ---------- ----------- -----------
Income before income taxes.................... 16,612 65,895 (14,753) 67,754
Provision for income taxes.................... 848 25,805 130(5) 26,783
--------- ---------- ----------- -----------
Net Income.................................. $ 15,764 $ 40,090 $ (14,883) $ 40,971
======== ========= ========= ==========
Net income per common share prior to
Merger................................... $1,485.01 $ 3.10 $ 3.17
======== ========= ==========
After Merger................................ N/A N/A $ 2.11(6)
======== ========= ==========
Weighted average number of common shares
outstanding prior to Merger................. 9,375 12,931,020 12,931,020
======== ========= ==========
After Merger................................ N/A N/A 19,396,530(6)
======== ========= ==========
</TABLE>
- ---------------
(1) Eliminates duplicative administrative services which will not be required
following the Merger.
(2) Eliminates interest expense on $1.5 million of the Company's 9% bonds held
by Parent.
(3) Eliminates interest income at 9% on $1.5 million of the Company's bonds held
by Parent.
(4) Eliminates Parent equity earnings of the Company.
(5) Adjusts taxes for elimination of duplicative administrative services.
(6) Adjusted for effect of Exchange Ratio in the Merger.
Note: The pro forma amounts do not include $1.750 million of transaction costs
or $1.7 million of income tax benefits resulting from the Merger.
52
<PAGE> 59
PARENT AND COMPANY COMBINED
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE QUARTER ENDED MAY 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PARENT COMPANY ADJUSTMENTS COMBINED
------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Sales............................................ $ 164,189 $ 164,189
Cost of sales.................................... 109,137 109,137
---------- ----------
Gross profit..................................... 55,052 55,052
Selling, general and administrative expense...... $ 523 28,751 $ (523)(1) 28,751
------- ---------- ----------- ----------
Income (loss) from operations.................... (523) 26,301 523 26,301
Interest expense................................. 0 (2,653) 34(2) (2,619)
Interest income.................................. 94 610 (34)(3) 670
Equity earnings from the Company................. 5,517 (5,517)(4)
Other income (expense), net...................... (6) (459) (465)
------- ---------- ----------- ----------
Income before income taxes....................... 5,082 23,799 (4,994) 23,887
Provision for income taxes....................... 21 9,520 (183)(5) 9,358
------- ---------- ----------- ----------
Net Income....................................... $ 5,061 $ 14,279 $(4,811) $ 14,529
======= ========= ========= =========
Net income per common share prior to Merger...... $485.01 $ 1.10 $ 1.12
======= ========= =========
After Merger................................... N/A N/A $ .75(6)
======= ========= =========
Weighted average number of common shares
outstanding prior to Merger.................... 9,375 12,954,389 12,954,389
======= ========= =========
After Merger................................... N/A N/A 19,431,584(6)
======= ========= =========
</TABLE>
- ---------------
(1) Eliminates duplicative administrative services which will not be required
following the Merger.
(2) Eliminates interest expense on $1.5 million of the Company's 9% bonds held
by Parent.
(3) Eliminates interest income at 9% on $1.5 million of the Company's bonds held
by Parent.
(4) Eliminates Parent equity earnings of the Company.
(5) Adjusts taxes for elimination of duplicative administrative services.
(6) Adjusted for effect of Exchange Ratio in the Merger.
Note: The pro forma amounts do not include $1.750 million of transaction costs
or $1.7 million of income tax benefits resulting from the Merger.
53
<PAGE> 60
MARKET AND DIVIDEND INFORMATION RESPECTING THE
COMMON STOCK OF PARENT AND THE COMPANY
COMPARATIVE STOCK PRICES PER SHARE
The following table sets forth certain information as to the high and low
last sales prices per share of the Company Class A Common Stock and the Company
Class B Common Stock for the fiscal quarters indicated. The Company Class A
Common Stock is listed on the AMEX under the symbol "BLTA," and the Company
Class B Common Stock is listed on the AMEX under the symbol "BLTB." The
information listed below with respect to the high and low last sales prices for
shares of the Company Class A Common Stock and the Company Class B Common Stock
was obtained from AMEX -- Composite Transactions as reported by AMEX.
<TABLE>
<CAPTION>
COMPANY COMPANY
CLASS A CLASS B
COMMON COMMON
STOCK STOCK
----------- -----------
FISCAL YEAR ENDING LAST DAY OF FEBRUARY, HIGH LOW HIGH LOW
- ---------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1994:
First Quarter................................................. $16 1/2 $12 1/8 $16 5/8 $12 7/8
Second Quarter................................................ 16 1/2 13 1/8 16 3/8 12 3/4
Third Quarter................................................. 23 3/8 14 1/2 23 3/4 14 3/8
Fourth Quarter................................................ 32 1/2 22 3/4 32 1/2 23 3/8
1995:
First Quarter................................................. $37 7/8 $28 1/8 $36 5/8 $ 29
Second Quarter................................................ 41 7/8 35 41 1/2 36 1/8
Third Quarter................................................. 45 3/4 39 3/4 45 40 3/8
Fourth Quarter................................................ 49 1/8 42 5/8 48 7/8 42 3/4
1996:
First Quarter................................................. $46 5/8 $37 3/4 $46 1/2 $38 3/4
Second Quarter................................................ 50 1/8 36 3/4 49 1/2 37 3/4
Third Quarter (through October 2, 1995)....................... 52 3/4 45 7/8 52 3/4 48
</TABLE>
Shares of Parent Class A Common Stock and Parent Class B Common Stock are
not actively traded, and such trading activity, if it occurs, takes place in
privately negotiated transactions. Parent is not aware of any sales transactions
involving shares of Parent Common Stock that have occurred in the last two
years.
On July 31, 1995 (the trading day immediately preceding the announcement of
the proposed Merger Agreement), the last sales price of the Company Class A
Common Stock, as obtained from the AMEX -- Composite Transactions as reported by
AMEX, was $48 3/8, and the last sales price of the Company Class B Common Stock
was $49 1/2. On October 2, 1995, the last sales price of the Company Class A
Common Stock, as obtained from AMEX -- Composite Transactions as reported by
AMEX, was $46, and the last sales price of the Company Class B Common Stock
(which occurred on September 27, 1995) was $48.
54
<PAGE> 61
DIVIDENDS AND DIVIDEND POLICY
The following table sets forth the respective cash dividends per share
declared on shares of Parent Class A Common Stock, Parent Class B Common Stock,
the Company Class A Common Stock and the Company Class B Common Stock during the
periods indicated:
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
DIVIDENDS DECLARED PER SHARE OF
PER SHARE OF COMPANY COMMON
FISCAL YEAR ENDING LAST DAY OF FEBRUARY, PARENT COMMON STOCK STOCK
- ----------------------------------------------------------- ------------------- -----------------
CLASS A CLASS B
------- -------
<S> <C> <C> <C>
1994:
First Quarter............................................ $ 8.63 $ .1125 $ .1000
Second Quarter........................................... 8.84 .1125 .1000
Third Quarter............................................ 8.84 .1125 .1000
Fourth Quarter........................................... 13.85 .1250 .1125
1995:
First Quarter............................................ $ 29.77 $ .1250 $ .1125
Second Quarter........................................... 13.94 .1250 .1125
Third Quarter............................................ 13.94 .1250 .1125
Fourth Quarter........................................... 16.01 .1425 .1300
1996:
First Quarter............................................ $ 16.01 $ .1425 $ .1300
Second Quarter........................................... 16.01 .1425 .1300
Third Quarter (through October 2, 1995).................. 16.01 -- --
</TABLE>
Dividends paid by shares of Parent Class A Common Stock and Parent Class B
Common Stock are at the discretion of Parent's Board of Directors and depend
upon the Company's earnings and financial condition and other relevant factors.
See "DESCRIPTION OF PARENT CAPITAL STOCK -- Parent Common Stock." Parent does
not currently anticipate that its dividend policy will be different from the
current dividend policy of the Company, except that it is presently anticipated
that the per share quarterly dividends of $.1425 and $.1300 on the Company Class
A Common Stock and Company Class B Common Stock, respectively, will be adjusted
to $.0950 and $.086 2/3, respectively, on Parent Class A Common Stock and Parent
Class B Common Stock to reflect the effect of the Exchange Ratio. Following the
Effective Time of the Merger, however, the ability of Parent to declare and pay
dividends will be restricted and limited by the ability of the Company to
declare and pay dividends to Parent.
Dividends paid by the Company on shares of the Company Class A Common Stock
and the Company Class B Common Stock are at the discretion of the Company's
Board of Directors and depend upon the restrictions on the payment of dividends
contained in the Company's loan agreements and Bylaws, the earnings and
financial condition of the Company and other relevant factors, including
limitations contained in the DGCL. Under the most restrictive of these
limitations, $51.4 million was available for the payment of dividends of the
Company as of the Record Date.
55
<PAGE> 62
CERTAIN INFORMATION CONCERNING THE
BUSINESS OF PARENT
HISTORICAL OPERATIONS OF PARENT
Parent was incorporated on October 5, 1979 to act as a holding company for
businesses to be acquired by Parent, and to hold shares of Company Common Stock
owned by the family of Winton M. Blount. On the date of this Proxy
Statement/Prospectus, Parent owns 2,075,048 shares (or approximately 24%) of the
issued and outstanding shares of the Company Class A Common Stock and 2,803,232
shares (or approximately 71%) of the issued and outstanding shares of the
Company Class B Common Stock. The shares of Company Common Stock owned by Parent
represent approximately 62% of the total votes entitled to be cast with respect
to the approval of the Merger at the Special Meeting. Other than shares of
Company Common Stock, since February, 1993, Parent has had no significant assets
and has not actively engaged in any business. Prior to February, 1993, however,
Parent was actively engaged in business through the various subsidiaries
described below.
On May 22, 1980, Parent purchased certain of the assets of the Plantation
Patterns Division of General Housewares Corp., which assets it transferred to a
wholly-owned subsidiary ("Plantation Patterns"). As a subsidiary of Parent,
Plantation Patterns manufactured and sold wrought iron furniture and operated a
manufacturing facility located on leased property in Birmingham, Alabama. On
September 2, 1980 a wholly-owned subsidiary of Parent acquired all of the issued
and outstanding capital stock of The Lindsay Wire Weaving Company ("Lindsay
Wire"). As a subsidiary of Parent, Lindsay Wire manufactured woven plastic and
metal wire mesh for use on fourdrinier paper machines at manufacturing plants in
Mentor, Ohio and Florence, Mississippi. Shortly after its purchase, Lindsay
Wire's operations were consolidated on real property owned or leased by Lindsay
Wire in Florence, Mississippi. On November 3, 1982, a wholly-owned subsidiary of
Parent merged with and into H. Waterbury & Sons Company ("H. Waterbury"), such
that H. Waterbury became a wholly-owned subsidiary of Parent. As a subsidiary of
Parent, H. Waterbury manufactured wet felts for the paper industry, spandex for
the automotive and various other industries, and certain needle-punched nonwoven
industrial products at manufacturing plants owned in Oriskany and leased in
Utica, New York. On April 29, 1983, a wholly-owned subsidiary of Parent acquired
certain of the assets of Vogue Rattan Manufacturing Co., Inc. ("Vogue Rattan")
used in the business of manufacturing and selling rattan and wicker furniture.
As a subsidiary of Parent, Vogue Rattan manufactured and sold rattan and wicker
furniture produced in a manufacturing facility leased in Lexington, Kentucky.
On May 31, 1983, Parent merged its four subsidiaries into one, which
subsidiary changed its name to BI Industries, Inc. ("BI"). On January 22, 1985,
BI sold its leisure furniture and needle-punched nonwoven industrial products
division to Sam Blount Company, Inc., a company principally owned by Samuel R.
Blount. Following this sale, BI operated only two divisions, the former
operations of Lindsay Wire and Waterbury Felt, the former woven portion of the
operations of H. Waterbury. BI sold substantially all of the assets of its
Waterbury Felt division on February 12, 1992. As part of this transaction, BI
agreed not to compete directly or indirectly in the manufacture, distribution,
sale or service of wet felt products or spandex products in the North American
market prior to February 12, 1997. Parent does not believe that it is bound by
this agreement. Substantially all of the remaining assets of BI (the business
division formerly operated as Lindsay Wire), were sold by BI on February 1,
1993. In connection with this sale, BI and Parent executed and delivered non-
compete agreements, expiring on January 31, 1998, which restrict Parent from
engaging in certain activities with respect to the production and sale of
fabrics and other items used in a wet paper making process. Because the Company
was expressly excluded from the terms of such non-compete agreements, the
Company's operations as a wholly-owned subsidiary of Parent would not be subject
to such non-compete agreements. Following the sale of the Lindsay Wire Division,
BI had no active business, and on June 15, 1993, was merged with Parent.
Pursuant to the Indemnification Agreement, the Blount Partnership has
agreed, subject to certain provisions, to indemnify and hold harmless the Blount
Indemnified Persons from all damages and liabilities incurred by any Blount
Indemnified Person as a result of any claims made against any Blount Indemnified
Person which arise out of or relate to the acts or omissions of, or states of
fact relating to, Parent, its employees
56
<PAGE> 63
or agents, or any of its past subsidiaries or employees or agents prior to the
Effective Time of the Merger. See "THE MERGER -- Indemnification by Parent and
the Blount Partnership."
OPERATIONS FOLLOWING THE EFFECTIVE TIME OF THE MERGER
Following the consummation of the Merger, the Company will be a direct,
wholly-owned subsidiary of Parent. It is not currently anticipated that Parent
will make any immediate changes in the business conducted by the Company. The
description of the business of the Company contained in the Annual Report on
Form 10-K of the Company for the year ended February 28, 1995 is hereby
incorporated by reference into this Proxy Statement/Prospectus.
EMPLOYEES
On the date of this Proxy Statement/Prospectus, Parent employed two
persons. Each of such persons performed management or administrative duties for
Parent. The discussion regarding employees of the Company contained in the
Annual Report on Form 10-K of the Company for the year ended February 28, 1995
is hereby incorporated by reference into this Proxy Statement/Prospectus.
DESCRIPTION OF PROPERTY
On the date of this Proxy Statement/Prospectus, Parent leases approximately
100 square feet of office space from the Company pursuant to an oral lease
agreement. Under this agreement, Parent pays the Company $260.00 per month for
use of this space. It is currently anticipated that the Blount Partnership will
continue this lease following the Effective Time of the Merger.
The description of the property of the Company contained in the Annual
Report on Form 10-K of the Company for the year ended February 28, 1995 is
hereby incorporated by reference into this Proxy Statement/Prospectus.
LEGAL PROCEEDINGS
Parent is involved from time to time in various pending and threatened
legal actions arising out of the conduct of its past businesses. In the opinion
of Parent, the outcome of currently known pending and threatened legal actions
and proceedings are not presently expected to have a material adverse effect on
the financial condition of Parent. See Note 5 of Notes to Unaudited Consolidated
Financial Statements of Parent at May 31, 1995 contained elsewhere herein.
The description of legal proceedings involving the Company contained in the
Annual Report on Form 10-K of the Company for the year ended February 28, 1995
is hereby incorporated by reference into this Proxy Statement/Prospectus.
57
<PAGE> 64
MANAGEMENT OF PARENT FOLLOWING THE MERGER
DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to the
persons who will serve as directors of Parent following the Effective Time of
the Merger, all of whom were elected by the stockholders of the Company as
directors of the Company:
<TABLE>
<CAPTION>
DIRECTOR OF
THE
NAME AGE COMPANY SINCE
---------------------------------------------------------------- --- -------------
<S> <C> <C>
DIRECTORS DEEMED TO BE ELECTED BY HOLDERS
OF PARENT CLASS A COMMON STOCK
W. Houston Blount(2)(5)(6).................................... 73 1949(1)
Herbert J. Dickson(4)(5)...................................... 70 1966(1)
Alfred M. Gleason(2)(5)....................................... 65 1985
Mary D. Nelson(3)(4).......................................... 62 1986
DIRECTORS DEEMED TO BE ELECTED BY HOLDERS
OF PARENT CLASS B COMMON STOCK
Winton M. Blount(2)........................................... 74 1949(1)
R. Eugene Cartledge(3)(5)..................................... 66 1994
C. Todd Conover(3)(4)......................................... 55 1992
H. Corbin Day(3)(4)(5)(6)..................................... 58 1992
Emory M. Folmar(3)(4)......................................... 65 1995
John M. Panettiere(2)......................................... 58 1992
Arthur P. Ronan(3)(6)......................................... 65 1993
Joab L. Thomas(3)(4).......................................... 62 1981
</TABLE>
- ---------------
(1) Includes the period for which the person served as a director of Blount
Brothers Corporation, a predecessor of the Company. The Company was
organized in February 1971, and on March 1, 1971, the stockholders of
Blount Brothers Corporation exchanged their stock in Blount Brothers
Corporation for stock in the Company. Blount Brothers Corporation was
merged into the Company on February 19, 1988.
(2) To be member of Executive Committee.
(3) To be member of Audit Committee.
(4) To be member of Finance Committee.
(5) To be member of Compensation and Management Development Committee.
(6) To be member of Acquisition Committee.
The following is a brief summary of the business experience of each of the
persons who will serve as a director of Parent following the Merger.
W. Houston Blount. Mr. Blount served as Chairman of the Board from May
1986 to May 1992 of Vulcan Materials Company, Birmingham, Alabama (construction
aggregates and chemicals), and has served as Chairman of the Board emeritus of
Vulcan Materials Company since May 1992. Mr. Blount is also a director of VF
Corporation, Reading, Pennsylvania. Mr. Blount is the brother of Winton M.
Blount.
Herbert J. Dickson. Mr. Dickson has been a financial consultant since
March 1993. For more than five years prior to March 1993 he served as Chairman
of the Board and Chief Executive Officer of Fortune Financial Services, Inc.,
Atlanta, Georgia (a finance company). Mr. Dickson is also a director of American
Business Products, Inc., Atlanta, Georgia; and Martin Industries, Inc.,
Florence, Alabama.
Alfred M. Gleason. Prior to retirement in May 1995, Mr. Gleason served as
Vice Chairman from February of 1994, President and Chief Executive Officer from
January 1989 and President from January 1985 of PacifiCorp, Portland, Oregon (a
diversified utility company). Mr. Gleason is also a director of Fred Meyer,
Inc., Portland, Oregon; Comdial Corporation, Charlottesville, Virginia;
PacifiCorp Financial Services, Inc., Portland, Oregon; Tektronix, Inc.,
Beaverton, Oregon; and Legacy Health System, Portland, Oregon.
58
<PAGE> 65
Mary D. Nelson. Ms. Nelson has served as President of Nelson & Co.,
Cincinnati, Ohio (consulting actuaries) throughout the past five years. Ms.
Nelson is also a director of Cincinnati Bell, Inc., Cincinnati, Ohio; and Union
Central Life Insurance Co., Cincinnati, Ohio.
Winton M. Blount. Mr. Blount has served as Chairman of the Board since
June 1993; and served as Chairman of the Board and Chief Executive Officer of
the Company throughout the five years preceding June 1993 except from December
1990 to October 1991 during which period he served as Chairman of the Board. Mr.
Blount is the brother of W. Houston Blount.
R. Eugene Cartledge. Prior to retirement in June 1994, Mr. Cartledge
served as Chairman of the Board and Chief Executive Officer of Union Camp
Corporation, Wayne, New Jersey, from 1989 to 1994, and prior to December of
1989, as Chairman of the Board, President and Chief Executive Officer of Union
Camp Corporation. Mr. Cartledge is also a director of Union Camp Corporation,
Delta Airlines, NationsBank and Sun Company, Inc.
C. Todd Conover. Mr. Conover is and has been President and Chief Executive
Officer of the Vantage Company, Los Altos, California (management services)
since July 1992. He was formerly General Manager of the Finance Industry Group
of Tandem Computers, Incorporated, Cupertino, California from January 1994;
President and Chief Executive Officer of Central Bankorporation, Denver,
Colorado (bank holding company) from July 1991; National Director with KPMG Peat
Marwick, San Francisco, California and New York, New York (bank consulting) from
September 1988; and served as Comptroller of the Currency of the United States
from December 1981 through May 1985. Mr. Conover is also a director of
PacifiCorp, Portland, Oregon.
H. Corbin Day. Mr. Day has been a limited partner of Goldman, Sachs & Co.,
New York, New York (investment bankers) throughout the past five years, and
Chairman from May 1988 of Jemison Investment Co., Inc., Birmingham, Alabama
(investment bankers). Mr. Day is also a director of Jemison Investment Co., Inc.
and its affiliated companies; Altec Industries, Inc., Birmingham, Alabama; and
American Heritage Life Insurance Company, Jacksonville, Florida.
Emory M. Folmar. Mr. Folmar has served as Mayor of the City of Montgomery,
Alabama since 1977.
John M. Panettiere. Mr. Panettiere has served as President and Chief
Executive Officer since June 1993, and President and Chief Operating Officer
from May 1992 of the Company. Mr. Panettiere was formerly Chairman, President
and Chief Executive Officer from January 1990, President and Chief Executive
Officer from January 1988, Senior Executive Vice President and Chief Operating
Officer from August 1986 of Grove Worldwide Company, Shady Grove, Pennsylvania
(manufacturer of mobile hydraulic cranes and aerial work platforms).
Arthur P. Ronan. Prior to retiring in February 1992, Mr. Ronan was
Corporate Vice President from 1982 and President from June 1985 of the
automotive operations of Rockwell International Corporation, Troy, Michigan
(manufacturer of automotive components).
Joab L. Thomas. Dr. Thomas is currently President Emeritus of Pennsylvania
State University, University Park, Pennsylvania. From September 1990 until
August 1995, Dr. Thomas served as President of Pennsylvania State University.
Prior to that time, he served as Professor from September 1988 and President
from July 1981 to September 1988 of the University of Alabama, Tuscaloosa,
Alabama. Dr. Thomas is also a director of Lukens, Inc., Coatesville,
Pennsylvania; and Mellon Bank, Pittsburgh, Pennsylvania.
Following the Effective Time of the Merger, the committees of the Board of
Directors of Parent will consist of those committees presently utilized by the
Company. Accordingly, the Board of Directors of Parent will have the standing
committees whose principal functions are described below. Parent will not have a
nominating committee.
Executive Committee. The Executive Committee will be authorized to
exercise all of the authority and powers of the Board of Directors of Parent to
the extent permitted by law, including the right to appoint special committees
of the Board, during the intervals between meetings of the Board of Directors of
Parent. The Chairman of the Board of Parent will be Chairman of the Executive
Committee.
59
<PAGE> 66
Audit Committee. The functions of the Audit Committee will include (i)
recommending annually to the Board of Directors the appointment of Parent's
independent auditors, (ii) reviewing the professional services, proposed fees
and independence of such auditors, (iii) reviewing the annual audit plans of
such auditors and the internal audit staff, (iv) monitoring the activities of
the independent auditors and the internal audit staff, and (v) reporting on such
activities to the Board of Directors of Parent. All of the members of this
committee will be nonemployee directors.
Finance Committee. The functions of the Finance Committee will include (i)
approving Parent's funding policy for its retirement plans, (ii) approving
actuarial assumptions for the retirement plans, (iii) approving the selection
and termination of investment managers, trustees, independent auditors and
actuaries for the retirement plans, (iv) approving the investment policy asset
allocation guidelines, objectives, constraints, and restrictions, as
appropriate, issued to investment managers and trustees, (v) approving operating
procedures and safeguards as required to prohibit transactions not authorized
under the Employee Retirement Income Security Act of 1974, as amended, (vi)
approving the consolidation, merger, or transfer of retirement plan assets or
liabilities to or from one plan to another, (vii) approving reports with regard
to retirement plans prepared by the trustees, the independent auditors,
investment managers or consultants and the actuaries, and (viii) reporting on
such activities to the Board of Directors of Parent. All the members of this
committee will be nonemployee directors.
Compensation and Management Development Committee. The functions of the
Compensation and Management Development Committee will include (i) approving
compensation philosophy and guidelines for Parent's executive and managerial
employees, (ii) establishing a total compensation range for the Chairman of the
Board and the President and Chief Executive Officer and appraising the
performance of said officers on a timely basis, (iii) approving salaries and
changes in salaries of certain officers of Parent and presidents of its
divisions and subsidiaries or other executives as such committee may deem
appropriate, (iv) approving the participants, annual financial or other
incentives and amounts to be paid under the Target Incentive Plan of the Company
which will become a plan of Parent following the Effective Time of the Merger,
(v) reviewing and recommending to the Board of Directors of Parent any new
executive incentive or stock option plans or additions to or revisions of such
existing plans and approving any awards of options granted under such plans,
(vi) reviewing from time to time Parent's management resources and executive
personnel planning, development and selection process, and (vii) reporting on
such activities to the Board of Directors of Parent.
Acquisition Committee. The functions of the Acquisition Committee will be
to review and approve any acquisition proposed by management and report on such
activities to the Board of Directors of Parent.
In addition to Winton M. Blount and John M. Panettiere, the following
persons will be the executive officers of Parent, including those persons who
will be deemed to be executive officers of Parent by virtue of their positions
with its subsidiaries, following the Merger:
<TABLE>
<CAPTION>
YEAR FIRST ELECTED
OR APPOINTED TO
NAME OFFICE SUCH OFFICE AGE
- ---------------------------- -------------------------------------------- ------------------ ---
<S> <C> <C> <C>
K.O. Dixon.................. President of Dixon Industries, Inc. 1973 57
Darrel F. Inman............. President of the Sporting Equipment Division 1995 50
of the Company
Richard H. Irving III....... Senior Vice President and General Counsel of 1995 52
Parent
Harold E. Layman............ Senior Vice President and Chief Financial 1993 48
Officer of Parent
D. Joseph McInnes........... Senior Vice President -- Administration and 1991 52
Secretary of Parent
James S. Osterman........... President of the Oregon Cutting Systems 1987 57
Division of the Company
Michael E. Short............ President of Gear Products, Inc. 1995 45
Donald B. Zorn.............. President of the Forestry and Industrial 1994 59
Equipment Division of the Company
</TABLE>
60
<PAGE> 67
Each of these persons will serve at the pleasure of the Board of Directors
of Parent or the relevant subsidiary. There are no arrangements or
understandings with any other person pursuant to which any officer is to be
elected. These persons may also be directors or officers of divisions or
subsidiaries of Parent.
K.O. Dixon was elected President of Dixon Industries, Inc. (manufacturer of
riding lawn mowers) in 1973. Dixon Industries, Inc. was acquired by the Company
in March 1990.
Darrel F. Inman was appointed President of the Sporting Equipment Division
of the Company on July 1, 1995. Prior to that date, he served for more than five
years as Vice President of Engineering and Product Development for the Sporting
Equipment Division. Mr. Inman has also served as General Manager of three
manufacturing facilities of that Division located in Lewiston, Idaho.
Richard H. Irving III was elected Senior Vice President and General Counsel
of the Company on April 10, 1995. Prior to that date, he served since 1986 as
Vice President, General Counsel and Secretary of Duchossois Industries, Inc., a
diversified privately held company headquartered in Elmhurst, Illinois. Mr.
Irving also served as Associate General Counsel of Union Camp Corporation from
1979 to 1986, and Assistant General Counsel of Rockwell International from 1974
to 1979.
Harold E. Layman was elected Senior Vice President and Chief Financial
Officer of the Company in January 1993. Prior to that date, he served as Senior
Vice President Finance and Administration and was a member of the Executive
Committee of VME Group, N.V., The Netherlands from September 1988 (manufacturer
of automotive components and industrial equipment).
D. Joseph McInnes was elected Senior Vice President -- Administration and
Secretary of the Company in May 1994. Prior to that date, he served as Senior
Vice President -- Administration of the Company from October 1991, and Vice
President -- Human Resources of the Company from March 1983. In addition, he was
elected President of The Blount Foundation, Inc. (a charitable foundation funded
by Parent) in April 1982.
James S. Osterman was appointed President of the Oregon Cutting Systems
Division of the Company in January 1987.
Michael E. Short was elected President of Gear Products, Inc. (designer and
manufacturer of rotation bearings and mechanical power transmission components)
in September 1995. Prior to that time he served, for more than five years, as
Vice President -- Sales and Marketing of Fairfield Manufacturing Company,
Lafayette, Indiana. Gear Products, Inc. was acquired by the Company in March
1991.
Donald B. Zorn was appointed President of the Forestry and Industrial
Equipment Division of the Company in January 1994. Prior to that date, he served
as President and Chief Operating Officer of Grove Cranes, a division of Grove
Worldwide Company, Shady Grove, Pennsylvania (manufacturer of mobile hydraulic
cranes and aerial work platforms) from March 1988.
EXECUTIVE COMPENSATION
The information contained under the subheadings "Executive
Compensation," "Pension Plans," "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements" and "Compensation of
Directors" is intended to summarize the current compensation and
related arrangements between the Company and its directors and
officers. It is currently anticipated that the compensation
arrangements summarized herein will remain in place following the
Effective Time of the Merger without modification in the terms
thereof, except that Winton M. Blount will be compensated only by
Parent following the Effective Time of the Merger.
Except for amounts paid to Winton M. Blount, the following table reflects
compensation paid to the named individuals (the "Named Executive Officers") for
the stated periods as officers or employees of the Company. The amounts shown as
paid to Winton M. Blount include, in addition to compensation received from the
Company, amounts paid to Mr. Blount by Parent. Following the Effective Time of
the Merger,
61
<PAGE> 68
Mr. Blount and the other named individuals will be compensated only by Parent
and Company only in the manner such individuals are presently compensated by the
Company.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------- ------------
----------------------------------------------- SECURITIES LONG-TERM
OTHER ANNUAL UNDERLYING INCENTIVE ALL OTHER
SALARY BONUS COMPENSATION OPTIONS PLAN PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
- ------------------------------------ ---- -------- ---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Winton M. Blount.................... 1995 $855,000(1) $1,025,000(2) $ 70,789(6) 0 0 $ 41,769(8)
Chairman of the Board 1994 810,000(1) 1,419,125(3) 30,569 0 0 33,261
1993 765,000(1) 555,000(4) 13,538 0 0 25,701
John M. Panettiere.................. 1995 550,000 800,000(5) 24,915(6) 25,000 0 53,888(9)
President and CEO 1994 461,379 450,000 26,807 100,000 0 193,774
1993 332,051 225,000 34,273 100,000 0 0
Donald B. Zorn...................... 1995 250,000 225,000 90,425(7) 7,500 0 18,550(10)
President -- Forestry and 1994 41,666 10,000 0 30,000 0 0
Industrial Equipment Division 1993 0 0 0 0 0 0
Harold E. Layman.................... 1995 237,600 215,000 12,227(6) 7,500 0 23,356(11)
Senior Vice President and Chief 1994 220,000 148,500 6,319 50,000 0 31,673
Financial Officer 1993 36,667 16,506 0 20,000 0 0
D. Joseph McInnes................... 1995 236,000 215,000 11,338(6) 7,500 118,527 13,366(12)
Senior Vice President -- 1994 219,450 148,129 5,785 50,000 0 13,799
Administration and Corporate 1993 201,027 100,000 2,266 0 0 713
Secretary
</TABLE>
- ---------------
(1) Amount includes $175,000 paid to Mr. Blount by Parent.
(2) Amount includes $125,000 paid to Mr. Blount by Parent, and an $884,000
bonus earned under the Executive Management Target Incentive Plan of
Company and a $16,000 discretionary bonus from Company.
(3) Amount includes $800,000 paid to Mr. Blount by Parent.
(4) Amount includes $200,000 paid to Mr. Blount by Parent.
(5) Consists of $715,000 bonus earned under the Executive Management Target
Incentive Plan and an $85,000 discretionary bonus.
(6) Tax gross-up on club dues, personal use of the Company's property and
premiums on life insurance policies.
(7) Personal use of the Company's property, premiums on life insurance policy
and relocation expenses.
(8) Amount is comprised of $12,307 matching contributions to employee's 401(k)
and excess 401(k) accounts and $29,462 attributable to the personal portion
of the premiums on life insurance policies under the Executive Benefit Life
Insurance and Supplemental Retirement Plan.
(9) Amount is comprised of $21,463 matching contributions to employee's 401(k)
and excess 401(k) accounts and $32,425 premiums on a life insurance policy
under the Executive Life Insurance Plan.
(10) Amount is comprised of $18,550 in premiums on a life insurance policy under
the Executive Life Insurance Plan.
(11) Amount is comprised of $10,016 matching contributions to the employee's
401(k) and excess 401(k) accounts and $13,340 in premiums on a life
insurance policy under the Executive Life Insurance Plan.
(12) Amount is comprised of $12,407 matching contributions to employee's 401(k)
and excess 401(k) accounts and $959 attributable to the personal portion of
the premiums on the life insurance policies under the Executive Benefit
Life Insurance and Supplemental Retirement Plan.
62
<PAGE> 69
Option Grants
The following table summarizes pertinent information concerning individual
grants of stock options, including the potential realizable dollar value of
grants of options made during fiscal 1995 to each Named Executive Officer,
assuming that the market value of the underlying security appreciates in value,
from the date of grant to the end of the option term, at the rates indicated in
the following table:
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
--------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE EXPIRATION FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE DATE -------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) (MM-DD-YY) 5% ($) 10% ($)
- --------------------------------- ----------- ------------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Winton M. Blount................. 0 0 0 -- 0 0
John M. Panettiere............... 25,000 16.79% 46.0625 02-13-05 724,000 1,835,000
Donald B. Zorn................... 7,500 5.04% 46.0625 02-13-05 217,000 551,000
Harold E. Layman................. 7,500 5.04% 46.0625 02-13-05 217,000 551,000
D. Joseph McInnes................ 7,500 5.04% 46.0625 02-13-05 217,000 551,000
</TABLE>
- ---------------
(1) The amounts under these columns are the result of calculations at 5% and 10%
rates which were established by rules adopted by the Securities and
Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, in the price of Parent Class A Common Stock.
Option Exercises and Year-End Option Values
The following table summarizes pertinent information concerning the
exercise of stock options during fiscal 1995 by each of the Named Executive
Officers and the fiscal year-end value of unexercised options:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
SHARES (#) FISCAL YEAR END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Winton M. Blount........... 0 0 0 0 0 0
John M. Panettiere......... 12,213 343,000 33,334 167,240 600,000 4,106,000
Donald B. Zorn............. 0 0 10,000 27,500 184,000 372,000
Harold E. Layman........... 0 0 24,667 52,833 565,000 1,000,000
D. Joseph McInnes.......... 0 0 28,667 48,833 767,000 914,000
</TABLE>
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<PAGE> 70
PENSION PLANS
Assuming continuance of the Company's Retirement Plan in its present form,
estimated annual benefits payable to eligible employees (including executive
officers) in specific classifications following retirement at age 65 (normal
retirement age), after continuous years of credited service, are shown below:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS FOR
FIVE-YEAR AVERAGE SPECIFIED YEARS OF CREDITED SERVICE(1)(2)
EARNINGS AT ----------------------------------------------------------------------------
RETIREMENT(3) 10 15 20 25 30 35 40 OR MORE
- ----------------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000............ $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 52,500 $ 55,000 $ 57,500
150,000............ 30,000 45,000 60,000 75,000 78,750 82,500 86,250
200,000............ 40,000 60,000 80,000 100,000 105,000 110,000 115,000
250,000............ 50,000 75,000 100,000 125,000 131,250 137,500 143,750
300,000............ 60,000 90,000 120,000 150,000 157,500 165,000 172,500
350,000............ 70,000 105,000 140,000 175,000 183,750 192,500 201,250
400,000............ 80,000 120,000 160,000 200,000 210,000 220,000 230,000
450,000............ 90,000 135,000 180,000 225,000 236,250 247,500 258,750
500,000............ 100,000 150,000 200,000 250,000 262,500 275,000 287,500
550,000............ 110,000 165,000 220,000 275,000 288,750 302,500 316,250
600,000............ 120,000 180,000 240,000 300,000 315,000 330,000 345,000
650,000............ 130,000 195,000 260,000 325,000 341,250 357,500 373,750
700,000............ 140,000 210,000 280,000 350,000 367,500 385,000 402,500
</TABLE>
- ---------------
(1) The amounts set out above are based on the benefits under a straight life
annuity to a participant retiring at age 65 on March 1, 1995. The amounts
shown are to be reduced for offsetting amounts to be paid as social
security benefits and benefits payable under Master Annuity Contracts
(purchased upon termination of prior Retirement Plans).
(2) Under Section 415(b) of the Code, the maximum benefit payable under the
Master Annuity Contracts (purchased upon termination of prior Retirement
Plans) and the Company's Retirement Plan to an employee retiring at age 65
in 1995 is $120,800 ($118,800 for 1994), an amount which may change each
year in accordance with a determination made by the Commissioner of the
Internal Revenue Service. In addition, Section 401(a)(17) of the Code
limits the amount of an employee's compensation which may be taken into
account under the Company's Retirement Plan to $150,000 for 1995, 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 the benefit payable in excess of the limitation is
covered by the Supplemental Retirement Benefit Plan of the Company (the
"Excess Benefit Plan").
(3) Earnings covered by the Company's Retirement Plan are based on the
participant's base salary or wages.
The years of benefit service used to determine benefits under the Company's
Retirement Plan and the Master Annuity Contracts (purchased upon termination of
prior Retirement Plans) as of February 28, 1995, for the Named Executive
Officers are: Mr. Blount -- 49 years; Mr. Panettiere -- 3 years; Mr. Layman -- 2
years; Mr. McInnes -- 21 years; and Mr. Zorn -- 1 year.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Executive Benefit Life Insurance and Supplemental Retirement Plan
On September 22, 1980, the Board of Directors of the Company adopted,
effective August 1, 1980, an Executive Benefit Life Insurance and Supplemental
Retirement Plan (the "Keyman Insurance Plan") for key executive officers of the
Company and its divisions and subsidiaries. Eligibility is determined by the
Compensation and Management Development Committee of the Board of Directors of
the Company. Each participating executive officer has the opportunity to obtain
life insurance that will pay to the named beneficiary in the event of the
executive officer's death while employed by the Company or one of its divisions
or subsidiaries as a full-time permanent employee, an amount equal to 2 1/2
times the executive officer's annual compensation (base salary as of August 1 of
each year plus the amount of the most recent bonus paid under
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<PAGE> 71
the Company's Annual Target Incentive Plan) at the time of the executive
officer's death (the "Death Benefit"). The excess of the face amount of the
policy over the Death Benefit is paid to the Company. The Company has ownership
rights in the policy, except that the executive officer has the right to change
the beneficiary designation for the amount of the Death Benefit. All dividends
declared on the policy shall be applied at the option of the Company to purchase
additional paid-up insurance on the life of the executive officer or to reduce
the premiums on the policy. The Company pays all premiums due on the policies.
If the executive officer retires directly from permanent full-time
employment with the Company or one of its divisions or subsidiaries, under
certain circumstances and subject to the election by the executive officer, the
Company, after withdrawing the cash value, will assign its rights in the policy
to the executive officer. In lieu of the Company's assignment of its rights in
the policy, the executive officer may elect to receive an optional supplemental
retirement benefit payable by the Company instead of all or a portion of any
interest the executive officer or his beneficiary or beneficiaries may otherwise
be entitled to under the policy, and the Death Benefit will terminate. If the
executive officer retires prior to age 65, he or she may elect a supplemental
retirement benefit commencing upon such retirement date, but the benefit will be
reduced based on a formula.
Should the executive officer upon retirement at age 65 elect to receive a
supplemental retirement benefit under the Keyman Insurance Plan and based on the
amount of life insurance in force at the end of Fiscal 1995, the persons named
in the Summary Compensation Table would receive the following annual payments
from the Company for 15 years in addition to the benefits payable under the
Master Annuity Contract, the Excess Benefit Plan and any Supplemental Executive
Retirement Plan: Mr. Blount -- $280,000, and Mr. McInnes -- $107,556. Messrs.
Panettiere, Layman and Zorn do not participate in the Keyman Insurance Plan.
Supplemental Executive Retirement Plans
The Company maintains a Supplemental Executive Retirement Plan for John M.
Panettiere. If Mr. Panettiere completes at least five years of service with the
Company, the Supplemental Executive Retirement Plan will provide him with a
benefit upon his normal retirement date or earlier termination of employment
equal to a benefit calculated under the benefit formula of the Company's
Retirement Plan, but based on a schedule of years of service granted to him
under the Supplemental Executive Retirement Plan rather than his actual service,
reduced by any retirement benefits payable under the Company Retirement Plan,
the Supplemental Retirement Benefit Plan, and any retirement income actually
paid to Mr. Panettiere under any pension plan maintained by a former employer.
This Plan is administered by the Board or, at its discretion, the Compensation
and Management Development Committee of the Board of Directors of the Company.
This Plan may be amended from time to time in any respect with the consent of
the other party, but it cannot be terminated without the consent of the Board or
its designated committee and Mr. Panettiere. At the discretion of the Board and
after timely notice to Mr. Panettiere, rights to receive any benefits under this
Plan may be forfeited, suspended, reduced or terminated by the Board of
Directors of the Company if it determines in good faith that good cause as
defined in this Plan has been shown. The projected annual benefit payable to Mr.
Panettiere under this Plan, in addition to the benefits payable under the
Company Retirement Plan, the Excess Benefit Plan and the retirement income
payable under any pension plan maintained by a former employer of Mr.
Panettiere, is $247,979.
The Company maintains a Supplemental Executive Retirement Plan for Donald
B. Zorn. If Mr. Zorn completes at least five years of service, the Supplemental
Executive Retirement Plan will provide him with a benefit upon his normal
retirement date or earlier termination of employment equal to a benefit
calculated under the benefit formula of the Company Retirement Plan, but based
on a schedule of years of service granted to him under the Supplemental
Executive Retirement Plan rather than his actual service, reduced by any
retirement benefits payable under the Company Retirement Plan, the Supplemental
Retirement Benefit Plan, and any retirement income actually paid to Mr. Zorn
under any pension plan maintained by a former employer. This Plan is
administered by the Board or, at its discretion, the Compensation and Management
Development Committee of the Board of Directors of the Company. This Plan may be
amended from time to time in any respect with the consent of the other party,
but it cannot be terminated without the consent of the Board or its designated
committee and Mr. Zorn. At the discretion of the Board and after timely notice
to
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<PAGE> 72
Mr. Zorn, rights to receive any benefits under this Plan may be forfeited,
suspended, reduced or terminated by the Board if it determines in good faith
that good cause as defined in this Plan has been shown. Due to Mr. Zorn's
service of less than one year at the date of the Company's latest Actuarial
Valuation, no projected benefit under this Plan was determined.
Employment Contracts and Change-in-Control Arrangements
The Company has entered into Employment Agreements (the "Employment
Agreements") with all of its Named Executive Officers except for Winton M.
Blount. The terms of the Employment Agreements provide that each executive will
be paid a base salary no less than the 1995 base salary shown in the summary
compensation table, be eligible to participate in the Company's incentive plans
with target bonuses ranging from 45% to 65% of base salary, participate in the
Company's stock option programs and all other benefit plans, arrangements and
perquisites generally available to executive officers. Three executives are
covered by the Company's Executive Life Insurance Program and two are covered
under the Company's Keyman Life Insurance and Supplemental Retirement Plan. The
Employment Agreements with Messrs. Panettiere and Zorn provide for certain
supplemental retirement benefits, less any benefits from the Company's
Retirement Plan, the Blount, Inc. and Subsidiaries Supplemental Retirement Plan
and any pension plan of a former employer.
The duration of each Employment Agreement is automatically extended one day
for each day employed until such time as the executive attains his 65th
birthday. Each Employment Agreement has a clause which prohibits the executive,
for up to three years following the termination of employment, from competing
directly or indirectly with the Company or disclosing proprietary or
confidential information.
Each of the Employment Agreements contains a provision pursuant to which
the executive is paid a multiple (of 24 to 36 months, depending on the
executive) of his then current base salary and an average of bonus payments
recently received upon a change in control of the Company, as defined in the
Employment Agreements. Full funding of certain benefits and immediate vesting in
unvested stock options also occur upon such a change in control. The Merger
should not trigger such change in control provisions.
Each of the Employment Agreements also contains provisions for severance
payments and benefits (for 24 to 36 months, depending on the executive) if the
Company terminates the executive for reasons other than death, disability or
cause, as defined in the Employment Agreements.
In the event of death, disability or termination for cause (as defined in
the Employment Agreements) or in the event the employee terminates his
employment, except upon a change in control, the Company's obligations under the
Employment Agreements cease and no special benefits will be paid.
A Rabbi Trust has been established by the Company for the purpose of
helping to meet obligations including certain non-qualified benefits and change
in control liabilities identified in this section.
COMPENSATION OF DIRECTORS
Non-employee directors receive a retainer fee of $6,250 per quarter plus a
fee of $1,000 for each Board Meeting attended in person or by telephone
conference, and an additional $1,000 for each Board Committee Meeting attended
in person or by telephone conference. No fee for execution of consent actions is
paid. Persons serving as Chairmen of Committees of the Board, who are not
employees of the Company, receive an additional retainer fee of $750 per quarter
for their services. The Chairman and the members of the Independent Committee
will receive retainer fees of $12,500 and $10,000, respectively, for their
service on such committee, in addition to receipt of the standard payment for
attendance at committee meetings. The directors are reimbursed for travel and
other expenses and are provided travel insurance when traveling on business for
the Company, liability insurance coverage and participation in a charitable
contributions matching gift program. Participation in the Company's group
medical and dental plans is also available to non-employee directors on the same
basis as offered to all employees of Company. In addition, each non-employee
director is provided $50,000 of life insurance under the Company's group life
insurance plan. Directors who are employees of Company do not receive any
additional compensation for their services as directors.
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<PAGE> 73
Under the Directors' Fee Deferral Plan of the Company, directors may defer
receipt of directors' fees until their retirement or other termination of status
as a director. Deferred amounts bear interest, adjusted quarterly, based on the
prime rate set by a New York bank. Such accumulated fees, together with the
income accrued thereon, are payable in cash to the director or his or her estate
in accordance with the option selected by the director at the time he or she
elected to participate in this plan. The Directors' Fee Deferral Plan is
unfunded and amounts due the participants covered thereby are general
obligations of the Company.
The Company also has in place the Advisory Directors' Recognition Plan.
Each member of the Board of Directors of the Company who has served as a
director for at least five (5) consecutive years and who has not been an
employee vested in any employee benefits sponsored by the Company during his or
her service on the Board and (a) who is serving at the attainment of age 72, or
(b) who becomes permanently and totally disabled at any time prior to age 72,
shall become an advisory director. No advisory director and no other director,
except the co-founders of the Company, shall be eligible to stand for
re-election to the Board who, after July 1, 1991, is or reaches age 72. Under
this plan, a director who is or becomes eligible for advisory director status
after July 1, 1991, shall, at the end of his or her current term, be paid a
quarterly benefit for life equal to the quarterly cash retainer, exclusive of
Committee Chairman fees, then being paid to the director. An advisory director
who attains that status due to disability shall be paid a quarterly disability
benefit equal to the quarterly cash retainer then being paid to directors for
the shorter of (a) such advisory director's life or (b) the number of the
advisory director's full years of service as a director. A director who has been
an employee vested in employee benefits sponsored by the Company is eligible to
become an advisory director, but shall not be entitled to the retainer paid to
advisory directors. When their views on a matter are sought, advisory directors
are expected to consult with the management or directors of the Company. 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 becomes a
director, officer, employee, or consultant of or to another company that
competes with the Company or any of its divisions or subsidiaries. The Advisory
Directors' Recognition Plan does not apply to Winton M. Blount, a cofounder of
the Company, nor to W. Houston Blount, a co-founder of the Company, until either
ceases to be a member of the Board of Directors regardless of his age at the
time of such cessation. The Advisory Directors' Recognition Plan is unfunded and
amounts due to the participants covered thereby are general obligations of the
Company.
On April 10, 1995, the Company's Board of Directors adopted the Blount,
Inc. Non-Employee Directors' Stock Compensation Plan (the "Directors' Plan").
Pursuant to the Directors' Plan, each non-employee director of the Company is
entitled to receive shares of Company Class A Common Stock with an aggregate
fair market value equal to $25,000 (the "Grant"). Shares awarded pursuant to a
Grant vest in equal installments over a five year period, during which time the
non-employee director may direct the voting and receive dividends upon the
shares of Company Class A Common Stock subject to the Grant, but may not
transfer any unvested portion of such shares to any person except Company.
Non-employee directors are entitled to receive a new Grant under the Directors'
Plan once the non-employee directors' previous Grant becomes fully vested.
COMPENSATION PLANS
At the Effective Time of the Merger, Parent will assume the obligations of
the Company under the 1992 Blount Incentive Stock Option Plan, the 1994 Blount
Executive Stock Option Plan, and the 1995 Blount Long-Term Executive Stock
Option Plan, and each outstanding option to purchase shares of the Company Class
A Common Stock granted under the Compensation Plans will become an option to
acquire shares of Parent Class A Common Stock on the same terms and conditions
as were applicable under the Compensation Plans and the stock option agreements
granting such options, except that the number of shares subject to each option
and the exercise price will be appropriately adjusted to give effect to the
Exchange Ratio. Adoption of the Merger Agreement at the Special Meeting will be
deemed to constitute approval by the holders of Parent Common Stock, following
the Merger, of the terms of and the assumption by Parent of the Compensation
Plans, all of which have been approved previously by the stockholders of the
Company. No changes will be made to the terms of the Compensation Plans as a
result of or in connection the Merger except that the authority, responsibility
and duties of the Company and its Board of Directors under the Compensation
Plans
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<PAGE> 74
will be transferred to Parent and its Board of Directors, respectively. Adoption
of the Merger Agreement at the Special Meeting will also be deemed to constitute
approval of the Compensation Plans for purposes of Section 16 of the Exchange
Act.
Copies of the 1992 Blount Incentive Stock Option Plan, the 1994 Blount
Executive Stock Option Plan and the 1995 Blount Long-Term Executive Stock Option
Plan are attached hereto as Appendices C, D and E, respectively, and are
incorporated herein by this reference. The descriptions of the Compensation
Plans contained in this Proxy Statement/Prospectus are qualified in their
entirety by reference to such Appendices.
