UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 29, 1996
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OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 001-11549
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BLOUNT INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 63-0780521
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4520 Executive Park Drive, Montgomery, Alabama 36116-1602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (334) 244-4000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, $.01 par value New York Stock Exchange
Class B Common Stock, $.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained, and will not be contained, to the best of
registrant's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value of voting stock held by nonaffiliates as of April 1,
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1996: $396,851,978
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock $.01 par value, as of April 1, 1996: 13,187,147 shares
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Class B Common Stock $.01 par value, as of April 1, 1996: 5,923,358 shares
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DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
Portions of proxy statement for the annual meeting of stockholders to be held
June 24, 1996, are incorporated by reference in Part III.
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PART I
ITEM 1. BUSINESS
Blount International, Inc. ("the Company") was incorporated on October 5, 1979,
to act as a holding company for businesses to be acquired by the Company, and to
hold shares of Blount, Inc. Common Stock owned by the family of Winton M.
Blount. After incorporation, the Company acquired and operated several
businesses, the last of which was sold in February, 1993. Except for the equity
interest in Blount, Inc. (an approximate 62% voting interest and 38% total
interest at November 3, 1995), the Company had no significant assets or business
from February, 1993, until November, 1995. On November 3, 1995, through a
merger approved by the stockholders of Blount, Inc. (See Note 1 of Notes to
Consolidated Financial Statements), Blount, Inc. became a wholly-owned
subsidiary of the Company and the equity ownership of the Company was the same
as that which previously existed for Blount, Inc.
The Company is an international manufacturing company with operations in three
business segments: Outdoor Products, Industrial and Power Equipment and
Sporting Equipment. The Company's current manufacturing operations date largely
to the acquisition of Omark Industries, Inc. by Blount, Inc. in 1985. The
predecessor to Blount, Inc. 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
construction business was discontinued. See "Business - Acquisitions and
Dispositions" on page 6.
The following text contains various trademarks of Blount, Inc. and its
subsidiaries.
OUTDOOR PRODUCTS
The Company's Outdoor Products segment is comprised of the Oregon Cutting
Systems Division ("Oregon") and Dixon Industries, Inc. ("Dixon"). Oregon
produces a wide variety of saw chain, chain saw guide bars, saw chain drive
sprockets and maintenance tools for use primarily on portable gasoline and
electric chainsaws, and mechanical timber harvesting equipment. The Oregon
trademark is well known to end-users and the Company believes that it is the
world leader in the production of saw chain. Oregon's saw chain and related
products are used primarily by professional loggers, construction workers,
farmers, arborists and homeowners. Oregon now markets a new Industrial Cutting
System ("ICS"). ICS, a diamond-segmented chain cutting system for concrete
(including steel-reinforced concrete), is a faster and more flexible concrete
cutting method than others currently employed in the construction and demolition
industries.
Oregon sells to distributors, dealers and mass merchandisers serving the retail
replacement market. In addition, Oregon currently sells its products to more
than 50 original equipment manufacturers ("OEMs"). Due to the high level of
technical expertise and capital investment required to manufacture saw chain and
guide bars, the Company believes that it is able to produce durable, high-
quality saw chain and guide bars more efficiently than most of its competitors.
The use of Oregon cutting chain as original equipment on chainsaws is also
promoted through cooperation with OEMs in improving the design and
specifications of chain and saws. Sales of saw chain for replacement use, which
accounted for approximately three-quarters of the Company's saw chain sales in
fiscal 1996, are generally more profitable than sales of saw chain to OEMs.
The Company has Oregon marketing personnel throughout the United States and in a
number of foreign countries. Sales derived from operations outside the United
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States accounted for 44%, and export sales accounted for an additional 23%, of
Oregon's sales during fiscal 1996. Oregon manufactures saw chain and related
products in Milwaukie, Oregon; Guelph, Ontario, Canada; and Curitiba, Parana,
Brazil.
Oregon's products compete with other saw chain manufacturers as well as a small
number of international chainsaw manufacturers, some of whom are also customers.
This segment's principal raw material, strip steel, is generally purchased from
two vendors, and can be obtained from other sources.
Dixon, acquired in early fiscal 1991, has manufactured ZTR (zero turning radius)
riding lawn mowers and related attachments since 1973. Dixon pioneered the
development of ZTR and is the only manufacturer to offer a full line of ZTR
riding lawn mowers for both homeowner and commercial applications.