The 1995 Blount Long Term Executive Stock Option Plan
If approved, the Blount Long Term Executive Stock Option Plan (the "1995
LTESO Plan") will permit Parent to grant options to purchase shares of Parent
Class A Common Stock in accordance with the terms of the 1995 LTESO Plan and
pursuant to written stock option agreements. Subject to appropriate adjustment
in the event of certain stock splits, stock dividends or similar distributions
with respect to Parent Class A Common Stock, the number of shares of Parent
Class A Common Stock which may be issued under the 1995 LTESO Plan may not
exceed 1,050,000 shares. The 1995 LTESO Plan will be administered by the
Compensation and Management Development Committee of the Board (the
"Committee"), no member of which is eligible to receive options under the 1995
LTESO Plan. The officers and other key management employees (approximately 50
persons) of Parent and its divisions and subsidiaries will be eligible to
receive options under the 1995 LTESO Plan. The Committee will have sole
discretion to determine from among eligible employees those to whom and the time
or times at which or the criteria under which options may be granted pursuant to
the 1995 LTESO Plan, the number of shares of Parent Class A Common Stock to be
subject to each option and the period for the exercise of such options.
The per share exercise price of Parent Class A Common Stock subject to each
option granted under the 1995 LTESO Plan may not be less than the fair market
value of such stock on the date the option is granted. Options must be granted
within 10 years from April 10, 1995, the effective date of the 1995 LTESO Plan,
and the period for the exercise of each option cannot exceed 10 years from the
date of its grant.
No option issued under the 1995 LTESO Plan may be exercised unless and
until the optionee has remained in the employ of Parent or its divisions and
subsidiaries for one year from the date of grant, except in the case of death,
as described below. No option issued under the 1995 LTESO Plan will be
transferable by an optionee other than by will or the laws of descent and
distribution. During the lifetime of an optionee, options issued under the 1995
LTESO Plan will be exercisable only by the optionee.
In the event an optionee's employment is terminated with or without cause,
or by the act of the optionee including death, before his or her option has been
in effect for one year, the optionee's right to exercise such option shall
terminate and all rights thereunder shall cease. In the event an optionee's
employment is terminated with or without cause, or by the act of the optionee
including death, after his or her option has been in effect for one year, the
optionee will have three months, except in the case of death as described below,
after such termination within which to exercise such option to the extent it was
exercisable at the date of such termination.
In the event of the death of an optionee, the executor or administrator of
the estate of the optionee or the person or persons to whom the option shall
have been validly transferred by the executor or the administrator pursuant to a
will or the laws of descent and distribution shall have the right for one year
following the date of death to exercise the optionee's option to the extent it
was exercisable at the date of death, but not to exceed the original expiration
date of the option.
At the Effective Time of the Merger, no options will have been issued under
the 1995 LTESO Plan.
Options which may be granted under the 1995 LTESO Plan are not intended to
qualify as "incentive stock options" within the meaning of Section 422A of the
Code. Under current federal tax law, there are no tax consequences to either
Parent or the optionee upon the grant of an option under the 1995 LTESO Plan.
Upon exercise of any such option, the excess of the fair market value of Parent
Class A Common Stock acquired over the exercise price of the option exercised is
taxable to the optionee as compensation income and
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<PAGE> 75
is deductible by Parent. The tax basis for the stock acquired by the optionee is
the exercise price plus such taxable excess. When an optionee disposes of shares
acquired upon exercise of an option issued under the 1995 LTESO Plan, any amount
received in excess of the tax basis of the shares will be treated as capital
gain and will either be long-term or short-term, depending on the holding period
of the shares of Parent Class A Common Stock acquired. The holding period
commences on the date of exercise of the option. If the amount received on sale
is less than the tax basis of the shares, the loss will be treated as long-term
or short-term capital loss, depending upon the holding period of the shares.
The 1994 Blount Executive Stock Option Plan
If approved, the 1994 Blount Executive Stock Option Plan (the "1994 ESO
Plan") will permit Parent to grant options to purchase shares of Parent Class A
Common Stock in accordance with the terms and the 1994 ESO Plan and pursuant to
written stock option agreements. Subject to appropriate adjustment in the event
of certain stock splits, stock dividends of similar distributions with respect
to Parent Class A Common Stock, the number of shares of Parent Class A Common
Stock which may be issued under the 1994 ESO Plan may not exceed 600,000 shares.
The 1994 ESO Plan will be administered by the Committee, no member of which is
eligible to participate in the 1994 ESO Plan. The officers and other key
management employees (approximately 100 persons) of Parent and its divisions and
subsidiaries are eligible to receive options under the 1994 ESO Plan. The
Committee will have sole discretion to determine from among eligible employees
those to whom and the time or times of which options may be granted, the number
of shares of Parent Class A Common Stock to be subject to each option and the
period for the exercise of such options.
The per shares exercise price of Parent Class A Common Stock subject to
each option may not be less than the fair market value of such stock on the date
the option is granted. Options must be granted within 10 years from January 24,
1994, and the period for the exercise of each option cannot exceed 10 years from
the date of grant.
No option issued under the 1994 ESO Plan may be exercised unless and until
the optionee has remained in the employ of Parent or its divisions and
subsidiaries for one year from the date of grant, except in the case of death,
as described below. No option issued under the 1994 ESO Plan will be
transferable by an optionee other than by will or the laws of descent and
distribution. During the lifetime of an optionee, options issued under the 1994
ESO Plan are exercisable only by the optionee.
In the event an optionee's employment is terminated with or without cause,
or by the act of the optionee including death, before his or her option has been
in effect for one year, the optionee's right to exercise such option shall
terminate and all rights thereunder shall cease. In the event an optionee's
employment is terminated with or without cause, or by the act of the optionee
including death, after his or her option has been in effect for one year, the
optionee will have three months, except in the case of death as described below,
after such termination within which to exercise such option to the extent it was
exercisable at the date of such termination.
In the event of death of an optionee, the executor or administrator of the
estate of the optionee or the person or persons to whom the option shall have
been validly transferred by the executor or the administrator pursuant to a will
or the laws of descent and distribution shall have the right for one year
following the date of death to exercise the optionee's option to the extent it
was exercisable at the date of death, but not to exceed the original expiration
date of the option.
At the Effective Time of the Merger, options to purchase 22,500 shares of
Parent Class A Common Stock will be available for grant under the 1994 ESO plan,
and outstanding options to purchase 502,500 shares of Parent Class A Common
Stock will be assumed by Parent.
Options granted the 1994 ESO Plan are not intended to qualify as "incentive
stock options" within the meaning of Section 422A of the Code. Under the current
federal tax law, there are no tax consequences to either Parent or the optionee
upon the grant of an option. Upon exercise of the option, the excess of the fair
market value of Parent Class A Common Stock acquired over the option price is
taxable to the optionee as compensation income and is deductible by Parent. The
tax basis for the stock acquired by the optionee is the
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<PAGE> 76
option price plus such taxable excess. When an optionee disposes of shares
acquired upon exercise of the option, any amount received in excess of the tax
basis of the shares will be treated as capital gain and will either be long-term
or short-term, depending on the holding period of the shares. The holding period
commences on the date of exercise of the option. If the amount received on sale
is less than the tax basis of the shares, the loss will be treated as long-term
or short-term capital loss, depending upon the holding period of the shares.
The 1992 Blount Incentive Stock Option Plan
If approved, the 1992 Blount Incentive Stock Option Plan (the "1992 ISO
Plan") will permit Parent to grant options to purchase shares of Parent Class A
Common Stock in accordance with the terms of the 1992 ISO Plan and pursuant to
written incentive stock option agreements. Subject to appropriate adjustment in
the event of certain stock splits, stock dividends or similar distributions with
respect to Parent Class A Common Stock, the number of shares of Parent Class A
Common Stock which may be issued under the 1992 ISO Plan may not exceed
1,125,000 shares. The 1992 ISO Plan will be administered by the Committee, no
member of which is eligible to receive options under the 1992 ISO Plan. The
officers and other key management employees of Parent and its divisions and
subsidiaries will be eligible to receive options under the 1992 ISO Plan. The
Committee will have sole discretion to determine from among eligible employees
those to whom and the time or times at which options may be granted under the
1992 ISO Plan, the number of shares of Parent Class A Common Stock to be subject
to each option and the period for the exercise of such options.
The per share exercise price of Parent Class A Common Stock subject to each
option granted under the 1992 ISO Plan may not be less than the fair market
value of such stock on the date the option is granted. Options to be issued
pursuant to the 1992 ISO Plan must be granted within 10 years from January 27,
1992, and the period for the exercise of each option granted under the 1992 ISO
Plan cannot exceed 10 years from the date of grant.
No option granted under the 1992 ISO Plan may be exercised unless and until
the optionee has remained in the employ of Parent or its divisions and
subsidiaries for one year from the date of grant, except in the case of death,
as described below. No option granted under the 1992 ISO Plan will be
transferable by an optionee other than by will or the laws of descent and
distribution. During the lifetime of an optionee, an option granted under the
1992 ISO Plan may be exercised only by the optionee.
In the event an optionee's employment is terminated with or without cause,
or by the act of the optionee including death, before his or her option has been
in effect for one year, the optionee's right to exercise such option shall
terminate and all rights thereunder shall cease. In the event an optionee's
employment is terminated with or without cause, or by the act of the optionee
including death, after his or her option has been in effect for one year, the
optionee will have three months, except in the case of death as described below,
after such termination within which to exercise such option to the extent it was
exercisable at the date of such termination.
In the event of the death of an optionee, the executor or administrator of
the estate of the optionee or the person or persons to whom the option shall
have been validly transferred by the executor or the administrator pursuant to a
will or the laws of descent and distribution shall have the right for one year
following the date of death to exercise the optionee's option to the extent it
was exercisable at the date of death, but not to exceed the original expiration
date of the option.
At the Effective Time of the Merger options to purchase 33,450 shares of
Company Class A Common Stock will be available for grant under the 1992 ISO
Plan, and outstanding options to purchase 652,892 shares of Parent Class A
Common Stock will be assumed by Parent.
Options granted under the 1992 ISO Plan are intended to qualify as
"incentive stock options" within the meaning of Section 422A of the Code. Under
current federal tax law, there are no tax consequences to either Parent or the
optionee upon grant of an option under the 1992 ISO Plan. There are no tax
consequences to the optionee upon exercise of an option granted under the 1992
ISO Plan if the shares are not disposed of within two years from the date such
option was granted or within one year from the date such option was exercised.
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Any gain realized upon disposition of the shares acquired pursuant to the option
will be long-term capital gain and any loss will be long-term capital loss. If
long-term capital gain is realized, a portion of such capital gain may, in
certain circumstances, be subject to the alternative minimum tax on tax
preferences. No deduction will be allowed to Parent upon exercise of an option
granted under the 1992 ISO Plan. If the above described holding period
requirements are not met, the gain realized on disposition constitutes ordinary
compensation income to the extent of the lesser of (1) the fair market value of
the stock on the date of exercise minus the exercise price or (2) the amount
realized on disposition minus the exercise price. Any gain in excess of the
amount taxed as ordinary compensation income will be taxed as short-term capital
gain. Parent will be entitled to a compensation deduction in an amount equal to
the optionee's ordinary compensation income.
Benefits to be granted under the Compensation Plans in the future, if any,
can not be determined on the date of this Proxy Statement/Prospectus. For
certain information regarding benefits previously granted under the Compensation
Plans and other plans maintained by the Company, see "Executive Compensation."
71
<PAGE> 78
SELECTED FINANCIAL DATA OF PARENT AND THE COMPANY
The following tables set forth certain selected historical consolidated
financial information for Parent and the Company. Selected financial data for
the five most recent fiscal years are derived from the audited consolidated
financial statements of Parent for the fiscal years ended the last day of
February 1995, 1994 and 1993, the unaudited consolidated financial statements of
Parent for the fiscal years ended the last day of February 1992 and 1991, and
the audited consolidated financial statements of the Company. The selected
financial data for the three months ended May 31, 1995 and 1994 are derived from
the unaudited consolidated financial statements of Parent and the Company. This
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations of Parent included
elsewhere herein and the consolidated financial statements of Parent and the
Company, and the related notes thereto, included in documents included elsewhere
herein or incorporated herein by reference. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PARENT" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
PARENT AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED LAST DAY OF FEBRUARY ENDED MAY 31,
---------------------------------------------------------- --------------------
1995 1994 1993 1992 1991 1995 1994
--------- -------- -------- --------- -------- -------- --------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales....................... $ 588,419 $488,045 $426,492 $ 382,352 $355,012 $164,189 $145,684
Operating income from
segments.................. 101,887 73,631 43,404 25,372 28,384 30,446 22,550
Income (loss) from
continuing operations
before minority interest,
extraordinary gain and
cumulative effect of
accounting changes........ 40,731 21,568 10,258 (5,490) (357) 13,823 9,845
Minority interest in income
of consolidated
subsidiary................ 24,967 8,401 4,116 386 1,267 8,762 5,504
Net income.................. 15,764 2,851 10,321 1,650 547 5,061 4,341
Net income (loss) per
share..................... 1,485.01 117.97 916.48 (112.32) (80.00) 485.44 415.68
BALANCE SHEET DATA
Total assets................ $ 520,792 $499,648 $459,379 $ 479,379 $511,651 $502,604 $495,245
Working capital............. 123,295 105,108 58,222 70,261 97,662 140,571 108,227
Long-term debt.............. 98,254 106,151 82,046 126,124 145,177 95,670 100,262
Total debt.................. 106,045 112,249 94,818 151,417 165,586 101,281 107,857
Minority Interest........... 124,589 100,769 87,001 84,362 86,591 132,935 106,293
Shareholders' equity........ 83,124 70,239 69,608 60,826 62,016 87,526 73,661
OTHER DATA
Common share dividends per
share..................... $ 73.66 $ 40.16 $ 35.36 $ 54.28 $ 26.52 $ 16.01 $ 13.94
Weighted average common
shares outstanding........ 9,375 9,375 9,375 9,375 9,375 9,375 9,375
</TABLE>
72
<PAGE> 79
THE COMPANY AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED LAST DAY OF FEBRUARY ENDED MAY 31,
-------------------------------------------------------------- -----------------------
1995 1994 1993 1992 1991 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales..................... $ 588,419 $ 488,045 $ 426,492 $ 382,352 $ 355,012 $ 164,189 $ 145,684
Operating income from
segments................ 101,887 73,631 43,404 25,372 28,384 30,446 22,550
Income (loss) from
continuing operations
before extraordinary
gain and cumulative
effect of accounting
changes................. 40,090 24,396 11,888 (4,295) 644 14,279 9,008
Net income(1)............. 40,090 14,080 7,239 683 2,242 14,279 9,008
Per share:
Income (loss) from
continuing operations
before extraordinary
gain and cumulative
effect of accounting
changes............... 3.10 1.92 .97 (.35) .06 1.10 .70
Net income(1)............. 3.10 1.11 .59 .06 .19 1.10 .70
BALANCE SHEET DATA
Total assets.............. $ 517,788 $ 492,901 $ 447,151 $ 466,243 $ 496,319 $ 499,768 $ 490,134
Working capital........... 122,105 104,346 58,340 63,671 86,911 137,805 106,697
Long-term debt............ 99,754 107,651 82,046 105,654 124,052 97,170 101,762
Total debt................ 107,545 109,733 88,143 130,846 144,358 102,781 108,395
Shareholders' equity...... 203,067 166,853 155,071 151,129 155,409 216,269 174,960
OTHER DATA
Per common share dividends
Class A................. $ .5175 $ .4625 $ .45 $ .45 $ .45 $ .1425 $ .125
Class B................. .4675 .4125 .40 .40 .40 .13 .1125
Weighted average common
shares outstanding...... 12,931,020 12,730,733 12,283,592 11,958,557 12,000,207 12,954,389 12,853,894
</TABLE>
- ---------------
(1) Includes income of $6,014 ($.50 per share) representing the cumulative
effect of adopting Statement of Financial Accounting Standards ("SFAS") No.
106 and SFAS No. 109 in 1992 and an extraordinary gain of $1,205 ($.10 per
share) on repurchase of debt in 1991.
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<PAGE> 80
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF PARENT
The discussion contained in this section relates to the results of
operations and other financial information of Parent and the Company on a
consolidated basis and should be read in conjunction with the Consolidated
Financial Statements of Parent, and the related notes, included elsewhere in
this Proxy Statement/Prospectus.
Set forth below is certain segment financial information concerning
Parent's businesses. For additional information, see Note 10 of Notes to
Consolidated Financial Statements of Parent.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
THE LAST DAY OF FEBRUARY
----------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Outdoor Products......................................... $268,110 $234,502 $213,196
Industrial and Power Equipment........................... 207,556 162,026 128,912
Sporting Equipment....................................... 112,753 91,517 84,384
-------- -------- --------
Total(1)......................................... $588,419 $488,045 $426,492
======== ======== ========
Income from Operations:
Outdoor Products......................................... $ 49,583 $ 33,974 $ 20,611
Industrial and Power Equipment........................... 32,987 24,503 12,843
Sporting Equipment....................................... 19,317 15,154 9,950
-------- -------- --------
Operating income from segments(2)..................... 101,887 73,631 43,404
Corporate Overhead......................................... 25,337 29,752 14,486
-------- -------- --------
Income from operations................................ $ 76,550 $ 43,879 $ 28,918
======== ======== ========
</TABLE>
- ---------------
(1) Includes sales derived from operations outside the United States of $95.1
million, $104.7 million and $108.1 million and export sales of $94.3
million, $54.5 million and $39.9 million in 1995, 1994 and 1993. As a
result of a contract manufacturing agreement with a subsidiary, sales of
approximately $35 million, recorded as foreign sales in prior years, are
classified as export sales in 1995. Had it not been for the implementation
of this contract manufacturing agreement, foreign sales would have been
$130 million in 1995, an increase of 24% over 1994. The implementation of
contract manufacturing results in the reclassification of certain sales
from foreign to U.S. export but has no effect on total sales.
(2) Includes income from operations derived from outside the United States of
$9.9 million, $20.9 million and $18.8 million. Income from operations
derived from outside the U.S. in 1995 reflects the implementation of the
contract manufacturing agreement. Had it not been for the implementation of
this agreement, income derived from operations outside the U.S. in 1995
would have been $22.1 million, an increase of 6% from 1994. The
implementation of contract manufacturing results in the reclassification of
certain income from outside to within the U.S. but has no effect on total
income.
SUMMARY
In fiscal 1995, consolidated sales and revenues increased 20.6% from $488.0
million to $588.4 million and income from operations, on a consolidated basis
increased 74% to $76.6 million from $43.9 million in fiscal 1994 as each segment
continued its trend of strong performance with improved sales and operating
income aided by favorable economic conditions. The Outdoor Products segment,
which manufactures saw chain and related accessories and riding lawn mowers,
benefitted substantially from increased volume and favorable foreign currency
exchange rates. The Industrial and Power Equipment segment, which manufactures
equipment for timber harvesting and log loading, benefitted substantially from
improved conditions in the forest products industry, improvements at its Gear
Products, Inc. unit, and the contribution of CTR Manufacturing, Inc. which was
acquired on April 28, 1994. The Sporting Equipment segment which manufactures
small arms ammunition, reloading equipment and components, gun care and shooting
sports accessories, and industrial powerloads, benefitted significantly from
increased demand generated by uncertain-
74
<PAGE> 81
ties regarding legislative activities during the year. Fiscal 1995 segment
operating income increased 38.4% to $101.9 million from $73.6 million in fiscal
1994. All segments contributed to this operating income improvement. Outdoor
Products increased 45.9% from $34.0 million in fiscal 1994 to $49.6 million in
fiscal 1995. Industrial and Power Equipment was up 34.6% from fiscal 1994's
$24.5 million to fiscal 1995's $33.0 million. Sporting Equipment increased 27.5%
from $15.2 million in fiscal 1994 to $19.3 million in fiscal 1995.
Parent and the Company, on a consolidated basis, continue to be in a strong
financial position. During fiscal 1995 a $60 million revolving credit agreement
was replaced with a new $100 million revolving credit agreement. No amounts were
outstanding at any time during fiscal 1995 under this agreement. To fund future
capital expenditures of certain operations and take advantage of favorable
interest rates, $11.8 million of industrial development revenue bond
arrangements were executed, and $10.1 million was unexpended at February 28,
1995. In fiscal 1995, $20 million of the 9% senior subordinated notes due in
2003 with an original principal amount of $100 million were repurchased. Total
capitalization is $189.2 million, consisting of $83.1 million of equity and
$106.0 million of debt for a debt to equity ratio of 1.28 to 1. Net debt which
is total debt less cash, cash equivalents and unexpended revenue development
bond proceeds is 27.8% of total capitalization. Return on equity improved to
20.6% in fiscal 1995 from 1994's 4.1%.
OPERATING RESULTS
Three Months Ended May 31, 1995 Compared to Three Months Ended May 31, 1994
Record first quarter sales for the three months of fiscal 1996 ended May
31, 1995 of $164.2 million were reported compared to $145.7 million for the
first quarter of fiscal 1995. Net income for the first quarter of fiscal 1996
was $5.1 million ($485.44 per share) compared to net income of $4.3 million
($415.68 per share) for the comparable period of fiscal 1995. These operating
results reflect continued strong performance by each of the manufacturing
segments. The principal reasons for these results and the status of the
financial condition are set forth below and should be read in conjunction with
the 1995 Consolidated Financial Statements.
The total backlog at May 31, 1995 was $125.0 million compared to $134.4
million at February 28, 1995. Orders received increased during the first quarter
of this year over last year to $170 million versus $163 million and production
levels increased, as reflected in the higher shipping levels.
Fiscal 1995 Compared to Fiscal 1994
During fiscal 1995, record sales, operating income from segments and income
from continuing operations were achieved. Each operating segment continued its
trend of strong performance with improved sales and operating income in fiscal
1995 as compared to fiscal 1994. Fiscal 1995 operating income from segments of
$101.9 million improved 38% from fiscal 1994 operating income from segments of
$73.6 million.
Sales in fiscal 1995 were $588.4 million compared to $488.0 million in
fiscal 1994. Income from continuing operations before minority interest improved
to $40.7 million in fiscal 1995, an 89% increase over fiscal 1994's $21.6
million. Fiscal 1994 included a loss of $10.3 million from discontinued
operations.
Selling, general and administrative expenses were 21% of sales in fiscal
1995 compared to 23% of sales in fiscal 1994. Selling, general and
administrative expenses include corporate overhead expenses of $7.1 million in
1995 and $6.0 million in 1994 for anticipated litigation and settlement costs
related to the sale of a former subsidiary and $2.1 million in 1995 and $6.2
million in 1994 in charitable contributions.
Total backlog at February 28, 1995, was $134.4 million compared to $147.1
million at February 28, 1994. The backlog at February 28, 1994, was inordinately
high as production lagged the market demand.
Fiscal 1994 Compared to Fiscal 1993
Sales in fiscal 1994 were $488.0 million compared to $426.5 million in
fiscal 1993. Income from continuing operations before minority interest was
$21.6 million in fiscal 1994, double the $10.3 million in fiscal 1993. The
improved sales and operating results reflected continued strong performance by
each of the
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<PAGE> 82
business segments. Fiscal 1994 and fiscal 1993 net income before minority
interest included losses of $10.3 million and income of $4.2 million,
respectively, from discontinued operations.
Selling, general and administrative expenses increased by $15.9 million in
fiscal 1994, principally as a result of accruals for expected legal costs
related to the sale of a former subsidiary, management incentive plans resulting
from the improved earnings of the Company and an increase in the stock price of
the Company's Common Stock, and a charitable donation of shares of the Common
Stock of the Company.
In February 1994, a plan was adopted to discontinue its construction
business (see Note 4 of Notes to Consolidated Financial Statements) through the
orderly completion and close-out of principal domestic and foreign construction
projects and the sale of Pozzo Construction Company ("Pozzo"), a subsidiary
headquartered in Los Angeles, California. The sale of Pozzo was concluded during
the first quarter of fiscal 1996. In fiscal 1994, an after-tax loss of $650
thousand was provided for disposal of the construction segment. The results of
construction operations and Lindsay Wire (see Note 4 of Notes to Consolidated
Financial Statements) are classified as discontinued operations in the
consolidated statements of income.
SEGMENTS
Three Months Ended May 31, 1995 Compared to Three Months Ended May 31, 1994
Sales for the Outdoor Products segment for the first three months of fiscal
1996 were $76.7 million compared to $68.5 million during the first three months
of fiscal 1995. Operating income increased by 58% to $15.9 million during the
first quarter of fiscal 1996 from $10.1 million in the comparable period of the
prior fiscal year. The sales and operating income increases were principally
attributable to a higher volume of saw chain and saw bars sold in foreign
markets by the Oregon Cutting Systems Division and a 16% increase in the volume
of riding lawn mowers shipped by Dixon Industries, Inc.
Sales for the Industrial and Power Equipment segment were $57.8 million
during the first quarter of fiscal 1996 compared to $52.3 million during the
same period of fiscal 1995. Operating income increased to $9.9 million during
the first three months of fiscal 1996 from $7.8 million during the comparable
period of fiscal 1995. The improved operating results were principally due to
the inclusion of CTR Manufacturing, Inc., acquired on April 28, 1994, for the
full quarter in the current year and improved sales and operating income by the
Gear Products, Inc. subsidiary, primarily due to higher volume.
Sales for the Sporting Equipment segment increased to $29.6 million in the
first three months of fiscal 1996 from $24.9 million in the comparable period of
fiscal 1995, while operating income was flat at $4.7 million during the first
quarter of fiscal 1996. These results reflect lower margins due to reduced
average selling prices to maintain market share and some increase in product
costs, and a small loss from the Ram-Line unit acquired late in fiscal 1995.
Fiscal 1995 Compared to Fiscal 1994
The Outdoor Products segment recorded an excellent performance with record
levels of sales and operating income in fiscal 1995. Sales for the Outdoor
Products segment increased $33.6 million in fiscal 1995 to $268.1 million
compared to $234.5 million during fiscal 1994. Operating income increased $15.6
million during fiscal 1995 to $49.6 million from $34.0 million in fiscal 1994.
The improved results for this segment were primarily due to an increase in sales
and operating income of $25.4 million and $12.0 million, respectively, at the
Oregon Cutting Systems Division ("Oregon"). This was primarily due to an $8.8
million increase in the sales volume of saw chain and a $4.4 million increase in
the sales volume of saw bars, Oregon's two principal products, and $2.9 million
from higher average selling prices. A significant part of Oregon's operations
are conducted in foreign countries, and, as a result, fluctuations in exchange
rates impact the amount of reported sales, operating margins and the amount of
foreign exchange adjustments reflected in
76
<PAGE> 83
income. During fiscal 1995, Oregon's approximate sales, costs and operating
expenses denominated in local foreign currencies in Canada, Europe and Japan
were as follows (in millions of U.S. dollars):
<TABLE>
<CAPTION>
CANADA EUROPE JAPAN
------ ------ -----
<S> <C> <C> <C>
Sales........................................... $ 9.8 $33.9 $7.3
Costs and operating expenses.................... 36.2 13.1 1.9
</TABLE>
The remaining sales and costs for these locations are principally denominated in
U.S. dollars. During fiscal 1995, exchange rates in Canada, Europe and Japan
were favorable to Oregon's operating results, adding $3.7 million to operating
income, as exchange rates in Europe and Japan strengthened compared to the U.S.
dollar while the Canadian dollar weakened in comparison to the U.S. dollar. The
Company is unable to forecast the direction of future exchange rates with
certainty. Adverse changes could have a negative effect on Oregon's operating
results. Oregon has manufacturing facilities in Brazil whose operations have
historically been significantly affected by high inflation, currency devaluation
and resulting governmental policies. Official currency exchange rates stabilized
in Brazil during the last half of fiscal 1995. Operating income from Brazil was
$2.4 million in fiscal 1995 on sales of $16.5 million compared to $749 thousand
in fiscal 1994 on sales of $12.7 million. Fiscal 1995 sales at other units of
the Outdoor Products segment, principally Dixon Industries, Inc., were up by
$8.2 million to $42.0 million compared to $33.8 million in fiscal 1994,
principally as a result of higher average selling prices which added $.8 million
and a 26% increase in the sales volume of riding lawn mowers which added $7.9
million to fiscal 1995 sales. Operating income increased $3.7 million in fiscal
1995 to $7.0 million from fiscal 1994's $3.3 million, principally from the
increased volume. The current demand for Oregon's products continues at high
levels; therefore, another good sales year is expected in fiscal 1996. Also
expected is continued strong sales growth in fiscal 1996 for the riding lawn
mower business.
The upward trend of results by the Industrial and Power Equipment segment
continued during fiscal 1995. Over a three year span, this segment's sales have
more than doubled and operating income has improved to a record $33.0 million
from an approximate break-even level in fiscal 1992. Sales for the Industrial
and Power Equipment segment were $207.6 million in fiscal 1995, an increase of
$45.6 million compared to $162.0 million during the prior fiscal year. Operating
income was up $8.5 million to $33.0 million from $24.5 million in fiscal 1994.
The fiscal 1995 improvement in sales resulted principally from increases of
$23.1 million in the sales volume of forestry and industrial equipment sold,
$2.5 million from Gear Products, Inc., increased average selling prices added
$7.1 million and $12.9 million from CTR Manufacturing, Inc. acquired on April
28, 1994 (see Note 4 of Notes to Consolidated Financial Statements). The
increase in operating income was primarily attributable to the increase in sales
partially offset by higher warranty expenses. Additionally, export sales for
this segment continued to grow in fiscal 1995, increasing to $26.6 million from
$15.2 million for fiscal 1994. The continued emphasis on expanding international
opportunities coupled with the expected strong demand for this segment's
products by its principal market, the forest products industry, point to another
successful year in fiscal 1996.
For the second consecutive year, the Sporting Equipment segment experienced
strong growth in both sales and operating income, with each increasing to record
levels in fiscal 1995. Operating income increased by $4.2 million in fiscal 1995
to $19.3 million as compared to $15.2 million in fiscal 1994 and has almost
doubled from fiscal 1993's $10.0 million. For fiscal 1995, sales increased $21.2
million to $112.8 million compared to $91.5 million in fiscal 1994. These
improved results reflect the additional margin on a $16.7 million sales increase
attributable to higher volume, principally of ammunition, reloading equipment,
primers and percussion caps, partially offset by a charge of approximately $4.3
million for an environmental matter at this segment's Lewiston, Idaho facility
(see Note 8 of Notes to Consolidated Financial Statements). In November 1994,
this segment's product line was expanded through the acquisition of the
operating assets of Ram-Line, Inc. (see Note 4 of Notes to Consolidated
Financial Statements). The Sporting Equipment segment is currently encountering
a softening of the exceptionally strong demand experienced in fiscal 1995.
Fiscal 1994 Compared to Fiscal 1993
Sales for the Outdoor Products segment in fiscal 1994 increased $21.3
million to $234.5 million compared to $213.2 million during fiscal 1993.
Operating income increased $13.4 million to $34.0 million during fiscal
77
<PAGE> 84
1994 from $20.6 million in fiscal 1993. The improved results for this segment
were primarily due to increased sales and operating income of $15.3 million and
$11.6 million, respectively, at Oregon, reflecting a $12.3 million increase in
the sales volume and $2.9 million from reduced unit costs of saw chain, Oregon's
principal product. Operating income from operations in Brazil was $749 thousand
in fiscal 1994 compared to $384 thousand in fiscal 1993. Sales at other units of
the Outdoor Products segment were up by $6.0 million to $33.8 million, while
operating income increased $1.8 million to $3.3 million compared to $27.8
million in sales and $1.6 million operating income in fiscal 1993. This
improvement is principally the result of a $5.2 million increase in the sales
volume of riding lawn mowers and higher average selling prices.
Sales for the Industrial and Power Equipment segment increased $33.1
million in fiscal 1994 to $162.0 million from $128.9 million during fiscal 1993.
Operating income increased $11.7 million to $24.5 million during fiscal 1994
from $12.8 million during fiscal 1993. Demand for this segment's products
remained high as the aggregate volume of timber harvesting and industrial
tractor and loader units sold during fiscal 1994 increased by $14.6 million over
the prior fiscal year. The improvement in operating income was principally due
to this increase in volume, improved parts sales and increased average selling
prices.
Sales for the Sporting Equipment segment were up by $7.1 million during
fiscal 1994 to $91.5 million compared to $84.4 million in fiscal 1993. Operating
income increased $5.2 million in fiscal 1994 to $15.2 million from $10.0 million
during fiscal 1993. The increases in sales and operating income were principally
due to improved margins on approximately $5 million higher sales volume and $1.4
million income recognized in fiscal 1994 upon finalizing a license and technical
assistance agreement with a foreign company. This agreement is expected to lead
to future product sales as well as royalties.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
May 31, 1995
At May 31, 1995, there were no amounts outstanding under the $100 million
revolving credit agreement or the $25 million receivable sale agreement. The
total capitalization at May 31, 1995 consists of $95.7 million long-term debt
and equity of $87.5 million for a long-term debt to equity ratio of 1.1 to 1 as
compared to a ratio of 1.2 to 1 at February 28, 1995. At May 31, 1995, 9%
subordinated notes in the principal amount of $78.6 million maturing in 2003
were outstanding.
Working capital was $140.6 million at May 31, 1995 compared to $123.3
million at February 28, 1995. The increase resulted principally from improved
earnings. Operating cash flows for the first three months of fiscal 1996 were
$2.3 million compared to $7.6 million in the first three months of fiscal 1995.
This decrease reflects higher receivables at each manufacturing segment
principally due to higher sales and marketing programs. Cash flows from
discontinued construction operations were substantially offset by higher
corporate expenditures due to the timing of management incentive payments,
higher charitable contributions which were accrued in the prior year and
increased payments to employee benefit plans. Restrictions on the Company's
ability to pay cash dividends are contained in the indenture related to the 9%
subordinated notes and in certain financial covenants of the revolving credit
agreement. Under the most restrictive requirement, retained earnings of
approximately $45.7 million were available for the payment of dividends at May
31, 1995.
February 28, 1995
Parent and the Company, on a consolidated basis, continue to be in a strong
financial position. Growth has been funded entirely through cash generated by
operations, and recent acquisitions have been made through use of cash reserves.
In fiscal 1994, 9% senior subordinated notes ("the 9% notes") due in 2003 in the
principal amount of $100 million were issued and $73.6 million 12% subordinated
notes were retired. In fiscal 1995 and 1994, approximately $20 million and $1.5
million of the 9% notes were repurchased and retired. Since issuing the 9%
notes, the sale of receivables was discontinued under a $25 million receivable
sale agreement with a major bank. In fiscal 1995, (i) a $60 million revolving
credit agreement was replaced with a new $100 million revolving credit
agreement; (ii) the term of the $25 million receivable sale agreement was
extended until August 1995 and plans are to negotiate a replacement agreement;
and (iii) $11.8 million of industrial development revenue bond arrangements were
executed. At February 28, 1995, no amounts were
78
<PAGE> 85
outstanding under the $100 million revolving credit agreement. See Note 3 of
Notes to Consolidated Financial Statements for the year ended February 28, 1995
for a description of the terms and conditions of the 9% notes, the $100 million
revolving credit agreement, the receivable sale agreement and the industrial
development revenue bonds.
Working capital was $123.3 million at February 28, 1995, compared to $105.1
million at February 28, 1994. The principal reason for this increase was
improved earnings in fiscal 1995. Receivables decreased to $130.7 million from
$134.5 million principally due to a $13.6 million reduction in receivables of
the discontinued construction business (whose sales and revenues are not
included in the income statement, but are reflected in the notes to the
financial statements) partially offset by increases in continuing operations of
$9.8 million reflecting the higher sales levels. Operating cash flows for fiscal
1995 were $34.7 million compared to $22.2 million in fiscal 1994 and $68.9
million in fiscal 1993. The increased cash flows from operating activities for
fiscal 1995 resulted principally from the net income before minority interest
increase of $29.5 million partially offset by cash used for residual
construction operations, the settlement of litigation initiated in a prior year
and an increase in inventories, primarily due to higher demand. The reduction in
operating cash flows in fiscal 1994 as compared to fiscal 1993 was primarily due
to the reduced sales of receivables under the receivable sale agreement, higher
income tax payments and an increase in inventories in the fourth quarter of
fiscal 1994 to meet expected demand early in fiscal 1995. Cash and cash
equivalent balances were $43.4 million at February 28, 1995, compared to $54.1
million at February 28, 1994, as operating cash flows were exceeded by cash
expenditures to acquire CTR Manufacturing, Inc. and the operating assets of
Ram-Line, Inc., to repurchase approximately $20 million of the 9% notes and to
pay dividends (see Notes 3 and 4 of Notes to Consolidated Financial Statements).
Management believes that its operating cash flows, working capital and unused
credit facilities will provide both short-term and long-term liquidity.
Additionally, there is approximately $10.1 million in unexpended proceeds from
industrial development revenue bonds which are available to fund future capital
expenditures of certain operations.
Parent and its operations are subject to various environmental laws and
regulations. See Note 8 of Notes to Consolidated Financial Statements for a
description of certain environmental matters.
Management believes that the impact of domestic inflation has not been
material in recent years as inflation rates have remained low.
79
<PAGE> 86
PRINCIPAL STOCKHOLDERS OF PARENT
Parent is authorized under its Certificate of Incorporation to issue
60,000,000 shares of Parent Class A Common Stock and 14,000,000 shares of Parent
Class B Common Stock. Immediately prior to the Effective Time of the Merger,
Parent will have issued and outstanding 3,112,572 shares of Parent Class A
Common Stock and 4,204,848 shares of Parent Class B Common Stock. The following
table sets forth information as of such time with respect to the beneficial
ownership of each class of Parent Common Stock by (i) each person who will be
the beneficial owner of more than 5% of the outstanding shares of each class of
Parent Common Stock, (ii) each director of Parent, (iii) each of the executive
officers of Parent, and (iv) all executive officers and directors of Parent as a
group. Management of Parent knows of no other persons, other than those set
forth in the following table, who will own beneficially more than 5% of the
outstanding shares of either class of Parent Common Stock as of such time. See
"THE MERGER -- Background of the Merger; -- Reasons of Company and Parent for
Merger; -- Recommendation of the Board of Directors of Parent."
<TABLE>
<CAPTION>
PARENT CLASS A COMMON STOCK PARENT CLASS B COMMON STOCK
OUTSTANDING OUTSTANDING
----------------------------- -----------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS OWNERSHIP(1) CLASS
- -------------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Winton M. Blount(2)................... 1,446,072 46.4% 4,204,848 100%
4520 Executive Park Drive
Montgomery, Alabama 36116
The Blount Holding Company, L.P....... 1,446,072 46.4 4,204,848 100
4520 Executive Park Drive
Montgomery, Alabama 36116
BHP, Inc.(2).......................... 1,446,072 46.4 4,204,848 100
4520 Executive Park Drive
Montgomery, Alabama 36116
Winton M. Blount III(3)............... 333,300 10.7 0 *
4520 Executive Park Drive
Montgomery, Alabama 36116
Samuel R. Blount(3)................... 333,300 10.7 0 *
4520 Executive Park Drive
Montgomery, Alabama 36116
Thomas A. Blount(3)................... 333,300 10.7 0 *
4520 Executive Park Drive
Montgomery, Alabama 36116
Katherine Blount Miles(3)............. 203,357 6.5 0 *
4520 Executive Park Drive
Montgomery, Alabama 36116
Joseph W. Blount(3)................... 333,300 10.7 0 *
4520 Executive Park Drive
Montgomery, Alabama 36116
Teresa P. Rachal...................... 0 * 0 *
All directors and executive officers
of Parent as a group (one person)... 1,446,072 46.4 4,204,848 100
</TABLE>
- ---------------
* Less than one percent (1%).
(1) The information contained in this table reflects "beneficial ownership" as
defined in Rule 13d-3 under the Exchange Act, including securities such
person has the right to acquire within sixty days of the date hereof,
except information concerning Parent Class A Common Stock does not include
shares of Parent Class A Common Stock which may be acquired upon the
conversion of Parent Class B Common Stock.
80
<PAGE> 87
(2) Includes 1,446,072 shares of Parent Class A Common Stock and 4,204,848
Shares of Parent Class B Common Stock owned by The Blount Holding Company,
L.P. The sole general partner of the Blount Partnership is BHP, Inc., a
Delaware corporation controlled by Winton M. Blount. As a result of his
control of BHP, Inc., and pursuant to the terms of the limited partnership
agreement of the Blount Partnership, Mr. Blount has sole voting and
dispositive powers over the shares of Parent Common Stock owned by the
Blount Partnership.
(3) Does not include shares of Parent Common Stock held by the Blount
Partnership. Although Winton M. Blount III, Samuel R. Blount, Thomas A.
Blount, Katherine Blount Miles, and Joseph W. Blount are limited partners
of the Blount Partnership, BHP, Inc., a corporation controlled by Winton M.
Blount, has sole voting and dispositive power over the shares of Parent
Common Stock held by the Blount Partnership.
The following table sets forth pro forma information as expected to be in
effect immediately following the Effective Time of the Merger, based upon stock
ownership as of September 20, 1995, with respect to the beneficial ownership of
each class of Parent Common Stock by (i) each person who will at such time be
the beneficial owner of more than 5% of the outstanding shares of any class of
Parent Common Stock, (ii) each present director of Parent, (iii) each of the
present executive officers of Parent, and (iv) all present executive officers
and directors of Parent as a group:
<TABLE>
<CAPTION>
PARENT CLASS A COMMON STOCK PARENT CLASS B COMMON STOCK
PRO FORMA FOLLOWING MERGER PRO FORMA FOLLOWING MERGER
----------------------------- -----------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS OWNERSHIP(1) CLASS
- -------------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Winton M. Blount (2)(3)............... 1,473,574 11.2% 4,973,367 83.9%
4520 Executive Park Drive
Montgomery, Alabama 36116
The Blount Holding Company, L.P....... 1,446,072 11.0 4,204,848 71.0
4520 Executive Park Drive
Montgomery, Alabama 36116
BHP, Inc.(2).......................... 1,446,072 11.0 4,204,848 71.0
4520 Executive Park Drive
Montgomery, Alabama 36116
United States Trust Company of New 1,568,396 12.0 0 *
York(4).............................
114 West 47th Street
New York, New York 10036
Winton M. Blount III(5)............... 333,379 2.5 4,551 *
4520 Executive Park Drive
Montgomery, Alabama 36116
Samuel R. Blount(5)(6)................ 466,192 3.6 79,980 1.3
4520 Executive Park Drive
Montgomery, Alabama 36116
Thomas A. Blount(5)................... 364,702 2.8 131,296 2.2
4520 Executive Park Drive
Montgomery, Alabama 36116
Katherine Blount Miles(5)(6).......... 319,057 2.4 196,729 3.3
4520 Executive Park Drive
Montgomery, Alabama 36116
</TABLE>
81
<PAGE> 88
<TABLE>
<CAPTION>
PARENT CLASS A COMMON STOCK PARENT CLASS B COMMON STOCK
PRO FORMA FOLLOWING MERGER PRO FORMA FOLLOWING MERGER
----------------------------- -----------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS OWNERSHIP(1) CLASS
- -------------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Joseph W. Blount(5)................... 347,680 2.7 130,911 2.2
4520 Executive Park Drive
Montgomery, Alabama 36116
Teresa P. Rachal...................... 0 * 0 *
All directors and executive officers
of Parent as a group (one person)... 1,473,574 11.2 4,973,367 83.9
</TABLE>
- ---------------
* Less than one percent (1%).
(1) The information contained in this table reflects "beneficial ownership" as
defined in Rule 13d-3 under the Exchange Act, including securities such
person has the right to acquire within sixty days of the date hereof,
except information concerning Parent Class A Common Stock does not include
shares of Parent Class A Common Stock which may be acquired upon the
conversion of Parent Class B Common Stock.
(2) Includes 1,446,072 shares of Parent Class A Common Stock and 4,204,848
Shares of Parent Class B Common Stock owned by the Blount Holding Company,
L.P. The sole general partner of the Blount Partnership is BHP, Inc., a
Delaware corporation controlled by Winton M. Blount. As a result of his
control of BHP, Inc., and pursuant to the terms of the limited partnership
agreement of the Blount Partnership, Mr. Blount has sole voting and
dispositive powers over the shares of Parent Common Stock owned by the
Blount Partnership.
(3) Includes 2,949 shares of Parent Class A Common Stock and 2,949 shares of
Parent Class B Common Stock held in trust for the benefit of Mr. Blount's
sister, as to which shares he disclaims any beneficial ownership, and 1,359
shares of Parent Class A Common Stock and 1,359 shares of Parent Class B
Common Stock owned by Mr. Blount's spouse.
(4) United States Trust Company of New York serves as the Master Trustee (the
"Master Trustee") for the Company's 401(k) Retirement Savings Plan. The
shares listed are held for the benefit of the participants in that plan.
Under the terms of the plan, as amended, the Master Trustee is required to
vote the allocated shares held by the plan in accordance with the
instructions received from plan participants and to dispose of the
allocated shares in connection with tender offers in accordance with
directions received from plan participants. If no voting instructions or
invalid voting instructions are received with respect to allocated shares,
the Master Trustee is required to vote such shares in the same manner and
in the same proportions as the allocated shares with respect to which the
Master Trustee received valid voting instructions are voted. Also, with
respect to allocated shares, if no directions or invalid directions are
received in connection with tendering shares, the Master Trustee is
required to treat such allocated shares as if plan participants instructed
the Master Trustee not to dispose of such shares. With respect to
unallocated shares, the Master Trustee is required to vote such shares, or
dispose of such shares in connection with tender offers, in the same manner
and in the same proportion as the allocated shares with respect to which
the Master Trustee received valid voting instructions or directions are
voted or disposed. United States Trust Company of New York, as the Master
Trustee, expressly denies beneficial ownership in the shares listed.
(5) Does not include shares of Parent Common Stock held by the Blount
Partnership. Although Winton M. Blount III, Samuel R. Blount, Thomas A.
Blount, Katherine Blount Miles, and Joseph W. Blount are limited partners
of the Blount Partnership, BHP, Inc., a corporation controlled by Winton M.
Blount, has sole voting and dispositive power over the shares of Parent
Common Stock held by the Blount Partnership.
(6) Includes shares held by such person as custodian for the children of such
person.
Winton M. Blount presently owns all of the capital stock of BHP, Inc., the
general partner of the Blount Partnership, and in accordance with the present
terms of the partnership agreement of the Blount Partnership, will direct the
voting and disposition of shares of Parent Common Stock which will be owned by
the Blount
82
<PAGE> 89
Partnership following the Effective Time of the Merger. The partnership
agreement of the Blount Partnership, which may be amended at any time and from
time to time by requisite vote of the partners, presently provides that, in the
event there were to be a "change of control" (defined as the acquisition by a
person who previously owned no stock of BHP, Inc. of 20% or more of the total
voting power of all classes of the stock of such corporation) other than by
acquisition of stock of BHP, Inc. by gift, devise, bequest, or intestate
succession, then, in addition to causing a liquidation event of the Blount
Partnership, which would result in the distribution, over time, of the Parent
Common Stock owned by the Blount Partnership to the partners thereof, all Parent
Class B Common Stock owned by the Blount Partnership would be converted promptly
into Parent Class A Common Stock. In connection with the formation of the Blount
Partnership, the holders of the Class A interests in the Blount Partnership, who
are presently the children of Winton M. Blount, are being granted an option,
which is also subject to amendment at any time by the parties thereto, to
acquire the outstanding capital stock of BHP, Inc., which will be exercisable
only during certain specified periods, the first of which begins three years
after Winton M. Blount's death. In the event that such optionees were to
exercise such option to acquire the capital stock of BHP, Inc., such acquisition
would result in a change of control of BHP, Inc. and the conversion of all
Parent Class B Common Stock owned by the Blount Partnership into Parent Class A
Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference herein:
(i) The Company's Annual Report on Form 10-K for the year ended
February 28, 1995 (including therein the Company's Proxy Statement for its
Annual Meeting of Stockholders held on June 26, 1995) (Commission File No.
1-7002); and
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1995 (Commission File No. 1-7002).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to final adjournment of the Special Meeting, shall be deemed to be
incorporated by reference into this Proxy Statement/Prospectus from the date of
the filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
Copies of all documents with respect to the Company incorporated by
reference (not including exhibits to the documents incorporated by reference
unless such exhibits are specifically incorporated into the documents
incorporated by reference) will be provided without charge to each person to
whom a copy of this Proxy Statement/Prospectus is delivered upon written or oral
request. Requests for such copies should be directed to D. Joseph McInnes, 4520
Executive Park Drive, Montgomery, Alabama 36116-1602, telephone number (334)
244-4000.
LEGAL MATTERS
Certain legal matters in connection with Parent Common Stock being offered
hereby will be passed upon by Bradley, Arant, Rose & White, 2001 Park Place,
Suite 1400, Birmingham, Alabama, counsel for Parent. Bradley, Arant, Rose &
White has been routinely engaged to perform legal services by the Company,
Parent and members of the Blount Family since the formation of the Company.
83
<PAGE> 90
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company and subsidiaries as of the last day of February 1995 and 1994 and
for each of the three years in the period ended February 28, 1995 incorporated
by reference in this Proxy Statement/Prospectus have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent public
accountants, given upon the authority of said firm as experts in accounting and
auditing.
The Consolidated Financial Statements and financial statement schedule of
Parent and subsidiaries as of February 28, 1995 and 1994, and for each of the
three years in the period ended February 28, 1995, included in this Proxy
Statement/Prospectus and the Registration Statement have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent public
accountants, given upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
DELISTING AND DEREGISTRATION
After the Effective Date of the Merger, neither the Company Class A Common
Stock nor the Company Class B Common Stock will be registered pursuant to the
Exchange Act, and the Company will not be subject to the information
requirements of the Exchange Act. Accordingly, except to the extent, if any,
required with respect to the Company's 9% Subordinated Notes Due June 2003, the
Company will no longer be required under the Exchange Act to file periodic
reports, proxy statements and other information with the Commission or to
transmit certain documents to its stockholders.
OTHER BUSINESS
The Board of Directors of the Company does not know of any matter to be
brought before the Special Meeting other than as described in the Notice of
Special Meeting accompanying this Proxy Statement/Prospectus. If any other
matter comes before the Special Meeting, it is the intention of the persons
named in the accompanying proxy to vote the proxy in accordance with their best
judgment with respect to such other matters.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, stockholders of the Company will have the
right to have proposals presented at the Company's 1996 Annual Meeting of
Stockholders. Such proposals must comply with the rules of the Commission then
in effect and be received by the Secretary of the Company, at its principal
offices, by February 1, 1996. Such proposals should be submitted by certified
U.S. mail, with return receipt requested.
84
<PAGE> 91
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
OF BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Financial Statements:
Consolidated Balance Sheets at May 31, 1995 and February 28, 1995........................... F-2
Consolidated Statements of Income for the three months ended May 31, 1995 and 1994.......... F-3
Consolidated Statements of Cash Flows for the three months ended May 31, 1995 and 1994...... F-4
Notes to Unaudited Consolidated Financial Statements................................... F-5
Audited Consolidated Financial Statements:
Report of Independent Accountants........................................................... F-8
Consolidated Balance Sheets at February 28, 1995 and 1994................................... F-9
Consolidated Statements of Income for the years ended February 28, 1995, 1994 and 1993...... F-10
Consolidated Statements of Retained Earnings for the years ended February 28, 1995, 1994
and 1993................................................................................. F-11
Consolidated Statements of Cash Flows for the years ended February 28, 1995, 1994
and 1993................................................................................. F-12
Consolidated Statements of Changes in Capital Stock Accounts................................ F-13
Notes to Consolidated Financial Statements.................................................. F-14
</TABLE>
F-1
<PAGE> 92
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1995 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including short term investments of
$39,396 and $40,266............................................ $ 43,192 $ 43,390
Accounts receivable, net of allowances for doubtful accounts of
$2,672 and $2,611.............................................. 131,539 130,774
Inventories....................................................... 75,212 77,075
Deferred income taxes............................................. 25,400 25,068
Other current assets.............................................. 6,357 16,153
----------- ------------
Total current assets...................................... 281,700 292,460
Property, plant and equipment, net of accumulated depreciation of
$147,066 and $145,561............................................. 126,385 134,368
Cost in excess of net assets of acquired businesses, net............ 67,770 68,762
Other assets........................................................ 26,749 25,202
----------- ------------
Total assets.............................................. $ 502,604 $520,792
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt............ $ 5,611 $ 7,791
Accounts payable.................................................. 39,706 64,880
Accrued expenses.................................................. 93,125 91,836
Other current liabilities......................................... 2,687 4,658
----------- ------------
Total current liabilities................................. 141,129 169,165
Long-term debt, exclusive of current maturities..................... 95,670 98,254
Deferred income taxes, exclusive of current portion................. 19,075 19,214
Other liabilities................................................... 26,269 26,446
----------- ------------
Total liabilities......................................... 282,143 313,079
----------- ------------
Minority interest................................................... 132,935 124,589
----------- ------------
Commitments and Contingent Liabilities
Shareholders' equity:
Preferred Stock: par value $.10 per share
Class A: 12,100 shares authorized and issued, 11,000 shares
outstanding................................................... 1 1
Class B: 550 shares authorized and issued, 498 shares
outstanding................................................... -- --
Common Stock: 9,750 shares authorized, 9,375 shares issued and
outstanding.................................................... 1 1
Capital in excess of par value of stock........................... 19,975 19,975
Retained earnings................................................. 66,845 62,443
Accumulated translation adjustment................................ 2,961 2,961
Treasury stock at cost............................................ (2,257) (2,257)
----------- ------------
Total shareholders' equity................................ 87,526 83,124
----------- ------------
Total liabilities and shareholders' equity................ $ 502,604 $520,792
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 93
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
---------------------
1995 1994
-------- --------
(UNAUDITED)
<S> <C> <C>
Sales.................................................................. $164,189 $145,684
Cost of sales.......................................................... 109,137 97,165
-------- --------
Gross profit........................................................... 55,052 48,519
Selling, general and administrative expenses........................... 29,274 30,349
-------- --------
Income from operations................................................. 25,778 18,170
Interest expense....................................................... (2,619) (2,823)
Interest income........................................................ 670 589
Other income (expense), net............................................ (465) 588
-------- --------
Income before income taxes............................................. 23,364 16,524
Provision for income taxes............................................. 9,541 6,679
-------- --------
Income before minority interest........................................ 13,823 9,845
Minority interest in income of consolidated subsidiary................. (8,762) (5,504)
-------- --------
Net income............................................................. $ 5,061 $ 4,341
======== ========
Net income per common share............................................ $ 485.44 $ 415.68
======== ========
Number of common shares outstanding.................................... 9,375 9,375
======== ========
Cash dividends paid per share:
Preferred Stock...................................................... $ 44.36 $ 38.62
======== ========
Common Stock......................................................... $ 16.01 $ 13.94
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 94
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATION) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
---------------------
1995 1994
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Income before minority interest...................................... $ 13,823 $ 9,845
Adjustments to reconcile income before minority interest to net cash
provided by operating activities:
Depreciation, amortization and other noncash charges................. 5,605 5,814
Deferred income taxes................................................ (101) 2,112
Loss (gain) on disposal of property, plant and equipment............. (14) 27
Changes in assets and liabilities, net of effects of acquisitions of
business:
(Increase) decrease in accounts receivable........................... (9,399) 9,950
Decrease in inventories.............................................. 1,683 1,030
(Increase) decrease in other assets.................................. 6,808 (6,616)
Decrease in accounts payable......................................... (17,368) (10,572)
Increase (decrease) in accrued expenses.............................. 1,789 (2,205)
Decrease in other liabilities........................................ (547) (1,822)
-------- --------
Net cash provided by operating activities............................ 2,279 7,563
-------- --------
Cash flows from investing activities:
Proceeds from sales of businesses and property, plant and
equipment......................................................... 4,987 347
Purchases of property, plant and equipment........................... (1,816) (1,409)
Acquisitions of businesses........................................... (5,053)
-------- --------
Net cash provided by (used in) investing activities.......... 3,171 (6,115)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings..................... 60 (3,028)
Reduction of long-term debt.......................................... (4,824) (6,789)
Decrease in restricted funds......................................... 584
Dividends paid....................................................... (1,745) (1,505)
Issuance of stock under stock option and dividend reinvestment
plans............................................................. 277 361
-------- --------
Net cash used in financing activities........................ (5,648) (10,961)
-------- --------
Net decrease in cash and cash equivalents.............................. (198) (9,513)
Cash and cash equivalents at beginning of period....................... 43,390 54,088
-------- --------
Cash and cash equivalents at end of period............................. $ 43,192 $ 44,575
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 95
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
In the opinion of management, the accompanying unaudited consolidated
financial statements, which include the accounts of Blount International, Inc.
(formerly HBC, Incorporated) ("Parent"), and Blount, Inc. and its subsidiaries
(the "Company"), on a consolidated basis, contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position at May 31, 1995 and the results of operations and cash flows for the
period ended May 31, 1995. At May 31, 1995, Parent owned 2,075,048 shares of the
Class A Common Stock and 2,803,232 shares of the Class B Common Stock of the
Company, representing an approximate 62% voting interest and approximately 39%
of the Company's shares outstanding. These financial statements should be read
in conjunction with the notes to the financial statements for the year ended
February 28, 1995. The results of operations for the period ended May 31, 1995
are not necessarily indicative of the results to be expected for the full fiscal
year, due to the seasonal nature of certain operations.
NOTE 2:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1995 1995
-------- ------------
<S> <C> <C>
Finished goods................................................ $ 33,573 $ 35,769
Work in process............................................... 14,266 14,075
Raw materials and supplies.................................... 27,373 27,231
-------- ------------
$ 75,212 $ 77,075
======== =========
</TABLE>
NOTE 3:
The principal assets and liabilities of the discontinued construction
operations included in the consolidated balance sheets are as follows (in
thousands):
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1995 1995
-------- ------------
<S> <C> <C>
Accounts receivable........................................... $ 28,138 $ 45,706
Other current assets.......................................... 4,416 11,911
Other assets.................................................. 3,847 5,203
Accounts payable.............................................. (12,170) (24,588)
Accrued expenses.............................................. (11,731) (12,578)
Other current liabilities..................................... (2,687) (4,659)
Other liabilities............................................. (2,560) (2,849)
</TABLE>
During the first quarter of fiscal 1996, Pozzo Construction Company, part of the
remaining discontinued construction operations, and Injection Molding Metal
Products operations, headquartered in Oregon, were sold. The transactions were
not material to financial condition or operating results.
NOTE 4:
The $25 million receivable sale agreement (see Note 3 to the Consolidated
Financial Statements for the year ended February 28, 1995) expired in December
1994 and has been extended until August 29, 1995. Plans are to negotiate a
replacement agreement.
At May 31, 1995 and February 28, 1995, $9.5 million and $10.1 million,
representing the unexpended proceeds from issues of industrial development
revenue bonds in fiscal 1995, was held in trust and is included in "Other
assets" in the consolidated balance sheets.
F-5
<PAGE> 96
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5:
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin (the "Site").
The waste complained of was placed in the landfill prior to 1981 by a
corporation, some of whose assets were purchased in 1981 by a predecessor of the
Company. It is the view of the Company that because its predecessor corporation
purchased assets rather than stock, the Company does not have successor
liability and is not properly a PRP. However, the EPA has indicated it does not
accept this position. The Company believes the EPA is wrong on the successor
liability issue. However, with other PRPs, the Company made a good faith offer
to the EPA to pay a portion of the cleanup costs. The offer was rejected and the
EPA is proceeding with the clean-up. The estimated past and future clean-up
costs are approximately $12 million. In 1989 the EPA named four PRPs. One of the
PRPs, the Town of Onalaska (the "Town"), the EPA and the State of Wisconsin
negotiated a consent decree under which the Town would have been released from
future liability in return for paying $110 thousand, granting access to the Site
and adjacent properties and performing some future maintenance work. The United
States District Court for the District of Wisconsin found, on December 21, 1994,
that the settlement was not fair, reasonable or in the public interest, and
refused to approve and confirm it as the order of the Court. The Company denies
that it is a PRP and is unable to determine any other party's share of total
remediation costs. The Company does not know the financial status of the other
PRPs and other parties that, while not named by the EPA as PRPs, may have
liability with respect to the Site. Management does not expect the situation to
have a material adverse effect on the financial condition or operating results.
The EPA has designated a former subsidiary of Parent as a PRP with respect
to the New Lyme Landfill in Ohio. In October 1989, the EPA brought a civil
action against 13 PRPs who brought in an additional 24 PRPs. The former
subsidiary has not been named as a defendant in this litigation. No claim has
been asserted against the former subsidiary. Management believes the likelihood
of a claim being asserted is low.
The Company is closing a Resource Conservation and Recovery Act ("RCRA")
Part B Storage Permit at its Sporting Equipment Division's CCI operations
facility in Lewiston, Idaho. As part of the process, the Company is required by
the Sate of Idaho to undertake RCRA corrective action at the facility. This will
require the Company to investigate all areas at the facility where solid waste
and hazardous waste have historically been managed. The facility has been
operating since the 1950s. There are several areas where investigation and
sampling are required. In order to effect the investigation, the Company and the
State of Idaho entered into an Administrative Consent Order which governs the
completion of the corrective action activities. As a result of initial testing,
some contamination of the uppermost groundwater beneath the facility has been
encountered. This uppermost groundwater is not the drinking water supply source
and does not appear to be connected to the drinking water aquifer. Further
investigation is ongoing. It is expected that the range of remediation costs is
from $2.8 million to $6.2 million. Management does not expect the situation to
have a material adverse effect on the financial condition or operating results
beyond amounts accrued.
The Company is a defendant in a number of product liability lawsuits, some
of which seek significant or unspecified damages, involving serious personal
injuries for which there are large deductible amounts under the Company's
insurance programs. In addition, the Company is a party to a number of other
suits arising out of the conduct of its business. While there can be no
assurance as to their ultimate outcome, management does not believe these
lawsuits will have a material adverse effect on the financial condition or
operating results.
The Company's contingencies include normal liabilities for performance and
completion of its remaining construction contracts. At May 31, 1995, the Company
had outstanding bank letters of credit in the approximate amount of $17.3
million issued principally in connection with various foreign construction
contracts for which the Company is contingently liable to the issuing banks in
the event payment is demanded by the holder.
F-6
<PAGE> 97
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
See Notes 4 and 8 to the Consolidated Financial Statements for the year
ended February 28, 1995 for other commitments and contingencies which have not
changed significantly since year-end.
NOTE 6:
Segment information is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MAY 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Sales:
Outdoor products............................................. $ 76,693 $ 68,520
Industrial and power equipment............................... 57,849 52,297
Sporting equipment........................................... 29,647 24,867
-------- --------
$164,189 $145,684
======== ========
Operating income:
Outdoor products............................................. $ 15,856 $ 10,052
Industrial and power equipment............................... 9,895 7,827
Sporting equipment........................................... 4,695 4,671
-------- --------
Operating income from segments................................. 30,446 22,550
Corporate overhead expenses.................................... (4,668) (4,380)
-------- --------
Income from operations.................................... 25,778 18,170
Interest expense............................................... (2,619) (2,823)
Interest income................................................ 670 589
Other income (expense), net.................................... (465) 588
-------- --------
Income before income taxes..................................... $ 23,364 $ 16,524
======== ========
</TABLE>
NOTE 7:
Income taxes paid during the three months ended May 31, 1995 and 1994 were
$3.3 million and $5.6 million. Interest paid during the three months ended May
31, 1995 and 1994 was $696 thousand and $513 thousand.
NOTE 8:
Net income per common share is based on the number of common shares
outstanding in each period.
F-7
<PAGE> 98
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders, Blount International, Inc.:
We have audited the accompanying consolidated balance sheets of Blount
International, Inc. and subsidiaries (formerly HBC, Incorporated) as of the last
day of February 1995 and 1994, and the related consolidated statements of
income, retained earnings, changes in capital stock accounts, and cash flows for
each of the three years in the period ended February 28, 1995. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Blount
International, Inc. and subsidiaries as of the last day of February 1995 and
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended February 28, 1995, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 30, 1995
F-8
<PAGE> 99
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF THE LAST DAY OF FEBRUARY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including short-term investments of $40,266
and $50,686......................................................... $ 43,390 $ 54,088
Accounts receivable, net of allowances for doubtful accounts of $2,611
and $2,238.......................................................... 130,774 137,276
Inventories............................................................ 77,075 60,180
Deferred income taxes.................................................. 25,068 17,742
Other current assets................................................... 16,153 12,812
-------- --------
Total current assets........................................... 292,460 282,098
Property, plant and equipment, net of accumulated depreciation of
$145,561 and $135,747.................................................. 134,368 140,502
Cost in excess of net assets of acquired businesses, net................. 68,762 60,171
Other assets............................................................. 25,202 16,877
-------- --------
Total Assets................................................... $520,792 $499,648
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt................. $ 7,791 $ 6,098
Accounts payable....................................................... 64,880 74,281
Accrued expenses....................................................... 91,836 83,658
Billings in excess of costs and recognized profits on uncompleted
contracts........................................................... 4,658 12,953
-------- --------
Total current liabilities...................................... 169,165 176,990
Long-term debt, exclusive of current maturities.......................... 98,254 106,151
Deferred income taxes, exclusive of current portion...................... 19,214 13,499
Other liabilities........................................................ 26,446 32,000
-------- --------
Total liabilities.............................................. 313,079 328,640
Minority interest........................................................ 124,589 100,769
-------- --------
Commitments and Contingent Liabilities
Shareholders' equity:
Preferred Stock: $.10 par value and liquidating preference $1,959 per
share (see Note 5 for voting rights by class)
Class A: 12,100 shares authorized and issued, 11,000 shares
outstanding........................................................ 1 1
Class B: 550 shares authorized and issued, 498 shares outstanding... -- --
Common stock: par value $.10 per share 9,750 shares authorized, 9,375
shares issued and outstanding....................................... 1 1
Capital in excess of par value of stock................................ 19,975 19,975
Retained earnings...................................................... 62,443 49,212
Accumulated translation adjustment..................................... 2,961 3,307
Treasury stock at cost................................................. (2,257) (2,257)
-------- --------
Total shareholders' equity..................................... 83,124 70,239
-------- --------
Total liabilities and shareholders' equity..................... $520,792 $499,648
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 100
BLOUNT INTERNATIONAL INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED THE LAST DAY OF FEBRUARY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Sales...................................................... $ 588,419 $488,045 $426,492
Cost of sales.............................................. 390,818 330,059 299,399
--------- -------- --------
Gross profit............................................... 197,601 157,986 127,093
Selling, general and administrative expenses............... 121,051 114,107 98,175
--------- -------- --------
Income from operations..................................... 76,550 43,879 28,918
Interest expense........................................... (11,078) (11,357) (11,113)
Interest income............................................ 2,608 1,878 708
Other expense, net......................................... (696) (549) (1,925)
--------- -------- --------
Income before income taxes................................. 67,384 33,851 16,588
Provision for income taxes................................. 26,653 12,283 6,330
--------- -------- --------
Income from continuing operations before minority
interest................................................. 40,731 21,568 10,258
--------- -------- --------
Discontinued operations:
Loss from operations, net................................ (9,666) (4,919)
Gain (loss) on disposal, net............................. (650) 9,098
-------- --------
Total gain (loss) from discontinued operations... (10,316) 4,179
-------- --------
Income before minority interest............................ 40,731 11,252 14,437
Minority interest in income of consolidated subsidiary..... (24,967) (8,401) (4,116)
--------- -------- --------
Net income................................................. $ 15,764 $ 2,851 $ 10,321
======== ======== ========
Net income per share of common stock....................... $1,485.01 $ 117.97 $ 916.48
Weighted average number of common shares outstanding....... 9,375 9,375 9,375
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE> 101
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED THE LAST DAY OF FEBRUARY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period................................ $49,212 $48,484 $40,223
Net income.................................................... 15,764 2,851 10,321
------- ------- -------
64,976 51,335 50,544
Less cash dividends declared:
Class A and Class B Preferred stock -- $160.21 per share in
1995, $151.77 per share in 1994 and $150.35 per share in
1993..................................................... (1,842) (1,745) (1,729)
Common stock -- $73.66 per share in 1995, $40.16 per share
in 1994 and $35.36 per share in 1993..................... (691) (378) (331)
------- ------- -------
Balance at end of period...................................... $62,443 $49,212 $48,484
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE> 102
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED THE LAST DAY OF FEBRUARY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Income before minority interest.............................. $ 40,731 $ 11,252 $ 14,437
Adjustments to reconcile income before minority interest to net
cash provided by operating activities:
Depreciation, amortization and other noncash charges......... 23,543 23,487 24,564
Gain on disposal of Blount, Inc. stock....................... (1,904)
Deferred income taxes........................................ (1,251) (15,315) (6,264)
Loss (gain) on disposals of business and property, plant and
equipment................................................. 441 3,349 (7,616)
Charitable contribution of Blount, Inc. stock................ 4,010
Changes in assets and liabilities, net of effects of
acquisitions of businesses:
(Increase) decrease in aggregate balance of accounts
receivable sold........................................... (17,637) 3,637
Increase (decrease) in accounts receivable................... 8,226 (845) 2,283
(Increase) decrease in inventories........................... (12,991) (4,167) 10,559
(Increase) decrease in other assets.......................... (2,630) 12,087 1,700
Increase (decrease) in accounts payable...................... (9,833) 7,932 2,704
Increase in accrued expenses................................. 1,574 8,882 6,211
Increase (decrease) in other liabilities..................... (13,136) (8,974) 16,672
-------- -------- --------
Net cash provided by operating activities.................... 34,674 22,157 68,887
-------- -------- --------
Cash flows from investing activities:
Sale of Blount, Inc. stock................................... 3,207
Proceeds from sales of businesses and property, plant and
equipment................................................. 2,930 3,916 33,698
Purchases of property, plant and equipment................... (9,769) (14,609) (17,965)
Acquisitions of businesses................................... (10,150)
-------- -------- --------
Net cash provided by (used in) investing activities.......... (16,989) (7,486) 15,733
-------- -------- --------
Cash flows from financing activities:
Net reduction in short-term borrowings....................... (4,494) (4,905) (15,903)
Issuance of long-term debt................................... 11,800 97,327
Reduction of long-term debt.................................. (20,508) (76,832) (43,398)
Increase in restricted funds................................. (10,095)
Dividends paid............................................... (2,533) (2,122) (2,060)
Dividends paid to minority interest.......................... (3,887) (3,219) (2,981)
Issuance of stock under Blount stock option and dividend
reinvestment plans........................................ 1,334 1,729 529
-------- -------- --------
Net cash provided by (used in) financing activities.......... (28,383) 11,978 (63,813)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........... (10,698) 26,649 20,807
Cash and cash equivalents at beginning of period............... 54,088 27,439 6,632
-------- -------- --------
Cash and cash equivalents at end of period..................... $ 43,390 $ 54,088 $ 27,439
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 103
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL STOCK ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK CAPITAL ACCUMULATED
----------------- COMMON IN EXCESS TRANSLATION TREASURY
CLASS A CLASS B STOCK OF PAR ADJUSTMENT STOCK
------- ------- ------ --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 29, 1992............... $ 1 $-- $1 $19,975 $ 3,587 $ (2,257)
Aggregate adjustment resulting from
translation of foreign currency
statements.......................... (183)
------ ------- ------ --------- ----------- --------
Balance, February 28, 1993............. 1 -- 1 19,975 3,404 (2,257)
Aggregate adjustment resulting from
translation of foreign currency
statements.......................... (97)
------ ------- ------ --------- ----------- --------
Balance, February 28, 1994............... 1 -- 1 19,975 3,307 (2,257)
Aggregate adjustment resulting from
translation of foreign currency
statements.......................... (346)
------ ------- ------ --------- ---------- --------
Balance, February 28, 1995............... $ 1 $-- $1 $19,975 $ 2,961 $ (2,257)
====== ====== ====== ======= ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 104
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation:
The consolidated financial statements include the accounts of Blount
International, Inc. (formerly HBC, Incorporated), a Delaware corporation
("Parent"), and Blount, Inc., a Delaware corporation, and its subsidiaries (the
"Company"), on a consolidated basis. At February 28, 1995, Parent owns 2,075,048
shares of Company Class A Common Stock and 2,803,232 shares of Company Class B
Common Stock, representing an approximate 62% voting interest and approximately
39% of the shares of Company Common Stock outstanding. Except for this 39%
equity interest in the Company, Parent has no other operations or business. The
interest of the Company's other stockholders is reflected as a minority interest
in the consolidated financial statements. In fiscal 1994, Parent sold 105,400
shares of Company Common Stock.
Cash and cash equivalents:
All highly liquid temporary cash investments that are readily convertible
to known amounts of cash and present minimal risk of changes in value because of
changes in interest rates are considered to be cash equivalents.
Checks in transit are classified as accounts payable to the extent the
aggregate of such checks exceeds available cash balances not temporarily
invested. Checks classified as accounts payable were $6.2 million and $5.5
million as of the last day of February 1995 and 1994. All other checks in
transit are recorded as reductions of cash.
Inventories:
Inventories are stated at the lower of first-in, first-out cost or market.
Property, plant and equipment:
These assets are stated at cost and are depreciated principally on the
straight-line method over the estimated useful lives of the individual assets.
Gains or losses on disposal are reflected in income. Property, plant and
equipment held under leases which are essentially installment purchases are
capitalized, with the related obligations stated at the principal portion of
future lease payments. Depreciation charged to costs and expenses was $19.8
million, $19.9 million and $20.5 million in 1995, 1994 and 1993.
Interest cost incurred during the period of construction of plant and
equipment is capitalized. The interest cost capitalized on plant and equipment
was minimal in 1995 and 1994 and $620 thousand in 1993.
Cost in excess of net assets of acquired businesses:
The excess cost is being amortized by the straight-line method over periods
ranging from 30 to 40 years. Accumulated amortization was $17.4 million and
$15.3 million as of the last day of February 1995 and 1994. The excess cost is
evaluated for impairment based on the historic and estimated future
profitability of the business units to which it relates. Adjustments to carrying
value are made if required.
Insurance accruals:
The policy is to retain a portion of expected losses related to workers'
compensation and general, product and vehicle liability through large
deductibles under its insurance programs. Provisions for losses expected under
these programs are recorded based on estimates of the undiscounted aggregate
liabilities for claims incurred.
F-14
<PAGE> 105
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign currency:
For foreign subsidiaries which have a majority of transactions denominated
in U.S. dollars or conduct operations in a highly inflationary economy, monetary
assets and liabilities are translated into U.S. dollars at the current exchange
rate, while other assets (principally property, plant and equipment and
inventories) and related costs and expenses are generally translated at historic
exchange rates. Revenues and other costs and expenses are translated at the
average exchange rate for the period and the resulting foreign exchange
adjustments are recognized in income. Assets and liabilities of the remaining
foreign operations are translated into U.S. dollars at the current exchange rate
and their statements of income are translated at the average exchange rate for
the period. Gains and losses resulting from translation of the financial
statements of these operations are accumulated in a separate component of
shareholders' equity. The amount of income taxes allocated to this translation
adjustment is not significant.
Foreign exchange forward contracts are recorded in the consolidated balance
sheet at fair value as other current assets or accrued expenses. Changes in fair
values are recognized as other expense or income in the period in which the
changes occur (see Note 9 of Notes to Consolidated Financial Statements).
Foreign exchange adjustments, including gains or losses on foreign exchange
forward contracts, reduced pretax income by $662 thousand, $484 thousand and
$340 thousand in 1995, 1994 and 1993.
Revenue recognition:
The policy is to record sales as orders are shipped.
Research and development:
Expenditures for research and development are expensed as incurred. These
costs were $7.7 million, $7.0 million and $6.9 million for 1995, 1994 and 1993.
Net income per common share:
Net income per common share is based on the number of common shares
outstanding in each period and net income after preferred dividends.
NOTE 2 -- INCOME TAXES
The provision for income taxes attributable to continuing operations before
minority interest is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED THE LAST DAY
OF FEBRUARY
--------------------------------
1995 1994 1993
------- -------- -------
IN THOUSANDS
<S> <C> <C> <C>
Current provision:
Federal............................................ $19,407 $ 17,871 $ 3,613
State.............................................. 3,698 450 164
Foreign............................................ 5,159 8,993 9,851
Deferred provision (benefit):
Federal............................................ (1,048) (13,234) (6,314)
State.............................................. (1,000)
Foreign............................................ (563) (1,797) 16
------- -------- -------
$26,653 $ 12,283 $ 6,330
======= ======== =======
</TABLE>
F-15
<PAGE> 106
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the provision for income taxes attributable to
continuing operations before minority interest to the amount computed by
applying the statutory federal income tax rate to income from continuing
operations before income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED THE
LAST DAY OF FEBRUARY
---------------------------
1995 1994 1993
------- ------- -------
IN THOUSANDS
<S> <C> <C> <C>
Income before income taxes:
Domestic................................................ $57,462 $13,954 $ (679)
Foreign................................................. 9,922 19,897 17,267
------- ------- -------
$67,384 $33,851 $16,588
======= ======= =======
% % %
Statutory tax rate........................................ 35.0 35.0 34.0
Impact of earnings of foreign operations.................. (1.0) (.1) 11.6
State income taxes, net of federal tax benefit............ 3.7 1.2 (5.3)
Adjustments to prior year estimates....................... (4.6) (5.9)
Permanent differences between book bases and tax bases.... 1.7 1.4 (1.9)
Other items, net.......................................... .2 3.4 5.7
------- ------- -------
Effective income tax rate................................. 39.6 36.3 38.2
======= ======= =======
</TABLE>
All years reflect the allocation of substantially all corporate overhead
expenses and interest expense to domestic operations. Parent and the Company
filed separate tax returns for all years.
As of the last day of February 1995 and 1994, deferred income tax assets
were $37.7 million and $30.8 million and deferred income tax liabilities were
$31.8 million and $26.5 million. Deferred income taxes applicable to principal
temporary differences are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
THE LAST DAY OF
FEBRUARY
-------------------
1995 1994
-------- --------
IN THOUSANDS
<S> <C> <C>
Property, plant and equipment basis differences.................. $ 18,584 $ 20,611
Employee benefits................................................ (11,999) (14,288)
Other accrued expenses........................................... (19,716) (15,832)
Other -- net..................................................... 7,277 5,266
-------- --------
$ (5,854) $ (4,243)
======== ========
</TABLE>
Deferred income taxes of approximately $1.9 million have not been provided
on undistributed earnings of foreign subsidiaries in the amount of $23.1 million
as the earnings are considered to be permanently reinvested.
The Company has settled its issues with the Internal Revenue Service
through the 1990 fiscal year with no material adverse effect. The years 1991
through 1995 are still open for review.
During 1994 Parent donated 309,000 shares of Company Common Stock with a
market value of $5.5 million to the Alabama Shakespeare Festival Finance
Authority. Due to limitations on contribution deductions for income tax
purposes, $5.3 million of this donation remains to be utilized against future
periods.
F-16
<PAGE> 107
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- DEBT AND FINANCING AGREEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AS OF THE LAST DAY OF
FEBRUARY
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
9% subordinated notes.......................................... $ 78,550 $ 98,500
Industrial Development Revenue Bonds payable, maturing between
1996 and 2014, interest at varying rates (approximately 4.3%
at February 28, 1995)........................................ 16,741 5,288
Other long-term debt, interest from 8% to 10%, payable in
installments to 1997......................................... 8,953 1,582
Lease purchase obligations, interest at varying rates, payable
in installments to 2000...................................... 1,143 1,727
-------- --------
105,387 107,097
Less current maturities........................................ (7,133) (946)
-------- --------
$ 98,254 $106,151
======== ========
</TABLE>
Maturities of long-term debt and the principal and interest payments on
capital leases are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES
-------------------- TOTAL
FISCAL YEAR DEBT PRINCIPAL INTEREST PAYMENTS
- ----------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996............................................... $ 6,801 $ 332 $ 88 $ 7,221
1997............................................... 2,847 347 65 3,259
1998............................................... 348 433 20 801
1999............................................... 348 24 2 374
2000............................................... 338 7 345
2001 and beyond.................................... 93,562 93,562
-------- --------- -------- --------
$104,244 $ 1,143 $175 $105,562
======== ======= ===== ========
</TABLE>
In December 1994, the Company replaced its three-year $60 million revolving
credit agreement expiring in December 1995 with a new five-year $100 million
revolving credit agreement expiring December 1999 with a group of five banks. At
February 28, 1995, no amounts were outstanding under the $100 million agreement.
The $100 million agreement provides for interest rates to be determined at the
time of borrowings based on a choice of formulas as specified in the agreement.
The interest rates may vary based on cash flow and leverage ratios or, at the
Company's irrevocable option, the debt rating for senior unsecured long-term
debt of the Company. In addition, a commitment fee which varies to a maximum of
1/2% is charged on the total commitment. The new agreement contains covenants
relating to liens, subsidiary debt, transactions with affiliates, acquisitions,
consolidations, mergers and sales of assets, and requires the Company to
maintain certain specified debt-to-equity and fixed charge coverage ratios. The
Company has a $3.8 million three-year revolving credit agreement.
During fiscal 1995, the Company entered into four industrial development
revenue bond arrangements to finance future capital expenditures. The related
variable rate bonds of $11.8 million issued by the governmental units due in
fiscal 2005 and are recorded as long-term debt. The proceeds from the bonds are
held in trust and released as qualified capital expenditures are made. At
February 28, 1995, $10.1 million was held in trust and is included in "Other
assets" in the consolidated balance sheet.
F-17
<PAGE> 108
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1993, the Company issued 9% senior subordinated notes ("the 9%
notes") in the principal amount of $100 million maturing on June 15, 2003.
During fiscal 1995 and fiscal 1994, the Company repurchased approximately $20
million and $1.5 million of its 9% subordinated notes with no material gain or
loss. The 9% notes are redeemable at the election of the Company, in whole or in
part, at any time on or after June 15, 1998, initially at 103 3/8% of the
principal amount and thereafter at prices declining to par on June 15, 2001. The
9% notes were issued under an indenture ("the indenture") between the Company
and a major bank as trustee. The indenture restricts the Company's ability to
incur additional debt, pay dividends, make certain investments, dispose of
assets, create liens on assets and merge or consolidate with another entity. The
majority of the net proceeds from the 9% notes was used to retire the Company's
12% subordinated notes in the principal amount of $73.6 million with no material
gain or loss. During fiscal 1993, the Company repurchased $4.6 million of the
12% subordinated notes with no material gain or loss.
In November 1991, the Company entered into an agreement with a major bank
under which it has the right to sell, on a limited recourse basis, up to $25
million of undivided interests in a pool of eligible accounts receivable. The
purchaser's level of investment is subject to change based on the level of
eligible receivables. This agreement expired in December 1994 and was extended
until June 1995. The Company plans to negotiate a replacement agreement. During
fiscal 1994, the Company discontinued the sale of receivables under this
agreement and, since that time, there have been no sales of receivables under
this agreement. Other expense, net includes expenses of approximately $170
thousand, $405 thousand and $878 thousand in 1995, 1994 and 1993 related to this
agreement.
Under the most restrictive debt requirement, the Company retained earnings
of approximately $40.0 million were available for the payment of dividends at
February 28, 1995.
At February 28, 1995 and 1994, borrowings of $658 thousand and $1.1 million
were outstanding under uncommitted short-term foreign lines of credit with a
weighted average interest rate of 10.3% and 5.1%, respectively.
NOTE 4 -- ACQUISITIONS AND DISPOSALS
In April 1994, the Company acquired all the outstanding capital stock of
CTR Manufacturing, Inc. ("CTR"). CTR manufactures automated forestry harvesting
equipment. In November 1994, the Company acquired the operating assets of
Ram-Line, Inc. ("Ram-Line"), a manufacturer of stocks, magazines, lens caps and
other products for the shooting sports market. The purchase price paid for the
two businesses was approximately $18.2 million, including notes issued of $7.2
million. Both transactions have been accounted for by the purchase method and,
accordingly, the net assets and results of operations of the acquired businesses
have been included in the consolidated financial statements since the dates of
acquisition. The excess of the purchase price over the fair value of the net
assets acquired is being amortized on a straight-line basis over 40 years. The
consolidated results of operations for 1995 and 1994 would not have been
materially different from reported amounts if the acquisitions had occurred at
the beginning of either year. The combined sales and pretax income of CTR and
Ram-Line for their most recent fiscal years prior to acquisition were
approximately $17.1 million and $1.6 million, respectively.
In February 1994, a plan was adopted to discontinue the construction
business through the orderly completion and close-out of the principal domestic
and foreign construction projects ("the projects") and the sale of Pozzo
Construction Co. ("Pozzo"), a subsidiary headquartered in Los Angeles,
California. In March 1994, an agreement was entered into with Caddell
Construction Co., Inc. ("Caddell") under which Caddell provides the consulting
and construction management services necessary to complete the projects and
acquired the Company's right to use the name "Blount" in the construction
business for a period of years. As of February 28, 1995, the remaining projects
encompassed by the agreement with Caddell have a remaining contract value of
approximately $23.7 million and are expected to be completed within one year.
Although Caddell actively manages the projects, the Company remains subject to
the inherent risks associated with a
F-18
<PAGE> 109
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
general construction contractor. The Company generally participates in future
profits of the projects and remains responsible for substantially all losses, if
any, in excess of agreed upon estimates of final project profit or loss. The
sale of Pozzo was completed during the first quarter of fiscal 1996 with no
material gain or loss.
In fiscal 1994, a provision for loss of $650 thousand (after tax benefits
of $350 thousand) was recorded for disposal of the construction segment, which
is reflected as discontinued operations in the accompanying consolidated
statements of income. In fiscal 1993, Parent sold the assets of its Lindsay Wire
operation, retaining certain liabilities, for cash of $22.4 million. As a result
of the sale, a gain of $9.1 million net of applicable taxes of $6.0 million was
recognized. Results of the discontinued operations are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED THE LAST DAY OF
FEBRUARY
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues......................................... $125,208 $210,090 $274,611
Cost of revenues................................. 117,898 216,935 265,580
-------- -------- --------
Gross profit (loss).............................. 7,310 (6,845) 9,031
Selling, general and administrative expenses..... (4,070) (8,093) (16,054)
Other income (expense) -- net.................... 320 67 (430)
-------- -------- --------
Income (loss) before income taxes................ 3,560 (14,871) (7,453)
Provision (benefit) for income taxes............. 1,246 (5,205) (2,534)
-------- -------- --------
Net income (loss)................................ $ 2,314 $ (9,666) $ (4,919)
======== ======== ========
</TABLE>
As the provision for loss on disposal of the construction segment recorded
in fiscal 1994 includes estimates of that segment's operating results until its
final termination, the above 1995 net income of $2.3 million from the
discontinued construction segment has no impact on the fiscal 1995 consolidated
statement of income. The 1994 loss before taxes of $14.9 million is net of
income of approximately $7.3 million from a less than majority-owned foreign
joint venture. Distributions received from this joint venture were approximately
$21.2 million during fiscal 1994. In early fiscal 1996, the final distribution
of $4.9 million was received from this joint venture.
The principal assets and liabilities of the discontinued operations
included in the consolidated balance sheets are as follows (in thousands):
<TABLE>
<CAPTION>
AS OF THE LAST DAY OF
FEBRUARY
-------------------------
1995 1994
------- -------
<S> <C> <C>
Accounts receivable........................................ $45,706 $59,265
Other current assets....................................... 11,911 7,922
Other assets............................................... 5,203 6,013
Accounts payable........................................... (24,588) (38,503)
Accrued expenses........................................... (12,578) (11,106)
Other current liabilities.................................. (4,659) (13,015)
Other liabilities.......................................... (2,849) (7,312)
</TABLE>
NOTE 5 -- CAPITAL STRUCTURE
Parent has authorized 12,100 shares of Class A Preferred, 550 shares of
Class B Preferred and 9,750 shares of Common Stock. The Class A Preferred and
the Common Stock are each entitled to one vote per share and have the exclusive
right to vote for the election of directors and for all other purposes.
The Certificate of Incorporation of Parent specifies that a dividend shall
be paid to preferred stockholders subject to certain restrictions. The basic
annual rate of dividends shall be 85% of net income, as defined, and
F-19
<PAGE> 110
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shall be cumulative. The restrictions specify that total dividends paid on
preferred stock for any fiscal year may not exceed the greater of 12% or a
percentage equal to 2% in excess of the average prime lending rate times the
redemption price of the stock. The Certificate further provides that after
payment of dividends to preferred stockholders, a dividend may be paid to the
common stockholders. In addition, extra dividends may be paid out of retained
earnings provided that after such payment the adjusted stockholders' equity is
not less than 120% of the $1,959 per share redemption price of the preferred
shares.
The Company has granted options to purchase its Class A Common Stock to
certain officers and key employees under a non-qualified plan approved in 1994
and a qualified Incentive Stock Option Plan ("ISOP") approved in 1992. The
non-qualified plan terminates in January 2004 and provides for granting of
options for up to 400,000 shares with an option price not less than fair market
value at the time of grant. The ISOP terminates in January 2002 and provides for
the granting of options for up to 750,000 shares with an option price not less
than fair market value at the time of grant. The options granted are exercisable
for a period of up to ten years under both plans. As of the last day of February
1995 and 1994, there were options for 1,667 shares and 41,667 shares available
for grant under the non-qualified plan and 23,600 shares and 38,700 shares
available for grant under the ISOP. At February 28, 1995, options for 207,303
shares were exercisable. Changes with respect to options for each of the last
three years are as follows (in thousands, except per share prices):
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------- -------------------------- -------------------------
AVERAGE TOTAL AVERAGE TOTAL AVERAGE TOTAL
PER OPTION PER OPTION PER OPTION
SHARES SHARE PRICE SHARES SHARE PRICE SHARES SHARE PRICE
------ ------- ------- ------ ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
period........................ 948 $16.68 $15,812 729 $ 8.46 $ 6,160 649 $8.23 $5,346
Options granted................. 149 45.26 6,740 393 28.46 11,193 188 9.37 1,761
Options exercised............... (132) 8.43 (1,115) (142) 9.14 (1,294) (54) 8.56 (469)
Options canceled................ (94) 7.63 (716) (32) 7.67 (247) (54) 8.84 (478)
------ ------- ------- ------ ------- ------- ------ ------- ------
Outstanding, end of period...... 871 $23.79 $20,721 948 $16.68 $15,812 729 $8.46 $6,160
====== ======= ======== ====== ======= ======== ====== ======= ======
</TABLE>
NOTE 6 -- PENSION PLANS
The Company maintains funded, non-contributory, trusteed, defined benefit
pension plans covering the majority of the domestic employees of the Company and
certain subsidiaries. In addition, the Company sponsors certain supplemental
defined benefit plans and employees of certain foreign operations participate in
local plans.
The formulas of defined benefit plans generally base pension benefits paid
to retired employees upon their length of service and a percentage of average
compensation during the years of employment. The plans' assets are invested
principally in equity funds, bond funds, and temporary cash investments. The
actuarial method used for financial reporting purposes is the projected unit
credit method. The components of pension expense for the Company-sponsored
defined benefit plans for each of the last three years were (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned.............................. $ 3,830 $ 3,814 $ 3,743
Interest cost............................................. 5,086 4,649 4,211
Actual return on plan assets.............................. (691) (2,462) (2,404)
Net amortization and deferral............................. (2,418) 345 817
------- ------- -------
$ 5,807 $ 6,346 $ 6,367
======= ======= =======
</TABLE>
The Company's general funding policy for qualified plans is to fund amounts
deductible for income tax purposes. Supplemental non-qualified plans are not
funded and benefit payments are made as they become
F-20
<PAGE> 111
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
due. The funded status of qualified and non-qualified defined benefit plans as
of the last day of February 1995 and 1994 was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------------------- -----------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of projected
benefit obligation:
Vested............................. $41,824 $ 3,014 $41,465 $ 3,501
Nonvested.......................... 1,737 138 2,061 41
------------- ------------- ------------- -------------
Accumulated benefit obligation..... 43,561 3,152 43,526 3,542
Effect of projected compensation
increases....................... 19,987 762 18,698 618
------------- ------------- ------------- -------------
Projected benefit obligation....... 63,548 3,914 62,224 4,160
Plan assets at fair value............ 57,499 85 49,424 85
------------- ------------- ------------- -------------
Projected benefit obligation greater
(less) than plan assets............ 6,049 3,829 12,800 4,075
Unrecognized transition asset
(obligation)....................... 838 (575) 1,065 (655)
Unrecognized prior service
liability.......................... (3,335) (376) (4,596) (573)
Unrecognized net gain (loss)......... (6,568) 399 (6,005) 200
------------- ------------- ------------- -------------
Net accrued (prepaid) pension cost... $(3,016) $ 3,277 $ 3,264 $ 3,047
========== ========== ========== ==========
</TABLE>
The weighted average rate assumptions used in 1995, 1994 and 1993 to
determine pension expense and related pension obligations for domestic and
foreign defined benefit plans were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate................................................... 8.5 % 7.6 % 8.6 %
Rate of increase in compensation levels......................... 4.3 % 4.4 % 5.3 %
Expected long-term rate of return on plan assets................ 8.7 % 8.6 % 9.0 %
</TABLE>
The Company's share of unfunded liability, if any, related to
multi-employer pension plans is not determinable.
The Company provides a defined contribution 401(k) plan to the majority of
domestic employees and matches a portion of employee contributions. The expense
was $2.1 million, $1.9 million and $1.8 million in 1995, 1994 and 1993.
NOTE 7 -- POSTRETIREMENT INSURANCE BENEFITS
The Company sponsors plans which provide postretirement health care and
life insurance benefits ("postretirement benefits") to eligible domestic
retirees. The Company has funded the estimated liability for retirees of certain
operations sold in a prior year. Other postretirement benefit plans are not
funded and benefit payments are made as they become due.
F-21
<PAGE> 112
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement benefit expense for 1995, 1994 and 1993
consisted of the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost-benefits earned............................. $ 299 $ 284 $ 275
Interest cost............................................ 1,223 1,406 1,200
Actual return on plan assets............................. (33) (125) (215)
Net amortization and deferral............................ (49) 47 (31)
------ ------ ------
$1,440 $1,612 $1,229
====== ====== ======
</TABLE>
The accumulated postretirement benefit obligation for the funded plan was
$2.5 million and $2.4 million as of the last day of February 1995 and 1994. A
reconciliation of the accumulated postretirement benefit obligation to the
accrued liability included in the consolidated balance sheets as of the last day
of February 1995 and 1994 follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $11,234 $10,640
Fully eligible active plan participants........................ 1,788 2,740
Other active plan participants................................. 2,369 3,641
------- -------
15,391 17,021
Plan assets at fair value........................................ 2,171 2,650
------- -------
Postretirement benefits in excess of assets...................... 13,220 14,371
Unrecognized net (loss).......................................... (1,263) (3,086)
------- -------
Accrued postretirement benefit cost.............................. $11,957 $11,285
======= =======
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8 1/2% in 1995 and 1993 and 7 1/2% in
1994. The expected long-term rate of return on plan assets was 8 3/4% in 1995
and 1994 and 9 1/4% in 1993. An 11% annual rate of increase in the cost of
health care benefits was assumed for 1995; the rate was assumed to decrease 1%
per year until 5% is reached and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rate by 1% in each year
would increase the accumulated postretirement benefit obligation as of February
28, 1995, by 9.3% and the aggregate of the service and interest cost components
of net periodic expense for 1995 by 10.7%.
NOTE 8 -- COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space and equipment under operating leases
expiring in one to seven years. Most leases include renewal options and some
contain purchase options and escalation clauses. Future minimum rental
commitments required under operating leases having initial or remaining
noncancelable lease terms in excess of one year as of February 28, 1995, are as
follows (in thousands): 1996--$4,692; 1997--$3,342; 1998--$1,626; 1999--$1,161;
2000--$554 and 2001 and beyond--$861. Rentals charged to costs and expenses
under cancelable and noncancelable lease arrangements were $5.2 million, $5.7
million and $5.1 million for 1995, 1994 and 1993.
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin (the "Site").
The waste complained of was placed in the landfill prior to 1981 by a
corporation, some of whose assets were purchased in 1981 by a predecessor of the
Company. It is the view of the Company that because its predecessor corporation
purchased assets rather than stock, the Company does
F-22
<PAGE> 113
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
not have successor liability and is not properly a PRP. However, the EPA has
indicated it does not accept this position. The Company believes the EPA is
wrong on the successor liability issue. However, with other PRP's, the Company
made a good faith offer to the EPA to pay a portion of the clean-up costs. The
offer was rejected and the EPA is proceeding with the clean-up. The estimated
past and future clean-up costs are approximately $12 million. In 1989 the EPA
named four PRP's. One of the PRP's, the Town of Onalaska (the "Town") and the
EPA and State of Wisconsin negotiated a consent decree under which the Town
would have been released from future liability in return for paying $110
thousand, granting access to the Site and adjacent properties and performing
some future maintenance work. The United States District Court for the District
of Wisconsin found, on December 21, 1994, that the settlement was not fair,
reasonable or in the public interest, and refused to approve and confirm it as
the order of the Court. The Company denies that it is a PRP and is unable to
determine any other party's share of total remediation costs. The Company does
not know the financial status of the other PRP's and other parties that, while
not named by the EPA as PRP's, may have liability with respect to the Site.
Management does not expect the situation to have a material adverse effect on
its financial condition or operating results.
The EPA has designated a former subsidiary of Parent as a PRP with respect
to the New Lyme Landfill in Ohio. In October 1989, the EPA brought a civil
action against 13 PRPs who brought in an additional 24 RPs. The former
subsidiary has not been named as a defendant in this litigation. No claim has
been asserted against the former subsidiary. Management believes the likelihood
of a claim being asserted is low.
The Company is closing a Resource Conservation and Recovery Act ("RCRA")
Part B Storage Permit at its Sporting Equipment Division's CCI operations
facility in Lewiston, Idaho. As part of the process, the Company is required by
the State of Idaho to undertake RCRA corrective action at the facility. This
will require the Company to investigate all areas at the facility where solid
waste and hazardous waste have historically been managed. The facility has been
operating since the 1950s. There are several areas where investigation and
sampling are required. In order to effect the investigation, the Company and the
State of Idaho entered into an Administrative Consent Order which governs the
completion of the corrective action activities. As a result of initial testing,
some contamination of the uppermost groundwater beneath the facility has been
encountered. This uppermost groundwater is not the drinking water supply source
and does not appear to be connected to the drinking water aquifer. Further
investigation is ongoing. It is expected that the range of remediation costs is
from $2.8 million to $6.2 million. Management does not expect the situation to
have a material adverse effect on its financial condition or operating results
beyond amounts accrued.
The Company is a defendant in a number of product liability lawsuits, some
of which seek significant or unspecified damages, involving serious personal
injuries for which there are large deductible amounts under the Company's
insurance programs. In addition, the Company is a party to a number of other
suits arising out of the conduct of its business. While there can be no
assurance as to their ultimate outcome, management does not believe these
lawsuits will have a material adverse effect on its financial condition or
operating results.
The Company's contingencies include normal liabilities for performance and
completion of its remaining construction contracts. At February 28, 1995, the
Company had outstanding bank letters of credit in the approximate amount of
$20.2 million issued principally in connection with various foreign construction
contracts for which the Company is contingently liable to the issuing banks in
the event payment is demanded by the holder.
NOTE 9 -- FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
At February 28, 1995, approximately 66% of the accounts receivable arose
from manufacturing operations with the remainder resulting principally from
discontinued construction operations. There are manufacturing or distribution
operations in Brazil, Canada, Europe, Japan and the United States. Sales are
made to customers in these locations, primarily in the United States, and other
countries throughout the world. Accounts receivable from manufacturing customers
are principally from service and dealer groups,
F-23
<PAGE> 114
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
distributors and chainsaw manufacturers, and are generally not collateralized.
The remaining construction receivables are primarily from customers within the
United States and Kuwait. At February 28, 1995, approximately 58% of accounts
receivable from construction activities was from governmental entities with the
balance principally from customers in private industry. Construction related
accounts receivable are generally larger and from a smaller base of customers
than those from manufacturing operations.
From February 1994 until March 1995, foreign exchange forward contracts
were executed to reduce the effect of exchange rate fluctuations on anticipated
future foreign currency cash flows. As these contracts did not qualify for hedge
accounting treatment, gains or losses on the contracts were recorded in income
as exchange rates fluctuated. In March 1995, contracts were executed to offset
exposure under all outstanding foreign exchange forward contracts. At February
28, 1995 and 1994, foreign exchange forward contracts of $51.0 million and $23.4
million were outstanding. These foreign exchange forward contracts reduced
pretax income by approximately $1.3 million and $.1 million in fiscal 1995 and
fiscal 1994, respectively, and had no effect on income in fiscal 1993.