The key element which differentiates Dixon from its competitors is its unique
mechanical transaxle. The transaxle transmits power independently to the rear
drive wheels and enables the operator to move the back wheels at different
speeds and turn the mower in a circle no larger than the machine, a "zero radius
turn". This unique transmission enables the Dixon mower to out-maneuver
conventional ride-on products available in the market today and provides a cost
advantage over the more expensive hydrostatic drives used by competitors in the
market. The latest addition to the line is a new "front-mount" model featuring
a 60-inch cutting deck mounted in front of the mower. This allows commercial
customers to cut under obstacles such as bushes and trees and provides easier
access to the deck for servicing.
Dixon sells its products through distribution channels comprised of full-service
dealers, North American distributors and export distributors. Sales by Dixon
accounted for 16% of Outdoor Products sales in fiscal 1996.
INDUSTRIAL AND POWER EQUIPMENT
The Company's Industrial and Power Equipment segment manufactures equipment for
timber harvesting and log loading, industrial tractors and loaders, rotation
bearings and mechanical power transmission components. The Company believes
that it is a world leader in the manufacture of hydraulic timber harvesting
equipment, which includes a line of self-propelled and truck-mounted loaders and
feller bunchers (tractors with hydraulic attachments for felling timber) under
the Prentice brand name; a line of tractors, feller bunchers and related
attachments under the Hydro-Ax brand name; and a line of delimbers, slashers and
firewood processors under the CTR brand name. Major customers of the Industrial
and Power Equipment segment include timber harvesters, land reclamation
companies, contractors and scrap yard operators.
The Company sells its products through a network of approximately 160 dealers in
over 200 locations in the United States and currently has an additional 15
dealers overseas, primarily in South America and Southeast Asia. Over 85% of
this segment's sales in fiscal 1996 were in the United States, primarily in the
southeastern and south central states.
The Company places a strong emphasis on the quality, safety, comfort, durability
and productivity of its products and on the after-market service provided by its
distribution and support network. The Company's Industrial and Power Equipment
segment competes primarily on the basis of quality with a number of domestic and
foreign manufacturers of log loaders and feller bunchers.
The Company attempts to capitalize on its technological and manufacturing
expertise as a means of increasing its participation in the market for
replacement parts for products which it manufactures, as well as of developing
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new product applications both within and beyond the timber, scrap and
construction industries. The Company is committed to continuing research and
development in this segment to respond quickly to increasing mechanization and
environmental awareness in the timber harvesting industry.
The Company's Industrial and Power Equipment segment has manufacturing facili-
ties in Owatonna, Minnesota; Prentice and Spencer, Wisconsin; Tulsa, Oklahoma;
and Zebulon and Union Grove, North Carolina. A majority of the components used
in the Company's products are obtained from a number of domestic manufacturers.
Segment results include sales of $43 million from Gear Products, Inc. ("Gear"),
acquired by the Company early in fiscal 1992, and CTR Manufacturing, Inc.
("CTR"), acquired by the Company in early fiscal 1995. Gear designs,
manufactures and distributes rotation bearings and mechanical power transmission
components for manufacturers of equipment that serve the utility, man-lift,
construction, forestry and marine industries. CTR designs, manufactures and
distributes a line of slashers, delimbers, firewood processors and self-
propelled carriers that serve the forest products industry.
SPORTING EQUIPMENT
The Company's Sporting Equipment segment manufactures small arms ammunition,
reloading equipment, primers, gun care products and accessories, and is a
merchandiser of imported sports optical products under the Simmons and Weaver
brand names. Principal products include CCI and Speer ammunition sold for use by
hunters, sportsmen and law enforcement and military personnel; RCBS reloading
equipment for use by hunters and sportsmen who prefer to reload their own
ammunition; Outers gun care and trap-shooting products; Ram-Line synthetic
stocks, Polar Cap scope covers and other shooting sports accessories; Weaver
shooting mounts and scopes; and Simmons binoculars, scopes and telescopes and
other optical and hunting accessories. The Company believes that it is a market
leader in the domestic gun care and reloading markets with high levels of brand
name recognition in each of these areas. The Sporting Equipment segment also
produces industrial powerloads which are used in the construction industry to
drive fastening pins into metal or concrete.
The market for Sporting Equipment products is characterized by a high degree of
customer loyalty to brand names and historically has not been affected by
adverse economic conditions. A continuing focus on new and better technologies
has enabled the Company to introduce a number of new and improved products in
recent years. These products include Nitrex, the segment's new rifle
ammunition, which was previously available only to handloaders. One of the
segment's successful products in recent years has been Blazer aluminum-case
ammunition. Up to 15% less expensive than traditional brass-case ammunition,
Blazer aluminum-case ammunition is used as training ammunition by numerous law
enforcement agencies located throughout the world. The Company has been
successful with the introduction of Gold Dot pistol ammunition, a high
performance service round that is used by many major law enforcement agencies.