The estimated fair values of certain financial instruments are as follows
(in thousands):
<TABLE>
<CAPTION>
AS OF THE LAST DAY OF FEBRUARY
---------------------------------------------
1995 1994
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash and short-term investments................... $ 43,390 $ 43,390 $ 54,088 $ 54,088
Other current assets (foreign exchange forward
contracts)...................................... 119 119 5 5
Other assets (principally notes receivable)....... 3,705 3,705 5,010 5,299
Notes payable and long-term debt (see Note 3)..... (106,045) (105,457) (112,249) (115,811)
Accrued expenses (foreign exchange forward
contracts)...................................... (932) (932) (139) (139)
</TABLE>
The carrying amount of cash and short-term investments approximates fair
value because of the short maturity of those instruments. The fair value of
notes receivable is estimated based on the discounted value of estimated future
cash flows. The fair value of long-term debt is estimated based on recent market
transaction prices or on current rates available for debt with similar terms and
maturities. The fair value of foreign exchange forward contracts is estimated by
obtaining market quotes.
NOTE 10 -- SEGMENT INFORMATION
There are three business segments: outdoor products, industrial and power
equipment and sporting equipment. Identifiable assets consist of those assets
used by the segments; corporate assets consist principally of cash and temporary
investments, deferred income taxes and property, plant and equipment used by the
corporate office.
F-24
<PAGE> 115
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1995, 1994 and 1993, no customer accounted for more than 10% of
consolidated sales.
<TABLE>
<CAPTION>
INFORMATION ON GEOGRAPHIC
AREAS
FOR THE YEARS ENDED
THE LAST DAY OF FEBRUARY
------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
United States................................................ $493,293 $383,329 $318,380
Outside United States........................................ 95,126 104,716 108,112
-------- -------- --------
$588,419 $488,045 $426,492
======== ======== ========
Operating income:
United States................................................ $ 91,950 $ 52,750 $ 24,568
Outside United States........................................ 9,937 20,881 18,836
-------- -------- --------
Operating income from segments............................ $101,887 $ 73,631 $ 43,404
======== ======== ========
Identifiable assets:
United States................................................ $425,021 $398,007 $340,678
Outside United States........................................ 95,771 101,641 118,701
-------- -------- --------
$520,792 $499,648 $459,379
======== ======== ========
</TABLE>
Included in United States sales were export sales of $94.3 million, $54.5
million and $39.9 million in 1995, 1994 and 1993. As a result of a contract
manufacturing agreement with a subsidiary, sales of approximately $35 million,
recorded as foreign sales in prior years, are classified as export sales in
fiscal 1995.
<TABLE>
<CAPTION>
INFORMATION ON SEGMENTS
FOR THE YEARS ENDED
THE LAST DAY OF FEBRUARY
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Outdoor products................................. $268,110 $234,502 $213,196
Industrial and power equipment................... 207,556 162,026 128,912
Sporting equipment............................... 112,753 91,517 84,384
-------- -------- --------
$588,419 $488,045 $426,492
======== ======== ========
Operating income:
Outdoor products................................. $ 49,583 $ 33,974 $ 20,611
Industrial and power equipment................... 32,987 24,503 12,843
Sporting equipment............................... 19,317 15,154 9,950
-------- -------- --------
Operating income from segments................... 101,887 73,631 43,404
Corporate overhead expenses...................... (25,337) (29,752) (14,486)
-------- -------- --------
Income from operations........................... 76,550 43,879 28,918
Interest expense................................. (11,078) (11,357) (11,113)
Interest income.................................. 2,608 1,878 708
Other expense, net............................... (696) (549) (1,925)
-------- -------- --------
Income before income taxes....................... $ 67,384 $ 33,851 $ 16,588
======== ======== ========
</TABLE>
F-25
<PAGE> 116
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
INFORMATION ON SEGMENTS
FOR THE YEARS ENDED
THE LAST DAY OF FEBRUARY
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Identifiable assets:
Outdoor products................................. $199,489 $202,671 $201,824
Industrial and power equipment................... 82,959 69,230 67,799
Sporting equipment............................... 71,777 59,152 48,621
Corporate office................................. 103,747 95,395 51,093
Discontinued operations.......................... 62,820 73,200 90,042
-------- -------- --------
$520,792 $499,648 $459,379
======== ======== ========
Depreciation and amortization:
Outdoor products................................. $ 13,771 $ 14,511 $ 14,653
Industrial and power equipment................... 3,820 3,616 3,770
Sporting equipment............................... 3,774 3,594 3,685
Corporate office................................. 1,584 1,093 1,280
-------- -------- --------
$ 22,949 $ 22,814 $ 23,388
======== ======== ========
Capital expenditures:
Outdoor products................................. $ 4,939 $ 5,335 $ 15,743
Industrial and power equipment................... 4,917 698 2,123
Sporting equipment............................... 4,578 1,377 1,425
Corporate office................................. 254 7,033 420
-------- -------- --------
$ 14,688 $ 14,443 $ 19,711
======== ======== ========
</TABLE>
NOTE 11 -- SUPPLEMENTAL INFORMATION
The following balance sheet captions are comprised of the items specified
below:
<TABLE>
<CAPTION>
AS OF THE LAST DAY OF
FEBRUARY
-----------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable:
Trade accounts and other................................. $ 89,899 $ 87,453
Billings on construction contracts:
Current............................................... 32,029 37,527
Retainage estimated to be collected within one year... 11,457 14,534
Allowance for doubtful accounts.......................... (2,611) (2,238)
--------- ---------
$ 130,774 $ 137,276
========= =========
Inventories:
Finished goods........................................... $ 35,769 $ 27,169
Work in process.......................................... 14,075 13,329
Raw materials and supplies............................... 27,231 19,682
--------- ---------
$ 77,075 $ 60,180
========= =========
</TABLE>
F-26
<PAGE> 117
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AS OF THE LAST DAY OF
FEBRUARY
-----------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Property, plant and equipment:
Land..................................................... $ 6,639 $ 6,570
Buildings and improvements............................... 82,948 80,951
Machinery and equipment.................................. 153,617 146,449
Furniture, fixtures and office equipment................. 21,949 28,102
Transportation equipment................................. 11,083 11,582
Construction in progress................................. 3,693 2,595
Accumulated depreciation................................. (145,561) (135,747)
--------- ---------
$ 134,368 $ 140,502
========= =========
Accounts payable:
Trade accounts and other................................. $ 58,388 $ 62,210
Retainage estimated to be paid within one year........... 6,492 12,071
--------- ---------
$ 64,880 $ 74,281
========= =========
Accrued expenses:
Salaries, wages and related withholdings................. $ 25,033 $ 19,777
Employee benefits........................................ 5,707 15,049
Casualty insurance costs................................. 15,240 12,453
Income taxes payable..................................... 5,963 8,122
Other.................................................... 39,893 28,257
--------- ---------
$ 91,836 $ 83,658
========= =========
Other liabilities:
Employee benefits........................................ $ 21,215 $ 20,534
Casualty insurance costs................................. 3,749 8,276
Other.................................................... 1,482 3,190
--------- ---------
$ 26,446 $ 32,000
========= =========
</TABLE>
At February 28, 1995, the Canadian manufacturing operation had net assets
of $10.7 million which were subject to withdrawal restrictions resulting from a
financing agreement. The majority of this amount was invested in property, plant
and equipment.
Advertising costs were $10.6 million, $8.9 million and $7.0 million for
1995, 1994 and 1993.
Supplemental cash flow information is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Interest paid........................................ $ 10,378 $12,447 $12,428
Income taxes paid.................................... 28,915 21,668 7,351
Capital lease obligations incurred................... 34 106 2,408
Issuance of stock to employee benefits plan.......... 257 1,234 1,800
Acquisitions of businesses (see Note 4):
Fair value of assets acquired...................... 22,556
Liabilities assumed and incurred................... (12,406)
Cash paid.......................................... 10,150
</TABLE>
F-27
<PAGE> 118
BLOUNT INTERNATIONAL, INC. (FORMERLY HBC, INCORPORATED) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- RELATED PARTY TRANSACTIONS
In connection with a previous loan and other guarantees made by Parent to
Sam Blount Company, Inc., whose majority shareholder is a director of Parent, an
agreement was reached whereas Sam Blount Company, Inc. paid Parent $2,130,000 as
a guaranty fee. A payment of $700,000 was received in November 1993 and the
remainder was paid in July 1994.
On December 31, 1990, Parent approved a loan to Joseph W. Blount, a
director of Parent, for $325,000. The note provided for interest at the prime
rate and expired on July 1, 1993. The outstanding balance was paid in May 1994.
On August 20, 1990, Parent approved the following related party loans:
<TABLE>
<S> <C>
Katherine Blount Miles and James V. Miles................................. $250,000
Alabama Education Systems, Inc. (James V. Miles, President)............... 100,000
</TABLE>
Katherine Blount Miles is a director of Parent. The notes provided for
interest at the prime rate. The outstanding balance was paid in March 1994.
On May 13, 1991, Parent approved a loan to Winton M. Blount III, in the
amount of $1,465,000. This note was increased to $1,715,000 on July 30, 1993.
The note bears interest at the prime rate. Interest is payable monthly beginning
July 1, 1991 and continuing through May 1, 1996, at which time outstanding
principal is due. In connection with this note, a commitment fee of $249,495 was
charged by Parent. In lieu of payment, Parent accepted a note from the director
which matures May 1996. Interest accrues on this loan at 7.98% per annum and
payment of principal and accrued interest is due May 1996. The aggregate of the
notes receivable was $2,030,000 at February 28, 1995 and $1,998,000 at February
28, 1994. On July 24, 1995, the aggregate outstanding amount under these notes
was paid in full.
F-28
<PAGE> 119
SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)
The following table sets forth a summary of the quarterly results of
operations for the two years ended the last day of February 1995.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR TOTAL
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
1995
Sales....................................... $145,684 $138,781 $157,459 $146,495 $ 588,419
Gross profit................................ 48,519 47,094 52,963 49,025 197,601
Income before minority interest............. 9,845 9,503 12,336 9,047 40,731
Minority interest in income of consolidated
subsidiary................................ 5,504 6,356 7,562 5,545 24,967
Net income.................................. 4,341 3,147 4,774 3,502 15,764
Net income per common share................. 415.68 288.32 461.87 319.14 1,485.01
</TABLE>
The first and third quarters include after-tax charges of $2.4 million and
$2.3 million, respectively, for anticipated litigation and settlement costs
related to the sale of a former subsidiary. The second quarter includes net
income of $.9 million from loan guarantee fee received from a related party. The
third and fourth quarters include after-tax charges of $1.3 million each for an
environmental matter at the Sporting Equipment segment's Lewiston, Idaho
facility.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR TOTAL
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
1994
Sales....................................... $117,386 $118,454 $128,030 $124,175 $ 488,045
Gross profit................................ 35,432 37,963 42,800 41,791 157,986
Income before minority interest............. 54 1,926 3,789 5,483 11,252
Minority interest in income of consolidated
subsidiary................................ 721 1,512 3,980 2,188 8,401
Net income (loss)........................... (667) 414 (191) 3,295 2,851
Net income (loss) per common share.......... (117.44) (1.60) (66.13) 303.14 117.97
</TABLE>
The first quarter includes net income of $.9 million resulting from
finalizing a license and technical agreement. The third quarter includes an
after-tax charge of $2.6 million for the donation of Company Common Stock to the
Alabama Shakespeare Festival Theatre Finance Authority. The third and fourth
quarters include after-tax charges of $1.3 million and $2.6 million,
respectively, resulting from accruals for expected legal costs related to the
sale of a former subsidiary. The fourth quarter includes a net loss of $650
thousand for disposal of the Company's construction business, an after-tax
charge of $1.1 million for accruals for a management incentive plan, net income
of $1.6 million resulting from the resolution of a prior year tax issue and net
income of $1.2 million from the sale of 105,400 shares of Company Common Stock.
F-29
<PAGE> 120
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLAN AND AGREEMENT OF MERGER
AMONG
HBC, INCORPORATED,
HBC TRANSACTION SUBSIDIARY, INC.
AND
BLOUNT, INC.
DATED AUGUST 17, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 121
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
ARTICLE 1. CERTIFICATE OF INCORPORATION, BY-LAWS AND CAPITALIZATION OF HBC......... A-4
Section 1.1 Certificate of Incorporation of HBC..................... A-4
Section 1.2 By-Laws of HBC.......................................... A-4
Section 1.3 Capitalization of HBC................................... A-4
Section 1.4 Directors and Officers of HBC........................... A-4
ARTICLE 2. THE MERGER.............................................................. A-5
Section 2.1 The Merger.............................................. A-5
Section 2.2 The Closing............................................. A-5
Section 2.3 Effective Time of the Merger............................ A-5
Section 2.4 Effect of the Merger.................................... A-5
ARTICLE 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; ISSUANCE OF CERTIFICATES; AMENDMENT OF CERTIFICATE OF
INCORPORATION OF BLOUNT................................................. A-5
Section 3.1 Effect on Capital Stock................................. A-5
Section 3.2 Certificates for HBC Common Stock; Fractional Shares.... A-6
Section 3.3 Certificate of Incorporation of Surviving Corporation... A-8
Section 3.4 By-Laws of Surviving Corporation........................ A-8
Section 3.5 Directors and Officers of Surviving Corporation......... A-8
Section 3.6 Change of Name of HBC................................... A-8
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BLOUNT................................ A-8
Section 4.1 Organization, Existence and Good Standing............... A-8
Section 4.2 Blount Capital Stock.................................... A-8
Section 4.3 Power and Authority..................................... A-8
Section 4.4 Commissions and Fees.................................... A-9
Section 4.5 Tax Matters............................................. A-9
Section 4.6 Opinion of Financial Advisor............................ A-9
Section 4.7 No Untrue Representation................................ A-9
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE SUBSIDIARY AND HBC................ A-9
Section 5.1 Organization, Existence and Capital Stock............... A-9
Section 5.2 Power and Authority..................................... A-9
Section 5.3 No Contracts or Liabilities............................. A-9
Section 5.4 No Activities........................................... A-9
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF HBC................................... A-10
Section 6.1 Organization, Existence and Good Standing............... A-10
Section 6.2 Power and Authority..................................... A-10
Section 6.3 HBC Common Stock........................................ A-10
Section 6.4 Capital Stock and Ownership............................. A-10
Section 6.5 Subsidiary Common Stock and Liabilities................. A-10
Section 6.6 HBC Information......................................... A-11
Section 6.7 Commissions and Fees.................................... A-11
Section 6.8 Legal Proceedings....................................... A-11
Section 6.9 No Violations........................................... A-11
Section 6.10 Tax Matters............................................. A-11
Section 6.11 No Untrue Representations............................... A-11
</TABLE>
A-2
<PAGE> 122
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
ARTICLE 7. COVENANTS............................................................... A-11
Section 7.1 Interim Operations of HBC............................... A-11
Section 7.2 Meeting of Blount Stockholders.......................... A-12
Section 7.3 Registration Statement, Proxy Statement and Listing
Application........................................... A-12
Section 7.4 Exemption from State Takeover Laws...................... A-13
Section 7.5 HSR Act Compliance...................................... A-13
Section 7.6 Public Disclosures...................................... A-13
Section 7.7 Other Actions........................................... A-13
Section 7.8 Accounting and Tax-Free Reorganization Treatment........ A-13
Section 7.9 Blount Stock Options and Employment Agreements.......... A-14
Section 7.10 Obligations of Subsidiary............................... A-14
Section 7.11 Registration Rights and Stock Transfer Restriction
Agreement............................................. A-14
Section 7.12 Indemnification for Litigation.......................... A-14
ARTICLE 8. TERMINATION, AMENDMENT AND WAIVER....................................... A-16
Section 8.1 Termination............................................. A-16
Section 8.2 Effect of Termination................................... A-17
Section 8.3 Amendment............................................... A-17
Section 8.4 Extension; Waiver....................................... A-17
Section 8.5 Procedure for Termination, Amendment, Extension or
Waiver................................................ A-17
Section 8.6 Expenses................................................ A-17
ARTICLE 9. CONDITIONS TO CLOSING................................................... A-18
Section 9.1 Mutual Conditions....................................... A-18
Section 9.2 Conditions to Obligations of HBC and the Subsidiary..... A-19
Section 9.3 Conditions to Obligations of Blount..................... A-19
ARTICLE 10. MISCELLANEOUS........................................................... A-20
Section 10.1 Nonsurvival of Representations and Warranties........... A-20
Section 10.2 Notices................................................. A-21
Section 10.3 Further Assurances...................................... A-21
Section 10.4 Indemnification of Directors and Officers............... A-21
Section 10.5 Governing Law........................................... A-21
Section 10.6 Table of Contents; Captions; Glossary................... A-21
Section 10.7 Integration Exhibits and Schedules...................... A-22
Section 10.8 Entire Agreement........................................ A-22
Section 10.9 Counterparts............................................ A-22
Section 10.10 Binding Effect.......................................... A-22
Section 10.11 No Rule of Construction................................. A-22
GLOSSARY ........................................................................ A-23
EXHIBITS
I -- Form of Restated Certificate of Incorporation of HBC..................... A-I-1
II -- Form of Restated By-Laws of HBC.......................................... A-II-1
III -- Form of Indemnification Agreement........................................A-III-1
IV -- Form of Registration Rights and Stock Transfer Restriction Agreement..... A-IV-1
V -- Form of Opinion of Counsel for HBC....................................... A-V-I
</TABLE>
A-3
<PAGE> 123
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER (the " Merger Agreement"), made and
entered into this 17th day of August, 1995, by and among HBC, Incorporated, a
Delaware corporation ("HBC"), HBC Transaction Subsidiary, Inc., a Delaware
corporation (the "Subsidiary"), and Blount, Inc., a Delaware corporation
("Blount") (the Subsidiary and Blount being sometimes collectively referred to
herein as the "Constituent Corporations"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of HBC and Blount has determined
that a combination between HBC and Blount is in the best interests of each such
company and its stockholders;
WHEREAS, the Board of Directors of each of HBC, the Subsidiary and Blount
has approved the merger of the Subsidiary with and into Blount (the "Merger"),
upon the terms and conditions set forth in this Merger Agreement, whereby each
issued and outstanding share of Class A Common Stock, par value $1.00 per share,
of Blount ("Blount Class A Common Stock"), and each issued and outstanding share
of Class B Common Stock, par value $1.00 per share, of Blount ("Blount Class B
Common Stock", and together with the Blount Class A Common Stock, the "Blount
Common Stock") not owned directly or indirectly by Blount or HBC will be
converted into the Merger Consideration (as hereinafter defined) (the shares of
Blount Common Stock to be so converted being hereinafter collectively referred
to as the "Blount Stock"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that the
Merger Agreement shall constitute a plan of reorganization thereunder;
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein, the parties hereto do hereby agree as follows:
ARTICLE 1.
CERTIFICATE OF INCORPORATION, BY-LAWS AND CAPITALIZATION OF HBC.
Section 1.1 Certificate of Incorporation of HBC. Prior to the Effective
Time of the Merger (as hereinafter defined), the Certificate of Incorporation of
HBC shall be amended and restated, and at all times thereafter through the
Effective Time of the Merger (except as set forth in Section 3.6 hereof) and
thereafter until amended as provided by law and in such Certificate of
Incorporation, such Certificate of Incorporation shall read, as set forth in
Exhibit I hereto.
Section 1.2 By-Laws of HBC. Prior to the Effective Time of the Merger,
the By-Laws of HBC shall be amended and restated, and at all times thereafter
through the Effective Time of the Merger (except as set forth in Section 3.6
hereof) and thereafter until amended or repealed as provided by law or therein,
such By-Laws shall read, as set forth in Exhibit II hereto.
Section 1.3 Capitalization of HBC. At the Effective Time of the Merger,
HBC will have an authorized capitalization of 4,456,855 shares of Preferred
Stock, par value $0.01 per share, of which no shares will be issued and
outstanding, and no shares will be held in treasury; 60,000,000 shares of Class
A Common Stock, par value $0.01 per share (the "HBC Class A Common Stock"), of
which 3,112,572 shares will, prior to the issuance of the Merger Consideration,
be issued and outstanding and no shares will be held in treasury; and 14,000,000
shares of Class B Common Stock, par value $0.01 per share (the "HBC Class B
Common Stock," and together with the HBC Class A Common Stock, the "HBC Common
Stock"), of which 4,204,848 shares will, prior to the issuance of the Merger
Consideration, be issued and outstanding and no shares of which will be held in
treasury.
Section 1.4 Directors and Officers of HBC. The directors and officers of
Blount immediately prior to the Effective Time of the Merger shall become, as of
the Effective Time of the Merger, the directors and officers of HBC, with the
present directors of Blount elected by the holders of the Blount Class A Common
A-4
<PAGE> 124
Stock being deemed the directors elected by the holders of the HBC Class A
Common Stock and the present directors of Blount elected by the holders of the
Blount Class B Common Stock being deemed the directors elected by the holders of
the HBC Class B Common Stock, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of HBC in effect as of the Effective
Time of the Merger and as such Certificate of Incorporation and By-Laws may
thereafter be amended.
ARTICLE 2.
THE MERGER.
Section 2.1 The Merger. Upon the terms and conditions set forth in this
Merger Agreement, and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), the Subsidiary shall be merged with and into
Blount at the Effective Time of the Merger. At the Effective Time of the Merger,
the separate corporate existence of the Subsidiary shall cease and Blount shall
continue as the surviving corporation (the "Surviving Corporation") under the
name "Blount, Inc." and shall succeed to and assume all the rights and
obligations of the Subsidiary and Blount in accordance with the DGCL.
Section 2.2 The Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. Central Time on a date to be specified by the parties
(the "Closing Date"), which (subject to satisfaction or waiver of the conditions
set forth in Article 9) shall be no later than the second business day after
satisfaction, or waiver, of the conditions set forth in Article 9, at the
offices of Bradley, Arant, Rose & White, 1400 Park Place Tower, 2001 Park Place,
Birmingham, Alabama, unless another date and time or place is agreed to in
writing by the parties hereto.
Section 2.3 Effective Time of the Merger. Subject to the provisions of
this Merger Agreement, the parties shall file a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL
as soon as practicable on or after the Closing Date. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Delaware Secretary of State, or at such other time as Subsidiary and Blount
shall agree should be specified in the Certificate of Merger (the "Effective
Time of the Merger").
Section 2.4 Effect of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
ARTICLE 3.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
ISSUANCE OF CERTIFICATES; AMENDMENT OF CERTIFICATE OF INCORPORATION OF BLOUNT.
Section 3.1 Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of any holder
of Blount Stock or any shares of capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of capital stock of the
Subsidiary issued and outstanding immediately prior to the Effective Time
of the Merger (the "Subsidiary Common Stock") shall automatically be
canceled and retired and shall cease to exist, and none of the HBC Class A
Common Stock, HBC Class B Common Stock, cash or other consideration shall
be delivered in exchange therefor.
(b) Cancellation of Treasury Stock. Each share of Blount Common Stock
that is owned by Blount or by any subsidiary of Blount shall automatically
be canceled and retired and shall cease to exist, and none of the HBC Class
A Common Stock, HBC Class B Common Stock, cash or other consideration shall
be delivered in exchange therefor.
(c) Treatment of Blount Common Stock Owned by HBC. The outstanding
shares of Blount Common Stock owned by HBC immediately prior to the
Effective Time of the Merger shall be converted, in the aggregate, into one
thousand (1,000) shares of Blount Class B Common Stock or, if
A-5
<PAGE> 125
Blount shall at such time have only one class of common stock authorized,
of Blount Common Stock, and as a result thereof Blount shall become a
wholly-owned subsidiary of HBC.
(d) Conversion of Blount Common Stock Not Owned by HBC. Subject to
Section 3.2(d), each issued and outstanding share of Blount Common Stock
(other than the shares described in paragraphs (b) and (c) of this Section
3.1) shall be converted into shares of HBC Common Stock (the shares of HBC
Common Stock to be issued to the holders of Blount Stock being herein
called the "Merger Consideration") as follows:
(i) each issued and outstanding share of Blount Class A Common
Stock shall be converted into one and one-half (1.5) shares of HBC Class
A Common Stock, and
(ii) each issued and outstanding share of Blount Class B Common
Stock shall be converted into one and one-half (1.5) shares of HBC Class
B Common Stock;
in the manner hereinafter specified. For purposes of this Merger Agreement,
the conversion ratio of 1.5 shares of HBC Class A Common Stock for one
share of Blount Class A Common Stock, and 1.5 shares of HBC Class B Common
Stock for one shares of Blount Class B Common Stock, respectively, shall be
referred to as the "Exchange Ratio." As of the Effective Time of the Merger
and as a result of the Merger, such shares of the Blount Common Stock shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate theretofore representing
shares of Blount Common Stock shall cease to represent shares of Blount
Common Stock or have any rights with respect thereto and shall thereupon
represent (I) an equal number of shares of HBC Class A Common Stock or HBC
Class B Common Stock, respectively, as such certificate formerly
represented of Blount Class A Common Stock or Blount Class B Common Stock
and (II) the right to receive the balance of the Merger Consideration and
any cash in lieu of fractional shares of HBC Common Stock to be issued or
paid in consideration therefor in accordance with the provisions of Section
3.2 of this Merger Agreement, without interest.
(e) Stock Options. At the Effective Time of the Merger, all rights
with respect to Blount Class A Common Stock pursuant to any Blount stock
options which are outstanding at the Effective Time of the Merger, whether
or not then exercisable, shall be converted into and become rights with
respect to HBC Class A Common Stock, and HBC shall assume each Blount stock
option in accordance with the terms of the stock option agreement or plan,
in each case as amended, under which such option was issued and the stock
option agreement, as amended, by which it is evidenced, such conversion to
be consistent with the Exchange Ratio. It is intended that the foregoing
provisions shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 425 of the Code, as to any stock
option which is an "incentive stock option."
Section 3.2 Certificates for HBC Common Stock; Fractional Shares.
(a) Conversion of Existing Certificates and Issuance of New
Certificates. In order to effect the conversion of Blount Common Stock not
owned by HBC into shares of HBC Common Stock pursuant to Section 3.1(d) of this
Merger Agreement:
(i) At the Effective Time of the Merger, each certificate for issued
and outstanding shares of Blount Class A Common Stock and Blount Class B
Common Stock other than the shares described in Paragraphs (b) and (c) of
Section 3.1 hereof shall remain outstanding and shall thereafter be deemed
to represent a certificate for a number of shares of HBC Class A Common
Stock and HBC Class B Common Stock, respectively, equivalent to the number
of shares of Blount Class A Common Stock and Blount Class B Common Stock
formerly represented by such certificate; and
(ii) As soon as reasonably practically practicable after the Effective
Time of the Merger, HBC shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
of the Merger represented outstanding shares of Blount Common Stock (the
"Certificates") whose shares of Blount Common Stock were converted into the
Merger Consideration pursuant to Section 3.1, additional certificates for
(A) a number of shares of HBC Class A Common Stock equal to one-half ( 1/2)
A-6
<PAGE> 126
of the number of shares of the issued and outstanding shares of Blount
Class A Common Stock held of record by such holder and (B) a number of
shares of HBC Class B Common Stock equal to one-half ( 1/2) of the number
of shares of Blount Class B Common Stock held of record by such holder
immediately prior to the Effective Time of the Merger, provided that
certificates shall only be issued for whole shares of HBC Common Stock and,
in the event such holder is entitled to receive a fractional share of HBC
Class A Common Stock, HBC Class B Common Stock, or both, such holder shall
instead receive cash in lieu of such fractional shares of HBC Common Stock
in accordance with the provisions of Section 3.2 (d).
(b) Alternate Exchange Procedures. In the event that the procedures for
effecting conversion of certificates for Blount Common Stock not owned by HBC
and certificates for HBC Common Stock set forth in paragraph (a) to the Section
3.2 are not acceptable to the stock exchange upon which the shares of HBC Common
Stock are to be listed, or are otherwise deemed impracticable by the parties to
this Merger Agreement, the parties to this Merger Agreement will adopt such
procedures for exchanging certificates of Blount Common Stock for certificates
of HBC Common Stock as they shall deem appropriate under the circumstances as
shall be mutually agreeable to such parties.
(c) No Further Ownership Rights in Blount Common Stock. All shares of HBC
Common Stock deemed to be outstanding or issued in accordance with the terms of
this Article 3 (including any cash paid pursuant to Section 3.2(d)) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the Blount Common Stock theretofore represented by such
Certificates. After the Effective Time of the Merger, Certificates which
formerly represented shares of Blount Common Stock and which, pursuant to the
provisions of this Section 3.2, subsequent to the Effective Time of the Merger
are deemed to represent certificates for shares of HBC Common Stock, shall have
no further rights in and shall represent no interest in the capital stock of
Blount and shall thereafter only be entitled to be exchanged and transferred on
the stock transfer books of HBC in accordance with procedures therefor
established by HBC and shall thereafter represent only the interest in the HBC
Common Stock specified in this Section 3.2.
(d) No Fractional Shares. No certificates or scrip representing fractional
shares of HBC Common Stock shall be issued in connection with the Merger, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of HBC. Notwithstanding any other provision of this
Merger Agreement, (i) each holder of Blount Class A Common Stock converted
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of HBC Class A Common Stock (after taking into account all
Certificates with respect to Blount Class A Common Stock held by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of HBC Class A Common Stock and (ii) each holder
of Blount Class B Common Stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of HBC Class B
Common Stock (after taking into account all Certificates with respect to Blount
Class B Stock held by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of HBC Class B
Common Stock. The amount of cash to be payable in lieu of a fractional interest
of a share of HBC Class A Common Stock shall be equal to one-third ( 1/3) of the
closing price per share of Blount Class A Common Stock on the trading day
immediately preceding the date of the Effective Time of the Merger for American
Stock Exchange -- Composite Transactions as reported by the American Stock
Exchange (the "Exchange"), or, if there are no transactions in the Blount Class
A Common Stock on such trading date, the closing price per share of Blount Class
A Common Stock on the trading day next preceding the date of the Effective Time
of the Merger on which a transaction in Blount Class A Common Stock occurred, as
so reported by the Exchange. The amount of cash to be payable in lieu of a
fractional interest of a share of HBC Class B Common Stock shall be equal to
one-third ( 1/3) of the closing price per share of Blount Class B Common Stock
on the trading day immediately preceding the date of the Effective Time of the
Merger for American Stock Exchange -- Composite Transactions as reported by the
Exchange, or, if there are no transactions in the Blount Class B Common Stock on
such trading date, the closing price per share of Blount Class B Common Stock on
the trading day next preceding the date of the Effective Time of the Merger on
which a transaction in Blount Class B Common Stock occurred, as so reported by
the Exchange.
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Section 3.3 Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of Blount shall be amended and restated, effective
at the Effective Time of the Merger, in a manner satisfactory to HBC. The
Certificate of Incorporation of Blount, as so amended and restated, shall become
the Certificate of Incorporation of the Surviving Corporation from and after the
Effective Time of the Merger and until thereafter amended as provided by law and
said amended and restated Certificate of Incorporation.
Section 3.4 By-Laws of Surviving Corporation. The By-Laws of Blount shall
be the By-Laws of the Surviving Corporation from and after the Effective Time of
the Merger and until thereafter altered, amended or repealed in accordance with
the laws of the State of Delaware, the Certificate of Incorporation of Blount
and the said By-Laws.
Section 3.5 Directors and Officers of Surviving Corporation. The
directors and officers of Blount immediately prior to the Effective Time of the
Merger shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation.
Section 3.6 Change of Name of HBC. At or prior to the Effective Time of
the Merger, the name of HBC shall be changed to "Blount International, Inc." and
an appropriate amendment to the certificate of said corporation shall be filed
with respect thereto.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BLOUNT.
Blount hereby represents and warrants to HBC and the Subsidiary as follows:
Section 4.1 Organization, Existence and Good Standing. Blount is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
Section 4.2 Blount Capital Stock. Blount's authorized capital consists of
(i) 40,000,000 shares of Blount Class A Common Stock, of which 8,731,173 shares
are issued and outstanding as of the date of this Merger Agreement and none of
which shares are issued and held as treasury shares, (ii) 12,000,000 shares of
Blount Class B Common Stock, of which 3,951,992 shares are issued and
outstanding as of the date of this Merger Agreement and none of which shares are
issued and held as treasury shares, and (iii) 4,456,855 shares of Preference
Stock, par value $.10 per share, no shares of which are issued and outstanding
as of the date of this Merger Agreement and none of which shares are issued and
held as treasury stock. All of the issued and outstanding shares of Blount
Common Stock are duly and validly issued, fully paid and nonassessable. Except
for stock options to employees, sales pursuant to Blount's existing dividend
reinvestment plan and the right of holders thereof to convert Blount Class B
Common Stock into Blount Class A Common Stock, there are no options, warrants,
or similar rights granted by Blount or any other agreements to which Blount is a
party providing for the issuance or sale by it of any additional securities.
Section 4.3 Power and Authority. Subject to the satisfaction of the
conditions precedent set forth herein, Blount has the corporate power to
execute, deliver and perform the Merger Agreement and all agreements and other
documents executed and delivered or to be executed and delivered by it pursuant
to the Merger Agreement and, subject to the satisfaction of the conditions
precedent set forth herein, has taken all corporate action on its part required
by its Certificate of Incorporation, By-Laws or otherwise, to authorize the
execution, delivery and performance of the Merger Agreement and such related
documents. Except as otherwise disclosed to HBC, the execution and delivery of
the Merger Agreement does not and, subject to the receipt of required
stockholder and regulatory approvals and any other required third-party consents
or approvals, the consummation of the Merger will not, violate any provisions of
the Certificate of Incorporation of Blount or any provisions of, or result in
the acceleration of any obligation under, any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree, to which Blount or any
subsidiary in which Blount directly or indirectly holds a majority of the voting
securities issued by such subsidiary (a "Blount Subsidiary") is a party, or by
which it is bound, or violate any restrictions of any kind to which it is
subject which, if violated or accelerated, would have a material adverse effect
on Blount.
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Section 4.4 Commissions and Fees. Except for fees payable to J. P. Morgan
& Company, Incorporated ("Morgan"), detailed in an agreement, a copy of which
has been delivered to HBC, there are no valid claims for brokerage commissions,
finder's fees, investment bankers' or financial advisors' fees or similar fees
in connection with the transactions contemplated by this Merger Agreement which
may be now or hereafter asserted against HBC or Blount resulting from any action
taken on behalf of Blount by Blount or its stockholders, officers, directors or
agents, or any of them.
Section 4.5 Tax Matters. To the knowledge of Blount, neither Blount nor
any of its affiliates has taken or agreed to take any action that would prevent
the Merger from constituting a reorganization as defined by Section 368(a)(1)(B)
of the Code.
Section 4.6 Opinion of Financial Advisor. Blount has received the oral
opinion of Morgan to the effect that, as of the date hereof, the Merger
Consideration is fair to the holders of Blount Common Stock other than HBC and
the Blount Family from a financial point of view, a written copy of which
opinion will be delivered by Blount to HBC prior to the date on which the
definitive proxy materials for the Proxy Statement (as defined in Section
7.3(a)) are filed with the SEC.
Section 4.7 No Untrue Representation. No representation or warranty by
Blount in this Merger Agreement, and no exhibit or certificate issued by Blount
and furnished or to be furnished to HBC pursuant to this Merger Agreement or in
connection with the transactions contemplated hereby, contains or, at the time
furnished, will contain any untrue statement of a material fact, or omits or, at
the time furnished, will omit to state a material fact necessary to make the
statement or facts contained therein not misleading in light of all of the
circumstances then prevailing.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE SUBSIDIARY AND HBC.
The Subsidiary and HBC hereby represent and warrant to Blount as follows:
Section 5.1 Organization, Existence and Capital Stock. The Subsidiary is
a corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware and is duly qualified to transact business as
a foreign corporation in the State of Alabama. The Subsidiary's authorized
capital consists of 1,000 shares of common stock, par value $1.00 per share, all
of which shares are issued and registered in the name of HBC. The Subsidiary has
never owned, directly or indirectly, any shares of Blount Common Stock or HBC
Common Stock.
Section 5.2 Power and Authority. The Subsidiary has corporate power and
authority to execute, deliver and perform the Merger Agreement and all
agreements and other documents executed and delivered, or to be executed and
delivered, by it pursuant to the Merger Agreement, and, subject to the
satisfaction of the conditions precedent set forth herein and subject to
stockholder approval as required by Delaware law, has taken all actions required
by law, its Certificate of Incorporation, its By-Laws or otherwise, to authorize
the execution and delivery of the Merger Agreement and such related documents.
Section 5.3 No Contracts or Liabilities. Other than the obligations
created under the Merger Agreement or as contemplated by the HBC
Recapitalization (as hereinafter defined), the Subsidiary is not obligated under
any contracts, claims, leases, liabilities (contingent or otherwise), loans or
otherwise.
Section 5.4 No Activities. The Subsidiary was incorporated solely for the
purpose of effecting the Merger and has not engaged in any business activity
unrelated to effecting the Merger.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF HBC.
HBC hereby represents and warrants to Blount as follows:
Section 6.1 Organization, Existence and Good Standing. HBC is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. HBC has all necessary corporate power to own
its properties and assets and to carry on its business as presently conducted.
HBC is duly qualified to do business and is in good standing in all
jurisdictions in which the character of the property owned, leased or operated
or the nature of the business transacted by it makes qualification necessary.
Section 6.2 Power and Authority. HBC has corporate power and authority to
execute, deliver and perform the Merger Agreement and all agreements and other
documents executed and delivered, or to be executed and delivered, by it
pursuant to the Merger Agreement, and, subject to the satisfaction of the
conditions precedent set forth herein, has taken all actions required by law,
its Certificate of Incorporation, its By-Laws or otherwise, to authorize the
execution and delivery of the Merger Agreement and such related documents. The
execution and delivery of the Merger Agreement does not and, subject to the
receipt of required regulatory approvals and any other required third-party
consents or approvals, the consummation of the Merger contemplated hereby will
not, violate any provisions of the Certificate of Incorporation or By-Laws of
HBC, or any provision of, or result in the acceleration of any obligation under,
any mortgage, lien, lease, agreement, instrument, order, arbitration award,
judgment or decree to which HBC is a party or by which it is bound, or violate
any restrictions of any kind to which HBC is subject.
Section 6.3 HBC Common Stock. As of the Effective Time of the Merger, HBC
will have a sufficient number of authorized but unissued shares of HBC Class A
Common Stock and HBC Class B Common Stock available for issuance to the holders
of Blount Common Stock in accordance with the provisions of the Merger
Agreement. The HBC Common Stock to be issued pursuant to the Merger Agreement
will, when so delivered, be (i) duly and validly issued, fully paid and
nonassessable, (ii) issued pursuant to an effective registration statement under
the Securities Act of 1933, as amended, and the rules and regulation of the
Securities and Exchange Commission (the "SEC") thereunder applicable thereto
(the "Securities Act"), and (iii) subject to the provisions of Section 7.3(e)
hereof, authorized for listing on the Exchange upon official notice of issuance.
Section 6.4 Capital Stock and Ownership.
(a) As of the Effective Time of the Merger, HBC will have an authorized
capitalization of 4,456,855 shares of Preferred Stock, par value $0.01 per
share, of which no shares will be issued and outstanding, and no shares will be
held in treasury; 60,000,000 shares of HBC Class A Common Stock, par value $0.01
per share, of which 3,112,572 shares will be issued and outstanding and no
shares will be held in the treasury of HBC; and 14,000,000 shares of HBC Class B
Common Stock, par value $0.01 per share, of which 4,204,848 shares will be
issued and outstanding and no shares will be held in treasury. All of the issued
and outstanding shares of HBC Common Stock at the Effective Time of the Merger
will have been duly and validly issued and will be fully paid and nonassessable.
At the Effective Time of the Merger, except as assumed by HBC pursuant to the
Merger Agreement, there will be no options, warrants or similar rights granted
by HBC or any other agreements to which HBC is a party providing for the
issuance or sale by it of any additional securities. At the Effective Time of
the Merger, there will be no liability for dividends declared or accumulated but
unpaid with respect to any shares of HBC Common Stock.
(b) The HBC Common Stock outstanding at the Effective Time of the Merger
will be owned beneficially and of record by (i) The Blount Holding Company,
L.P., a Delaware limited partnership (the "Blount Family Partnership") to be
formed by Winton M. Blount and his children (the "Blount Family") prior to the
Effective Time of the Merger in substantially the manner heretofore disclosed to
Blount, (ii) Winton M. Blount, and (iii) members of his family or trusts of
which they are the beneficiaries.
Section 6.5 Subsidiary Common Stock and Liabilities. HBC owns,
beneficially and of record, all of the issued and outstanding shares of
Subsidiary Common Stock, which shares are all validly issued and
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outstanding, fully paid and nonassessable, free and clear of all liens and
encumbrances. HBC has the corporate power and authority to endorse and surrender
all of such Subsidiary Common Stock for conversion and cancellation pursuant to
the Merger Agreement. HBC has taken all such actions as may be required in its
capacity as the sole stockholder of the Subsidiary to approve the Merger.
Immediately prior to the Effective Time of the Merger, the Subsidiary will have
no liabilities other than its obligations pursuant to this Merger Agreement.
Section 6.6 HBC Information. HBC has heretofore furnished Blount with a
true and complete copy of the unconsolidated balance sheet of HBC at February
28, 1995, together with the opinion of the independent auditors of HBC with
respect thereto, which balance sheet was prepared in accordance with generally
accepted accounting principles except that the ownership by HBC of Blount Common
Stock was accounted for on the equity method rather than by consolidating the
financial statements of Blount with those of HBC. This consolidated balance
sheet of HBC at February 28, 1995 and the notes related thereto are herein
sometimes referred to as the "HBC Balance Sheet." Except (i) as disclosed or
reserved against in the HBC Balance Sheet or in the Disclosure Schedule
delivered to Blount by HBC concurrently with the execution of this Merger
Agreement (the "HBC Disclosure Schedule") or arising out of HBC's ownership of
Blount Common Stock and (ii) for liabilities arising out of the Merger, HBC has
no liabilities of any nature, whether accrued, absolute, contingent or
otherwise.
Section 6.7 Commissions and Fees. There are no valid claims for brokerage
commissions, finder's fees, investment bankers' or financial advisors' fees or
similar fees in connection with the transactions contemplated by the Merger
Agreement which may be now or hereafter asserted against HBC or Blount resulting
from any action taken on behalf of HBC by HBC or its stockholders, officers,
directors or agents, or any of them.
Section 6.8 Legal Proceedings. Except as disclosed in the HBC Balance
Sheet and the HBC Disclosure Schedule, there is no litigation, governmental
investigation or other proceeding pending or, so far as is known to HBC,
threatened against or relating to HBC, its properties or business (other than
litigation, investigations or proceedings against or relating to Blount and its
properties and business), or the transaction contemplated by the Merger
Agreement and, so far as is known to HBC, no basis for any such action exists.
Section 6.9 No Violations. Subject to compliance with applicable
securities laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the consummation of the Merger will not violate any law
or restriction to which HBC or its affiliates or their respective properties or
assets is subject.
Section 6.10 Tax Matters. To the knowledge of HBC, neither HBC nor any of
its affiliates has taken or agreed to take any action that would prevent the
Merger from constituting a reorganization as defined by Section 368(a)(1)(B) of
the Code.
Section 6.11 No Untrue Representations. No representation or warranty by
HBC in this Merger Agreement, and no exhibit or certificate issued by HBC and
furnished or to be furnished to Blount pursuant to this Merger Agreement or in
connection with the transactions contemplated hereby, contains or, at the time
furnished, will contain any untrue statement of a material fact, or omits or, at
the time furnished, will omit to state a material fact necessary to make the
statement or facts contained therein not misleading in light of all of the
circumstances then prevailing.
ARTICLE 7.
COVENANTS
Between the date hereof and the Effective Time of the Merger, except as
otherwise contemplated by this Merger Agreement,
Section 7.1 Interim Operations of HBC. Except in connection with, and as
contemplated by, the Merger Agreement or the recapitalization of the capital
structure of HBC in substantially the manner
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heretofore disclosed to Blount to be effected prior to the Effective Time of the
Merger (the "HBC Recapitalization"), HBC shall not, without the prior consent of
Blount,
(a) engage in any business activities;
(b) amend its Certificate of Incorporation or By-Laws (other than as
set forth in Article 1 and Section 3.6); or
(c) sell or dispose of any of the Blount Common Stock owned by it.
Section 7.2 Meeting of Blount Stockholders. Blount will take all steps
necessary in accordance with its Certificate of Incorporation and By-Laws to
call, give notice of, convene and hold a meeting of its stockholders as soon as
practicable after the effectiveness of the Registration Statement (as defined in
Section 7.3(a) hereof), for the purpose of approving this Merger Agreement and
for such other purposes as may be necessary. Unless this Merger Agreement shall
have been validly terminated as provided herein, the Board of Directors of
Blount will (i) recommend to its stockholders the approval of this Merger
Agreement, the transactions contemplated hereby and any other matters to be
submitted to the stockholders in connection therewith, to the extent that such
approval is required by applicable law in order to consummate the Merger, and
(ii) use its reasonable, good faith efforts to obtain the approval by its
stockholders of this Merger Agreement and the transactions contemplated hereby.
Section 7.3 Registration Statement, Proxy Statement and Listing
Application.
(a) HBC shall prepare and file with the SEC and any other applicable
regulatory bodies, as soon as reasonably practicable, a Registration Statement
on Form S-4 with respect to the shares of HBC Common Stock to be issued in the
Merger (the "Registration Statement"), and will otherwise proceed promptly to
satisfy the requirements of the Securities Act, including Rule 145 thereunder;
provided, that the Registration Statement shall be initially filed by Blount on
Schedule 14A pursuant to Rule 14a-6(e)(2) under the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC thereunder applicable
thereto (the "Exchange Act"). Such Registration Statement shall contain a proxy
statement of Blount containing the information required by the Exchange Act (the
"Proxy Statement"). HBC shall take all reasonable steps to cause the
Registration Statement to be declared effective and to maintain such
effectiveness until all of the shares covered thereby have been distributed. HBC
shall promptly amend or supplement the Registration Statement to the extent
necessary in order to make the statements therein not misleading or to correct
any misstatements which have become false or misleading. HBC shall use its
reasonable, good faith efforts to have the Registration Statement declared
effective by the SEC under the provisions of the Securities Act.
(b) If at any time prior to the Effective Time of the Merger any event or
circumstance relating to Blount or any of the Blount Subsidiaries, or its or
their respective officers or directors, should be discovered by Blount which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Blount shall promptly inform HBC.
(c) If at any time prior to the Effective Time of the Merger any event or
circumstance relating to HBC, or its officers or directors, should be discovered
by HBC which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, HBC shall promptly inform Blount and
shall promptly file such amendment to the Registration Statement.
(d) Prior to the Closing Date, HBC shall use its reasonable, good faith
efforts to cause the shares of HBC Common Stock to be issued pursuant to the
Merger to be registered or qualified under all applicable securities or Blue Sky
laws of each of the states and territories of the United States where such
registration or qualification is required, and to take any other actions which
may be necessary to enable the HBC Common Stock to be issued pursuant to the
Merger to be distributed in each such jurisdiction.
(e) Prior to the mailing of the Proxy Statement to Blount's stockholders,
HBC shall file a listing application (the "Listing Application") with the
Exchange relating to the shares of HBC Common Stock to be outstanding at the
Effective Time of the Merger and the shares of HBC Common Stock to be issued in
connection with the Merger, and shall use its reasonable, good faith efforts to
cause such shares of HBC
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Common Stock to be approved for listing upon the Exchange at the Effective Time
of the Merger or upon official notice of issuance prior to such mailing date;
provided that, at the request of Blount, HBC shall file the Listing Application
with the New York Stock Exchange, Inc. (the "NYSE") and shall use its
reasonable, good faith efforts to cause such shares of HBC Common Stock to be
approved for listing upon the NYSE at the Effective Time of the Merger or upon
official notice of issuance, respectively.
(f) Blount shall furnish all information to HBC with respect to Blount and
the Blount Subsidiaries as HBC may reasonably request for inclusion in the
Registration Statement and the Listing Application, and shall otherwise
cooperate with HBC in the preparation and filing of such documents.
(g) HBC shall furnish all information to Blount with respect to HBC as
Blount may reasonably request for inclusion in the Proxy Statement, and shall
otherwise cooperate with Blount in the preparation and filing of such documents.
Section 7.4 Exemption from State Takeover Laws. Blount shall take all
reasonable steps, by action of Blount's Board of Directors or otherwise,
necessary to exempt Blount and the Merger from the requirements of any state
takeover statute or other similar state law which would prevent or impede the
consummation of the transactions contemplated hereby.
Section 7.5 HSR Act Compliance. If advised to do so by counsel, HBC and
Blount shall promptly make their respective filings, and shall thereafter use
their reasonable, good faith efforts to promptly make any required submissions,
under the HSR Act with respect to the Merger and the transactions contemplated
hereby. HBC and Blount will use their respective reasonable, good faith efforts
to obtain all other permits, authorizations, consents and approvals from third
parties and governmental authorities necessary to consummate the Merger and the
transactions contemplated hereby.
Section 7.6 Public Disclosures. HBC and Blount will consult with each
other before issuing any press release or otherwise making any public statement
with respect to the transactions contemplated by this Merger Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation except as may be required by applicable law or requirements
of the Exchange or, if applicable, the NYSE. The parties may issue a joint press
release, mutually acceptable to HBC and Blount, promptly upon execution and
delivery of this Merger Agreement.
Section 7.7 Other Actions.
(a) Blount shall not knowingly or intentionally take any action that would,
or reasonably might be expected to, result in any of its representations and
warranties set forth herein being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in this Merger Agreement not
being satisfied, or (unless such action is required by applicable law) which
would adversely affect the ability of Blount or HBC to obtain any consents or
approvals required for the consummation of the Merger without imposition of a
condition or restriction which would have a material adverse effect on the
Surviving Corporation or HBC.
(b) HBC shall not knowingly or intentionally take any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth herein being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in this Merger Agreement not
being satisfied, or (unless such action is required by applicable law) which
would adversely affect the ability of HBC or Blount to obtain any consents or
approvals required for the consummation of the Merger without imposition of a
condition or restriction which would have a material adverse effect on the
Surviving Corporation or HBC.
Section 7.8 Accounting and Tax-Free Reorganization Treatment. Neither HBC
nor Blount shall intentionally take or cause to be taken any action, whether on
or before the Effective Time of the Merger, which would disqualify the Merger
from being accounted for in a manner similar to that in a "pooling of interest"
accounting or treated as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code.
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Section 7.9 Blount Stock Options and Employment Agreements.
(a) At or as soon as reasonably practicable after the Effective Time of the
Merger, HBC shall deliver to the holders of Blount stock options appropriate
notices setting forth such holders' rights pursuant to the stock option plans
under which such Blount stock options were issued and the stock option
agreements evidencing such options, which shall continue in full force and
effect on the same terms and conditions (subject to the adjustments required by
Sections 3.1(e) or this Section 7.9 after giving effect to the Merger and the
assumption of such options by HBC as set forth herein) as in effect immediately
prior to the Effective Time of the Merger. HBC shall comply with the terms of
the stock option plans, and the stock option agreements as so adjusted, and
shall use its reasonable, good faith efforts to ensure, to the extent required
by, and subject to the provisions of, such plans or agreements, that the Blount
stock options which qualified as incentive stock options prior to the Effective
Time of the Merger shall continue to qualify as incentive stock options after
the Effective Time of the Merger.
(b) HBC shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of HBC Common Stock for delivery upon exercise of
the Blount stock options assumed by HBC in accordance with Section 3.1(e). As
soon as practicable after the Effective Time of the Merger, HBC shall file with
the SEC a registration statement on Form S-8 with respect to shares of HBC
Common Stock subject to such Blount stock options, or, if permitted by Rule 414,
appropriate amendments to the existing registration statements of Blount with
respect thereto, and shall use its best efforts to maintain the effectiveness of
a registration statement or registration statements covering such options (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such Blount stock options remain outstanding. With respect to
those individuals who subsequent to the Merger will be subject to the provisions
of Section 16 of the Exchange Act, where applicable, HBC shall administer the
options and plans assumed pursuant to Section 3.1(e) hereof in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent the
applicable option or plan complied with such rule prior to the Merger.
(c) At the Effective Time of the Merger, the employment agreements of those
employees of Blount whose names have been provided to HBC shall be guaranteed
by, or, as applicable, assigned to and assumed by, HBC, and Blount and HBC shall
take all actions reasonably necessary to effect any such assignments and
assumptions without alteration of any of the substantive rights or obligations
of the parties to such employment agreements as the same were in effect
immediately prior to the date hereof and the Effective Time of the Merger.
Section 7.10 Obligations of Subsidiary. HBC shall take all actions
necessary to cause the Subsidiary to perform its obligations under this Merger
Agreement and to consummate the Merger on the terms and conditions set forth in
this Merger Agreement.
Section 7.11 Registration Rights and Stock Transfer Restriction
Agreement. At the Closing, HBC shall, and shall use its best efforts to cause
the Blount Family Partnership and the members of the Blount Family to, execute
and deliver a Registration Rights and Stock Transfer Restriction Agreement
substantially in the form attached hereto as Exhibit IV, with such changes
therein as shall be approved by Blount.
Section 7.12 Indemnification for Litigation.
(a) Subject to the limitations set forth in this Section 7.12, HBC agrees
to indemnify Blount and its officers and directors (collectively, the
"Indemnitees") against, and hold the Indemnitees harmless from, all damages,
liabilities, fees and expenses, including, without limitation, reasonable
attorneys' fees incurred in defending any Indemnitee against the assertion of
any claim with respect to such damages, liabilities and fees (collectively, the
"Damages"), incurred by the Indemnitees as a result of any claim, action or
proceeding against any Indemnitee (a "Claim") arising out of or related to the
Merger or pursuant to any obligation of Blount for any amounts Blount may be
required to pay pursuant to Schedule I to the engagement letter dated June 16,
1995 between Morgan and Blount.
(b) Blount shall promptly notify HBC in writing of the assertion of any
Claim with respect to which indemnity may be sought under this Section 7.12. HBC
shall have no obligation or liability under this
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Section 7.12 to the extent that HBC, or HBC's ability to adequately respond to
or defend any Claim, is prejudiced by the unreasonable failure of Blount to
provide prompt notice as required by this Section 7.12.
(c) HBC shall have no right to defend any Claim or action against which it
has agreed to indemnify the Indemnitees pursuant to Section 7.12(a) of this
Merger Agreement. With respect to any Claims to which Section 7.12(a) of this
Merger Agreement is applicable, the Indemnitees agree
(i) to promptly provide to the HBC any information related to such
Claim reasonably requested by HBC;
(ii) not to settle, or agree to settle, any such Claim without the
prior written consent of HBC, which consent will not be unreasonably
withheld; and
(iii) to provide periodic updates regarding such Claim, including,
without limitation, prompt notice and full information regarding the
occurrence of any material development with respect to such Claim.
HBC agrees to promptly reimburse, as incurred, litigation expenses, including,
without limitation, reasonable attorneys' fees, actually and reasonably incurred
by any Indemnitee in connection with any Claim for which HBC is obligated to
provide indemnification pursuant to Section 7.12(a) of this Merger Agreement;
provided, however, that HBC shall only be obligated to reimburse the Indemnitees
for the fees and expenses of one legal counsel per jurisdiction for all
Indemnitees in connection with any such Claim.
(d) (i) Notwithstanding any statement contained in this Merger Agreement to
the contrary,
(A) HBC shall have no liability under Section 7.12(a) of this
Merger Agreement as a result of any Claim which arises out of or relates
to the enforcement, application or interpretation of any law, rule,
statute, regulation or other pronouncement or finding concerning the
treatment of the Merger for tax purposes; and
(B) HBC shall be obligated pursuant to Section 7.12(a) of this
Agreement only to the extent that any Damages incurred by the
Indemnitees with respect to all such Claims within Section 7.12(a) of
this Agreement exceed in the aggregate $500,000; and once such amount is
exceeded, HBC shall be liable only for fifty percent (50%) of such
Damages in excess of such $500,000 aggregate amount.
(ii) HBC shall not be obligated or required pursuant to this Merger
Agreement or otherwise to pay consequential or punitive damages to any
party or to any Indemnitee for or in connection with the breach or
violation by HBC of this Section 7.12.
(e) The parties to this Merger Agreement hereby expressly agree that,
subject to the provisions of the agreement to which reference is made in Section
9.3(d) hereof, the remedies expressly set forth in this Section 7.12 constitute
the sole and exclusive remedies for recoveries against HBC and its affiliates
for Damages incurred or suffered by the Indemnitees as a result of any Claim
arising out of or related to the Merger, including, without limitation, the
execution and delivery of the Merger Agreement. Further, the parties hereby
expressly agree that HBC shall have no liability or obligation under this Merger
Agreement or otherwise for any liability, cost, damage, obligation or expense
incurred by any Indemnitee that arises out of acts or omissions of Blount that
is imposed upon HBC because of its ownership of the stock of, or alleged control
of, Blount (other than Claims against Blount with respect to the Merger).
(f) In determining the gross amount of any loss suffered by Blount for
which it is indemnified hereunder, the amount of such gross loss shall be
reduced by the amount, if any, of the actual recovery or benefit (net of
reasonable expenses incurred in obtaining said recovery or benefit) Blount
receives with respect thereto from any other person (including any federal,
state or local income tax benefit); and if such a recovery or benefit is
received by Blount after it receives full payment or satisfaction under this
Merger Agreement with respect to a loss, then a refund equal to the aggregate
amount of the subsequent recovery (or pro rata portion thereof for which HBC is
responsible under this Merger Agreement), net of reasonable expenses and tax or
other costs incurred in obtaining such recovery, shall be made promptly to HBC.
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(g) As a condition to the obligation of HBC to provide indemnification
pursuant to this Merger Agreement, each Indemnitee shall, when and insofar as
HBC provides indemnification hereunder, assign and convey to HBC a share
proportionate to HBC's indemnification of the Indemnitee hereunder of such
Indemnitee's right and interest in and to any claim, cause of action or other
right of recovery that such Indemnitee may have against any other party for any
loss, liability, damage or expense within the meaning of this Section 7.12 and
for which any Indemnitee seeks indemnification or reimbursement under this
Merger Agreement, and further, HBC shall be subrogated to the extent of HBC's
indemnification of Indemnitee hereunder to any rights of the Indemnitee
thereunder or under any policy of insurance. In addition, the Indemnitees agree
to take reasonable steps to cooperate with HBC in any attempt by HBC to
prosecute or otherwise pursue any such claim, cause of action or other right of
recovery, provided that HBC must promptly reimburse the reasonable out-of-pocket
expenses incurred by any Indemnitee as a result of any request by HBC for
cooperation.
(h) Each Indemnitee is intended to be, and shall be, a third party
beneficiary of the provisions of this Section 7.12 and shall have the right to
enforce the obligations of HBC to such Indemnitee under this Section 7.12 in its
own name and behalf.
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Merger Agreement may be terminated at any
time prior to the Effective Time of the Merger, whether before or after approval
of matters presented in connection with the Merger by the holders of Blount
Common Stock and the holders of HBC Common Stock:
(a) by mutual written consent of HBC, the Subsidiary and Blount;
(b) by either HBC or Blount:
(i) if, upon a vote at a duly held meeting of stockholders or any
adjournment thereof, any required approval of the holders of Blount
Common Stock shall not have been obtained;
(ii) if the Merger shall not have been consummated before January
1, 1996, provided, however, that the passage of such period shall be
tolled for any part thereof (but not exceeding 60 days in the aggregate)
during which any party shall be subject to a nonfinal order, decree,
ruling or action restraining, enjoining or otherwise prohibiting the
consummation of the Merger or the calling or holding of a meeting of
stockholders;
(iii) if any court of competent jurisdiction or other governmental
entity shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and nonappealable; or
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Merger Agreement which (A) would give rise to the failure of a condition
set forth in Article 9, and (B) cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of
such breach (a "Material Breach") (provided that the terminating party
is not then in Material Breach of any representation, warranty, covenant
or other agreement contained in this Merger Agreement);
(c) by either HBC or Blount in the event that (i) all of the
conditions to the obligation of such party to effect the Merger set forth
in Section 9.1 shall have been satisfied and (ii) any condition to the
obligation of such party to effect the Merger set forth in Section 9.2 (in
the case of HBC) or Section 9.3 (in the case of Blount) is not capable of
being satisfied prior to the end of the period referred to in Section
8.1(b)(ii); or
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(d) By Blount, if Blount's board of directors shall have determined,
in the exercise of its fiduciary duties under applicable law, not to
recommend the Merger to the holders of Blount Common Stock or shall have
withdrawn such recommendation.
Section 8.2 Effect of Termination. In the event of termination of this
Merger Agreement as provided in Section 8.1, this Merger Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of any party, other than the provisions of Section 7.12, this Section
8.2 and Section 8.6, and except to the extent that such termination results from
the willful and material breach by a party of any of its representations,
warranties, covenants or other agreements set forth in this Merger Agreement.
Section 8.3 Amendment. This Merger Agreement may be amended by the
parties at any time before or after any required approval of matters presented
in connection with the Merger by the holders of Blount Common Stock; provided,
however, that after any such approval, there shall be made no amendment that
pursuant to Section 251(d) of the DGCL requires further approval by such
stockholders without the further approval of such stockholders. This Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time of
the Merger, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Merger Agreement or in
any document delivered pursuant to this Merger Agreement or (c) subject to the
proviso set forth in Section 8.3, waive compliance with any of the agreements or
conditions contained in this Merger Agreement. Any agreement on the part of a
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Merger Agreement to assert any of its rights under this Merger Agreement
or otherwise shall not constitute a waiver of such rights.
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Merger Agreement pursuant to Section 8.1, an amendment of
this Merger Agreement pursuant to Section 8.3, or an extension or waiver
pursuant to Section 8.4 shall, in order to be effective, require in the case of
HBC, the Subsidiary or Blount, action by its board of directors or the duly
authorized designee of the board of directors of such party.
Section 8.6 Expenses. Subject to the provisions of Sections 7.12 and
9.3(i) hereof and the agreement contemplated by Section 9.3(d) hereof, all costs
and expenses incurred in connection with this Merger Agreement and the
transactions contemplated hereby in the following categories as have heretofore
been agreed by Blount and HBC (other than expenses related to effecting a
listing of the HBC Common Stock on the NYSE and effecting, as a practical
matter, a split of the Blount Common Stock by means of the Merger, which shall
be paid by Blount) shall be paid by, or reimbursed to Blount by, HBC: the fees
and expenses of counsel for HBC; the fees and expenses of accountants for HBC;
the expenses of effecting the HBC Recapitalization; the fees and expenses of
Morgan; the compensation and expenses of the directors of Blount for special
meetings of the Board of Directors held to consider the Merger; the compensation
and expenses of the special committee of the Board of Directors of Blount formed
to negotiate the Merger; the fees and expenses of counsel for the special
committee; the expenses incurred in amending credit agreements (and, with
respect to said credit agreements, obtaining waivers), stock option plans and
employment agreements to which Blount is party in connection with the Merger;
the costs of filing amendments to the certificate of incorporation of Parent and
the certificate of merger with respect to the Merger; the filing fees for the
Registration Statement and the Proxy Statement under federal and state
securities laws; the expenses of printing the Registration Statement, Proxy
Statement and related documents in connection with the Stockholders' Meeting;
the expenses of conducting the Stockholders' Meeting; transfer agent and
registrar fees in establishing new issuer accounts for HBC; the cost of
additional premiums on directors' and officers' insurance; the costs associated
with changing the name of HBC; the fees and expenses of accountants of Blount
for additional audit and other services in connection with the Merger and
increased audit fees following the transaction; the estimated net increases in
state income taxes as a result of the holding company structure to be in effect
following the Merger; and miscellaneous expenses agreed to by the parties.
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ARTICLE 9.
CONDITIONS TO CLOSING.
Section 9.1 Mutual Conditions. The respective obligations of each party
to effect the Merger shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions (any of which may be waived in writing
by HBC, the Subsidiary and Blount):
(a) None of HBC, the Subsidiary or Blount nor any of their respective
subsidiaries shall be subject to any order, decree or injunction by a court
of competent jurisdiction which (i) prevents the consummation of the Merger
or (ii) would impose any material limitation on the ability of HBC
effectively to exercise full rights of ownership of the Common Stock of the
Surviving Corporation or any material portion of the assets or business of
Blount.
(b) No statute, rule or regulation shall have been enacted by the
government (or any governmental agency) of the United States or any state,
municipality or other political subdivision thereof that makes the
consummation of the Merger and any other transaction contemplated hereby
illegal.
(c) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) The Registration Statement shall have been declared effective and
no stop order with respect to the Registration Statement shall be in
effect.
(e) The Merger and such other matters as counsel may reasonably advise
shall have been approved by such vote of the stockholders of Blount as may
be required under the DGCL and under the Certificate of Incorporation of
Blount, and such other vote as may be reasonably required by the Board of
Directors of Blount upon the advice of counsel in the exercise of its
fiduciary obligations.
(f) The shares of HBC Common Stock to be issued in connection with the
Merger (i) shall have been approved for listing on the Exchange or the NYSE
upon official notice of issuance and (ii) shall have been issued pursuant
to an effective registration statement (which is subject to no stop order)
or in transactions qualified or exempt from registration under applicable
securities or Blue Sky laws of such states and territories of the United
States as may be required.
(g) The Merger shall not result in any "goodwill" for accounting
purposes and shall qualify to be accounted for in a manner similar to that
in a "pooling of interest" accounting, and HBC and Blount shall have
received letters to such effects from Coopers & Lybrand L.L.P., independent
accountants for Blount and HBC, dated (i) the date of the mailing of the
Proxy Statement to Blount's stockholders and (ii) the Closing Date.
(h) The Merger shall be treated for purposes of Federal income taxes
as a reorganization within the meaning of Section 368(a)(1)(B) of the Code,
and HBC and Blount shall have received opinions to such effect, in form and
substance reasonably satisfactory to each of them, from Bradley, Arant,
Rose, & White, counsel for HBC, and Sutherland, Asbill & Brennan, special
counsel for HBC, dated (i) the date of the mailing of the proxy statement
to Blount's stockholders and (ii) the Closing Date.
(i) The parties shall have received all consents, approvals and
authorizations of third parties with respect to all agreements to which any
of the parties is a party which are reasonably determined by the parties to
be material and which are required of such third parties by such documents,
in form and substance acceptable to each of the parties, except where the
failure to obtain such consent, approval or authorization would not have a
material adverse effect on the business of HBC and Blount following the
Effective Time of the Merger, taken as a whole.
(j) The information in the Registration Statement shall not, at the
time the Registration Statement is declared effective, at the time the
Proxy Statement is first mailed to Blount's stockholders, at the time of
the Blount Stockholders' Meeting (as hereinafter defined) and at the
Effective Time of the Merger, have contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under
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which they were made, not misleading. The information included or
incorporated by reference in the Proxy Statement sent to the stockholders
of Blount in connection with the meeting of the holders of Blount Common
Stock to consider the Merger (the "Stockholders' Meeting") shall not, at
the date the Proxy Statement (or any amendment thereof or supplement
thereto) was first mailed to Blount's stockholders, at the time of the
Stockholders' Meeting and at the Effective Time of the Merger, have
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. All documents filed with the SEC in connection
with the transactions contemplated herein shall have complied as to form
and substance in all material respects at all relevant times with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
(k) It shall not have been determined that any of the holders of the
Blount Stock have the right to demand appraisal for such shares in
accordance with Section 262 of the DGCL.
(l) The Merger and such other matters as counsel may reasonably advise
shall have been approved by such vote of the stockholders of HBC as may be
required under the DGCL and under the certificate of incorporation of HBC.
Section 9.2 Conditions to Obligations of HBC and the Subsidiary. The
obligations of HBC and the Subsidiary to consummate the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing Date, of the following conditions (any of which may be
waived by HBC):
(a) The representations and warranties of Blount set forth in Article
4 shall be true and correct in all material respects as of the date of this
Merger Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent that such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects on and as of
such earlier date) and except for breaches of representations and
warranties as to matters that do not have a material adverse affect on
Blount; and HBC and the Subsidiary shall have been furnished with a
certificate, executed by a duly authorized officer of Blount, dated the
Closing Date, certifying in such detail as HBC and the Subsidiary may
reasonably request as to the fulfillment of the foregoing conditions (with
such exceptions thereto as may be noted therein); provided, however, that
HBC and the Subsidiary shall not have the right to terminate this Merger
Agreement by reason of the failure of the conditions set forth in this
Section 9.2(a) if such failure will not have a material adverse affect on
the business of Blount;
(b) Each of the agreements of Blount to be performed at or prior to
the Closing Date pursuant to the terms hereof shall have been duly
performed in all material respects, and Blount shall have performed, in all
material respects, all of the acts required to be performed by it at or
prior to the Closing Date by the terms hereof;
(c) Section 203 of the DGCL shall not at any time since the date of
execution of this Merger Agreement have been applicable to the Merger;
(d) HBC, the Blount Family Partnership and the members of the Blount
Family who are parties thereto shall have entered into the Registration
Rights and Stock Transfer Restriction Agreement contemplated by Section
7.11 hereof; and
(e) HBC and the Blount Family Partnership shall have been able to
effect the HBC Recapitalization in the manner and with the effect
contemplated by the Blount Family.
Section 9.3 Conditions to Obligations of Blount. The obligations of
Blount to consummate the Merger and the other transactions contemplated hereby
shall be subject to the satisfaction, at or prior to the Closing Date, of the
following conditions (any of which may be waived by Blount):
(a) The Certificate of Incorporation, By-Laws, capitalization and
directors and executive officers of HBC shall be as set forth in Article 1
of this Merger Agreement;
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(b) Each of the agreements of HBC and the Subsidiary to be performed
at or prior to the Closing Date pursuant to the terms hereof shall have
been duly performed, in all material respects, and HBC and the Subsidiary
shall have performed, in all material respects, all of the acts required to
be performed by them at or prior to the Closing Date by the terms hereof;
(c) The representations and warranties of HBC and the Subsidiary set
forth in this Merger Agreement shall be true and correct in all respects as
of the date of this Merger Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent that such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct in
all respects on and as of such earlier date) and except for breaches of
representations and warranties as to matters that do not have an adverse
affect on HBC; and Blount shall have been furnished with a certificate,
executed by a duly authorized officer of HBC, dated the Closing Date,
certifying in such detail as Blount may reasonably request as to the
fulfillment of the foregoing conditions (with such exceptions thereto as
may be noted therein);
(d) Blount and HBC shall have received the Indemnification Agreement
in form as attached hereto as Exhibit III executed by the Blount Family
Partnership and a schedule of the reserves on the financial statements of
HBC to which reference is made in Section 4(a)(iii) of such agreement;
(e) All outstanding loans by HBC to any member of the Blount Family
shall have been repaid in full and any lien or encumbrance resulting from
any pledge of any of the Blount Common Stock owned by HBC shall have been
released;
(f) Immediately prior to the Effective Time of the Merger, HBC shall
own 2,075,048 shares of Blount Class A Common Stock and 2,803,232 shares of
Blount Class B Common Stock;
(g) Blount shall have received an opinion from Bradley, Arant, Rose &
White substantially to the effect set forth in Exhibit V hereto;
(h) HBC, the Blount Family Partnership and the members of the Blount
Family who are parties thereto shall have entered into the Registration
Rights and Stock Transfer Restriction Agreement contemplated by Section
7.11 hereof; and
(i) At the Closing Date immediately prior to the Effective Time of the
Merger, HBC shall have an unused charitable deduction carryforward for
federal income tax purposes of not less than $4,800,000 and shall have a
net worth, without regard to such charitable deduction carryforward, of not
less than $500,000, determined in accordance with generally accepted
accounting principles consistently applied with those principles applied in
preparing the HBC Balance Sheet (including the fact that the ownership by
HBC of Blount Common Stock shall be accounted for on the equity method
rather than by consolidating the financial statements of Blount with those
of HBC), after (i) deducting therefrom HBC's investment in Blount, (ii)
establishing reserves sufficient in the reasonable estimation of Blount and
HBC to pay the expenses which HBC is obligated to pay pursuant to Section
8.6 of this Agreement, the establishment of which reserves shall, if the
Merger is consummated, constitute full satisfaction of the obligation of
HBC to Blount with respect to HBC's obligation, as between the parties to
this Merger Agreement, to pay or provide for the payment of such expenses
except as otherwise agreed to by Blount and HBC at the Closing and (iii)
setting aside the reserves referred to in paragraph (d) of this Section
9.3.
ARTICLE 10.
MISCELLANEOUS.
Section 10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties of Blount, HBC or the Subsidiary in this Merger
Agreement or in any instrument (other than the agreements contemplated by
Sections 7.11 and 9.3(d) hereof) delivered by or on behalf of Blount, HBC or the
Subsidiary pursuant to this Merger Agreement shall survive the Effective Time of
the Merger. There shall be no personal liability of any officer, director or
stockholder of Blount, HBC or the Subsidiary.
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Section 10.2 Notices. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery
or by facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to HBC or Subsidiary:
HBC, Incorporated
4520 Executive Park Drive
Montgomery, Alabama 36116
[P.O. Box 5060
Montgomery, Alabama 36103]
Attention: Teresa P. Rachal
Facsimile: (334) 271-8133
If to Blount:
Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116
[P.O. Box 949
Montgomery, Alabama 36101-0949]
Attention: Richard H. Irving, III
Facsimile: (334) 271-8130
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
Section 10.3 Further Assurances. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Merger Agreement.
Section 10.4 Indemnification of Directors and Officers. (a) From and
after the Effective Time of the Merger, HBC shall, and shall cause the Surviving
Corporation to, jointly and severally, indemnify, defend and hold harmless the
present and former officers and directors of HBC, the Subsidiary and Blount
(collectively, the "Indemnified Parties") against all losses, expenses
(including attorneys' fees), claims, damages, costs, liabilities or judgments or
amounts that are paid in settlement with the approval of HBC (which approval
shall not be unreasonably withheld) arising out of actions or omissions
occurring at or prior to the Effective Time of the Merger or required under the
DGCL (and shall also pay expenses in advance of the final disposition of any
claim to each Indemnified Party), to the fullest extent permitted under, and
under the terms and conditions provided by, the DGCL.
(b) HBC shall use its best efforts to arrange to have the Indemnified
Parties named as insureds under, or otherwise covered by, its officers' and
directors' liability insurance policy (as long as any such policy shall be in
force), provided that such action shall not involve unreasonable cost to HBC.
(c) This Section 10.4 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on HBC and the Surviving Corporation and
their respective successors and assigns.
Section 10.5 Governing Law. This Merger Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of Delaware,
applied without giving effect to any conflicts-of-law principles.
Section 10.6 Table of Contents; Captions; Glossary. The table of
contents, captions or headings and glossary in this Merger Agreement and the HBC
Disclosure Schedule are made for convenience and general reference only and
shall not be construed to describe, define or limit the scope or intent of the
provisions of this Merger Agreement.
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Section 10.7 Integration Exhibits and Schedules. All Exhibits attached to
this Merger Agreement and the HBC Disclosure Schedule are integral parts of this
Merger Agreement as if fully set forth herein, and all statements appearing
therein shall be deemed disclosed for all purposes and not only in connection
with the specific representation in which they are explicitly referenced.
Section 10.8 Entire Agreement. This instrument, including all Exhibits
attached hereto, contains the entire agreement of the parties and supersedes any
and all prior or contemporaneous agreements between the parties, written or
oral, with respect to the transactions contemplated hereby. It may not be
changed or terminated orally, but may only be changed by an agreement in writing
signed by the party or parties against whom enforcement of any waiver, change,
modification, extension, discharge or termination is sought.
Section 10.9 Counterparts. This Merger Agreement may be executed in
several counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
Section 10.10 Binding Effect. This Merger Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Merger Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties.
Section 10.11 No Rule of Construction. The parties acknowledge that this
Merger Agreement was initially prepared by HBC, and that all parties have read
and negotiated the language used in this Merger Agreement. The parties agree
that, because all parties participated in negotiating and drafting this Merger
Agreement, no rule of construction shall apply to this Merger Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Merger Agreement.
IN WITNESS WHEREOF, the parties have caused this Plan and Agreement of
Merger to be executed by their respective duly authorized officers as of the day
and year first above written.
HBC, INCORPORATED
By /s/ WINTON M. BLOUNT
-----------------------------------
Winton M. Blount
Its Chairman of the Board and
President
HBC TRANSACTION SUBSIDIARY, INC.
By /s/ WINTON M. BLOUNT
-----------------------------------
Winton M. Blount
Its President
BLOUNT, INC.
By /s/ JOHN M. PANETTIERE
-----------------------------------
John M. Panettiere
Its President
and Chief Executive Officer
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<PAGE> 142
GLOSSARY
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Blount............................................................................... A-4
Blount Class A Common Stock.......................................................... A-4
Blount Class B Common Stock.......................................................... A-4
Blount Common Stock.................................................................. A-4
Blount Family........................................................................ A-10
Blount Family Partnership............................................................ A-10
Blount Stock......................................................................... A-4
Blount Subsidiary.................................................................... A-8
Certificate of Merger................................................................ A-5
Certificates......................................................................... A-6
Claim................................................................................ A-14
Closing.............................................................................. A-5
Closing Date......................................................................... A-5
Code................................................................................. A-4
Constituent Corporations............................................................. A-4
Damages.............................................................................. A-14
DGCL................................................................................. A-5
Effective Time of the Merger......................................................... A-5
Exchange............................................................................. A-7
Exchange Act......................................................................... A-12
Exchange Ratio....................................................................... A-6
HBC.................................................................................. A-4
HBC Balance Sheet.................................................................... A-11
HBC Class A Common Stock............................................................. A-4
HBC Class B Common Stock............................................................. A-4
HBC Common Stock..................................................................... A-4
HBC Disclosure Schedule.............................................................. A-11
HBC Recapitalization................................................................. A-12
HSR Act.............................................................................. A-11
Indemnified Parties.................................................................. A-21
Indemnitees.......................................................................... A-14
Listing Application.................................................................. A-12
Material Breach...................................................................... A-16
Merger............................................................................... A-4
Merger Agreement..................................................................... A-4
Merger Consideration................................................................. A-6
Morgan............................................................................... A-9
NYSE................................................................................. A-13
Proxy Statement...................................................................... A-12
Registration Statement............................................................... A-12
SEC.................................................................................. A-10
Securities Act....................................................................... A-10
Stockholders' Meeting................................................................ A-19
Subsidiary........................................................................... A-4
Subsidiary Common Stock.............................................................. A-5
Surviving Corporation................................................................ A-8
</TABLE>
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<PAGE> 143
EXHIBIT I
RESTATED CERTIFICATE OF INCORPORATION
OF
HBC, INCORPORATED
HBC, Incorporated, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is HBC, Incorporated. HBC, Incorporated was
originally incorporated under the same name, and the original
Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on October 5, 1979.
2. Pursuant to the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and further amends the provisions
of the Certificate of Incorporation of this corporation.
3. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby restated and further amended and supplemented to
read in its entirety as follows:
FIRST: The name of the Corporation is HBC, Incorporated.
SECOND: Its registered office in the State of Delaware is located at
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: Subject to (B)(1)(b) of Part III of this Article FOURTH, the total
number of shares of all classes of capital stock which the Corporation shall
have authority to issue is 78,456,855 shares, of which 4,456,855 shares, par
value of $0.01 per share, are to be preferred stock (hereinafter sometimes
called the "Preferred Stock"), 60,000,000 shares, par value of $0.01 per share,
are to be Class A common stock (hereinafter sometimes called the "Class A Common
Stock") and 14,000,000 shares, par value of $0.01 per share, are to be Class B
common stock (hereinafter sometimes called the "Class B Common Stock," and the
Class A Common Stock and the Class B Common Stock are sometimes hereinafter
collectively called the "Common Stock").
PART I -- GENERAL
(A) Authority of Board of Directors. The authority of the Board of
Directors to provide for the issuance of any shares of the Corporation's capital
stock shall include, but shall not be limited to, authority to issue shares of
capital stock of the Corporation for any purpose (including for delivery as all
or part of the consideration for or in connection with the acquisition of all or
part of the outstanding securities of another corporation or enterprise or of
all or part of the assets of another corporation or enterprise) and in any
manner (including issuance pursuant to rights, warrants, or other options)
permitted by law, irrespective of the amount by which the issuance of such
capital stock shall increase the number of shares outstanding (but not in excess
of the number of shares authorized); provided that, after the issuance of shares
of Class B Common Stock pursuant to that certain Plan and Agreement of Merger
among the Corporation, HBC, Incorporated and Blount, Inc. dated August 17, 1995,
without the approval of the holders of a majority of the shares of the Class A
Common Stock then outstanding, the Board of Directors of the Corporation may not
provide for the issuance of any shares of Class B Common Stock except in the
manner set forth in (C)(2)(a) or (C)(2)(b) of Part III of this Article FOURTH.
(B) No Preemptive Rights. No holder of any share or shares of any class of
capital stock of the Corporation shall have any preemptive right to subscribe
for any shares of capital stock of any class of the
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Corporation now or hereafter authorized or for any securities convertible into
or carrying any optional rights to purchase or subscribe for any shares of
capital stock of any class of the Corporation now or hereafter authorized;
provided, however, that no provision of this Restated Certificate of
Incorporation shall be deemed to deny to the Board of Directors the right, in
its discretion, to grant to the holders of shares of any class of capital stock
at the time outstanding the right to purchase or subscribe for shares of capital
stock of any class or any other securities of the Corporation now or hereafter
authorized at such prices and upon such other terms and conditions as the Board
of Directors, in its discretion, may fix.
(C) Source and Payment of Dividends. Dividends respecting any shares of
capital stock of the Corporation shall be payable only out of earnings or assets
of the Corporation legally available for the payment of such dividends and only
as and when declared by the Board of Directors of the Corporation.
PART II -- PREFERRED STOCK
(A) Issuance in Series. The Preferred Stock may be issued in such one or
more series as shall from time to time be created and authorized to be issued by
the Board of Directors as hereinafter provided.
(B) Creation of Series. The Board of Directors is hereby expressly
authorized, by resolution or resolutions from time to time adopted providing for
the issuance of the Preferred Stock, to fix and state, to the extent not fixed
or limited by the provisions herein set forth, the designations, voting powers,
if any, preferences and relative, participating, optional and other special
rights of the shares of each series of the Preferred Stock, and the
qualifications, limitations and restrictions thereof, including (but without
limiting the generality of the foregoing) any of the following with respect to
which the Board of Directors may make specific provisions:
(1) the distinctive name and any serial designation;
(2) the annual dividend rate or rates and the dividend payment dates;
(3) with respect to the declaration and payment of dividends upon each
series of the Preferred Stock, whether such dividends are to be cumulative
or noncumulative, preferred, subordinate or equal to dividends declared and
paid respecting any other series of the Preferred Stock or respecting the
Common Stock, and the participating or other special rights, if any, with
respect to the declaration and payment of such dividends;
(4) the redemption provisions, if any, with respect to any series of
the Preferred Stock, and if any series is subject to redemption, the manner
and time of redemption and the redemption price or prices;
(5) the amount or amounts of preferential or other payment to which
any series is entitled over any other series of the Preferred Stock or over
the Common Stock on any voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation;
(6) any sinking fund or other retirement provisions and the extent to
which the charges therefor are to have priority over the payment of
dividends on or the making of sinking fund or other like retirement
provisions respecting shares of any other series of the Preferred Stock or
of the Common Stock;
(7) any conversion, exchange, purchase, or other privilege to acquire
shares of any other series of the Preferred Stock or of the Common Stock;
(8) the number of shares of such series; or
(9) the voting rights, if any, of such series, subject to the
provisions set forth in (A)(2) of Part III of this Article FOURTH.
(C) Shares of a Series to Have Identical Rights. Each share of each series
of the Preferred Stock shall have the same relative rights and be identical in
all respects with all the other shares of the same series.
(D) Certificate of Designation. Before the Corporation shall issue any
shares of the Preferred Stock of any series authorized as hereinbefore provided,
a certificate setting forth a copy of the resolution or resolutions
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with respect to such series adopted by the Board of Directors of the Corporation
pursuant to the foregoing authority vested in said Board of Directors shall be
made, filed, and recorded in accordance with the then applicable requirements,
if any, of the laws of the State of Delaware, or, if no certificate is then so
required, such certificate shall be signed and acknowledged on behalf of the
Corporation by its chairman of the Board of Directors, president or a vice
president, and its corporate seal shall be affixed thereto and attested by its
secretary or assistant secretary, and such certificate shall be filed and kept
on file at the principal office of the Corporation in the State of Delaware and
in such other place or places as the Board of Directors shall designate.
(E) Status of Reacquired Shares. Shares of any series of the Preferred
Stock which shall be issued and thereafter acquired by the Corporation through
purchase, redemption, conversion, or otherwise, may, as provided by resolution
or resolutions of the Board of Directors and upon compliance with applicable
law, be returned to the status of authorized but unissued shares of the
Preferred Stock, undesignated as to series, or to the status of authorized but
unissued shares of the Preferred Stock of the same series.
(F) Change in Authorized Shares of a Series. Unless otherwise provided in
the resolution or resolutions of the Board of Directors providing for the issue
thereof, the number of authorized shares of the Preferred Stock of any such
series may be increased or decreased (but not below the number of shares thereof
then outstanding) by resolution or resolutions of the Board of Directors, and
the filing and recording of a certificate, setting forth that such increase or
decrease has been authorized by the Board of Directors in accordance with
applicable law. In case the number of shares of any such series of the Preferred
Stock shall be decreased in accordance with the immediately preceding sentence,
the shares representing such decrease shall, unless otherwise provided in the
resolution or resolutions of the Board of Directors providing for the issuance
thereof or for the decrease of the number of such shares, resume the status of
authorized but unissued shares of the Preferred Stock, undesignated as to
series.
PART III -- POWERS, PREFERENCES, RIGHTS AND LIMITATIONS
OF EACH CLASS OF CAPITAL STOCK
Except as otherwise provided or contemplated by Parts I and II of this
Article FOURTH, the following powers, preferences, and relative, participating,
optional, or other special rights, and qualifications, limitations or
restrictions of the capital stock of the Corporation are fixed as follows:
(A) Voting Rights.
(1) CLASS A COMMON STOCK AND CLASS B COMMON STOCK. Subject to (A)(2) of
Part III of this Article FOURTH, voting power shall be divided between the
holders of the Class A Common Stock and the Class B Common Stock as follows:
(a) With respect to the election of directors, the holders of the
Class A Common Stock, voting as a separate class, shall be entitled to
elect that number of directors which constitutes 25% of the entire Board of
Directors (including for all purposes any number of the members of the
Board of Directors which are entitled to be elected by the holders of any
series of the Preferred Stock) and, if 25% of the number of directors which
constitutes the entire Board of Directors is not a whole number then the
holders of the Class A Common Stock shall be entitled to elect the nearest
higher whole number of directors that is at least 25% of such membership.
Holders of the Class B Common Stock, voting as a separate class, shall be
entitled to elect the remaining directors.
(b) The holders of the Class A Common Stock shall be entitled to vote
as a separate class on the removal, with or without cause, of any director
elected by the holders of the Class A Common Stock, and the holders of the
Class B Common Stock shall be entitled to vote as a separate class on the
removal, with or without cause, of any director elected by the holders of
the Class B Common Stock.
(c) Any vacancy in the office of a director elected by the holders of
the Class A Common Stock may be filled by a vote of such holders, voting as
a separate class, and any vacancy in the office of a director elected by
the holders of the Class B Common Stock may be filled by a vote of such
holders,
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voting as a separate class, or, if the by-laws or applicable laws permit
any such vacancy to be filled by the directors of the Corporation, in the
case of a vacancy in the office of a director elected by the holders of
Class A Common Stock, such vacancy may be filled by the remaining directors
elected by the holders of Class A Common Stock, and in the case of a
vacancy in the office of a director elected by the holders of the Class B
Common Stock, such vacancy may be filled by the remaining directors elected
by the holders of the Class B Common Stock. Any director elected by the
Board of Directors, or by the remaining members of the Board of Directors
elected by the holders of a class of common stock, to fill a vacancy shall
serve until the next annual meeting of stockholders and until such
director's successor has been elected and has qualified. If permitted by
the by-laws or applicable laws, the Board of Directors may increase the
number of directors, and any vacancy so created may be filled by the Board
of Directors; provided that, so long as the holders of the Class A Common
Stock have the rights provided in (A)(1)(a) and (A)(1)(c) of Part III of
this Article FOURTH as of the date of the last preceding annual meeting of
stockholders, the Board of Directors may be so enlarged by the Board of
Directors only to the extent that at least 25% of the enlarged Board of
Directors consists of directors elected by the holders of the Class A
Common Stock or, if the by-laws or applicable laws permit, by the directors
elected by the holders of the Class A Common Stock. The remaining directors
of the enlarged Board of Directors shall be elected by the holders of the
Class B Common Stock or, if the by-laws or applicable laws permit, by the
directors elected by the holders of the Class B Common Stock.
(d) In addition to the voting rights conferred in (A)(1)(a),
(A)(1)(b), and (A)(1)(c) of Part III of this Article FOURTH, the holders of
the Class A Common Stock and the holders of the Class B Common Stock shall
be entitled to vote as separate classes on such other matters as may be
required by law to be submitted to such holders voting as separate classes.
(e) The holders of the Class A Common Stock and the Class B Common
Stock shall, in all matters not specified in (A)(1)(a), (A)(1)(b),
(A)(1)(c), and (A)(1)(d) of Part III of this Article FOURTH, vote together
as a single class; provided that the holders of the Class A Common Stock
shall have one-tenth of one (1/10th of 1) vote per share and the holders of
the Class B Common Stock shall have one (1) vote per share.
(f) (i) Notwithstanding anything else to the contrary contained
herein, the holders of the Class A Common Stock shall not have the right to
elect or remove directors as set forth in (A)(1)(a), (A)(1)(b), and
(A)(1)(c) of Part III of this Article FOURTH if, as of the record date for
any meeting of stockholders of the Corporation at which directors are to be
elected or removed, the number of issued and outstanding shares of the
Class A Common Stock is less than 10% of the aggregate number of issued and
outstanding shares of the Class A Common Stock and the Class B Common
Stock. In such case, all directors to be elected or removed at any such
meeting, including the election of any director to fill any vacancy
resulting from the death, resignation, or removal of any director or from
any increase in the number of directors constituting the entire Board of
Directors, shall be elected or removed by the holders of the Class A Common
Stock and the Class B Common Stock, voting together as a single class;
provided, however, with respect to such election or removal, that the
holders of the Class A Common Stock shall have one-tenth of one (1/10th of
1) vote per share and the holders of the Class B Common Stock shall have
one (1) vote per share.
(ii) If, as of the record date for any meeting of stockholders of the
Corporation at which directors are to be elected or removed, the number of
issued and outstanding shares of the Class B Common Stock is less than
2,100,000 (as adjusted pursuant to the next sentence of this clause (ii)),
after the holders of the Class A Common Stock have exercised their rights
set forth in (A)(1)(a), (A)(1)(b), and (A)(1)(c) of Part III of this
Article FOURTH, including the election of any director to fill any vacancy
resulting from the death, resignation, or removal of any director or from
any increase in the number of directors constituting the entire Board of
Directors, all directors remaining to be elected or the directors to be
removed at such meeting shall, subject to the rights of the holders of any
series of Preferred Stock then outstanding, be elected or removed by the
holders of the Class A Common Stock and the Class B Common Stock, voting
together as a single class; provided, however, with respect to such
election or removal, that the holders of the Class A Common Stock shall
have one-tenth of one (1/10th of 1) vote
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per share and the holders of the Class B Common Stock shall have one (1)
vote per share. In the event there is any increase or decrease in the
number of issued and outstanding shares of Class B Common Stock resulting
from a subdivision or consolidation of shares or the payment of a stock
dividend on the Class B Common Stock or any other increase or decrease in
the number of issued and outstanding shares of Class B Common Stock
effected without receipt of consideration by the Corporation, the number of
shares of Class B Common Stock set forth in the immediately preceding
sentence of this clause (ii) shall be appropriately adjusted for any such
increase or decrease.
(2) PREFERRED STOCK. Except as expressly set forth in any resolution or
resolutions of the Board of Directors creating any series of the Preferred
Stock, the holders of any such series of the Preferred Stock entitled to vote
shall vote, in accordance with the vote per share granted such holders by
resolution or resolutions of the Board of Directors creating such series, on all
matters other than the election of directors of the Corporation as a single
class together with the holders of the Class A Common Stock and the holders of
the Class B Common Stock, and shall vote with respect to the election of
directors of the Corporation in the manner specified in such resolution or
resolutions of the Board of Directors; provided, however, that the Corporation
shall not issue any series having voting rights which would (i) deprive the
Class A Common Stock of its rights set forth in (A)(1)(a), (A)(1)(b), and
(A)(1)(c) of Part III of this Article FOURTH or (ii) have voting rights which
would otherwise adversely affect the voting rights of the Class A Common Stock;
provided further, however, that for the purposes hereof the authorization or
issuance of additional shares of the Class A Common Stock, the Class B Common
Stock or the Preferred Stock or securities convertible into or exchangeable for
the Class A Common Stock, the Class B Common Stock or the Preferred Stock shall
not be deemed to deprive the Class A Common Stock of its rights set forth in
(A)(1)(a), (A)(1)(b), and (A)(1)(c) of Part III of this Article FOURTH or to
affect adversely the voting rights of the holders of the Class A Common Stock so
long as such securities (other than the Class A Common Stock) or the Preferred
Stock does not have a vote in excess of one vote per share and votes as a class
for directors with the Class B Common Stock.
(B) Conversion.
(1) CLASS B COMMON STOCK. (a) Each holder of record of the Class B Common
Stock may at any time or from time to time, in such holder's sole discretion and
at such holder's option, convert any whole number of shares of or all of such
holder's shares of the Class B Common Stock into fully paid and nonassessable
shares of the Class A Common Stock at the rate (subject to adjustment as
hereinafter provided) of one (1) share of the Class A Common Stock for each one
(1) share of the Class B Common Stock surrendered for conversion. Any such
conversion may be effected by any holder of the Class B Common Stock
surrendering such holder's certificate or certificates for the Class B Common
Stock to be converted, duly endorsed, at the office of the Corporation or of any
transfer agent for the Class B Common Stock, together with a written notice to
the Corporation at the Corporation's office or at any transfer agent's office
that such holder elects to convert all or a specified number of shares of the
Class B Common Stock and stating the name or names in which such holder desires
the certificate or certificates for such shares of the Class A Common Stock to
be issued and fully complies with such other reasonable requirement or
requirements as the Corporation may set out. Promptly thereafter, the
Corporation or any transfer agent shall issue and deliver to such holder, or to
such holder's nominee or nominees, a certificate or certificates for the number
of shares of the Class A Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made as of the close of
business on the date of the receipt by the Corporation or any transfer agent of
the certificates for the shares being surrendered, and the person or persons
entitled to receive the shares of the Class A Common Stock issuable on such
conversion shall be treated for all purposes as the record holder or holders of
such shares of the Class A Common Stock on such date. Shares of the Class B
Common Stock so surrendered for conversion, as aforesaid, shall, except as
otherwise provided by resolution or resolutions of the Board of Directors, upon
compliance with applicable laws, be restored to the status of authorized but
unissued shares of the Class B Common Stock.
(b) If, at any time following the death of Winton M. Blount, the number of
shares of Class A Common Stock into which the shares of Class B Common Stock
then remaining outstanding are convertible pursuant to (B)(1)(a) of the Part III
of this Article FOURTH shall be less than ten percent (10%) of the aggregate
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number of shares of Class A Common Stock which would be outstanding following
the conversion of all such shares of Class B Common Stock, then, without further
act on the part of anyone, all remaining outstanding shares of Class B Common
Stock shall be converted into fully paid and nonassessable shares of the Class A
Common Stock at the rate (subject to adjustment as hereinafter provided) of one
(1) share of the Class A Common Stock for each one (1) share of Class B Common
Stock so converted, such conversion to be effected in the manner hereinafter
provided, and upon the effectiveness of such conversion, stock certificates
formerly representing shares of Class B Common Stock shall thereafter be deemed
to represent the number of shares of Class A Common Stock into which the shares
of Class B Common Stock formerly represented by such stock certificates have
been converted. Such conversion shall become effective at the close of business
on such date as shall be established by the Board of Directors, which date shall
be within thirty (30) days of the date on which the Corporation determines that
the conditions specified in the first sentence of this (B)(1)(b) of Part III of
Article FOURTH for such conversion have occurred, provided that the Board of
Directors may extend such date by not more than thirty (30) additional days if
the date to be set would otherwise occur after a record date for determining the
stockholders of the Corporation previously established by the Board of Directors
and prior to the date upon which the event for which such record date was
established is to occur. Notice of such effective date of such conversion shall
be sent to all record holders of Class B Common Stock not less than fifteen (15)
days prior to such date, but the failure of the Corporation to give such notice
shall not affect the validity of such automatic conversion. Upon such
conversion, no further shares of Class B Common Stock may be issued and the
total number of shares of capital stock which the Corporation shall have
authority to issue shall be reduced from 78,456,855 shares to 64,456,855 shares
and the number of shares of Class B Common Stock which the Corporation shall
have authority to issue shall be reduced from 14,000,000 shares to 0 shares.
(2) ADJUSTMENT OF CONVERSION PRIVILEGE. In the event that, prior to the
conversion of all shares of the Class B Common Stock into shares of the Class A
Common Stock, any one class of the Common Stock is changed into, exchanged for,
or reclassified into a different number or kind of shares of outstanding
securities of the Corporation, or any other corporation or entity, without such
action being taken on a proportionate basis with respect to the other class of
the Common Stock, whether such change, exchange or reclassification occurs
through a reorganization, recapitalization, stock dividend, stock split,
combination of shares, merger, consolidation, or otherwise, then the conversion
rate specified in (B)(1)(a) and (B)(1)(b) of Part III of this Article FOURTH
shall be appropriately and equitably adjusted to reflect such action.
(3) FRACTIONAL SHARES. No fraction of a share of the Class A Common Stock
shall be issued on conversion of any of the Class B Common Stock, but, in lieu
thereof, the Corporation shall pay in cash therefor the pro rata fair market
value of any such fraction. Such fair market value shall be based, in the case
of securities traded on a national securities exchange, on the closing price for
such securities on such exchange on the business day next prior to the date such
fair market value is to be determined (or, in the event no sale is made on that
day, the closing price for such securities on the business day next prior to the
date such fair market value is to be determined during which a sale on such
exchange occurred), or if such securities are not then traded on any national
securities exchange, the last sale price or the average of the closing bid and
asked prices for that day, whichever is applicable, as reported by the National
Association of Securities Dealers, Inc. for the Nasdaq National Market
("Nasdaq"), or if quotations for such securities are not then reported on
Nasdaq, the last sale price or the average of the closing bid and asked prices
for such day as reported by any recognized securities quotation system, or in
the case there is no public trading market for such securities, the fair market
value on that day determined by a qualified independent appraiser expert in
evaluating securities and appointed by the Board of Directors of the
Corporation. Any such determination of fair market value shall be final and
binding on the Corporation and on each holder of the Class A Common Stock and
the Class B Common Stock.
(C) Dividends and Securities Distributions.
(1) CLASS A COMMON STOCK AND CLASS B COMMON STOCK. Subject to (C)(2) and
(C)(3) of Part III of this Article FOURTH and to the rights of the holders of
any series of the Preferred Stock, the Board of Directors of the Corporation may
declare and pay dividends on the Common Stock out of earnings or assets of the
Corporation legally available for the payment thereof, provided that whenever a
cash dividend is
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declared and paid, holders of the Class A Common Stock shall be paid $0.0083 1/3
per share in addition to the amount payable for each share of the Class B Common
Stock for each quarter in respect of which the cash dividend is declared and
paid (such extra amount, as from time to time adjusted, is herein called the
"Additional Dividend"). The Additional Dividend shall be non-cumulative but
shall be appropriately adjusted if the Board of Directors declares a cash
dividend in respect of a period other than a quarterly period, e.g., if the
dividend is declared in respect to a semi-annual or annual period, the
Additional Dividend shall be $0.0166 2/3 or $0.0333 1/3, respectively. In the
declaration of any dividend, the Board of Directors shall specify the period in
respect of which such dividend is declared. No Additional Dividend shall be
payable with respect to any extra dividend, special dividend, or dividend
payable other than in cash, including, without limitation, a dividend paid in
partial or complete liquidation even if paid in cash. Subject to the foregoing
portion of this paragraph and to (C)(2) and (C)(3) of Part III of this Article
FOURTH and to the rights of the holders of any series of the Preferred Stock,
the Board of Directors of the Corporation may declare and pay dividends to the
holders of the Class A Common Stock in excess of dividends declared and paid, or
without declaring and paying dividends, to the holders of the Class B Common
Stock. In case the Board of Directors shall declare and pay a dividend pursuant
to (C)(2) of Part III of this Article FOURTH and such dividend equals or exceeds
a 10% dividend (i.e., one share for each ten shares), then the Additional
Dividend in effect immediately prior to the record date for such payment shall
be proportionately decreased as of such record date. In the case the shares of
the Class A Common Stock and the Class B Common Stock are subdivided into a
greater number of shares or combined into a smaller number of shares, then the
Additional Dividend in effect immediately prior to such subdivision or
combination, as the case may be, shall be proportionately decreased or increased
as of the effective date of such division or combination.
(2) SECURITIES DISTRIBUTIONS. If at any time a distribution is to be paid
in the Class A Common Stock, the Class B Common Stock, or any other securities
of the Corporation, which does not result in the receipt by the Corporation of
any new consideration (hereinafter sometimes called a "share distribution" or
"share distributions"), such share distributions may be declared and paid only
as follows:
(a) So long as no shares of the Class A Common Stock have been issued
and are outstanding, a share distribution consisting of the Class A Common
Stock may be declared and paid to holders of the Class B Common Stock.
(b) At such time as shares of the Class A Common Stock are issued and
outstanding, the following share distributions may be declared and paid:
(i) a share distribution consisting of the Class A Common Stock may
be declared and paid to holders of the Class A Common Stock only or to
the holders of the Class A Common Stock and the Class B Common Stock;
(ii) a share distribution consisting of the Class B Common Stock
may be declared and paid to the holders of the Class B Common Stock
only, but in any such event, there also shall be a simultaneous share
distribution declared and paid to the holders of the Class A Common
Stock, which share distribution shall consist of a number of shares of
the Class A Common Stock equal on a per share basis to the number of
shares of the Class B Common Stock declared and paid respecting the
Class B Common Stock;
(iii) a share distribution consisting of the Class A Common Stock
and the Class B Common Stock may be declared and paid to the holders of
the Class B Common Stock, but in such event, there also shall be a
simultaneous share distribution declared and paid to the holders of the
Class A Common Stock, which share distribution shall consist of a number
of shares of the Class A Common Stock equal on a per share basis to the
number of shares of the Class A Common Stock and the Class B Common
Stock declared and paid respecting the Class B Common Stock; and
(iv) a share distribution consisting of any other class of equity
securities of the Corporation, other than the Class A Common Stock and
the Class B Common Stock, may be declared and paid to the holders of
such class of equity securities only or to the holders of such class of
equity securities, the holders of the Class A Common Stock, and the
holders of the Class B Common Stock.
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(3) ADDITIONAL REQUIREMENTS. Subject to (C)(1) and (C)(2) of Part III of
this Article FOURTH and to the rights of the holders of any series of the
Preferred Stock, the Board of Directors of the Corporation may declare and pay
dividends on the Common Stock out of earnings or assets of the Corporation
legally available for the payment thereof, provided that whenever a dividend is
declared other than as set out in (C)(1) and (C)(2) of Part III of this Article
FOURTH and paid to the holders of the Class B Common Stock, the Board of
Directors of the Corporation also shall declare and pay to the holders of the
Class A Common Stock a per share dividend at least equal to the per share
dividend declared and paid to the holders of the Class B Common Stock.
(4) OTHER POWERS, PREFERENCES, RIGHTS AND LIMITATIONS. Except as expressly
set forth in this Article FOURTH, the powers, preferences, and relative,
participating, optional, or other special rights, and the qualifications,
limitations or restrictions of the Class A Common Stock and the Class B Common
Stock shall be the same.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
A. To make, alter, or repeal the by-laws of the Corporation.
B. To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation.
C. To set apart out of any of the funds of the Corporation available
for dividends, a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
D. Subject to the other provisions of this Restated Certificate of
Incorporation, to determine whether any, and if any, what part of the
earnings and assets of the Corporation legally available for dividends
shall be declared in dividends and paid to the stockholders, and whether or
not in cash or capital stock of the Corporation or in other property, and
generally to determine and direct the use and disposition of any earnings
and assets, and to fix the times for the declaration and payment of
dividends and to close the stock books of the Corporation or fix a record
date for purposes of determining the stockholders entitled to participate
in any transfers in connection with any such corporate act.
E. To determine from time to time whether and to what extent and at
what times the accounts and books of the Corporation, or any of them, shall
be open to the inspection of the stockholders, and no stockholder shall
have any right to inspect any account or book or document of the
Corporation except as conferred by the laws of the State of Delaware or
authorized by resolution of the Board of Directors or the stockholders.
F. Subject to the provisions of Article FOURTH, at any time, and from
time to time when authorized by resolution of the Board of Directors, and
without any action by its stockholders, the Board of Directors may cause
the Corporation to issue or sell any shares of its capital stock of any
class, whether such shares are issued or sold out of the unissued shares
thereof authorized by this Restated Certificate of Incorporation, as from
time to time amended, or out of shares of its capital stock acquired by it
after the issuance thereof; the Board of Directors also may cause the
Corporation to issue and sell its obligations, secured or unsecured, and in
bearer or registered or such other form, and including such provisions as
to redeemability, convertibility, or otherwise, as the Board of Directors,
in its sole discretion, may determine, and mortgage or pledge, as security
therefor, any property of the Corporation, real or personal including after
acquired property; and the Board of Directors may cause the Corporation to
issue or grant warrants or options, in bearer or registered or such other
form as the Board of Directors may determine, for the purchase of shares of
its capital stock of any class, within such period of time, or without
limit as to time, and at such price per share, as the Board of Directors
may determine. Any options or warrants issued or granted pursuant to the
immediately preceding sentence may be issued or granted separately or in
connection with the issue of any bonds, debentures, notes, or other
evidences of indebtedness or in connection with other shares of the capital
stock of any class of the Corporation. The Board of Directors
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may cause the Corporation to issue and sell shares of its capital stock of
any class, including warrants and options, and to issue and sell its
obligations for such consideration as may from time to time be fixed by the
Board of Directors, and the Corporation may receive in payment, in whole or
in part, for any such securities issued or sold by it, cash, labor done,
personal property or real property or leases thereof. In the absence of
actual fraud in the transaction, the judgment of the Board of Directors as
to the value of the labor, personal property or real property or leases
thereof so received shall be conclusive.
G. By a majority of the whole Board, to designate one or more
committees, each committee to consist of one or more of the directors of
the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. The by-laws may provide that in the
absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, or in the
by-laws of the Corporation, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation
to be affixed to all papers which may require it; but no such committee
shall have the power or authority in reference to amending this Restated
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of
shares of Preferred Stock pursuant to Article FOURTH of this Restated
Certificate of Incorporation, fix the designations and any of the
preferences or rights of such shares of Preferred Stock relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or exchange of such shares for, shares
of any other class or classes or any other series of the same or any other
class or classes of stock of the Corporation or fix the number of shares of
any series of stock or authorize the increase or decrease of the shares of
any series) adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all
of the Corporation's property and assets, recommending to the Stockholders
a dissolution of the Corporation or a revocation of a dissolution, or
amending the by-laws of the Corporation; and, unless the resolution or
by-laws expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of
Title 8 of the Delaware Code.
H. When and as authorized by the stockholders in accordance with law,
to sell, lease, or exchange all or substantially all of the property and
assets of the Corporation, including its good will and its corporate
franchises, upon such terms and conditions and for such consideration,
which may consist in whole or in part of money or property including shares
of stock in, and/or other securities of, any other corporation or
corporations, as its Board of Directors shall deem expedient and for the
best interests of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders, or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
sec. 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the application has
been made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
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EIGHTH: Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the General Corporation Law of the State
of Delaware) within or without the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the by-laws
of the Corporation.
NINTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this Article NINTH by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
TENTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
4. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, HBC, Incorporated has caused this Restated Certificate
of Incorporation to be executed by its duly authorized [ ], this
day of , 1995.
HBC, INCORPORATED
By
--------------------------------------
[ ]
Its
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EXHIBIT II
BY-LAWS OF
BLOUNT INTERNATIONAL, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
Section 2. Additional Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require, including, without limitation, in the City of Montgomery, Alabama.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders for the
election of directors shall be held in the City of Montgomery, Alabama, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Alabama or the State of
Delaware as shall be designated from time to time by the board of directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting.
Section 2. Annual Meetings. Annual meetings of stockholders, commencing
with the year 1996, shall be held on the fourth Monday of June if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
10:00 a.m., or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
the stockholders shall elect a board of directors and transact such other
business as may properly be brought before the meeting.
Section 3. Notice of Annual Meetings. Unless otherwise required by law,
written notice of the annual meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 4. List of Stockholders. The officer who has charge of the stock
ledger of the corporation shall prepare and make, or cause to be prepared and
made, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board, the
chief executive officer, or the president and shall be called by the chairman of
the board, the chief executive officer, the president or the secretary at the
request in writing of a majority of the board of directors or at the request in
writing of stockholders owning shares of the capital stock of the corporation
entitled to cast a majority of the votes entitled to be cast by stockholders of
the corporation entitled to vote on the matters to be considered at the special
meetings. Such request shall state the purpose or purposes of the proposed
meeting.
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Section 6. Notice of Special Meetings. Unless otherwise required by law,
written notice of a special meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called, shall be
given not less than ten nor more than sixty days before the date of the meeting,
to each stockholder entitled to vote at such meeting.
Section 7. Business at Special Meetings. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
Section 8. Inspectors of Elections; Opening and Closing the Polls. The
board of directors by resolution shall, in advance of any meeting of
stockholders, appoint one or more inspectors of elections, which inspector or
inspectors may include individuals who serve the corporation in other
capacities, including, without limitation, as officers, employees, agents or
representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of stockholders, the chairman of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging such inspector's duties, shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality and
according to the best of such person's ability. The inspectors shall have the
duties prescribed by law.
The chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the date and time of the closing of the polls for
each matter upon which the stockholders will vote at a meeting.
Section 9. Quorum. The holders of shares of the capital stock of the
corporation entitled to cast a majority of the votes entitled to be cast by
stockholders of the corporation entitled to vote on the matters to be considered
thereat, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business except as
otherwise provided by statute or by the certificate of incorporation. At any
meeting of stockholders, whether annual or special, or any adjournment thereof,
including any such meeting at which a quorum shall not be present or
represented, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting. At such adjourned meeting
at which a quorum shall be present or represented any business may be transacted
which might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 10. Voting. When a quorum is present at any meeting, the vote of
the holders of stock entitled to cast a majority of the votes entitled to be
cast by the holders of stock having voting rights present in person or
represented by proxy at such meeting shall decide any question, other than the
election of directors, brought before such meeting, unless the question is one
upon which by express provision of the statutes or of the certificate of
incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question. All elections of
directors by the stockholders of the corporation shall be by plurality vote of
the class or classes of stock entitled to elect such directors.
Section 11. Proxies. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period.
Section 12. Action by Consent.
(a) Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be
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delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered to the corporation in the manner required by
paragraph (a) of this Section 11, written consents signed by a sufficient number
of holders to take action are delivered to the corporation in the manner
provided in said paragraph (a).
(c) Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The number of directors which shall
constitute the whole board shall be not less than three nor more than fourteen,
the exact number to be determined from time to time by resolution of the board
of directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article III, and each
director elected shall hold office until such director's successor is elected
and qualified. Directors need not be stockholders.
Section 2. Vacancies; Removal. Except as otherwise provided in the
certificate of incorporation, (i) vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director; and (ii) whenever the holders of any class or classes
of stock or series thereof are entitled to elect one (1) or more directors by
the certificate of incorporation, vacancies and newly created directorships to
be elected by such class or classes or series may be filled by a majority of the
directors elected by such class or classes or such series thereof then in
office, or by a sole remaining director so elected. Any of the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner removed. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office. Any director of the corporation may be removed from office at any time
with or without cause, by the holders of shares entitled to cast a majority of
votes then entitled to be cast at an election of directors; provided that,
whenever the holders of any class or classes of stock or series thereof are
entitled to elect one (1) or more directors by the provisions of the certificate
of incorporation, a director of the corporation elected or to be elected by the
holders of a class or series may be removed from office at any time with or
without cause, by the holders of a majority of the outstanding shares of that
class or series and not by the vote of the outstanding shares as a whole.
Section 3. Powers. The business and operations of the corporation shall
be managed by or under the direction of its board of directors which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the certificate of incorporation or by these
by-laws directed or required to be exercised or done by the stockholders.
Section 4. Place of Meetings. The board of directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected board
of directors shall be held at the same place as the annual meeting of the
stockholders immediately following the adjournment thereof,
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and no notice of such meeting shall be necessary to the newly elected directors
in order legally to constitute the meeting, provided a quorum shall be present.
In the event of the failure of the board of directors to hold such meeting at
the same place as the annual meeting of the stockholders immediately following
the adjournment thereof, the meeting may be held at such time and place as shall
be specified in a notice given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a written waiver signed by
all of the directors.
Section 6. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
Section 7. Special Meetings. Special meetings of the board may be called
by the chairman of the board, the chief executive officer or the president on
one days' notice to each director, delivered in the manner provided in Section 2
of Article IV of these by-laws; special meetings shall be called by the chairman
of the board, the chief executive officer, the president or the secretary in
like manner and on like notice upon the written request of two directors.
Section 8. Quorum; Telephone Meetings. At all meetings of the board,
one-third of the directors then constituting the total number of the board, but
not less than three directors, shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. Any director may participate in any meeting of the board of
directors or a committee of the board of directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in such meeting can hear each other, and participation in a
meeting pursuant to the provisions of this Section 8 shall constitute presence
in person at such meeting.
Section 9. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 10. Committees.
(a) The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, each committee to consist of two
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise the powers and
authority of the board of directors in the management of the business and
operations of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the certificate of incorporation
(except that a committee may, to the extent authorized in any resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of the
State of Delaware, or any successor provision thereto, fix the designation and
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the
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corporation or a revocation of a dissolution, or amending the by-laws of the
corporation; and, unless the resolution or the certificate of incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock, or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware, or any successor provision thereto.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors.
(b) In furtherance of, and not in limitation of, the provisions of
paragraph (a) of this Section 10, the board of directors shall have the
following standing committees: Executive Committee, Audit Committee, Finance
Committee, Compensation and Management Development Committee and Acquisition
Committee. Except as hereinafter set forth in this paragraph (b), the members
and chairman of each of the standing committees of the board of directors shall
be established by the board of directors at its annual meeting each year.
(i) Executive Committee. The Executive Committee shall exercise all
of the authority and powers of the board of directors of the corporation to
the extent permitted by law, including the right to appoint special
committees of the board of directors, during the intervals between meetings
of the board of directors of the corporation. Unless the board of directors
determines otherwise, the chairman of the board of the corporation shall be
chairman of the Executive Committee.
(ii) Audit Committee. The duties of the Audit Committee shall be to
(A) recommend annually to the board of directors the appointment of the
independent auditors of the corporation, (B) review the professional
services, proposed fees and independence of such auditors, (C) review the
annual audit plans of such auditors and the internal audit staff of the
corporation, (D) monitor the activities of the independent auditors and the
internal audit staff of the corporation, (E) perform such other functions
as may from time to time be prescribed for such committee by the board of
directors and (F) report on such activities to the board of directors of
the corporation. All of the members of the Audit Committee shall be
directors who are not employees of the corporation.
(iii) Finance Committee. The duties of the Finance Committee shall be
to (A) approve the corporation's funding policy for its retirement plans,
(B) approve actuarial assumptions for the retirement plans, (C) approve the
selection and termination of investment managers, trustees, independent
auditors and actuaries for the retirement plans, (D) approve the investment
policy, asset allocation guidelines, objectives, constraints, and
restrictions, as appropriate, issued to investment managers and trustees,
(E) approve operating procedures and safeguards as required to prohibit
transactions not authorized under the Employee Retirement Income Security
Act of 1974, (F) approve the consolidation, merger, or transfer of
retirement plan assets or liabilities to or from one plan to another, (G)
approve reports with regard to retirement plans prepared by the trustees,
the independent auditors, investment managers or consultants and the
actuaries, (H) perform such other functions as may from time to time be
prescribed for such committee by the board of directors and (I) report on
such activities to the board of directors of the corporation. All the
members of the Finance Committee shall be directors who are not employees
of the corporation.
(iv) Compensation and Management Development Committee. The duties of
this committee shall be to (A) approve compensation philosophy and
guidelines for the corporation's executive and managerial employees, (B)
establish a total compensation range for the chairman of the board, the
chief executive officer and the president and appraise the performance of
said officers on a timely basis, (C) approve salaries and changes in
salaries of officers of the corporation and presidents of its divisions and
subsidiaries or other executives as such committee may deem appropriate,
(D) approve the participants, annual financial or other incentives and
amounts to be paid under the target incentive plan of the corporation, (E)
review and recommend to the board of directors of the corporation any new
executive incentive or stock option plans or additions to or revisions of
such existing plans and approving any awards of options granted under such
plans, (F) review from time to time the corporation's management resources
and executive personnel planning, development and selection process,
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(G) perform such other functions as may from time to time be prescribed for
such committee by the board of directors, and (H) report on such activities
to the board of directors of the corporation.
(v) Acquisition Committee. The duties of this committee shall be to
review and approve any acquisition proposed by management and report on
such activities to the board of directors of the corporation.
Section 11. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
Section 12. Compensation. Unless otherwise restricted by the certificate
of incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director, or both. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings or such other compensation as shall be determined by the
board of directors.
Section 13. Conflict of Interest.
(a) No contract or other transaction between the corporation and one or
more of its directors or officers, or between the corporation and any other
corporation, partnership, association or other organization in which one or more
of the corporation's directors or officers are directors or officers or have a
financial interest, shall be void or voidable solely for such reason, or solely
because such director or directors or officer or officers are present at or
participates in the meeting of the board of directors or a committee thereof
which authorizes or approves the contract or transaction, or solely because such
director's or directors' votes are counted for such purpose, if (1) the material
facts as to such director's or directors' relationships or interests and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to such director's or directors'
relationships or interests as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the board of directors, a committee
thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
ARTICLE IV
NOTICES
Section 1. Notice to Stockholders. Whenever, under the provisions of
applicable law or of the certificate of incorporation or of these by-laws,
notice is required to be given to any stockholder, it shall not be construed to
mean personal notice only, but such notice may be given in writing, by mail,
addressed to such stockholder, at such stockholder's address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail.
Section 2. Notice to Directors. Whenever, under the provisions of
applicable law or of the certificate of incorporation or of these by-laws,
notice is required to be given to any director, it shall be delivered by the
chairman of the board, the chief executive officer, the president or the
secretary to such director within the time provided in Section 7 of Article III
of these by-laws. Such notice either (i) may be in writing (A) delivered
personally, (B) delivered by mailing to a director at such director's address as
it appears in the records of the corporation, (C) delivered by telecopier or
other means of electronic facsimile transmission, (D) delivered by telegram or
(E) delivered by overnight mail or courier service to a director at such
director's address as it appears in the records of the corporation, or (ii) may
be oral given either in person or by
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telephone. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, so addressed, with postage thereon prepaid at least
five (5) days prior to the date on which such notice is required to be given. If
by telecopier or other electronic means of facsimile transmittal, such notice
shall be deemed delivered upon completion of transmittal from the sender
thereof, provided that it shall have been directed to such a place as is
reasonably calculated to cause actual receipt of such notice by such director.
If by telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company, provided that the notice shall have been
directed to such a place as is reasonably calculated to cause actual receipt of
such notice by such director. If by overnight mail or courier service, such
notice shall be deemed delivered on the date such notice is scheduled to be
delivered by such overnight mail or courier service following deposit of such
notice with such overnight mail or courier service, so addressed, with delivery
charges therefor paid by the sender thereof. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in any notice of such meeting.
Section 3. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of incorporation or
of these by-laws to a stockholder or director, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
was not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall be chosen by
the board of directors and shall be a chairman of the board and a president, one
of whom shall be designated by the Board of Directors to be the chief executive
officer of the corporation, a vice president, a secretary, a treasurer and a
controller. The board of directors may also choose one or more vice chairmen of
the board, a chairman of the executive committee, additional vice presidents,
one or more of whom may be designated as executive or senior vice presidents,
and one or more assistant secretaries and assistant treasurers. The board of
directors shall also designate which officer shall serve as the chief operating
officer (if any), the chief financial officer and such other special officers as
the board of directors shall deem necessary. Any number of offices may be held
by the same person unless the certificate of incorporation otherwise provides.
Section 2. Additional Officers. The board of directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board.
Section 3. Compensation. The salaries and other compensation of the
chairman of the board, the chief executive officer and the president of the
corporation, and of such other persons as the board of directors may determine,
shall be fixed by the board of directors.
Section 4. Term of Office; Removal; Vacancies. The officers of the
corporation shall serve at the pleasure of the board of directors and shall hold
office until their successors are duly elected and qualified or until their
earlier resignation or removal. Any officer elected or appointed by the board of
directors may be removed at any time with or without cause by the affirmative
vote of a majority of the board of directors. Any vacancy occurring in any
office of the corporation shall be filled by the board of directors.
Section 5. Duties of Officers. The officers of the corporation, if and
when elected by the board of directors of the corporation, shall have the
following duties:
(a) CHAIRMAN OF THE BOARD. The chairman of the board shall preside at
all meetings of the stockholders and of the board of directors, and shall
be a senior executive officer of the corporation
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responsible to the board of directors for the direction and development of
the corporation, for oversight responsibility on all activities in which
the corporation may engage, and shall work with the other executives to
insure that the policies and objectives of the corporation are achieved.
The chairman of the board shall advise and counsel with the other officers
of the corporation on any and all activities in which the corporation may
engage, and shall perform such other duties as may be assigned to such
officer by the board of directors. The chairman of the board may sign
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments on behalf of the corporation, except where
required by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation. In general,
the chairman of the board shall perform all duties incident to the office
of chairman of the board and such other duties as may be prescribed by the
board of directors.
(b) CHIEF EXECUTIVE OFFICER. The chief executive officer of the
corporation shall report to the board of directors of the corporation and,
if requested by the board of directors, to the chairman of the board. He
shall have general and active management and control of the business and
operations of the corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. In general, the chief
executive officer shall perform all duties incident to the office and
position of chief executive officer and such other duties as may be from
time to time prescribed by the board of directors.
(c) CHAIRMAN OF THE EXECUTIVE COMMITTEE. The chairman of the
executive committee, if any, shall preside at all meetings of the executive
committee and otherwise serve as a senior executive officer of the
corporation responsible to the board of directors. The chairman of the
executive committee, if not the chairman of the board, will work closely
with the chairman of the board in the direction and development of the
corporation.
(d) PRESIDENT. The president shall have general and active management
of such areas and divisions of the business of the corporation as may be
designated by the board of directors or by the chief executive officer. The
president of the corporation, if not the chief executive officer, shall
carry into effect the orders of the chief executive officer. The president
may sign certificates for shares of the corporation and deeds, mortgages,
bonds, contracts or other instruments on behalf of the corporation except
where required by law to be otherwise signed and executed and except where
the signing and execution thereof shall be expressly delegated by the board
of directors to some other officer or agent of the corporation. In general,
the president shall perform all duties incident to the office of president
and such other duties as may be prescribed by the board of directors or the
chief executive officer.
(e) VICE PRESIDENTS. The vice presidents shall perform such duties
and have such powers as the chief executive officer may from time to time
prescribe.
(f) SECRETARY. The secretary shall attend all meetings of the board
of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the board of
directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The secretary shall give,
or cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors, and shall perform such other
duties as may be prescribed by the board of directors or the chairman of
the board, the chief executive officer or the president, under whose
supervision the secretary shall be. The secretary shall have custody of the
corporate seal of the corporation and the secretary, or an assistant
secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by the secretary's
signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal
of the corporation and to attest the affixing by such officer's signature.
(g) ASSISTANT SECRETARIES. The assistant secretary, or if there be
more than one, the assistant secretaries in the order determined by the
board of directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the secretary or in the event
of the secretary's inability or refusal to act, perform the duties and
exercise the powers of the secretary and shall perform such other duties
and have such other powers as the board of directors may from time to time
prescribe.
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(h) CHIEF FINANCIAL OFFICER. The chief financial officer, if any,
shall be a vice president and shall act in an executive financial capacity.
The chief financial officer shall assist the chairman of the board, the
chief executive officer and the president in the general supervision of the
corporation's financial policies and affairs and shall perform such other
duties and have such other powers as the board of directors, the chairman
of the board, the chief executive officer or the president may from time to
time prescribe.
(i) CONTROLLER. The controller shall be the principal accounting
officer of the corporation and shall, subject to the direction and
supervision of the chief financial officer of the corporation, if any, have
management supervision over the accounting procedures, practices and
records of the corporation and its subsidiaries. The controller shall be
responsible for the preparation of consolidated financial statements of the
corporation and its subsidiaries. The controller shall be empowered to
require from the officers or agents of the corporation or its subsidiaries
reports or statements giving such information as the controller may desire
with respect to the preparation of financial statements. The controller
shall perform such other duties and shall have such other powers as the
board of directors, the chief executive officer, the president or the chief
financial officer may from time to time prescribe.
(j) ASSISTANT CONTROLLER. The assistant controller, or if there shall
be more than one, the assistant controllers in the order determined by the
board of directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the controller or in the event
of the controller's inability or refusal to act, perform the duties and
exercise the powers of the controller and shall perform such other duties
and have such other powers as the board of directors may from time to time
prescribe.
(k) TREASURER. The treasurer shall, subject to the direction and
supervision of the chief financial officer of the corporation, if any,
exercise general supervision over the receipt, custody and disbursement of
corporate funds. The treasurer shall cause the funds of the corporation to
be deposited in such banks as may be authorized by the board of directors,
or in such banks as may be designated as depositaries in the manner
provided by resolution of the board of directors. The treasurer shall
perform such other duties and shall have such other powers as the board of
directors, the chief executive officer, the president or the chief
financial officer may from time to time prescribe.
(l) ASSISTANT TREASURERS. The assistant treasurer, or if there shall
be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the treasurer or in the event
of the treasurer's inability or refusal to act, perform the duties and
exercise the powers of the treasurer and shall perform such other duties
and have such other powers as the board of directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Certificates. Every holder of stock in the corporation shall
be entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or a vice chairman of the board of directors or the president
or a vice president, and by the treasurer or an assistant treasurer or the
secretary or an assistant secretary of the corporation, certifying the number of
shares owned by such holder of stock in the corporation. If the corporation
shall be authorized to issue more than one class of stock or more than one
series of any class, the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of the State of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the
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powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Signatures. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost, Stolen or Destroyed Certificates. The board of directors
may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or such owner's legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. Record Date.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors, and which record date shall not be more than sixty
nor less than ten days before the date of such meeting. If no record date is
fixed by the board of directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the corporation
in the manner provided by Section 12(a) of Article II hereof. If no record date
has been fixed by the board of directors and prior action by the board of
directors is required, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
(c) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action.
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If no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 6. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. Indemnification. The corporation shall indemnify, and in
connection with such indemnification may advance expenses to, any person who is
or was a director, officer, employee or agent of the corporation, and any person
who is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise, to the fullest extent permitted by law, including without
limitation the General Corporation Law of the State of Delaware. If the amount,
extent, or quality of indemnification permitted by law should be in any way
restricted after the adoption of these by-laws, then the corporation shall
indemnify such persons to the fullest extent permitted by law as or in effect at
the time of the occurrence of the omission or the act giving rise to the claimed
liability with respect to which indemnification is sought. The indemnification
and advancement of expenses pursuant to this Article VII shall be in addition
to, and not exclusive of, any other right that the person seeking
indemnification may have under these by-laws, the certificate of incorporation,
any separate contract or agreement or applicable law.
Section 2. Insurance. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or any person who is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprises, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under
applicable law.
Section 3. Survival of Right. Any right to indemnification or advancement
of expenses provided by or granted pursuant to this Article VII shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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Section 3. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall, until
otherwise determined from time to time by resolution of the board of directors,
begin on the first day of March of each year and end on the last day of the next
succeeding February.
Section 5. Seal. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal" and "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 6. Contracts. The board of directors may authorize any officer,
agent or employee to enter into any contract, instrument or agreement on behalf
of the corporation, and the authority granted may be general or confined to
specific instances. Except as provided in this section or as authorized by the
board of directors, no officer, agent, or employee, other than the chairman of
the board, the chief executive officer, the president, any vice president, the
secretary or the treasurer, shall have any power or authority to bind the
corporation by any contract, instrument or agreement, to pledge its credit, or
to render it liable, for any purpose or any amount.
Section 7. Voting of Corporation's Securities. Unless otherwise ordered
by the board of directors, the chairman of the board, the chief executive
officer, the president or any vice president, or such other officer as may be
designated by the board of directors to act in the absence of such persons,
shall have full power and authority on behalf of the corporation to attend and
to act and to vote, and to execute a proxy or proxies empowering others to
attend and to act and to vote, at any meetings of security holders of any
corporation in which the corporation may hold securities, or to execute in the
name of the corporation actions by written consent in lieu of the holding of
such meetings, and at such meetings the chairman of the board, or such other
officer of the corporation, or such proxy shall possess and may exercise any and
all rights and powers incident to the ownership of such securities, and which as
the owner thereof the corporation might have possessed and exercised, if
present. The secretary or any assistant secretary may affix the corporate seal
to any such proxy or proxies so executed by the chairman of the board, or such
other officer, and attest the same. The board of directors by resolution from
time to time may confer like powers upon any other person or persons.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 1. Procedure. These by-laws may be altered, amended or repealed
or new by-laws may be adopted by the stockholders or by the board of directors,
when such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
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EXHIBIT III
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") made and entered into this
day of , 1995, between Blount International, Inc., a
Delaware corporation formerly named HBC, Incorporated ("Parent"), and The Blount
Holding Company, L.P., a limited partnership formed under the laws of the State
of Delaware (the "Partnership"),
WITNESSETH:
WHEREAS, Parent, HBC Transaction Subsidiary, Inc., a Delaware corporation,
and Blount, Inc., a Delaware corporation (the "Company"), are parties to that
certain Plan and Agreement of Merger dated August 17, 1995 (the "Merger
Agreement"), pursuant to which the Company will become a wholly-owned subsidiary
of Parent; and
WHEREAS, Winton M. Blount, his children and trusts for their benefit own,
whether directly or indirectly, all of the general and limited partnership
interests of the Partnership, the Partnership will own (immediately prior to the
Effective Time of the Merger) all of the outstanding capital stock of Parent,
and the assets of Parent consist primarily of shares of Company Class A Common
Stock and Company Class B Common Stock, which together represent approximately
69% of the votes entitled to be cast by holders of Company Common Stock when
voting together as a single class; and
WHEREAS, pursuant to Section 9.3(d) of the Merger Agreement, it is a
condition to the obligations of the Company to consummate the Merger that the
Partnership execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties to this Agreement do hereby agree as follows:
Section 1. Indemnity by the Partnership. Subject to the limitations set
forth in this Agreement, the Partnership agrees to indemnify Parent, the Company
and their respective officers and directors (collectively, the "Indemnified
Parties") against, and hold the Indemnified Parties harmless from, all damages,
liabilities, fees and expenses, including, without limitation, reasonable
attorneys' fees incurred in defending any Indemnified Party against the
assertion of any claim with respect to such damages, liabilities and fees
(collectively, the "Damages"), incurred by the Indemnified Parties as a result
of any claim, action or proceeding (a "Claim") made against any Indemnified
Party arising out of or related to (a) the Merger or pursuant to any obligation
of the Company for any amounts the Company may be required to pay pursuant to
Schedule I to the engagement letter dated June 16, 1995 between J.P. Morgan
Securities, Inc. and the Company, and (b) the acts or omissions of, or states of
fact relating to, the Parent, its employees or agents, or any past subsidiaries
or any employees or agents of any past subsidiaries, which acts or omissions
occurred, or states of fact existed, prior to the Effective Time of the Merger.
Section 2. Notice of Claims. Parent shall promptly notify the Partnership
in writing of the assertion of any Claim with respect to which indemnity may be
sought under this Agreement. The Partnership shall have no obligation or
liability under this Agreement to the extent that the Partnership, or the
Partnership's ability to adequately respond to or defend any Claim, is
prejudiced by the unreasonable failure of Parent to provide prompt notice as
required by this Section 2.
Section 3. Defense.
(a) The Partnership shall have no right to defend any Claim against which
it has agreed to indemnify the Indemnified Parties pursuant to Section 1(a) of
this Agreement. With respect to any Claims to which Section 1(a) of this
Agreement is applicable, the Indemnified Parties agree (i) to promptly provide
to the Partnership any information related to such Claim reasonably requested by
the Partnership; (ii) not to settle, or agree to settle, any such Claim without
the prior written consent of the Partnership, which consent will not
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be unreasonably withheld; and (iii) to provide periodic updates regarding such
Claim, including, without limitation, prompt notice and full information
regarding the occurrence of any material development with respect to such Claim.
The Partnership agrees to promptly reimburse, as incurred, litigation expenses,
including, without limitation, reasonable attorneys' fees, actually and
reasonably incurred by any Indemnified Party in connection with any Claim for
which the Partnership is obligated to provide indemnification pursuant to
Section 1(a) of this Agreement; provided, however, that the Partnership shall
only be obligated to reimburse the Indemnified Parties for the fees and expenses
of one legal counsel per jurisdiction for all Indemnified Parties in connection
with any such Claim.
(b) If the asserted liability relates to a Claim for which the Partnership
has agreed pursuant to Section 1(b) of this Agreement to indemnify the
Indemnified Parties, and if, within 20 days after the Partnership receives the
notice required by this Agreement, the Partnership notifies Parent of its
election to defend the asserted liability, then the Partnership thereafter shall
be entitled to direct, through counsel of the Partnership's own choosing and at
the Partnership's own expense, the defense against such asserted liability. If
the Partnership elects to direct such defense, the Indemnified Parties may
participate in such defense, but in such case the fees and expenses incurred
therein by the Indemnified Parties shall be borne by the Indemnified Parties
notwithstanding anything in this Agreement to contrary, unless, and only to the
extent, such participation by the Indemnified Parties has been requested in
writing by the Partnership. If the Partnership does not elect as aforesaid to
direct such defense of a matter for which the Partnership is obligated to
provide indemnification pursuant to Section 1(b) of this Agreement, the
Indemnified Parties may then, in their sole discretion, elect to defend such
matter, in which event the reasonable fees and expenses of the Indemnified
Parties shall be reimbursed by the Partnership as such fees and expenses are
actually incurred by the Indemnified Parties. In the event the Partnership
elects to direct such defense as herein set out, the Indemnified Parties agree
not to settle, or agree to settle, the Claim without the prior written consent
of the Partnership.
Section 4. Limitation of Rights.
(a) Notwithstanding any statement contained in this Agreement to the
contrary, the obligations of the Partnership under this Agreement shall be
limited as follows:
(i) the Partnership shall have no liability under Section 1(a) of this
Agreement as a result of any Claim which arises out of or relates to the
enforcement, application or interpretation of any law, rule, statute,
regulation or other pronouncement or finding concerning the treatment of
the Merger for tax purposes;
(ii) in addition to the limitations set forth in Section 4(a)(i) of
this Agreement, the Partnership shall be obligated pursuant to Section 1(a)
of this Agreement only to the extent that any Damages incurred by the
Indemnified Parties with respect to all such Claims within Section 1(a) of
this Agreement exceed in the aggregate $500,000; and once such amount is
exceeded, the Partnership shall be liable only for fifty percent (50%) of
such Damages in excess of such $500,000 aggregate amount; and
(iii) the Partnership shall be obligated pursuant to Section 1(b) of
this Agreement only to the extent that any Damages incurred by the
Indemnified Parties with respect to all such Claims within Section 1(b) of
this Agreement exceed in the aggregate $250,000 PLUS the aggregate amount
of any reduction or elimination of any reserves for liabilities established
on the financial statements of Parent (other than reserves established for
expenses pursuant to Sections 8.6 and 9.3(i) of the Merger Agreement) as in
existence immediately prior to the Effective Time of the Merger that
subsequently are reduced or eliminated, it being further understood that,
with respect to claims under Section 1(b) arising out of matters with
respect to which reserves have been established under Section 9.3(d) of the
Merger Agreement (other than reserves established for expenses under
Sections 8.6 and 9.3(i), the Damages on account of such matter shall not be
deemed to include the amount of any such reserves.
(b) The Partnership shall not be obligated or required pursuant to this
Agreement or otherwise to pay consequential or punitive damages to any party or
to any Indemnified Party for or in connection with the breach or violation by
the Partnership of this Agreement.
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(c) Subject to the terms of this Section 4(c), the future obligations of
the Partnership pursuant to this Agreement shall immediately cease and be
rendered null and void, and the existing obligations of the Partnership pursuant
to this Agreement shall be deemed fully satisfied, upon the date and time (the
"Termination Date") that the Partnership establishes an escrow account with an
institution and on terms reasonably satisfactory to the Parent (the "Escrow
Account") intended by the Partnership to satisfy any claims made against the
Partnership under this Agreement for which notice has been given to the
Partnership prior to the Termination Date or which the parties hereto are then
aware grounds for the assertion thereof against the Partnership may exist;
provided, however, that the Termination Date shall not occur until the earlier
of (i) the three year anniversary of the execution and delivery of the Merger
Agreement, or (ii) two years following the death of Winton M. Blount; and
provided further, however, that the Partnership must establish an Escrow Account
prior to making any distribution which would cause the Partnership to have
assets net of liabilities with a fair market value of at least $10,000,000 or
promptly upon the Partnership otherwise ceasing to have assets net of
liabilities with a fair market value of less than $10,000,000. Once established,
the Escrow Account may consist of cash, shares of Parent Common Stock,
certificates of deposit, obligations of the United States government, commercial
paper or other low-risk, highly liquid securities the fair market value of which
has been determined by arbitration as set forth in this Agreement to be
sufficient in amount (taking into consideration the stability of the fair market
value of the assets to be held in the Escrow Account) to satisfy any such claims
made against the Partnership under this Agreement for which notice has been
given to the Partnership prior to the Termination Date or which the parties
hereto are then aware grounds for the assertion thereof against the Partnership
may exist. Following the Termination Date, the obligations of the Partnership
under this Agreement shall be expressly limited to the assets held in the Escrow
Agreement. To the extent that the potential liabilities of the Partnership under
this Agreement are ultimately determined to be less than the assets held in the
Escrow Agreement, then the Partnership, or its successors in interest, shall
receive a prompt refund of the assets remaining in the Escrow Account.
Section 5. Exclusive Remedies. The parties to this Agreement hereby
expressly agree that the remedies expressly set forth in this Agreement
constitute the sole and exclusive remedies for recoveries against the
Partnership and its affiliates for Damages incurred or suffered by the
Indemnified Parties as a result of any Claim arising out of or related to (a)
the Merger or (b) any act or omission of Parent, or any affiliate of Parent,
prior to the Effective Time of the Merger, including in either case, without
limitation, the execution and delivery of the Merger Agreement. Further, the
parties hereby expressly agree that the Partnership shall have no liability or
obligation under this Agreement or otherwise for any liability, cost, damage,
obligation or expense incurred by any Indemnified Party that arises out of acts
or omissions of Company that is imposed upon Parent because of its ownership of
the stock of, or alleged control of, Company (other than Claims against the
Parent with respect to the Merger).
Section 6. Amount of Loss. In determining the gross amount of any loss
suffered by Parent for which it is indemnified hereunder, the amount of such
gross loss shall be reduced by the amount, if any, of the actual recovery or
benefit (net of reasonable expenses incurred in obtaining said recovery or
benefit) Parent receives with respect thereto from any other person (including
any federal, state or local income tax benefit); and if such a recovery or
benefit is received by Parent after it receives full payment or satisfaction
under this Agreement with respect to a loss, then a refund equal to the
aggregate amount of the subsequent recovery (or pro rata portion thereof for
which the Partnership is responsible under this Agreement), net of reasonable
expenses and tax or other costs incurred in obtaining such recovery, shall be
made promptly to the Partnership.
Section 7. Arbitration.
(a) Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, whether common law or statutory, shall be settled
exclusively by arbitration in Montgomery, Alabama, using the American
Arbitration Association. The arbitration shall be heard before three
arbitrators, one to be chosen by the Partnership, one to be chosen by Parent and
the third to be chosen by those two arbitrators.
(b) The arbitrators shall apply the substantive law of the State of Alabama
applicable to contracts made and to be performed entirely in such state (without
giving effect to the choice-of-law principles of such state which would lead to
the application of the substantive law of any other state) in determining the
rights,
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obligations and liabilities of the parties. The arbitrators shall not have the
power to alter, modify, amend, add to or subtract from any term or provision of
this Agreement, nor to grant injunctive relief (including interim relief, of any
nature) or punitive or consequential damages for breach of this Agreement. In
all other respects, the commercial rules of the American Arbitration Association
shall govern the arbitration. Judgment on the award of the arbitrators may be
entered by any court having jurisdiction to do so, and each party hereto hereby
irrevocably consents and submits to the personal jurisdiction of the federal and
state courts of the State of Alabama for that purpose.
(c) The failure or refusal of any party to submit to arbitration shall
constitute a breach of this Agreement. Judicial action may be commenced in order
to compel arbitration. If such action is commenced and if arbitration is in fact
compelled, the party that shall have resisted arbitration shall be required (if
affirmatively required by the court in which such action is commenced) to pay to
the other parties all costs and expenses, including, without limitation,
reasonable attorneys' fees, that they incur in compelling arbitration. The
prevailing party in arbitration shall be entitled to its reasonable attorneys'
fees actually incurred and costs.
Section 8. Miscellaneous.
(a) Capitalized terms used herein, if not otherwise defined herein, shall
have the respective meanings ascribed to such terms in the Merger Agreement.
(b) As a condition to the obligation of the Partnership to provide
indemnification pursuant to this Agreement, each Indemnified Party shall, when
and in so far as the Partnership provides indemnification hereunder, including
by means of the Escrow Account, assign and convey to the Partnership a share
proportionate to the Partnership's indemnification of the Indemnified Party
hereunder of such Indemnified Party's right and interest in and to any claim,
cause of action or other right of recovery that such Indemnified Party may have
against any other party for any loss, liability, damage or expense within the
meaning of Section 1 of this Agreement and for which any Indemnified Party seeks
indemnification or reimbursement under this Agreement, and further, the
Partnership shall be subrogated to the extent of the Partnership's
indemnification of the Indemnified Party hereunder to any rights of the
Indemnified Party thereunder or under any policy of insurance. In addition, the
Indemnified Parties agree to take reasonable steps to cooperate with the
Partnership in any attempt by the Partnership to prosecute or otherwise pursue
any such claim, cause of action or other right of recovery, provided that the
Partnership must promptly reimburse the reasonable out-of-pocket expenses
incurred by any Indemnified Party as a result of any request by the Partnership
for cooperation.
(c) Each Indemnified Party is intended to be, and shall be, a third party
beneficiary of the provisions of this Agreement and shall have the right to
enforce the obligations of the Partnership to such Indemnified Party under this
Agreement in its own name and behalf.
(d) This Agreement shall be interpreted, construed and enforced in
accordance with the substantive laws of the State of Alabama, applied without
giving effect to those choice-of-law principles of such State which would lead
to the application of the substantive laws of any other State.
(e) This Agreement may be executed in one or any number of counterparts,
each of which, once so executed, shall be deemed to be an original, and such
counterparts together shall constitute and be one and the same instrument.
(f) The captions or headings in this Agreement are provided for convenience
only and shall not be construed or applied to limit, amend or otherwise describe
or define the intent or scope of the provisions of this Agreement.
(g) Any communications required or desired to be given hereunder to any
Indemnified Party may be sent to Parent. Any communications required or desired
to be given hereunder shall be deemed to have been
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properly given if sent by hand delivery or by facsimile and overnight courier to
the parties hereto at the following addresses, or at such other address as
either party may advise the other in writing from time to time:
Notice to Parent:
Blount International, Inc.
Post Office Box 949
Montgomery, Alabama 36101-0949
Fax: (334) 271-8177
Attn: John M. Panettiere
with a copy to:
Richard H. Irving III, Esq.
Senior Vice President and General Counsel
Post Office Box 949
Montgomery, Alabama 36101-0949
Fax: (334) 271-8130
Notice to the Partnership:
The Blount Holding Company, L.P.
Post Office Box 5060
Montgomery, Alabama 36103-5060
Fax: (334) 271-8133
Attn: Teresa P. Rachal
IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be executed and delivered by their respective duly authorized
officers or representatives as of the day and year first written above.
BLOUNT INTERNATIONAL, INC.
By
-----------------------------------
Its
----------------------------------
THE BLOUNT HOLDING COMPANY, L.P.
By BHP, Inc.,
Its General Partner
By
-----------------------------------
Winton M. Blount
Its President
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EXHIBIT IV
REGISTRATION RIGHTS AND STOCK TRANSFER RESTRICTION AGREEMENT
This REGISTRATION RIGHTS AND STOCK TRANSFER RESTRICTION AGREEMENT (the
"Agreement") made as of the day of , 1995, by and between Blount
International, Inc., a Delaware corporation formerly named HBC, Incorporated
(the "Company"), and Winton M. Blount ("Mr. Blount"), Carolyn S. Blount ("Mrs.
Blount"), Winton M. Blount III, Samuel R. Blount, Joseph W. Blount, Thomas A.
Blount, and Katherine Blount Miles (Mr. Blount, Mrs. Blount and said other
individuals being herein referred to collectively as the "Blount Family"), and
The Blount Holding Company, L.P., a Delaware limited partnership (the "Blount
Family Partnership," and, together with the Blount Family, being sometimes
referred to herein as the "Primary Holders"),
WITNESSETH:
WHEREAS, as of the date of this Agreement, a wholly-owned subsidiary of the
Company is being merged with and into Blount, Inc., a Delaware corporation (the
"Blount Subsidiary"), pursuant to that certain Plan and Agreement of Merger
dated August 17, 1995 (the "Merger Agreement"), which transaction is herein
sometimes referred to as the "Merger;" and
WHEREAS, pursuant to the terms of the Merger Agreement, the parties hereto
desire to provide certain registration rights to the Primary Holders and certain
related parties with respect to the shares of Company Class A Common Stock, par
value $0.01 per share (the "Company Class A Common Stock"), and the shares of
Company Class B Common Stock, par value $0.01 per share (the "Company Class B
Common Stock," and, together with the Company Class A Common Stock, being
sometimes referred to herein as the "Company Common Stock"), owned following the
Merger by the Primary Holders and such related parties, and to provide for
restrictions on the transfer and sale of the Company Common Stock owned by the
Primary Holders upon the terms and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Primary
Holders hereby agree as follows:
ARTICLE 1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Family Transferee" shall mean any of the lineal descendants, spouses
of lineal descendants and lineal descendants of such spouses, including adoptive
children of each of such persons, of Mr. Blount's parents.
(d) "Form S-3" shall mean such form under the Securities Act as in effect
on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
(e) "Holders" shall mean the Primary Holders and the related persons and
entities to whom transfers of Company Common Stock may be made by Primary
Holders pursuant to Section 3.1(i) of this Agreement, provided, that notice of
such transfer is given to the Company in the manner provided therefor in this
Agreement.
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(f) "Minimum Registrable Amount" shall mean the lesser of (i) shares of
Company Common Stock having a minimum value of $20,000,000, based upon the
trading price of Company Class A Common Stock at the time registration is
demanded or (ii) 600,000 shares of Company Common Stock, or such lesser number
of shares of Registrable Securities as the Board of Directors of the Company
shall approve.
(g) "Permitted Transferee" shall mean the following:
(i) In the case of a Restricted Holder who is a natural person holding
the shares of Company Common Stock in question, "Permitted Transferee"
means (I) a Family Transferee, (II) the custodian under any Uniform
Transfers to Minors Act or similar law for a minor who is a Family
Transferee, (III) the trustee of a trust (including a voting trust) created
principally for the benefit of one or more Family Transferees, (IV) any
split-interest trust described in Section 4947 of the Internal Revenue
Code, as it may from time to time be amended (herein referred to as a
"Charitable Organization") of which one or more Family Transferees is a
beneficiary, (V) a corporation of which one or more Family Transferees or
such Family Transferees' Permitted Transferees (as determined under this
clause (i)) collectively beneficially own a majority of the combined voting
power of the outstanding capital stock entitled to vote for the election of
directors, a partnership of which one or more Family Transferees or such
Family Transferees' Permitted Transferees (as determined under this clause
(i)) collectively beneficially own a majority of the partnership interests
entitled to participate in the management of the partnership, a member
managed limited liability company of which one or more Family Transferees
or such Family Transferees' Permitted Transferees (as determined under this
clause (i)) collectively beneficially own a majority of the outstanding
member interests entitled to participate in the management of the limited
liability company, or a manager managed limited liability company of which
all of the managers entitled to participate in decisions with respect to
the voting or disposition by the limited liability company of the Company
Common Stock are either Family Transferees or such Family Transferees'
Permitted Transferees (as determined under this clause (i)), provided, that
no such corporation, partnership or company shall be a "Permitted
Transferee" unless such corporation, partnership or company agrees in
writing with the Company to be bound by the provisions of Section 3.3
hereof, (VI) the estate of a Family Transferee, or the executor,
administrator or personal representative of the estate of a Family
Transferee, (VII) the guardian, conservator, or custodian of any Family
Transferee adjudged disabled by a court of competent jurisdiction, (VIII) a
nominee of a Family Transferee, provided such Family Transferee possesses
the power to direct the voting and disposition of the shares of Company
Common Stock placed in the nominee's name, and (IX) the Company or any
subsidiary of the Company (herein collectively referred to sometimes as the
"Company").
(ii) In the case of a Restricted Holder holding the shares of Company
Common Stock in question as a custodian under the Uniform Transfers to
Minors Act or similar law, "Permitted Transferee" means (I) the minor for
whose benefit such shares are being held, (II) the executor, administrator,
or personal representative of the estate of such minor, and (III) any
Permitted Transferee (as determined under clause (i) above) of such minor.
(iii) In the case of a Restricted Holder holding the shares of Company
Common Stock in question as a trustee of a trust (other than a Charitable
Organization), "Permitted Transferee" means (I) any person transferring
such Company Common Stock to such trust, (II) any Permitted Transferee (as
determined under clause (i) above) of any such transferor, (III) any person
to whom or for whose benefit income or principal of a trust which was
irrevocable on the date hereof may be distributed during or at the end of
the term of such trust whether by power of appointment or otherwise, and
(IV) any Permitted Transferee (as determined under clause (i) above) of any
such person to whom or for whose benefit income or principal of a trust
described in subclause (III) of this clause (iii) may be distributed.
(iv) In the case of a Restricted Holder which is a Charitable
Organization holding the shares of Company Common Stock in question,
"Permitted Transferee" means (I) any person transferring such Company
Common Stock to such Charitable Organization, (II) any Permitted Transferee
(as determined under clause (i) above) of such transferor, and (III) the
Company.
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(v) In the case of a Restricted Holder which is a corporation,
partnership or limited liability company (other than a Charitable
Organization) holding record and beneficial ownership of the shares of
Company Common Stock in question on the date hereof, "Permitted Transferee"
means (I) any person who was, on the date hereof, a stockholder of such
corporation, a partner of such partnership, or a member of such limited
liability company, (II) any Permitted Transferee (as determined under this
paragraph (g) of this Article 1) of any such stockholder, partner or member
referred to in this clause (v), and (III) the Company.
(vi) In the case of a Restricted Holder which is a corporation or
partnership (other than a Charitable Organization or a corporation,
partnership, or limited liability company described in clause (v) above)
holding the shares of Company Common Stock in question, "Permitted
Transferee" means (I) any person who previously transferred such shares of
Company Common Stock to such corporation, partnership or limited liability
company, and (II) any Permitted Transferee (as determined under clause (i)
above) of any such transferor.
(vii) In the case of a Restricted Holder holding the shares of Company
Common Stock in question as the estate of a deceased person (the
"Decedent") or as the executor, administrator, personal representative of
the estate of a Decedent, "Permitted Transferee" means (I) any Permitted
Transferee (as determined under clause (i) above) of the Decedent, and (II)
the Company.
(viii) In the case of a Restricted Holder holding the shares of
Company Common Stock in question as the trustee or receiver of the estate
of a bankrupt or insolvent Restricted Holder, "Permitted Transferee" means
(I) such bankrupt or insolvent Restricted Holder, and (II) any Permitted
Transferee (as determined under clause (i) above) of such bankrupt or
insolvent Restricted Holder.
(ix) In the case of a Restricted Holder holding of record (but not
beneficially) the shares of Company Common Stock in question as nominee for
any person who is the beneficial owner thereof, "Permitted Transferee"
means (I) such beneficial owner, and (II) any Permitted Transferee (as
determined under clause (i) above) of such beneficial owner.
For purposes of this definition of "Permitted Transferee:"
(A) The relationship of any person that is derived by or through legal
adoption shall be considered a natural one.
(B) Each joint owner of shares of Company Common Stock shall be
considered a holder of such shares who must qualify as a Permitted
Transferee.
(C) Unless otherwise specified, the term "person" means both natural
persons and legal entities.
(D) Each reference to a corporation or the Company shall include any
successor corporation or limited liability company resulting from merger,
consolidation, reorganization or recapitalization; each reference to a
partnership shall include any successor partnership resulting from the
death or withdrawal of a partner; each reference to a trustee, executor or
any other personal representative shall include any successor trustee,
successor executor or successor personal representative.
(h) "Register", "Registered," and "Registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
(i) "Registrable Securities" shall mean any shares of Company Common Stock
owned at the time in question by any of the Holders and shall include any
security of the Company or any other entity for which any shares of the Company
Common Stock shall have been exchanged or converted into by reason of a merger,
consolidation, reorganization or other similar transaction.
(j) The number of shares of "Registrable Securities then outstanding" shall
be determined by the number of shares of Company Common Stock outstanding which
are, and the number of shares of Company Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
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(k) "Restricted Holder" shall mean (i) a Primary Holder or (ii) any person
or legal entity which from time to time becomes subject to any of the
restrictions on transfer of Company Common Stock set forth in Sections 2.15,
3.1(i), 3.1(iv), 3.1(vi) or 3.2 of this Agreement.
(l) "Rule 144" shall mean Rule 144 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(m) "Rule 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(n) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statue, and the rules and regulations thereunder,
all as the same shall be in effect at the time.
ARTICLE 2. REGISTRATION. The Company covenants and agrees with the
Primary Holders and the Holders, as third party beneficiaries of this Agreement,
as follows:
Section 2.1 Request for Registration. (a) If the Company shall receive at
any time a written request from Primary Holders requesting that the Company file
a registration statement under the Securities Act covering the registration for
sale in the aggregate of not less than the Minimum Registrable Amount of
Registrable Securities (which shall, unless otherwise consented to by the
Company, be by means of an underwriting), then the Company shall, within ten
(10) days of the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of subsection 2.1(b), effect as
soon as practicable (including filing an initial registration statement with the
Commission with respect thereto within 45 days of the receipt of such notice
from the Primary Holders) the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered by written
notice to the Company, which notices shall be given within twenty (20) days of
the mailing of such notice by the Company in accordance with Section 4.5 hereof;
provided, that the Company may delay the filing of such registration for up to
75 additional days, or a total of 120 days after the receipt by the Company of
the initial notice from the Primary Holders, if, as a result of such
registration, the Company would be required to disclose information not
theretofore disclosed as to which the Company has a valid business reason for
deferring disclosure thereof.
(b) If the distribution of the Registrable Securities is to be by means of
an underwriting, the underwriter will be selected by a majority in interest of
the Primary Holders initiating the registration request hereunder ("Initiating
Holders") and approved by the Company, which approval shall not be unreasonably
withheld. In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Subsection
2.3(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2.1, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder or in such other
proportions as may be mutually agreed to by such Holders; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting; and provided further, however, that the number
of shares of Registrable Securities held by Primary Holders to be included in
such underwriting shall not be reduced unless Registrable Securities held by
Holders other than the Primary Holders are first excluded entirely from the
underwriting.
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(c) The Company is obligated to effect only three (3) such registrations
pursuant to this Section 2.1, and shall not be obligated to take action in
response to a written request pursuant to Section 2.1(a) hereof until eighteen
(18) months have elapsed following the effective date of a registration
statement filed in response to a written request pursuant to Section 2.1(a).
Section 2.2 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock under the Securities Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, or a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 4.5, the Company shall, subject to the provisions of
Section 2.7, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
Section 2.3 Obligations of the Company. Whenever required under this
Article 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one
hundred twenty (120) days (or the remainder of the two-year period during
which registration may be required, if pursuant to Section 2.11) for the
purpose of selling all stock or securities registered thereunder.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by
them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Article 2, on the date that such
Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Article 2, if such
securities are being sold through
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underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to
such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
Section 2.4 Furnish Information. (a) It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Article 2
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
(b) The Company shall have no obligation with respect to any registration
requested pursuant to Section 2.1 or Section 2.11 if, due to the operation of
subsection 2.4(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 2.1(a) or subsection 2.11(b) (2),
whichever is applicable.
Section 2.5 Expenses of Demand Registration or Form S-3. All expenses
other than underwriting discounts and commissions and the fees and disbursements
of counsel for the selling stockholders incurred in connection with
registrations, filings or qualifications pursuant to Section 2.1 or 2.11,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for the
Company shall be borne by the Company; provided, however, that the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to Section 2.1 or Section 2.11 which it is obligated to pay pursuant to
this Section 2.5 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses);
provided further, however, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Holders at the time of their
request and have withdrawn the request with reasonable promptness following
disclosure by the Company of such material adverse change, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 2.1 or Section 2.11; and provided further, however, that
after the Company has effected two (2) such registrations pursuant to Section
2.1(a) hereof and such registrations have been declared or ordered effective,
the Company shall not be obligated to pay for any expenses of any further such
registration pursuant to Section 2.1(a).
Section 2.6 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to all registrations
pursuant to Section 2.2 for each Holder, including, without limitation, all
registration, filing, and qualification fees, printers' and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Securities and the fees and disbursements of
any separate counsel for the selling Holders.
Section 2.7 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 2.2 to include any of the Holders'
Registrable Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such
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securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders) but in no event shall any shares
being sold by a stockholder exercising a demand registration right similar to
that granted in Section 2.1 be excluded from such offering. For purposes of the
preceding parenthetical concerning apportionment, for any selling stockholder
which is a holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and stockholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder", and any pro rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.
Section 2.8 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Article 2.
Section 2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities, joint or several, to
which they may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make
the statements therein not misleading; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Subsection 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other
Holder, against any losses, claims, damages, or liabilities, joint or
several, to which any of the foregoing persons may become subject, under
the Securities Act, or the Exchange Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any Violation, in each case to the extent,
and only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Subsection 2.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Subsection 2.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided further, that,
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in no event shall any indemnity under this Subsection 2.9(b) exceed the
gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action, including any governmental
action, such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party, together with all other indemnified parties which may be
represented without conflict by one counsel, shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.9, but the omission
so to deliver written notice to the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than
under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section 2.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
Section 2.10 Reports Under Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to furnish to any
Holder, so long as the Holder owns any Registrable Securities, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of Commission Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the Commission which permits the selling of any such
securities without registration.
Section 2.11 Form S-3 Registration. In case the Company shall receive, at
any time during the two year period following the Merger in which, because of
the provisions of paragraph (d) of Rule 144 (including the application thereof
under Rule 145), one or more Holders are not able to sell shares of Registrable
Securities under the provisions of Rule 144 or Rule 145, from any such Holder or
Holders a written request or
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requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders similarly situated joining in such request as
are specified in a written request given within 15 days after receipt of
such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 2.11:
(1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if
any) at an aggregate price to the public (net of any underwriters'
discounts or commissions) of less than $1,000,000;
(3) if the Company shall furnish to the Holders a certificate
signed by the chief executive officer of the Company stating that, as a
result of such registration, the Company would be required to disclose
information not theretofore disclosed as to which the Company has a
valid business reason for deferring disclosure thereof, the Company
shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 120 days after receipt of the
request of the Holder or Holders under this Section 2.11; provided,
however, that the Company shall not utilize this right more than once in
any twelve month period; or
(4) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.11 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.1 or 2.2, respectively.
Section 2.12 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to include such securities in any registration filed under Section 2.1
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included.
Section 2.13 Termination of Registration Rights. The Holders shall be
entitled to exercise any right provided for in Sections 2.1, 2.2 or 2.11 for not
less than three (3) years following the date of this Agreement, and for so long
thereafter as either the restrictions on sale or transfer set forth in Article 3
of this Agreement remain in effect or any shares of Company Common Stock held by
or beneficially owned by any Primary Holder remain ineligible for sale pursuant
to paragraph (k) of Rule 144.
Section 2.14 Restriction on Sale of Company Class B Common Stock. Except
as provided in Section 3.2 of this Agreement, no sale of shares of Company Class
B Common Stock may be made pursuant to this Article 2 unless prior to the time
such shares are actually sold pursuant to a registration effected pursuant to
this Article 2 such shares are converted to shares of Company Class A Common
Stock.
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Section 2.15 Restrictions on Sales of Company Common Stock During
Registration. No Restricted Holder will effect any transaction pursuant to
Section 3.1(iii) of this Agreement or under any Form S-3 filed pursuant to
Section 2.11 of this Agreement during any period in which the Company would be
prohibited, in connection with an underwritten registration pursuant to Section
2.1 hereof, from buying or selling shares of Company Common Stock pursuant to
Rule 10b-6 under the Exchange Act, nor will any Restricted Holder sell any
shares of Company Common Stock pursuant to Section 3.1(iii) of this Agreement or
under any Form S-3 filed pursuant to Section 2.11 of this Agreement during the
period of 90 days from the effective date of a registration statement filed in
connection with an underwritten distribution pursuant to Section 2.1 hereof,
regardless of whether such Restricted Holder elects to include such Restricted
Holder's Registrable Securities in such registration, and each Restricted Holder
agrees to enter into agreements respecting such restrictions with the
underwriter for any such registered offering pursuant to Section 2.1 hereof. The
provisions of this Section 2.15 shall not be applicable to shares of Company
Common Stock held by a Restricted Holder as trustee or custodian under trusts or
custodianships in effect with respect to such shares of Company Common Stock on
August 17, 1995 or under trusts or custodianships thereafter created other than
pursuant to Section 3.1(i) hereof.
ARTICLE 3. RESTRICTIONS ON TRANSFER AND SALE OF COMPANY COMMON STOCK
Section 3.1 Restrictions on Transfer and Sale of Company Common
Stock. Each Primary Holder hereby agrees that no shares of Company Common Stock
now owned or hereafter acquired (other than as a trustee or custodian under
trusts or custodianships in effect with respect to such shares of Company Common
Stock on August 17, 1995 or under trusts or custodianships thereafter created
other than pursuant to clause (i) of this Section 3.1 or paragraph (c) of
Section 3.2) by such Primary Holder will be sold, transferred, pledged,
hypothecated or otherwise disposed of by such Primary Holder, either directly or
indirectly, except as follows:
(i) Shares of Company Common Stock may be sold, transferred, pledged,
hypothecated or otherwise disposed of by a Primary Holder to a Permitted
Transferee without restriction or limit; provided, that sales, transfers,
pledges, hypothecations or other dispositions of Company Common Stock
(other than transfers during any calendar quarter to any individual
Permitted Transferee of 1,500 shares or less of Company Common Stock) may
only be made if the Permitted Transferee agrees in writing, a copy of which
is delivered to the Company, to be bound, with respect to the shares of
Company Common Stock so sold, transferred, pledged, hypothecated or
otherwise disposed of, by the restrictions on sale, transfer, pledge,
hypothecation or other disposition of shares of Company Common Stock by
Primary Holders contained in Sections 2.15, 3.1(iii), 3.1(iv) and 3.1 (vi)
hereof; and provided further, that sales, transfers, pledges,
hypothecations or other dispositions of Company Class B Common Stock to a
Permitted Transferee in which such shares of Company Class B Common Stock
are not converted to Company Class A Common Stock at the time of such sale,
transfer, pledge, hypothecation or other disposition may only be made if
the Permitted Transferee agrees in writing, a copy of which is delivered to
the Company, to be bound, with respect to the shares of Company Class B
Common Stock so sold, transferred, pledged, hypothecated or otherwise
disposed of, by the restrictions on sale, transfer, pledge, hypothecation
or other disposition of Company Class B Common Stock without conversion to
Company Class A Common Stock by Primary Holders contained in Sections
3.1(vi) and 3.2 hereof;
(ii) Gifts of the entire interest of the Company Common Stock so
transferred may be made by a Primary Holder or any Permitted Transferee to
any organization to which contributions are deductible for federal income,
estate, or gift tax purposes, provided, that, subject to the provisions of
Section 3.2 of this Agreement, any shares of Company Class B Common Stock
transferred pursuant to this clause (ii) are first converted to shares of
Company Class A Common Stock;
(iii) Sales on a national securities exchange or by means of an
inter-dealer quotation system maintained by a registered securities
association may be made by each Primary Holder, together with sales by such
Primary Holder's Permitted Transferees of shares of Company Common Stock
transferred by such Primary Holder to such Permitted Transferees after
August 17, 1995, up to the amount which
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would be permitted to be sold by each such Primary Holder under Rule 144 if
such Primary Holder were deemed to be an "affiliate" of the Company,
whether or not such Primary Holder is in fact an "affiliate" of the Company
or otherwise subject to the provisions of Rule 144; provided, that (I) any
shares of Company Class B Common Stock sold pursuant to this clause (iii)
are first converted to shares of Company Class A Common Stock and (II) such
limitation on the number of shares of Company Common Stock which may be
sold by such Primary Holder and such Primary Holder's Permitted Transferees
pursuant to this clause (iii) shall terminate four (4) years following the
date of this Agreement;
(iv) Transfers or sales of shares of Company Common Stock effected
without registration on terms and under circumstances corresponding to
those terms and circumstances on and under which exempt private placements
may be made by the Company pursuant to Section 4(2) of the Securities Act
may be made by a Primary Holder without limit; provided, that,
(A) subject to the provisions of Section 3.2 of this Agreement, any
shares of Company Class B Common Stock transferred or sold pursuant to
this clause (iv) are first converted to shares of Company Class A Common
Stock, and
(B) if, as a result of, and after giving effect to, such
transaction the transferee of such shares of Company Common Stock,
together with any group (within the meaning of Section 13(d)(3) of the
Exchange Act) of which such transferee is a member, would hold shares of
Company Common Stock having the right to cast five percent (5%) or more
of the total votes entitled to be cast by the holders of Company Common
Stock when voting together as a single class, then the transferee in
such transaction (i) agrees in writing, a copy of which is delivered to
the Company, as a part of such transaction to offer, within 180 days of
such transaction, to acquire any and all shares of Company Common Stock,
at the highest price per share paid by the transferee to the transferor,
by means of a tender offer, merger or other similar transaction, and
(ii) such agreement provides that the Company and the other stockholders
of the Company shall be third party beneficiaries thereof and that,
unless the transferee thereafter makes such offer and acquires all such
shares of Company Common Stock tendered to such transferee pursuant to,
or otherwise electing to participate in, such offer or transaction
within such 180 day period, such transferee shall have no voting rights
with respect to, and may be enjoined from exercising any voting rights
with respect to, any shares of Company Common Stock beneficially owned
by such transferee (but without relieving such transferee of its
obligation to make such offer and acquisition); provided, this subclause
(B) shall not be applicable to any transaction as to which the Company
agrees in writing not to require such agreement; and provided further,
this subclause (B) shall not be applicable
(I) at any time after the Restricted Holders beneficially own,
directly or indirectly, in the aggregate shares of Company Common
Stock which are subject to the provisions of this Agreement either
having the right to cast less than 15% of the total votes entitled to
be cast by the holders of the Company Common Stock voting together as
a single class or constituting less than 15% of the aggregate number
of the outstanding shares of Company Common Stock, whichever shall
first occur, or
(II) at any time after a person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) who is not or does not include
a Restricted Holder beneficially owns, directly or indirectly, shares
of Company Common Stock having the right to cast a majority of the
votes entitled to be cast by the holders of Company Common Stock when
voting together as a single class;
(v) Sales of Company Common Stock pursuant to Article 2 of this
Agreement may be made by a Primary Holder;
(vi) Pledges may be made by a Primary Holder or a Restricted Holder
subject to the provisions of this Section 3.1(vi) of such Primary Holder's
or Restricted Holder's shares of Company Common Stock, to the extent the
sale, transfer, pledge, hypothecation or other disposition of such shares
is restricted
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pursuant to the provisions of this Agreement, to a pledgee pursuant to a
bona fide pledge of such shares as collateral security for indebtedness due
to the pledgee, provided, that shares of Company Class B Common Stock so
pledged shall not be transferred to or registered in the name of the
pledgee and all shares of Company Common Stock so pledged shall remain
subject to the provisions of this Agreement; and provided further, that, in
the event of foreclosure or other similar action by the pledgee, any such
pledged shares of Company Class B Common Stock may only be (I) transferred
to a Permitted Transferee of the pledgor who, if not a Primary Holder,
becomes a Restricted Holder with respect to such shares of Company Class B
Common Stock or (II) converted into shares of Company Class A Common Stock,
as the pledgee may elect;
(vii) Sales, transfers or exchanges of Company Common Stock may be
made pursuant to any tender or exchange offer to purchase or acquire any
portion of the outstanding Company Common Stock which is extended equally
to all stockholders of the Company based on their percentage ownership of
the outstanding Company Common Stock, provided, that (A) the per share
consideration received in such transaction by the Restricted Holders for
their Company Common Stock is the same as the per share consideration
offered to the other holders of Company Common Stock, (B) unless the
Restricted Holders no longer beneficially own, directly or indirectly, in
the aggregate shares of Company Common Stock which are subject to the
provisions of this Agreement having the right to cast 15% or more of the
total votes entitled to be cast by the holders of the Company Common Stock
voting together as a single class or a person or group (within the meaning
of Section 13(d)(3) of the Exchange Act) who is not or does not include a
Restricted Holder beneficially owns, directly or indirectly, shares of
Company Common Stock having the right to cast a majority of the votes
entitled to be cast by the holders of Company Common Stock when voting
together as a single class, such offer is to acquire all of the outstanding
Company Common Stock, (C) unless such offer is to acquire all of the
outstanding Company Common Stock, sales, transfers or exchanges may be made
only of Company Class A Common Stock pursuant to the provisions of this
clause (vii), and (D) if, as a result of any such offer, the holders of
shares of Company Common Stock immediately prior to such offer, in their
capacity as such holders, would be entitled to receive capital stock of the
entity making such offer having 50% or more of the combined voting power of
the capital stock of such entity, then the provisions of this Agreement
shall remain in effect with respect to the capital stock of such entity
received by the Restricted Holders pursuant to such offer;
(viii) Transfers, exchanges or other dispositions of Company Common
Stock may be made pursuant to any merger or consolidation involving the
Company, provided, that the per share consideration received in such
transaction by the Restricted Holders for their Company Common Stock is the
same as the per share consideration received by the other holders of
Company Common Stock, and provided further, that, unless as a result of
such transaction the conditions of Section 3.6 hereof are met, the
provisions of this Agreement shall remain in effect with respect to the
capital stock of such surviving or resulting entity; and
(ix) Transfers, exchanges or other dispositions of Company Common
Stock may be made in connection with any recapitalization, reorganization,
reclassification, change of domicile merger or other similar transaction in
which there is no change in the relative percentages of ownership among the
holders of the capital stock of the resulting or surviving entity from the
percentages of ownership of the Company Common Stock which existed
immediately prior to such transaction, provided, that the provisions of
this Agreement shall remain in effect with respect to the capital stock of
such surviving or resulting entity.
It shall be a condition to any sale pursuant to clause (iv) of this Section
3.1 that the transferor of Company Common Stock in such transaction give
written notice to the transferee in such transaction of the existence of
and the provisions of this Agreement and the applicability of this
Agreement, if any, to the shares of Company Common Stock being transferred
in such transaction and certify in writing to the Company that such notice
was given.
Section 3.2 Permitted Transfers of Company Class B Common Stock Without
Conversion. Notwithstanding the provisions of Section 3.1 of this Agreement, a
Primary Holder and any Restricted Holder may
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sell or otherwise transfer shares of Company Class B Common Stock, to the extent
the sale or transfer of such shares of Company Class B Common Stock is subject
to this Agreement, without the requirement that such shares be converted to
shares of Company Class A Common Stock in such transaction, if:
(a) as a result of, and after giving effect to, such transaction the
transferee of such shares of Company Class B Common Stock, together with
any group (within the meaning of Section 13(d)(3) of the Exchange Act) of
which such transferee is a member, would not hold shares of Company Common
Stock having the right to cast five percent (5%) or more of the total votes
entitled to be cast by the holders of Company Common Stock when voting
together as a single class; or
(b) the transferee in such transaction (i) agrees as a part of such
transaction to offer, within 180 days of such transaction, to acquire any
and all shares of Company Common Stock, at the highest price per share paid
by the transferee to the transferor, by means of a tender offer, merger or
other similar transaction, which agreement provides that the Company and
the other stockholders of the Company shall be third party beneficiaries
thereof, and (ii) such agreement provides that, unless the transferee
thereafter makes such offer and acquires all such shares of Company Common
Stock tendered to such transferee pursuant to, or otherwise electing to
participate in, such offer or transaction within such 180 day period, (A)
such transferee shall have no voting rights with respect to, and may be
enjoined from exercising any voting rights with respect to, any shares of
Company Common Stock beneficially owned by such transferee and (B) any
shares of Company Class B Common Stock acquired by such transferee pursuant
to the provisions of this paragraph (b) shall, without further act on
anyone's part, be converted into shares of Company Class A Common Stock
effective upon the expiration of such 180 day period and stock certificates
formerly representing such shares of Company Class B Common Stock shall
thereafter be deemed to represent an equal number of shares of Company
Class A Common Stock; provided, that such termination of voting rights and
conversion of Company Class B Common Stock shall not relieve such
transferee of such transferee's obligations to make such offer and
acquisition; and provided further, this paragraph (b) shall not be
applicable to any transaction as to which the Company agrees in writing not
to require such agreement; or
(c) The transferee in such transaction is either (i) a Primary Holder
or (ii) a Permitted Transferee who agrees at the time of such sale or
transfer, with respect to the shares of Company Class B Common Stock
acquired in such sale or transfer, in form reasonably satisfactory to the
Company, to become subject to the restrictions on transfer contained in
Section 3.1(vi) and Section 3.2 of this Agreement; or
(d) The transaction complies with the provisions of Sections 3.1(vii),
3.1(viii) or 3.1(ix) hereof.
Section 3.3 Changes in Ownership of Certain Entities. (a) If by reason of
any proposed change in the ownership of the stock, partnership interests or
member interests, or the identity or ownership interests of the managers of a
Permitted Transferee under the provisions of paragraph (g)(i)(V) of Article 1,
such corporation, partnership or limited liability company would no longer
qualify as a Permitted Transferee under paragraph (g)(i)(V) of Article 1, then
the event by which such proposed change of ownership shall occur shall be deemed
to be a sale, transfer, pledge, hypothecation or other disposition of all of the
Company Common Stock previously transferred to such corporation, partnership or
limited liability company pursuant to the provisions of paragraph (g)(i)(V) of
Article 1 hereof then held by such corporation, partnership or limited liability
company, partnership or limited liability company which sale, transfer, pledge,
hypothecation or other disposition must comply with the provisions of this
Agreement.
(b) Notwithstanding the provisions of paragraph (a) of this Section 3.3,
pledges may be made of the stock, partnership interests or member interests in,
or the ownership interests in the managers of, a Permitted Transferee which has
qualified as a Permitted Transferee under the provisions of Paragraph (g)(i)(V)
of Article 1 hereof, provided, such Permitted Transferee has agreed in
connection with such pledge that, in the event of foreclosure or other similar
action by the pledgee, any shares of Company Class B Common Stock owned by such
Permitted Transferee will either be (I) transferred to a Permitted Transferee of
the pledgor who, if not a Primary Holder, becomes a Restricted Holder with
respect to such shares of Company Class B Common Stock or (II) converted into
shares of Company Class A Common Stock.
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Section 3.4 Changes in Ownership of the Blount Family Partnership. No
general or limited partnership interest in, and no stock of any corporate
general partner of, the Blount Family Partnership may be transferred to any
person who is not a Primary Holder, a Family Transferee, a Permitted Transferee
or an organization to which contributions are deductible for federal income,
estate or gift tax purposes without the prior written consent of the Company.
The provisions of this Section 3.4 shall not be applicable and shall be of no
further force and effect at any time after either (i) the Restricted Holders no
longer beneficially own, directly or indirectly, in the aggregate shares of
Company Common Stock which are subject to the provisions of this Agreement
having the right to cast 15% or more of the total votes entitled to be cast by
the holders of the Company Common Stock voting together as a single class or
(ii) a person or group (within the meaning of Section 13(d)(3) of the Exchange
Act) who is not or does not include a Restricted Holder beneficially owns,
directly or indirectly, shares of Company Common Stock having the right to cast
a majority of the votes entitled to be cast by the holders of Company Common
Stock when voting together as a single class, whichever shall first occur.
Section 3.5 No Adverse Effect on Registration Rights. No violation of, or
failure to comply with, the provisions of this Article 3 shall adversely effect,
limit or otherwise restrict the rights of the Primary Holders and Holders
pursuant to Article 2 of this Agreement.
Section 3.6 Termination in Certain Events. Upon the liquidation or
dissolution of the Company or upon the occurrence of any reorganization, merger
or other transaction in which holders of shares of Company Common Stock
immediately prior to such event, in their capacity as such holders, receive less
than 50% of the combined voting power of the surviving or resulting entity, the
provisions of this Article 3 shall terminate and be of no further force and
effect.
ARTICLE 4. MISCELLANEOUS
Section 4.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
Section 4.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, applied without giving effect
to conflict-of-law principles.
Section 4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 4.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
Section 4.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
Section 4.7 Antidilution. In the event there is any increase or decrease
in the number of issued and outstanding shares of Company Common Stock following
the Effective Time of the Merger resulting from a subdivision or consolidation
of shares or the payment of a stock dividend (but only on the Company Common
Stock) or any other increase or decrease in the number of issued and outstanding
shares of Company Common Stock effected without receipt of consideration by the
Company, the shares resulting from such subdivision or consolidation or issued
as such dividend shall be subject to the provisions of this Agreement to
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the same extent as were the shares as to which such subdivision or consolidation
occurred or the shares with respect to which such dividend was distributed and
the number of shares of Company Common Stock set forth in any provision of this
Agreement shall be appropriately adjusted for any such increase or decrease.
Section 4.8 Legends. All certificates evidencing shares of Company Common
Stock now owned or hereafter transferred by the Blount Family Partnership shall
bear, so long as the restrictions hereunder are applicable to such shares,
legends to the effect that the shares represented thereby and the transfer
thereof are subject to the provisions of this Agreement.
Section 4.9 Amendments and Waiver. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent or the Company and each Primary Holder affected by
such amendment or waiver.
Section 4.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BLOUNT INTERNATIONAL, INC.
By
--------------------------------------
[ ]
Its
Address: P.O. Box 949
Montgomery, Alabama 36101-0949
--------------------------------------
Winton M. Blount
Address: [ ]
[ ]
[ ]
--------------------------------------
Carolyn S. Blount
Address: [ ]
[ ]
[ ]
--------------------------------------
Winton M. Blount III
Address: [ ]
[ ]
[ ]
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--------------------------------------
Samuel R. Blount
Address: [ ]
[ ]
[ ]
--------------------------------------
Joseph W. Blount
Address: [ ]
[ ]
[ ]
--------------------------------------
Thomas A. Blount
Address: [ ]
[ ]
[ ]
--------------------------------------
Katherine Blount Miles
Address: [ ]
[ ]
[ ]
THE BLOUNT HOLDING COMPANY, L.P.
By BHP, Inc.,
Its General Partner
By
--------------------------------------
Winton M. Blount
Its President
Address: [ ]
[ ]
[ ]
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EXHIBIT V
Note: Counsel for HBC may limit its opinion to the laws of the State of
Alabama, the DGCL and the federal laws of the United States, and such opinion
may be subject to such assumptions and other qualifications, and may rely on
such certifications, as are customary in rendering opinions in transactions
similar to the Merger.
1. Each of HBC and the Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the General Corporation Law of
the State of Delaware (the "DGCL").
2. Each of HBC and the Subsidiary has full corporate power to carry on its
business as to our knowledge it is now being conducted and to own all of its
material properties and assets.
3. The authorized capital stock of HBC and the issued and outstanding
capital stock of HBC is, as of the date of the Registration Statement, as set
forth in the Registration Statement on page under the caption
" ." All issued and outstanding shares of HBC Class A
Common Stock and HBC Class B Common Stock, and all of the issued and outstanding
shares of the capital stock of the Subsidiary, have been duly authorized and
validly issued, are fully paid and nonassessable by HBC or the Subsidiary, as
the case may be, and were not issued in violation of any preemptive rights under
DGCL or, to the knowledge of such counsel, in violation of any other rights to
purchase such shares.
4. HBC owns of record all of the issued and outstanding shares of the
capital stock of the Subsidiary free and clear of all liens, security interests
or pledges.
5. Each of HBC and Subsidiary has full corporate power to execute and
deliver the Merger Agreement and to consummate the transactions contemplated
thereby.
6. The execution, delivery and performance by HBC of the Merger Agreement
and the transactions contemplated thereby have been duly authorized by the
necessary corporate action on the part of HBC. The execution, delivery and
performance by the Subsidiary of the Merger Agreement and the transactions
contemplated thereby have been duly authorized by the necessary corporate action
on the part of the Subsidiary.
7. The Merger Agreement has been duly executed by HBC and the Subsidiary,
and the Merger Agreement (except for the indemnity provisions thereof, as to
which such counsel need not express an opinion) constitutes the valid and
binding obligation of HBC and the Subsidiary, enforceable against HBC and the
Subsidiary in accordance with its terms, except as limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
8. The execution and delivery of the Merger Agreement by HBC and the
Subsidiary did not, and the consummation of the transactions therein
contemplated by HBC and the Subsidiary does not, constitute a breach or
violation of, or a default under, any law, rule or regulation or, to the
knowledge of such counsel, any court order, judgment or decree of any
governmental or regulatory body, in each case, to which HBC or the Subsidiary is
subject or by which any of their material properties or assets are bound or
affected, or require any consent or approval of any other party under any law,
rule or regulation to which HBC or the Subsidiary are subject, except for
required approvals under the federal securities laws and under state securities
or blue sky laws.
9. The execution and delivery of the Merger Agreement by HBC and the
Subsidiary did not, and the consummation of the transactions therein
contemplated by HBC will not, constitute a breach or violation of, or constitute
a default (or any event which with notice of lapse of time or both would become
a default) under, (a) the Certificate of Incorporation or By-Laws of HBC or the
Subsidiary, or (b) except as indicated in the Merger Agreement, any material
contract (excluding any contracts which are terminable at will upon fewer than
30 days' notice), lease or instrument (including any note, mortgage, indenture
or other evidence of indebtedness), known to such counsel, to which HBC or the
Subsidiary is a party, in each case, which breach,
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violation or default would, in the judgment of such counsel, have a material
adverse effect on HBC and the Subsidiary, taken as a whole.
10. To the knowledge of such counsel, no actions, suits or proceedings are
pending or threatened against HBC or the Subsidiary which challenge the validity
of the Merger Agreement or any action required to be taken by HBC or the
Subsidiary pursuant to the Merger Agreement.
11. Insofar as the Registration Statement and the Proxy Statement relate to
HBC and the Subsidiary (other than the financial statements and other financial
and statistical information and data contained therein and other than
information supplied by persons other than HBC and the Subsidiary for inclusion
therein, as to which such counsel need express no opinion), the Registration
Statement complied as to form as of the effective date of the Registration
Statement in all material respects with the requirements of the Securities Act.
12. The shares of HBC Common Stock issued pursuant to the Merger have been
duly authorized and validly issued, and are fully paid and nonassessable.
13. The Registration Statement was declared effective by the Securities and
Exchange Commission prior to the mailing of the Proxy Statement and has remained
effective at all times subsequent to its having been declared effective. There
is no stop order in effect with respect to such Registration Statement under the
Securities Act and, to our knowledge, no proceedings for that purpose have been
instituted or are threatened. All filings required to be made pursuant to Rule
424 promulgated under the Securities Act have been made. The shares of HBC
Common Stock to be issued in the Merger have been registered or qualified, or
are exempt from registration or qualification, under all applicable state
securities laws.
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APPENDIX B
OPINION OF J.P. MORGAN SECURITIES INC.
July 31, 1995
Board of Directors and
Independent Committee of the Board of Directors
Blount, Inc.
4520 Executive Park Drive
P.O. Box 949
Montgomery, Alabama 36116-1602
Attention: Mr. Alfred M. Gleason
Chairman of the Independent Committee
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the Minority Shareholders (as defined below) of Blount, Inc. (the
"Company" or "Blount") of the terms of the exchange with HBC, Incorporated (the
"Parent" or "HBC") pursuant to the merger of the Company into a subsidiary of
the Parent (the "Transaction"). Pursuant to the Plan and Agreement of Merger
dated as of August 17, 1995 (including the exhibits thereto, the "Agreement")
between the Company and the Parent, a newly formed subsidiary of the Parent will
merge into the Company, with the Company surviving, and the Class A and Class B
shares of the Company will be automatically converted into newly issued Class A
and Class B shares of HBC.
We understand that the Transaction has been structured to generally provide
that:
- The percentage of Class A and Class B shares, respectively, of Blount
owned by the following individuals: Winton M. Blount, Carolyn S.
Blount, Winton M. Blount III, Samuel R. Blount, Joseph W. Blount,
Thomas A. Blount, and Katherine Blount Miles (Mr. Blount, Mrs. Blount
and such other individuals being herein referred to collectively as the
"Blount Family"), including the Blount Family's indirect ownership
interests in Blount, and the percentage of Class A and Class B shares,
respectively, of Blount owned by shareholders of Blount other than the
Blount Family, including the Family's indirect ownership interest (the
"Minority Shareholders"), will be identical to the percentage of Class
A and Class B shares of HBC owned by the Blount Family and the Minority
Shareholders after the Transaction.
- Expenses directly related to the Transaction will be paid by HBC, the
Blount Holding Company, L.P. (the "Blount Family Partnership"), or the
Blount Family. Reserves will be established on the balance sheet of HBC
for expenses not paid by the Closing Date.
- As the Closing Date, HBC will have charitable deductions carryforwards
for federal income tax purposes of not less than $4.8 million and net
worth of not less than $500,000, after giving effect to reserves
established for expenses, whether or not such reserves would be
established under generally accepted accounting principles ("GAAP"),
and not including any deferred tax assets related to the charitable
deduction carryforwards.
- The Blount Family Partnership will indemnify HBC for all damages and
liabilities incurred as a result of any claim, action or proceeding
arising out of or related to (a) the Transaction, and (b) the acts or
omissions of, or state of facts relating to, HBC occurring or existing
prior to the closing of the Transaction, except for the following: (i)
the first $250,000 of any existing
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unreserved liabilities of HBC, (ii) the first $500,000 of any
liabilities resulting from claims or litigation connected with the
Transaction and 50% of liabilities from claims or litigation connected
with the Transaction in excess of the first $500,000, and (iii) any tax
liabilities arising as a result of the Transaction.
- Upon the earlier of (i) three years after the execution and delivery
of the Agreement and (ii) two years after the death of Mr. Winton M.
Blount, the Blount Family Partnership may establish an escrow account
to satisfy any claims which have been made up to such time or which the
parties are then aware grounds for the assertion thereof may exist and
thereafter the sole recourse for indemnity shall be to such escrow
account.
- The charter of HBC will provide that, after the death of Winton
Blount, all Class B shares of HBC will automatically convert to Class A
shares of HBC at such time as the total number of Class B shares of HBC
outstanding constitutes less than 10% of the total Class A and Class B
shares of HBC outstanding.
- The Blount Family and the Blount Family Partnership will enter into an
agreement that will limit the manner in which they can dispose of HBC
shares, including provisions that in certain circumstances would
require the transferee to agree to make a tender offer for any and all
Class A and Class B shares at the same price per share offered to the
Blount Family or the Blount Family Partnership.
Please be advised that while certain provisions of the Transaction are
summarized above, the terms of the Transaction are more fully described in the
Agreement. As a result, the description of the Transaction and certain other
information contained herein is qualified in its entirety by reference to the
more detailed information appearing or incorporated by reference in the
Agreement. J.P. Morgan was engaged to opine only on the fairness of the
Transaction from a financial point of view and was not involved in the
structuring of the Transaction.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) a
draft of a proxy statement/prospectus of the Company and the Parent with respect
to the Transaction (the "Proxy Statement"); (iii) publicly available terms of
certain transactions comparable to the Transaction and the terms of those
transactions; (iv) publicly available information on companies who have
established holding companies in the absence of a specific transaction; (v) the
audited financial statements of the Company and the Parent for the fiscal year
ended February 28, 1995, and the unaudited financial statements of the Company
and the Parent for the period ended May 31, 1995; and (vi) information relating
to the past operations and financial results of HBC.
In addition, we have held discussions with certain members of the
management and agents of the Company and the Parent with respect to certain
aspects of the Transaction, the past and current business operations of the
Parent, the financial condition and future prospects and operations of the
Parent, the effects of the Transaction on the financial condition and future
prospects of the Company and the Parent, and certain other matters we believed
necessary or appropriate to our inquiry. We reviewed other financial studies and
analyses and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and the Parent or otherwise
reviewed by J.P. Morgan, and we have not assumed any responsibility or liability
therefor. In addition, we have not conducted a valuation of the Company or the
Parent and we do not state any opinion on the absolute value of either business.
We have not conducted any valuation or appraisal of any assets or liabilities,
nor have any such valuations or appraisals been provided to us. In relying on
financial analyses and estimates of expenses provided to us, we have assumed
that they have been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of the Company and the
Parent to which such analyses or estimates of expenses relate. We have also
assumed the accuracy of the Parent's representations and warranties set forth in
the Agreement, that the Transaction will have the tax and accounting
consequences
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described in the Proxy Statement, and in discussions with, and materials
furnished to us by, representatives of the Company, and that the other
transactions contemplated by the Agreement will be consummated as described in
such Agreement and the Proxy Statement. We have relied as to all legal matters
relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion.
We are expressing no opinion herein as to the price at which the HBC Class
A and Class B stock will trade if and when issued or at any future time. Other
factors after the date hereof may affect such prices and the value of the
businesses of the Company and HBC after consummation of the Transaction,
including but not limited to (i) the disposition of the common stock of the
Parent by shareholders of the Parent after the effective date of the
Transaction, (ii) changes in prevailing interest rates and other factors which
generally influence the price of securities, (iii) changes in the current
capital markets and (iv) the occurrence of adverse changes in the financial
condition, business, assets, results of operations or prospects of the Company
or of the Parent.
We have acted as financial advisor to the Independent Committee of the
Board of Directors of the Company with respect to the proposed Transaction and
have received a fee from the Company for our services. We will not receive an
additional fee if the proposed Transaction is consummated. Excluding the fee
discussed above, J.P. Morgan and its affiliates have received fees from Blount
totaling approximately $1.9 million since January 1993, the majority of which
related to the Company's issuance of high yield debt securities in 1993 and
credit-related fees. An affiliate of J.P. Morgan is one of the Company's
commercial lenders and acts as agent bank under its principal credit facility.
In addition, in the ordinary course of their businesses, affiliates of J.P.
Morgan may actively trade in the debt and equity securities of the Company or
the Parent for their own account or for the accounts of customers, and
accordingly, they may at any time hold long or short positions in such
securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the terms of the exchange in the proposed Transaction are fair,
from a financial point of view, to the stockholders of Blount, other than HBC
and the Blount Family.
This letter is provided for the benefit of the Independent Committee of the
Board of Directors and the Board of Directors of the Company in connection with
and for the purposes of their evaluation of the Transaction, is not on behalf of
any stockholders of the Company or any other person other than the Independent
Committee of the Board of Directors and the Board of Directors of the Company
and may not be used or relied upon for any other purpose. This opinion may not
be disclosed, referred to, or communicated by you (in whole or in part) to any
third party for any purpose whatsoever except with our written consent in each
instance.
This opinion may be reproduced in full in any proxy or information
statement mailed to stockholders of the Company but may not otherwise be
disclosed publicly in any manner without our prior written approval and must be
treated as confidential.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ Robert Sroka
-----------------------------
Name: Robert Sroka
Title: Managing Director
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APPENDIX C
BLOUNT, INC.
1992 BLOUNT INCENTIVE STOCK OPTION PLAN
ARTICLE I
Definitions
SEC. 1.1 DEFINITIONS
As used herein, the following terms shall have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
(a) "Company" shall mean Blount, Inc., a Delaware corporation.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Committee" shall mean the Compensation and Management Development
Committee of the Board consisting of two (2) or more persons.
(d) "Stock," with respect to each share to which that term refers,
shall mean one (1) share of Class A Common Stock of the Company, par value
$1.00 per share.
(e) "Fair Market Value" shall mean the average of the highest price
and the lowest price per share at which the Stock is sold in the regular
way on the American Stock Exchange on the day an Incentive Option is
granted hereunder or, in the absence of any reported sales on such day, the
first preceding day on which there were such sales.
(f) "Fundamental Change" shall mean any of the following events:
(i) the sale by the Company of substantially all of its assets to a
single purchaser or a group of associated or affiliated purchasers;
(ii) the sale, exchange, or other disposition, in one transaction
to an entity or entities not affiliated with the Company, of more than
fifty percent (50%) of the outstanding common stock of the Company other
than a sale, exchange, or disposition of the common stock of the Company
resulting from a public or private offering of common stock or other
security convertible into common stock of the Company which offering is
sponsored or initiated by the Company and approved by the Board;
(iii) the merger or consolidation of the Company in a transaction
in which the stockholders of the Company receive less than fifty percent
(50%) of the outstanding voting stock of the new or continuing entity;
or
(iv) a change in control of the Board as constituted on the date
this is adopted by the Board.
(g) "Incentive Option" shall mean an option to purchase Stock granted
pursuant to the provisions of Article VI hereof.
(h) "Optionee" shall mean an employee to whom an Incentive Option has
been granted hereunder.
(i) "Plan" shall mean the 1992 Blount Incentive Stock Option Plan, the
terms of which are set forth herein.
(j) "Incentive Stock Option Agreement" shall mean the agreement
between the Company and the Optionee under which the Optionee may purchase
Stock hereunder.
(k) "Subsidiary" shall mean any corporation, the majority of the
outstanding capital stock of which is owned, directly or indirectly, by the
Company.
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ARTICLE II
THE PLAN
SEC. 2.1 NAME
This plan shall be known as the "1992 Blount Incentive Stock Option Plan."
SEC. 2.2 PURPOSE
The purpose of the Plan is to advance the interests of the Company and its
stockholders by affording to key management employees of the Company and its
subsidiaries an opportunity to acquire or increase their proprietary interest in
the Company by the grant to such employees of Incentive Options under the terms
set forth herein. These Incentive Options are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the U.S. Internal Revenue
Code (the "Code"). By thus encouraging such employees to become owners of the
Company stock, the Company seeks to motivate, retain and attract those highly
competent individuals upon whose judgment, initiative, leadership and continued
efforts the success of the Company in large measure depends.
SEC. 2.3 EFFECTIVE DATE
The Plan shall be deemed adopted and shall become effective upon its
approval by the Board subject to its subsequent approval within 12 months of
adoption by the Board by the stockholders of the Company at an annual or special
meeting of the stockholders of the Company. No option granted hereunder may
become exercisable unless and until such approval is obtained. Any subsequent
amendments to the Plan requiring the consent of the stockholders of the Company
shall become effective upon approval of such amendments by the Board and by the
affirmative vote of the majority of the outstanding shares of Stock of the
Company at any annual or special meeting of the stockholders of the Company and
(if necessary) upon the filing of appropriate certificates of amendment to the
Certificate of Incorporation of the Company with the appropriate authorities in
the State of Delaware.
ARTICLE III
PARTICIPANTS
SEC. 3.1 ELIGIBILITY
Any officer or other key management employee of the Company or its
subsidiaries shall be eligible to participate in the Plan; provided, however,
that no member of the Committee shall be eligible to receive equity securities
or options of the Company under the Plan or equity securities or options of the
Company under any other plan of the Company while serving on the Committee or
for a period of one year prior to serving on the Committee, except as permitted
by the rules and regulations of the Securities Exchange Act of 1934. The
Committee may grant Incentive Options to any eligible employee in accordance
with such determinations as the Committee from time to time in its sole
discretion shall make.
ARTICLE IV
ADMINISTRATION
SEC. 4.1 DUTIES AND POWERS OF COMMITTEE
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have sole discretion and authority
to determine from among eligible employees those to whom and the time or times
at which Incentive Options may be granted, the number of shares of Stock to be
subject to each Incentive Option, and the period for the exercise of such
Incentive Option which need not be the same for each grant hereunder. Subject to
the express provisions of the Plan, the Committee shall also
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have complete authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the details and provisions of
each Incentive Stock Option Agreement and to make all other determinations
necessary or advisable in the administration of the Plan.
SEC. 4.2 MAJORITY RULE
A majority of the members of the Committee shall constitute a quorum, and
any action taken by a majority present at a meeting at which a quorum is present
or any action taken without a meeting evidenced by a writing executed by a
majority of the whole Committee shall constitute the action of the Committee.
SEC. 4.3 COMPANY ASSISTANCE
The Company shall supply full and timely information to the Committee on
all matters relating to eligible employees, their employment, death, or other
termination of employment, and such other pertinent facts as the Committee may
require. The Company shall furnish the Committee with such clerical and other
assistance as is necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
SEC. 5.1 LIMITATIONS
Subject to adjustment pursuant to the provisions of Section 5.3 hereof, the
number of shares of Stock which may be issued and sold hereunder shall not
exceed 750,000 shares of Stock. Such shares may be either authorized and
unissued shares or shares issued and thereafter acquired by the Company.
SEC. 5.2 INCENTIVE OPTIONS GRANTED UNDER PLAN
Shares of Stock with respect to which an Incentive Option granted hereunder
shall have been exercised shall not again be available for grant hereunder. If
Incentive Options granted hereunder shall expire, terminate or be canceled for
any reason without being wholly exercised, new Incentive Options may be granted
hereunder covering the number of shares to which such Incentive Option
expiration, termination or cancellation relates.
SEC. 5.3 ANTIDILUTION AND FUNDAMENTAL CHANGE
In the event that the outstanding shares of Stock hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up or stock dividend:
(a) the aggregate number and kind of shares subject to Incentive
Options which may be granted hereunder shall be adjusted appropriately;
(b) rights under outstanding Incentive Options granted hereunder, both
as to the number of subject shares and the Incentive Option price, shall be
adjusted appropriately;
(c) where dissolution or liquidation of the Company is involved, each
outstanding Incentive Option granted hereunder shall terminate, but the
Optionee shall have the right, subject to the other provisions of the Plan
except for Section 6.3, for thirty (30) days prior to such dissolution or
liquidation, to exercise his Incentive Option in full, without regard to
any installment exercise provisions, to the extent that it shall not have
been exercised; provided, further, that for any portion of an Incentive
Option that would not be exercisable because of the provisions of Section
6.3 hereof, such portion shall be deemed converted into a nonstatutory
option and become exercisable.
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The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Committee, and any such adjustment
shall provide for the elimination of fractional share interests.
In the event of a Fundamental Change, every Incentive Option outstanding
shall terminate, provided that for a period of thirty (30) days prior to the
effective date of such Fundamental Change and subject to the other provisions of
the Plan, except for Section 6.3, Optionee shall have the right to exercise his
Incentive Option in full, without regard to any installment exercise provisions,
to the extent that it shall not have been exercised; provided, further, that for
any portion of an Incentive Option that would not be exercisable because of the
provisions of Section 6.3, such portion shall be deemed converted into a
non-statutory option and become exercisable.
ARTICLE VI
INCENTIVE OPTIONS
SEC. 6.1 INCENTIVE OPTION GRANT AND AGREEMENT
Each Incentive Option granted hereunder shall be evidenced by minutes of a
meeting or the written consent of the Committee and by a Incentive Stock Option
Agreement dated as of the date of grant and executed by the Company and the
Optionee, which Agreement shall set forth such terms and conditions as may be
determined by the Committee consistent with the Plan.
SEC. 6.2 STOCK OWNERSHIP LIMITATION
The Committee shall not grant an Incentive Option to any employee who, at
the time of grant, owns more than ten percent of the total combined voting power
of all classes of stock of the Company or any parent or subsidiary of the
Company unless such Incentive Option is granted (i) for a period not to exceed
five (5) years, and (ii) at a per share price not less than 110% of the Fair
Market Value of the Stock on the date the Incentive Option is granted.
SEC. 6.3 ANNUAL EXERCISE LIMITATION
The aggregate Fair Market Value (determined at the time the Incentive
Option is granted) of the stock with respect to which incentive stock options
(as defined in Section 422 of the Code) are exercisable for the first time by
such Optionee during any calendar year (under all such plans of the Company and
its parent and subsidiary corporations) shall not exceed $100,000.
SEC. 6.4 INCENTIVE OPTION PRICE
The per share price of the Stock subject to each Incentive Option shall be
determined by the Committee, but said per share price shall not be less than the
Fair Market Value of the Stock on the date the Incentive Option is granted.
SEC. 6.5 INCENTIVE OPTION PERIOD
Each Incentive Option granted hereunder must be granted within ten years
from the effective date of the Plan. The period for the exercise of each
Incentive Option shall be determined by the Committee, but in no instance shall
such period exceed ten years from the date of grant of the Incentive Option.
SEC. 6.6 INCENTIVE OPTION EXERCISE
(a) No Incentive Option granted hereunder shall be exercisable unless and
until the Optionee shall have been or remained in the employ of the Company or
its subsidiaries for one year from and after the date such Incentive Option was
granted, except as otherwise provided in Section 6.8 hereof.
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(b) Incentive Options may be exercised with respect to whole shares only,
for such shares of Stock and within the period permitted by the exercise thereof
as determined by the Committee, and shall be exercised by written notice of
intent to exercise the Incentive Option with respect to a specified number of
shares delivered to the Company at its principal office in the State of Alabama,
and payment in full cash to the Company at said office of the amount of the
Incentive Option price for the number of shares of Stock with respect to which
the Incentive Option is then being exercised.
(c) No Incentive Option granted hereunder shall be exercisable unless at
all times during the period beginning on the date of the granting of such
Incentive Option and ending on the day which is three months before the date of
exercise (or ending on the day which is twelve months before the date of
exercise in case of the death of the Optionee) the Optionee was an employee of
either the Company or a parent or Subsidiary of the Company, or a corporation
(or parent or subsidiary of such corporation) issuing or assuming such Incentive
Option in a transaction to which Section 424(a) of the Code applies.
SEC. 6.7 NONTRANSFERABILITY OF INCENTIVE OPTION
No Incentive Option shall be transferred by an Optionee otherwise than by
will or the laws of descent and distribution. During the lifetime of an Optionee
the Incentive Option shall be exercisable only by the Optionee.
SEC. 6.8 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT
(a) If, prior to a date one year from the date an Incentive Option shall
have been granted, the Optionee's employment with the Company or its
subsidiaries shall be terminated by the Company or Subsidiary with or without
cause, or by the act of the Optionee including death, the Optionee's right to
exercise such Incentive Option shall terminate and all rights thereunder shall
cease.
(b) If on or subsequent to a date one year from the date an Incentive
Option shall have been granted, the Optionee's employment with the Company or
its subsidiaries shall be terminated by the Company or subsidiaries with or
without cause, or by the act of the Optionee including death, the Optionee's
right to exercise such Incentive Option shall extend only to the number of
shares under the Incentive Option which such Optionee has on such date a fully
vested right to exercise the Incentive Option with respect thereto. The
Incentive Option with respect to all remaining shares shall terminate, and
except as set forth in this Plan all rights under the Incentive Option shall
cease.
(c) In the event of the death of an Optionee, the executor or administrator
of the estate of the Optionee or the person or persons to whom an Incentive
Option granted hereunder shall have been validly transferred by the executor or
the administrator pursuant to will or the laws of descent and distribution shall
have the right to exercise the Optionee's Incentive Option for one year
following the date of death (but not to exceed the original expiration date of
the Incentive Option).
(d) No transfer of an Incentive Option by the Optionee by will or by the
laws of descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Incentive
Option.
SEC. 6.9 RIGHTS AS STOCKHOLDER
An Optionee or a transferee of an Incentive Option shall have no rights as
a stockholder with respect to any shares subject to such Incentive Option prior
to the purchase of such shares by exercise of such Incentive Option as provided
herein.
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ARTICLE VII
STOCK CERTIFICATES
SEC. 7.1 STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Incentive Option granted
hereunder or any portion thereof, prior to fulfillment of all of the following
conditions:
(a) the admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) the completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations
of the U.S. Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall in its sole discretion deem
necessary or advisable;
(c) the obtaining of any approval or other clearance from any federal
or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable; and
(d) the lapse of such reasonable period of time following the exercise
of the Incentive Option as the Committee from time to time may establish
for reasons of administrative convenience.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
SEC. 8.1 TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
The Board may at any time terminate, and may at any time and from time to
time and in any respect amend or modify, the Plan; provided, however, that no
such action of the Board without approval of the stockholders of the Company
may:
(a) increase the total number of shares of Stock subject to the Plan
except as contemplated in Section 5.3 hereof;
(b) change the manner of determining the Incentive Option price; (c)
withdraw the administration of the Plan from the Committee; or
(d) permit any person while a member of the Committee to be eligible
to receive an Incentive Option under the Plan; and
provided further, that no termination, amendment or modification of the Plan
shall in any manner affect any Incentive Stock Option Agreement theretofore
granted pursuant to the Plan without the consent of the Optionee or transferee
of the Incentive Option.
ARTICLE IX
MISCELLANEOUS
SEC. 9.1 EMPLOYMENT
Nothing in the Plan or in any Incentive Option granted hereunder or in any
Incentive Stock Option Agreement relating thereto shall confer upon any employee
the right to continue in the employ of the Company or any Subsidiary.
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SEC. 9.2 OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option or
incentive or other compensation plans in effect for the Company or any
Subsidiary, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees of the Company or any
Subsidiary.
SEC. 9.3 PLAN BINDING ON SUCCESSORS
The Plan shall be binding upon the successors and assigns of the Company.
SEC. 9.4 SINGULAR, PLURAL; GENDER
Whenever used herein, nouns in the singular shall include the plural, and
the masculine pronoun shall include the feminine gender.
SEC. 9.5 HEADINGS, ETC., NO PART OF PLAN
Headings of Articles and Sections hereof are inserted for convenience and
reference; they constitute no part of the Plan.
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APPENDIX D
BLOUNT, INC.
1994 BLOUNT EXECUTIVE STOCK OPTION PLAN
ARTICLE I.
DEFINITIONS
SEC. 1.1 DEFINITIONS
As used herein, the following terms shall have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
(a) "Company" shall mean Blount, Inc., a Delaware corporation.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Covered Employee" shall mean any individual who, as of the last
day of the Company's taxable year, is either the Chief Executive Officer of
the Company or is acting in such capacity, or is among the four highest
compensated officers of the Company other than the Chief Executive Officer.
(e) "Committee" shall mean the Compensation and Management Development
Committee of the Board consisting of two (2) or more persons.
(f) "Stock," with respect to each share to which that term refers,
shall mean one (1) share of Class A Common Stock of the Company, par value
$1.00 per share.
(g) "Fair Market Value" shall mean the average of the highest price
and the lowest price per share at which the Stock is sold in the regular
way on the American Stock Exchange on the day an Option is granted
hereunder or, in the absence of any reported sales on such day, the first
preceding day on which there were such sales.
(h) "Fundamental Change" shall mean any of the following events:
(i) the sale by the Company of substantially all of its assets to a
single purchaser or a group of associated or affiliated purchasers;
(ii) the sale, exchange, or other disposition, in one transaction
to an entity or entities not affiliated with the Company, of more than
fifty percent (50%) of the outstanding common stock of the Company other
than a sale, exchange, or disposition of the common stock of the Company
resulting from a public or private offering of common stock or other
security convertible into common stock of the Company which offering is
sponsored or initiated by the Company and approved by the Board;
(iii) the merger or consolidation of the Company in a transaction
in which the stockholders of the Company receive less than fifty percent
(50%) of the outstanding voting stock of the new or continuing entity;
or
(iv) a change in control of the Board as constituted on the date
this is adopted by the Board.
(i) "Option" shall mean an option to purchase Stock granted pursuant
to the provisions of Article VI hereof.
(j) "Optionee" shall mean an employee to whom an Option has been
granted hereunder.
(k) "Plan" shall mean the 1994 Blount Executive Stock Option Plan, the
terms of which are set forth herein.
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(l) "Stock Option Agreement" shall mean the agreement between the
Company and the Optionee under which the Optionee may purchase Stock
hereunder.
(m) "Subsidiary" shall mean any corporation, the majority of the
outstanding capital stock of which is owned, directly or indirectly, by the
Company.
ARTICLE II.
THE PLAN
SEC. 2.1 NAME
This plan shall be known as the "1994 Blount Executive Stock Option Plan".
SEC. 2.2 PURPOSE
The purpose of the Plan is to advance the interests of the Company and its
stockholders by affording to key management employees of the Company and its
subsidiaries an opportunity to acquire or increase their proprietary interest in
the Company and to allow such employees to benefit directly from improved
performance of the Company by the grant to such employees of Options under the
terms set forth herein. By thus encouraging such employees to become owners of
the Company stock and allowing them to benefit directly from improved
performance of the Company, the Company seeks to motivate, retain and attract
those highly competent individuals upon whose judgment, initiative, leadership
and continued efforts the success of the Company in large measure depends. The
Options granted under this Plan are not intended to qualify as incentive stock
options under Section 422 of the Code.
SEC. 2.3 EFFECTIVE DATE
The Plan shall be deemed adopted and shall become effective upon its
approval by the Board subject to its subsequent approval within 12 months of
adoption by the Board by the stockholders of the Company at an annual or special
meeting of the stockholders of the Company. No option granted hereunder may
become exercisable unless and until such approval is obtained. Any subsequent
amendments to the Plan requiring the consent of the stockholders of the Company
shall become effective upon approval of such amendments by the Board and by the
affirmative vote of the majority of the outstanding shares of Stock of the
Company at any annual or special meeting of the stockholders of the Company and,
if necessary, upon the filing of appropriate certificates of amendment to the
Certificate of Incorporation of the Company with the appropriate authorities in
the State of Delaware.
ARTICLE III.
PARTICIPANTS
SEC. 3.1 ELIGIBILITY
Any officer or other key management employee of the Company or its
subsidiaries shall be eligible to participate in the Plan; provided, however,
that no member of the Committee shall be eligible to receive equity securities
or options of the Company under the Plan or equity securities or options of the
Company under any other plan of the Company while serving on the Committee or
for a period of one year prior to serving on the Committee, except to the extent
permitted and still retain qualification of the Plan for exemption from the
provisions of Section 16(b) of the Securities Exchange Act of 1934 under Rule
16(b) (3) under the Securities Exchange Act of 1934. The Committee may grant
Options to any eligible employee in accordance with such determinations as the
Committee from time to time in its sole discretion shall make.
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ARTICLE IV.
ADMINISTRATION
SEC. 4.1 DUTIES AND POWERS OF COMMITTEE
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have sole discretion and authority
to determine from among eligible employees those to whom and the time or times
at which Options may be granted, the number of shares of Stock to be subject to
each Option, and the period for the exercise of such Option which need not be
the same for each grant hereunder. Subject to the express provisions of the
Plan, the Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable in the administration of the Plan.
SEC. 4.2 MAJORITY RULE
A majority of the members of the Committee shall constitute a quorum, and
any action taken by a majority present at a meeting at which a quorum is present
or any action taken without a meeting evidenced by a writing executed by a
majority of the whole Committee shall constitute the action of the Committee.
SEC. 4.3 COMPANY ASSISTANCE
The Company shall supply full and timely information to the Committee on
all matters relating to eligible employees, their employment, death, or other
termination of employment, and such other pertinent facts as the Committee may
require. The Company shall furnish the Committee with such clerical and other
assistance as is necessary in the performance of its duties.
ARTICLE V.
SHARES OF STOCK SUBJECT TO PLAN
SEC. 5.1 LIMITATIONS
Subject to adjustment pursuant to the provisions of Section 5.3 hereof, the
number of shares of Stock which may be issued and sold hereunder shall not
exceed 400,000 shares of Stock. Such shares may be either authorized and
unissued shares or shares issued and thereafter acquired by the Company. The
maximum number of shares with respect to which Options may be granted to any
individual who has been a Covered Employee at any time during the term of the
Plan is 100,000.
SEC. 5.2 OPTIONS GRANTED UNDER PLAN
Shares of Stock with respect to which an Option granted hereunder shall
have been exercised shall not again be available for grant hereunder. If Options
granted hereunder shall expire, terminate or be canceled for any reason without
being wholly exercised, new Options may be granted hereunder covering the number
of shares to which such Option expiration, termination or cancellation relates.
SEC. 5.3 ANTIDILUTION AND FUNDAMENTAL CHANGE
In the event that the outstanding shares of Stock hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up or stock dividend:
(a) the aggregate number and kind of shares subject to Options which
may be granted hereunder shall be adjusted appropriately;
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(b) rights under outstanding Options granted hereunder, both as to the
number of subject shares and the Option price, shall be adjusted
appropriately;
(c) where dissolution or liquidation of the Company is involved, each
outstanding Option granted hereunder shall terminate, but the Optionee
shall have the right, subject to the other provisions of the Plan, for
thirty (30) days prior to such dissolution or liquidation, to exercise his
Option in full, without regard to any installment exercise provisions, to
the extent that it shall not have been exercised;
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Committee, and any such adjustment
shall provide for the elimination of fractional share interests.
In the event of a Fundamental Change, every Option outstanding shall
terminate, provided that for a period of thirty (30) days prior to the effective
date of such Fundamental Change and subject to the other provisions of the Plan,
except for Section 6.4(a) which shall not apply, Optionee shall have the right
to exercise his Option in full, without regard to any installment exercise
provisions, to the extent that it shall not have been exercised.
ARTICLE VI.
OPTIONS
SEC. 6.1 OPTION GRANT AND AGREEMENT
Each Option granted hereunder shall be evidenced by minutes of a meeting or
the written consent of the Committee and by a Stock Option Agreement dated as of
the date of grant and executed by the Company and the Optionee, which Agreement
shall set forth such terms and conditions as may be determined by the Committee
consistent with the Plan. Such Agreement shall bind the Optionee to provide
written notice to the Company in the event that the Optionee shall make an
election under Section 83(b) of the Code with respect to any Stock purchased
through exercise of an Option under this Plan; such written notice shall be
presented to the Company no later than ten (10) days following the filing of
such election.
SEC. 6.2 OPTION PRICE
The per share price of the Stock subject to each Option shall be determined
by the Committee, but said per share price shall not be less than the Fair
Market Value of the Stock on the date the Option is granted.
SEC. 6.3 OPTION PERIOD
Each Option granted hereunder must be granted within ten years from the
effective date of the Plan. The period for the exercise of each Option shall be
determined by the Committee, but in no instance shall such period exceed ten
years from the date of grant of the Option.
SEC. 6.4 OPTION EXERCISE
(a) No Option granted hereunder shall be exercisable unless and until the
Optionee shall have been or remained in the employ of the Company or its
subsidiaries for one year from and after the date such Option was granted,
except as otherwise provided in Section 6.6 hereof.
(b) Options may be exercised with respect to whole shares only, for such
shares of Stock and within the period permitted by the exercise thereof as
determined by the Committee, and shall be exercised by written notice of intent
to exercise the Option with respect to a specified number of shares delivered to
the Company at its principal office in the State of Alabama, and payment in full
in cash to the Company at said office of the amount of the Option price for the
number of shares of Stock with respect to which the Option is then being
exercised. If and to the extent that the Company is required to withhold on
account of any present or future tax imposed by any taxing authority with
respect to such exercise, the notice of exercise shall be accompanied
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by a check to the order of the Company in payment of the amount of such
withholding, as determined by the Company in its sole discretion.
(c) No Option granted hereunder shall be exercisable unless at all times
during the period beginning on the date of the granting of such Option and
ending on the day which is three months before the date of exercise (or ending
on the day which is twelve months before the date of exercise in case of the
death of the Optionee) the Optionee was an employee of either the Company or a
parent or Subsidiary of the Company, or a corporation (or parent or subsidiary
of such corporation) issuing or assuming such Option.
SEC. 6.5 NONTRANSFERABILITY OF OPTION
No Option shall be transferred by an Optionee otherwise than by will or the
laws of descent and distribution. During the lifetime of an Optionee the Option
shall be exercisable only by the Optionee.
SEC. 6.6 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT
(a) If, prior to a date one year from the date an Option shall have been
granted, the Optionee's employment with the Company or its subsidiaries shall be
terminated by the Company or Subsidiary with or without cause, or by the act of
the Optionee including death, the Optionee's right to exercise such Option shall
terminate and all rights thereunder shall cease.
(b) If on or subsequent to a date one year from the date an Option shall
have been granted, the Optionee's employment with the Company or its
subsidiaries shall be terminated by the Company or subsidiaries with or without
cause, or by the act of the Optionee including death, the Optionee's right to
exercise such Option shall extend only to the number of shares under the Option
which such Optionee has on such date a fully vested right to exercise the Option
with respect thereto. The Option with respect to all remaining shares shall
terminate, and except as set forth in this Plan all rights under the Option
shall cease.
(c) In the event of the death of an Optionee, the executor or administrator
of the estate of the Optionee or the person or persons to whom an Option granted
hereunder shall have been validly transferred by the executor or the
administrator pursuant to will or the laws of descent and distribution shall
have the right to exercise the Optionee's Option for one year following the date
of death (but not to exceed the original expiration date of the Option).
(d) No transfer of an Option by the Optionee by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Option.
SEC. 6.7 RIGHTS AS STOCKHOLDER
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares subject to such Option prior to the
purchase of such shares by exercise of such Option as provided herein.
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ARTICLE VII.
STOCK CERTIFICATES
SEC. 7.1 STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, prior to fulfillment of all of the following conditions:
(a) the admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) the completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations
of the U.S. Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall in its sole discretion deem
necessary or advisable;
(c) the obtaining of any approval or other clearance from any federal
or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable; and
(d) the lapse of such reasonable period of time following the exercise
of the Option as the Committee from time to time may establish for reasons
of administrative convenience.
ARTICLE VIII.
TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
SEC. 8.1 TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
The Board may at any time terminate, and may at any time and from time to
time and in any respect amend or modify, the Plan; provided, however, that no
such action of the Board without approval of the stockholders of the Company
may:
(a) increase the total number of shares of Stock subject to the Plan
except as contemplated in Section 5.3 hereof;
(b) change the manner of determining the Option price;
(c) withdraw the administration of the Plan from the Committee; or
(d) permit any person while a member of the Committee to be eligible
to receive an Option under the Plan; and provided further, that no
termination, amendment or modification of the Plan shall in any manner
affect any Stock Option Agreement theretofore granted pursuant to the Plan
without the consent of the Optionee or transferee of the Option and
provided further that any amendment which if not approved by Stockholders
of the Company would adversely affect the qualification of the Plan for
exemption from the provisions of Section 16(b) of Securities Exchange Act
of 1934 under Rule 16(b) (3) under the Securities Exchange Action of 1934
will require approval of the Stockholders of the Company.
ARTICLE IX.
MISCELLANEOUS
SEC. 9.1 EMPLOYMENT
Nothing in the Plan or in any Option granted hereunder or in any Stock
Option Agreement relating thereto shall confer upon any employee the right to
continue in the employ of the Company or any Subsidiary.
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SEC. 9.2 OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option or
incentive or other compensation plans in effect for the Company or any
Subsidiary, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees of the Company or any
Subsidiary.
SEC. 9.3 PLAN BINDING ON SUCCESSORS
The Plan shall be binding upon the successors and assigns of the Company.
SEC. 9.4 SINGULAR, PLURAL; GENDER
Whenever used herein, nouns in the singular shall include the plural, and
the masculine pronoun shall include the feminine gender.
SEC. 9.5 HEADINGS, ETC., NO PART OF PLAN
Headings of Articles and Sections hereof are inserted for convenience and
reference; they constitute no part of the Plan.
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APPENDIX E
BLOUNT, INC.
1995 BLOUNT LONG TERM EXECUTIVE STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
SEC. 1.1 DEFINITIONS
As used herein, the following terms shall have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
(a) "Company" shall mean Blount, Inc., a Delaware corporation.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Covered Employee" shall mean any individual who, as of the last
day of the Company's taxable year, is either the Chief Executive Officer of
the Company or is acting in such capacity, or is among the four highest
compensated officers of the Company other than the Chief Executive Officer.
(e) "Committee" shall mean the Compensation and Management Development
Committee of the Board consisting of two (2) or more persons.
(f) "Stock," with respect to each share to which that term refers,
shall mean one (1) share of Class A Common Stock of the Company, par value
$1.00 per share.
(g) "Fair Market Value" shall mean the average of the highest price
and the lowest price per share at which the Stock is sold in the regular
way on the American Stock Exchange on the day an Option is granted
hereunder or, in the absence of any reported sales on such day, the first
preceding day on which there were such sales.
(h) "Fundamental Change" shall mean any of the following events:
(i) the sale by the Company of substantially all of its assets to a
single purchaser or a group of associated or affiliated purchasers;
(ii) the sale, exchange, or other disposition, in one transaction
to an entity or entities not affiliated with the Company, of more than
fifty percent (50%) of the outstanding common stock of the Company other
than a sale, exchange, or disposition of the common stock of the Company
resulting from a public or private offering of common stock or other
security convertible into common stock of the Company which offering is
sponsored or initiated by the Company and approved by the Board;
(iii) the merger or consolidation of the Company in a transaction
in which the stockholders of the Company receive less than fifty percent
(50%) of the outstanding voting stock of the new or continuing entity;
or
(iv) a change in control of the Board as constituted on the date
this is adopted by the Board.
(i) "Option" shall mean an option to purchase Stock granted pursuant
to the provisions of Article VI hereof.
(j) "Optionee" shall mean an employee to whom an Option has been
granted hereunder.
(k) "Plan" shall mean the 1995 Blount Long Term Executive Stock Option
Plan, the terms of which are set forth herein.
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(l) "Stock Option Agreement" shall mean the agreement between the
Company and the Optionee under which the Optionee may purchase Stock
hereunder.
(m) "Subsidiary" shall mean any corporation, the majority of the
outstanding capital stock of which is owned, directly or indirectly, by the
Company.
ARTICLE II
THE PLAN
SEC. 2.1 NAME
This plan shall be known as the "1995 Blount Long Term Executive Stock
Option Plan".
SEC. 2.2 PURPOSE
The purpose of the Plan is to advance the interests of the Company and its
stockholders by affording to key management employees of the Company and its
subsidiaries an opportunity to acquire or increase their proprietary interest in
the Company and to allow such employees to benefit directly from improved
performance of the Company by the grant to such employees of Options under the
terms set forth herein. By thus encouraging such employees to become owners of
the Company stock and allowing them to benefit directly from improved
performance of the Company, the Company seeks to motivate, retain and attract
those highly competent individuals upon whose judgment, initiative, leadership
and continued efforts the success of the Company in large measure depends. The
Options granted under this Plan are not intended to qualify as incentive stock
options under Section 422 of the Code.
SEC. 2.3 EFFECTIVE DATE
The Plan shall be deemed adopted and shall become effective upon its
approval by the Board subject to its subsequent approval within 12 months of
adoption by the Board by the stockholders of the Company at an annual or special
meeting of the stockholders of the Company. No option granted hereunder may
become exercisable unless and until such approval is obtained. Any subsequent
amendments to the Plan requiring the consent of the stockholders of the Company
shall become effective upon approval of such amendments by the Board and by the
affirmative vote of the majority of the outstanding shares of Stock of the
Company at any annual or special meeting of the stockholders of the Company and,
if necessary, upon the filing of appropriate certificates of amendment to the
Certificate of Incorporation of the Company with the appropriate authorities in
the State of Delaware.
ARTICLE III
PARTICIPANTS
SEC. 3.1 ELIGIBILITY
Any officer or other key management employee of the Company or its
subsidiaries shall be eligible to participate in the Plan; provided, however,
that no member of the Committee shall be eligible to receive equity securities
or options of the Company under the Plan or equity securities or options of the
Company under any other plan of the Company while serving on the Committee or
for a period of one year prior to serving on the Committee, except to the extent
permitted and still retain qualification of the Plan for exemption from the
provisions of Section 16(b) of the Securities Exchange Act of 1934 under Rule
16(b) (3) under the Securities Exchange Act of 1934. The Committee may grant
Options to any eligible employee in accordance with such determinations as the
Committee from time to time in its sole discretion shall make.
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ARTICLE IV
ADMINISTRATION
SEC 4.1 DUTIES AND POWERS OF COMMITTEE
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have sole discretion and authority
to determine from among eligible employees those to whom and the time or times
at which Options may be granted, the number of shares of Stock to be subject to
each Option, and the period for the exercise of such Option which need not be
the same for each grant hereunder. Subject to the express provisions of the
Plan, the Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable in the administration of the Plan.
SEC. 4.2 MAJORITY RULE
A majority of the members of the Committee shall constitute a quorum, and
any action taken by a majority present at a meeting at which a quorum is present
or any action taken without a meeting evidenced by a writing executed by a
majority of the whole Committee shall constitute the action of the Committee.
SEC. 4.3 COMPANY ASSISTANCE
The Company shall supply full and timely information to the Committee on
all matters relating to eligible employees, their employment, death, or other
termination of employment, and such other pertinent facts as the Committee may
require. The Company shall furnish the Committee with such clerical and other
assistance as is necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
SEC. 5.1 LIMITATIONS
Subject to adjustment pursuant to the provisions of Section 5.3 hereof, the
number of shares of Stock which may be issued and sold hereunder shall not
exceed 700,000 shares of Stock. Such shares may be either authorized and
unissued shares or shares issued and thereafter acquired by the Company. The
maximum number of shares with respect to which Options may be granted to any
individual who has been a Covered Employee at any time during the term of the
Plan is 700,000 in any calendar year.
SEC. 5.2 OPTIONS GRANTED UNDER PLAN
Shares of Stock with respect to which an Option granted hereunder shall
have been exercised shall not again be available for grant hereunder. If Options
granted hereunder shall expire, terminate or be canceled for any reason without
being wholly exercised, new Options may be granted hereunder covering the number
of shares to which such Option expiration, termination or cancellation relates.
SEC 5.3 ANTIDILUTION AND FUNDAMENTAL CHANGE
In the event that the outstanding shares of Stock hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up or stock dividend:
(a) the aggregate number and kind of shares subject to Options which
may be granted hereunder shall be adjusted appropriately;
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(b) rights under outstanding Options granted hereunder, both as to the
number of subject shares and the Option price, shall be adjusted
appropriately;
(c) where dissolution or liquidation of the Company is involved, each
outstanding Option granted hereunder shall terminate, but the Optionee
shall have the right, subject to the other provisions of the Plan, for
thirty (30) days prior to such dissolution or liquidation, to exercise his
Option in full, without regard to any installment exercise provisions, to
the extent that it shall not have been exercised;
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Committee, and any such adjustment
shall provide for the elimination of fractional share interests.
In the event of a Fundamental Change, every Option outstanding shall
terminate, provided that for a period of thirty (30) days prior to the effective
date of such Fundamental Change and subject to the other provisions of the Plan,
except for Section 6.4(a) which shall not apply, Optionee shall have the right
to exercise his Option in full, without regard to any installment exercise
provisions, to the extent that it shall not have been exercised.
ARTICLE VI
OPTIONS
SEC 6.1 OPTION GRANT AND AGREEMENT
Each Option granted hereunder shall be evidenced by minutes of a meeting or
the written consent of the Committee and by a Stock Option Agreement dated as of
the date of grant and executed by the Company and the Optionee, which Agreement
shall set forth such terms and conditions as may be determined by the Committee
consistent with the Plan. Such Agreement shall bind the Optionee to provide
written notice to the Company in the event that the Optionee shall make an
election under Section 83(b) of the Code with respect to any Stock purchased
through exercise of an Option under this Plan; such written notice shall be
presented to the Company no later than ten (10) days following the filing of
such election.
SEC. 6.2 OPTION PRICE
The per share price of the Stock subject to each Option shall be determined
by the Committee, but said per share price shall not be less than the Fair
Market Value of the Stock on the date the Option is granted.
SEC. 6.3 OPTION PERIOD
Each Option granted hereunder must be granted within ten years from the
effective date of the Plan. The period for the exercise of each Option shall be
determined by the Committee, but in no instance shall such period exceed ten
years from the date of grant of the Option.
SEC. 6.4 OPTION EXERCISE
(a) No Option granted hereunder shall be exercisable unless and until the
Optionee shall have been or remained in the employ of the Company or its
subsidiaries for one year from and after the date such Option was granted,
except as otherwise provided in Section 6.6 hereof.
(b) Options may be exercised with respect to whole shares only, for such
shares of Stock and within the period permitted by the exercise thereof as
determined by the Committee, and shall be exercised by written notice of intent
to exercise the Option with respect to a specified number of shares delivered to
the Company at its principal office in the State of Alabama, and payment in full
in cash to the Company at said office of the amount of the Option price for the
number of shares of Stock with respect to which the Option is then being
exercised. If and to the extent that the Company is required to withhold on
account of any present or future tax imposed by any taxing authority with
respect to such exercise, the notice of exercise shall be accompanied
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by a check to the order of the Company in payment of the amount of such
withholding, as determined by the Company in its sole discretion.
(c) No Option granted hereunder shall be exercisable unless at all times
during the period beginning on the date of the granting of such Option and
ending on the day which is three months before the date of exercise (or ending
on the day which is twelve months before the date of exercise in case of the
death of the Optionee) the Optionee was an employee of either the Company or a
parent or Subsidiary of the Company, or a corporation (or parent or subsidiary
of such corporation) issuing or assuming such Option.
SEC. 6.5 NONTRANSFERABILITY OF OPTION
No Option shall be transferred by an Optionee otherwise than by will or the
laws of descent and distribution. During the lifetime of an Optionee the Option
shall be exercisable only by the Optionee.
SEC. 6.6 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT
(a) If, prior to a date one year from the date an Option shall have been
granted, the Optionee's employment with the Company or its subsidiaries shall be
terminated by the Company or Subsidiary with or without cause, or by the act of
the Optionee including death, the Optionee's right to exercise such Option shall
terminate and all rights thereunder shall cease.
(b) If on or subsequent to a date one year from the date an Option shall
have been granted, the Optionee's employment with the Company or its
subsidiaries shall be terminated by the Company or subsidiaries with or without
cause, or by the act of the Optionee including death, the Optionee's right to
exercise such Option shall extend only to the number of shares under the Option
which such Optionee has on such date a fully vested right to exercise the Option
with respect thereto. The Option with respect to all remaining shares shall
terminate, and except as set forth in this Plan all rights under the Option
shall cease.
(c) In the event of the death of an Optionee, the executor or administrator
of the estate of the Optionee or the person or persons to whom an Option granted
hereunder shall have been validly transferred by the executor or the
administrator pursuant to will or the laws of descent and distribution shall
have the right to exercise the Optionee's Option for one year following the date
of death (but not to exceed the original expiration date of the Option).
(d) No transfer of an Option by the Optionee by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Option.
SEC. 6.7 RIGHTS AS STOCKHOLDER
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares subject to such Option prior to the
purchase of such shares by exercise of such Option as provided herein.
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ARTICLE VII
STOCK CERTIFICATES
SEC. 7.1 STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, prior to fulfillment of all of the following conditions:
(a) the admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) the completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations
of the U.S. Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall in its sole discretion deem
necessary or advisable;
(c) the obtaining of any approval or other clearance from any federal
or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable; and
(d) the lapse of such reasonable period of time following the exercise
of the Option as the Committee from time to time may establish for reasons
of administrative convenience.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
SEC. 8.1 TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
The Board may at any time terminate, and may at any time and from time to
time and in any respect amend or modify, the Plan; provided, however, that no
such action of the Board without approval of the stockholders of the Company
may:
(a) increase the total number of shares of Stock subject to the Plan
except as contemplated in Section 5.3 hereof;
(b) change the manner of determining the Option price;
(c) withdraw the administration of the Plan from the Committee; or
(d) permit any person while a member of the Committee to be eligible
to receive an Option under the Plan; and
provided further, that no termination, amendment or modification of the Plan
shall in any manner affect any Stock Option Agreement theretofore granted
pursuant to the Plan without the consent of the Optionee or transferee of the
Option and provided further that any amendment which if not approved by
Stockholders of the Company would adversely affect the qualification of the Plan
for exemption from the provisions of Section 16(b) of Securities Exchange Act of
1934 under Rule 16(b) (3) under the Securities Exchange Action of 1934 will
require approval of the Stockholders of the Company.
ARTICLE IX
MISCELLANEOUS
SEC. 9.1 EMPLOYMENT
Nothing in the Plan or in any Option granted hereunder or in any Stock
Option Agreement relating thereto shall confer upon any employee the right to
continue in the employ of the Company or any Subsidiary.
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SEC. 9.2 OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option or
incentive or other compensation plans in effect for the Company or any
Subsidiary, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees of the Company or any
Subsidiary.
SEC. 9.3 PLAN BINDING ON SUCCESSORS
The Plan shall be binding upon the successors and assigns of the Company.
SEC. 9.4 SINGULAR, PLURAL; GENDER
Whenever used herein, nouns in the singular shall include the plural, and
the masculine pronoun shall include the feminine gender.
SEC. 9.5 HEADINGS, ETC., NO PART OF PLAN
Headings of Articles and Sections hereof are inserted for convenience and
reference; they constitute no part of the Plan.
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[FORM OF CLASS A PROXY]
BLOUNT, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of Class A Common Stock, par value
$1.00 per share (the "Company Class A Common Stock"), of Blount, Inc., a
Delaware corporation (the "Company"), hereby appoints Richard H. Irving, III
and L. Daniel Morris, Jr. or either of them, as attorneys and proxies for the
undersigned, each with full power of substitution, to attend, vote and act for
and in the name of the undersigned and to vote, as designated below, all of the
shares of Company Class A Common Stock of the Company that the undersigned is
entitled to vote at the special meeting of stockholders of the Company to be
held on Friday, November 3, 1995, at the Company's principal executive offices,
4520 Executive Park Drive, Montgomery, Alabama 36116, and at any adjournments
thereof.
1. To consider and vote upon adoption of a Plan and Agreement of
Merger, dated August 17, 1995 (the "Merger Agreement"), among
Blount International, Inc. (formerly HBC, Incorporated)
("Parent") and HBC Transaction Subsidiary, Inc., a
wholly-owned subsidiary of Parent ("the Subsidiary"), and the
Company pursuant to which the Subsidiary will be merged with
and into the Company and each share of the Class A Common
Stock of the Company (other than shares held by Parent)
outstanding immediately prior to the Effective Time of the
Merger (as defined in the Merger Agreement) will be converted
into 1.5 shares of the Class A Common Stock of Parent, each
share of Class B Common Stock of the Company (other than
shares held by Parent) outstanding immediately prior to the
Effective Time of the Merger will be converted into 1.5 shares
of the Class B Common Stock of Parent, the Company will become
a wholly-owned subsidiary of Parent, and Parent will assume
certain of the compensation plans of the Company, all as more
fully described in the Proxy Statement/Prospectus of the
Company, dated October 4, 1995:
For [ ] Against [ ] Abstain [ ]
2. To consider and act upon such other matters as may properly
come before the Special Meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ITEM 1.
<PAGE> 213
The undersigned hereby revokes any other proxy or proxies heretofore
given to vote or act with respect to such Company Class A Common Stock, and
hereby ratifies and confirms all action that said attorneys and proxies, their
substitutes, or any of them, may lawfully take by virtue thereof.
<TABLE>
<S> <C>
Dated: , 1995
---------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Signature of Stockholder
----------------------------------------------------------------------
Signature if held jointly
This proxy should be signed exactly as your name appears thereon.
Joint owners should both sign. If signed by an attorney, executor,
guardian or in some other capacity or as officer of a corporation,
please add title as such.
</TABLE>
PLEASE COMPLETE, DATE AND SIGN THIS PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 214
[FORM OF CLASS B PROXY]
BLOUNT, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of Class B Common Stock, par value
$1.00 per share (the "Company Class B Common Stock"), of Blount, Inc., a
Delaware corporation (the "Company"), hereby appoints Richard H. Irving, III
and L. Daniel Morris, Jr. or either of them, as attorneys and proxies for the
undersigned, each with full power of substitution, to attend, vote and act for
and in the name of the undersigned and to vote, as designated below, all of the
shares of Company Class B Common Stock of the Company that the undersigned is
entitled to vote at the special meeting of stockholders of the Company to be
held on Friday, November 3, 1995, at the Company's principal executive offices,
4520 Executive Park Drive, Montgomery, Alabama 36116, and at any adjournments
thereof.
1. To consider and vote upon adoption of a Plan and Agreement of
Merger, dated August 17, 1995 (the "Merger Agreement"), among
Blount International, Inc. (formerly HBC, Incorporated)
("Parent") and HBC Transaction Subsidiary, Inc., a
wholly-owned subsidiary of Parent ("the Subsidiary"), and the
Company pursuant to which the Subsidiary will be merged with
and into the Company and each share of the Class A Common
Stock of the Company (other than shares held by Parent)
outstanding immediately prior to the Effective Time of the
Merger (as defined in the Merger Agreement) will be converted
into 1.5 shares of the Class A Common Stock of Parent, each
share of Class B Common Stock of the Company (other than
shares held by Parent) outstanding immediately prior to the
Effective Time of the Merger will be converted into 1.5 shares
of the Class B Common Stock of Parent, the Company will become
a wholly-owned subsidiary of Parent, and Parent will assume
certain of the compensation plans of the Company, all as more
fully described in the Proxy Statement/Prospectus of the
Company, dated October 4, 1995:
For [ ] Against [ ] Abstain [ ]
2. To consider and act upon such other matters as may properly
come before the Special Meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ITEM 1.
<PAGE> 215
The undersigned hereby revokes any other proxy or proxies heretofore
given to vote or act with respect to such Company Class B Common Stock, and
hereby ratifies and confirms all action that said attorneys and proxies, their
substitutes, or any of them, may lawfully take by virtue thereof.
<TABLE>
<S> <C>
Dated: , 1995
---------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Signature of Stockholder
----------------------------------------------------------------------
Signature if held jointly
This proxy should be signed exactly as your name appears thereon.
Joint owners should both sign. If signed by an attorney, executor,
guardian or in some other capacity or as officer of a corporation,
please add title as such.
</TABLE>
PLEASE COMPLETE, DATE AND SIGN THIS PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 216
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Restated Articles of Incorporation of
the Registrant provide that a director of the Registrant shall not be
personally liable to the Registrant or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Registrant or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (iii) under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the DGCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the Restated
Articles of Incorporation of the Registrant require that the liability of a
director of the Registrant must be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended. Further, any repeal or modification of
this provision of the Restated Articles of Incorporation of the Registrant by
the stockholders of the Registrant shall not adversely affect any right or
protection of a director of the Registrant existing at the time of such repeal
or modification.
In accordance with Section 145 of the DGCL, the By-Laws of the
Registrant provide that the Registrant shall indemnify, and in connection with
such indemnification may advance expenses to, any person who is or was a
director, officer, employee or agent of the Registrant, and any person who is
or was serving at the request of the Registrant as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise, to the fullest extent permitted by law, including without
limitation the DGCL. If the amount, extent, or quality of indemnification
permitted by law should be in any way restricted after the adoption of the
By-Laws of the Registrant, then the By-Laws require that the Registrant
indemnify such persons to the fullest extent permitted by law as or in effect
at the time of the occurrence of the omission or the act giving rise to the
claimed liability with respect to which indemnification is sought. The
indemnification and advancement of expenses pursuant to the By-Laws shall be in
addition to, and not exclusive of, any other right that the person seeking
indemnification may have under such By-Laws, the Restated Certificate of
Incorporation of the Registrant, any separate contract or agreement or
applicable law.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; and that indemnification
provided for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators.
Pursuant to the Plan and Agreement of Merger, dated August 17, 1995
(the "Merger Agreement"), among the Registrant, a corporation controlled by
Winton M. Blount and his children (such persons, together with the spouse of
Winton M. Blount, being referred to together herein as the "Blount Family"),
HBC Transaction Subsidiary, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Subsidiary"), and Blount, Inc., a Delaware
corporation (the "Surviving Corporation"), the Registrant is required to, and
is required to cause the Surviving Corporation to, jointly and severally
indemnify, defend and hold harmless the present and former officers and
directors of the Registrant, including members of the Blount Family
(collectively, the "Indemnified Parties") against all losses, expenses
(including attorneys' fees), claims, damages, costs, liabilities or judgments
or amounts that are paid in settlement with the approval of the Registrant
(which approval shall not be unreasonably withheld) arising out of actions or
omissions occurring at or prior to the Effective Time of Merger (as defined in
the Merger Agreement) or required under the DGCL (and shall also pay expenses
in advance of the final disposition of any claim to each Indemnified Party) to
the fullest extent permitted, under the terms and conditions provided by, the
DGCL. Parent is also required to use its best efforts to arrange to have the
Indemnified Parties named as insureds under, or otherwise
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<PAGE> 217
covered by, the officers and directors liability insurance policy of the
Surviving Corporation which will be continued by the Registrant following the
Effective Time of the Merger (as long as any such policy shall be in force),
provided that such action shall not involve unreasonable cost to the
Registrant.
In addition, the By-Laws of the Registrant permit the Registrant to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Registrant, or any person who is or
was serving at the request of the Registrant as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprises, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Registrant would have the power to indemnify such
person against such liability under applicable law. Policies of insurance are
maintained by the Registrant under which the directors and officers of the
Registrant are insured, within the limits and subject to the limitations of the
policies, against certain expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities which might be imposed as a
result of such actions, suits or proceedings, to which they are a parties by
reason of being or having been such directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
The following exhibits are filed as part of this Registration
Statement:
2 Plan and Agreement of Merger among Blount International, Inc., HBC
Transaction Subsidiary, Inc. and Blount, Inc., dated August 17, 1995
(included as Appendix A to the Proxy Statement/Prospectus filed as
part of this Registration Statement).
3(a) Restated Certificate of Incorporation of Blount International, Inc.
(included as Exhibit I to Appendix A to the Proxy
Statement/Prospectus filed as part of this Registration Statement).
3(b) By-Laws of Blount International, Inc. (included as Exhibit II to
Appendix A to the Proxy Statement/Prospectus filed as part of this
Registration Statement).
4(a) Restated Certificate of Incorporation of Blount International, Inc.
(included as Exhibit I to Appendix A to the Proxy
Statement/Prospectus filed as part of this Registration Statement).
4(b) By-Laws of Blount International, Inc. (included as Exhibit II to
Appendix A to the Proxy Statement/Prospectus filed as part of this
Registration Statement).
4(c) Form of Registration Rights and Stock Transfer Restriction Agreement
(included as Exhibit IV to Appendix A to the Proxy
Statement/Prospectus filed as part of this Registration Statement).
* 4(d) Registration Statement on Form S-2 (Reg. No. 33-62728) of Blount,
Inc. with respect to the 9% subordinated notes due June 2003 of
Blount, Inc., including amendments and exhibits, which became
effective on June 30, 1993 (Commission File No. 1-7002).
** 5 Opinion of Bradley, Arant, Rose & White as to the legality of the
securities being registered.
** 8(a) Opinion of Bradley, Arant, Rose & White regarding certain tax matters.
** 8(b) Opinion of Sutherland, Asbill & Brennan regarding certain tax matters.
10(a) Form of Indemnification Agreement between Blount International, Inc.
and The Blount Holding Company, L.P. (included as Exhibit III to
Appendix A to the Proxy Statement/Prospectus filed as part of this
Registration Statement).
** 10(b) Insurance Agreement dated August 1, 1980, between Blount, Inc. and
Winton M. Blount.
* 10(c) Supplemental Retirement and Disability Plan of Blount, Inc. which was
filed as Exhibit 10(e) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 29, 1992 (Commission File No.
1-7002).
* 10(d) Written description of the Management Incentive Plan of Blount, Inc.
which was included within the Proxy Statement of Blount, Inc. for the
Annual Meeting of Stockholders held June 27, 1994 (Commission File
No. 1-7002).
* 10(e) Supplemental Retirement Savings Plan of Blount, Inc. which was filed
as Exhibit 10(i) to the Annual Report of Blount, Inc. on Form 10-K
for the fiscal year ended February 29, 1992 (Commission File No.
1-7002).
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<PAGE> 218
* 10(f) Insurance Agreement between Blount, Inc. and D. Joseph McInnes which
was filed as Exhibit 10(y) to the Annual Report of Blount, Inc. on
Form 10-K for the fiscal year ended February 28, 1991 (Commission
File No. 1-7002).
* 10(g) Supplemental Executive Retirement Plan between Blount, Inc. and
Winton M. Blount which was filed as Exhibit 10(z) to the Annual
Report of Blount, Inc. on Form 10-K for the fiscal year ended
February 28, 1991 (Commission File No. 1-7002).
10(h) 1992 Blount Incentive Stock Option Plan of Blount, Inc. (included as
Appendix C to the Proxy Statement/Prospectus filed as part of this
Registration Statement).
* 10(i) Supplemental Executive Retirement Plan between Blount, Inc. and John
M. Panettiere which was filed as Exhibit 10(t) to the Annual Report
of Blount, Inc. on Form 10-K for the fiscal year ended February 28,
1993 (Commission File No. 1-7002).
10(j) 1994 Blount Executive Stock Option Plan of Blount, Inc. (included as
Appendix D to the Proxy Statement/Prospectus filed as part of this
Registration Statement).
* 10(k) Executive Management Target Incentive Plan of Blount, Inc. which was
filed as Exhibit B to the Proxy Statement of Blount, Inc. for the
Annual Meeting of Stockholders held June 27, 1994 (Commission File
No. 1-7002).
10(l) 1995 Blount Long-Term Executive Stock Option Plan of Blount, Inc.
(included as Appendix E to the Proxy Statement/Prospectus filed as
part of this Registration Statement).
* 10(m) Employment Agreement between Blount, Inc. and John M. Panettiere
which was filed as Exhibit 10(p) to the Annual Report of Blount, Inc.
on Form 10-K for the fiscal year ended February 28, 1995 (Commission
File No. 1-7002).
* 10(n) Employment Agreement between Blount, Inc. and Harold E. Layman which
was filed as Exhibit 10(q) to the Annual Report of Blount, Inc. on
Form 10-K for the fiscal year ended February 28, 1995 (Commission
File No. 1-7002).
* 10(o) Employment Agreement between Blount, Inc. and D. Joseph McInnes which
was filed as Exhibit 10(r) to the Annual Report of Blount, Inc. on
Form 10-K for the fiscal year ended February 28, 1995 (Commission
File No. 1-7002).
* 10(p) Employment Agreement between Blount, Inc. and James S. Osterman which
was filed as Exhibit 10(s) to the Annual Report of Blount, Inc. on
Form 10-K for the fiscal year ended February 28, 1995 (Commission
File No. 1-7002).
* 10(q) Employment Agreement between Blount, Inc. and Donald B. Zorn which
was filed as Exhibit 10(t) to the Annual Report of Blount, Inc. on
Form 10-K for the fiscal year ended February 28, 1995 (Commission
File No. 1-7002).
* 10(r) Supplemental Executive Retirement Plan between Blount, Inc. and
Donald B. Zorn which was filed as Exhibit 10(v) to the Annual Report
of Blount, Inc. on Form 10-K for the fiscal year ended February 28,
1995 (Commission File No. 1-7002).
* 10(s) $100 Million Revolving Credit Agreement of Blount, Inc. which was
filed as Exhibit 10(w) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 28, 1995 (Commission File No.
1-7002).
** 10(t) Letter Agreement between Blount, Inc. and Richard H. Irving III.
** 11 Statement Regarding Computation of Per Share Earnings.
** 21 Significant Subsidiaries of Blount International, Inc.
** 23(a) Consent of Coopers & Lybrand L.L.P.
** 23(b) Consent of Coopers & Lybrand L.L.P.
** 23(c) Consents of Bradley, Arant, Rose & White (contained in exhibits 5(a)
and 8(a)).
** 23(d) Consent of Sutherland, Asbill & Brennan (contained in exhibit 8(b)).
** 23(e) Consent of J.P. Morgan Securities Inc. (contained in Appendix B to
the Proxy Statement/Prospectus filed as part of this Registration
Statement).
** 27 Financial Data Schedule.
- ----------------------------------
* Incorporated by reference.
** Previously filed.
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<PAGE> 219
(B) FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Schedule
Number Description
------ -----------
<S> <C>
II Consolidated Schedule of Valuation and Qualifying Accounts
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement.
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1993;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement. Notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar value
of securities offered would not exceed that
which was registered) and any deviation from
the low or high end of the estimated maximum
offering range may be reflected in the form
of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no
more than 20 percent change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with
respect to the plan or distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the
securities registered hereunder through use of a
prospectus which is a part of this registration
statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus
will contain the information called for by the
applicable registration form with
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<PAGE> 220
respect to reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i)
that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not
be used until such amendment is effective, and that,
for purposes of determining any liability under the
Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
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<PAGE> 221
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Montgomery, State of Alabama, on October 3, 1995.
BLOUNT INTERNATIONAL, INC.
By: /s/ WINTON M. BLOUNT
-------------------------------------
Winton M. Blount,
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following person in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ WINTON M. BLOUNT Chairman of the Board and October 3, 1995
- ----------------------------------- President (Principal Executive
Winton M. Blount and Financial Officer)
/s/ TERESA P. RACHAL Vice President (Principal October 3, 1995
- ----------------------------------- Accounting Officer)
Teresa P. Rachal
</TABLE>
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<PAGE> 222
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders,
Blount International, Inc.:
In connection with our audits of the consolidated financial statements of
Blount International, Inc. and Subsidiaries (formerly HBC, Incorporated) as of
the last day of February 1995 and 1994, and for each of the three years in the
period ended February 28, 1995, which financial statements are included in this
registration statement on Form S-4, we have also audited the financial
statement schedule in Item 21(b) herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 30, 1995
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<PAGE> 223
SCHEDULE II
BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended the last day of February 1993, 1994 and 1995
<TABLE>
<CAPTION>
Additions
---------------------------
Balance at Charged to Charged to Balance
Beginning Cost and Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1993
- ----
Allowance for doubtful
accounts receivable $ 2,478 $ 992 $ 907 (1) $ 2,563
======== ======== ========= ========
1994
- ----
Allowance for doubtful
accounts receivable $ 2,563 $ 967 $ 1,292 (1) $ 2,238
======== ======== ========= ========
1995
- ----
Allowance for doubtful
accounts receivable $ 2,238 $ 801 $ 97 $ 525 (1) $ 2,611
======== ======== ========= ========= ========
</TABLE>
(1) Principally amounts written-off less recoveries of amounts previously
written-off.
S-2