The Company developed its Non-Toxic ammunition, which has a total copper bullet
and utilizes a Clean-Fire lead-free primer, in response to concern in the
shooting community about exposure to lead and other heavy metals, particularly
in indoor ranges. As a result of its acquisition of Simmons Outdoor Corporation
in December 1995 (see Business - Acquisitions and Dispositions), the Company
added over 300 models of binoculars, scopes, telescopes and other optical
accessories to its product line.
Principal raw materials include brass, lead, aluminum and powder, which are
purchased from several suppliers. The Company manufactures ammunition in
Lewiston, Idaho; reloading equipment in Oroville, California; mounts, shooting
accessories and gun care equipment in Onalaska, Wisconsin. The Company imports
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substantially all its optical products from foreign suppliers and does not rely
on long-term agreements, although it does have long-term relationships with some
of its suppliers.
In the market for small arms ammunition and primers, the Company competes with
several larger manufacturers with well established brand names and market share
positions. In the segment's other product lines, the Company competes with a
number of smaller competitors, none of whom has a dominant market share.
CAPACITY UTILIZATION
Based on an 80-hour work week, the Outdoor Products, Industrial and Power
Equipment and Sporting Equipment segments utilized approximately 96%, 80% and
55%, respectively, of their production capacity in fiscal 1996.
BACKLOG
The backlog for each of the Company's business segments as of the end of each of
its last four fiscal years was as follows:
Last day of February
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1996 1995 1994 1993
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(In thousands)
Outdoor Products $ 33,733 $ 44,421 $ 36,507 $ 31,369
Industrial and Power Equipment 63,547 74,374 93,794 32,883
Sporting Equipment 15,496 15,555 16,750 3,048
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$112,776 $134,350 $147,051 $ 67,300
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The total backlog as of February 29, 1996, is expected to be completed and
shipped within twelve months.
ACQUISITIONS AND DISPOSITIONS
In March 1991, the Company acquired all the outstanding capital stock of Gear
Products, Inc. for cash and notes of $17.4 million. Gear designs and
manufactures rotation bearings and mechanical power transmission components for
manufacturers of equipment that serve the utility, man-lift, construction,
forestry and marine industries. The transaction was accounted for as a
purchase.
In May 1991, the Company sold its remaining resource recovery operations
consisting principally of two resource recovery facilities. The sales price was
approximately $14.5 million in cash. The Company has been released from its
contingent liabilities under guarantees with respect to the two facilities.
In February 1992 and 1993, the Company sold substantially all of the assets of
its Waterbury Felt and Lindsay Wire operations, respectively.
In fiscal 1993, the Company sold its remaining agri/industrial sites for cash of
$.9 million.
In February 1994, the Company adopted a plan to discontinue its construction
business through the orderly completion and close-out of the Company's principal
domestic and foreign construction projects and the sale of Pozzo Construction
Co. ("Pozzo"), a subsidiary headquartered in Los Angeles, California. During
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the first quarter of fiscal 1996, Pozzo was sold with no material effect on the
Company's financial condition. At February 29, 1996, all construction projects
were complete.
In fiscal 1995, the Company acquired all the outstanding capital stock of CTR
Manufacturing, Inc., a manufacturer of automated forestry harvesting equipment,
and the operating assets of Ram-Line, Inc., a manufacturer of stocks, magazines,
lens caps and other products for the shooting sports markets. The purchase
price paid for the two businesses was approximately $18.2 million, including
notes issued of $7.2 million.
In December 1995, the Company acquired all the outstanding capital stock of
Simmons Outdoor Corporation, a sports optics merchandiser, for cash of
approximately $38 million.
See Note 4 of Notes to Consolidated Financial Statements on pages 26 and 27.
EMPLOYEES
At February 29, 1996, the Company employed approximately 4,400 individuals.
None of the Company's employees are unionized. The Company believes its
relations with its employees are satisfactory.
ENVIRONMENTAL MATTERS
For information regarding certain environmental matters, see Note 8 of Notes to
Consolidated Financial Statements on pages 31 and 32.
From time to time the Company may be identified as a potentially responsible
party with respect to a Superfund site. EPA (or a state) can either (a) allow
such a party to conduct and pay for a remedial investigation and feasibility
study and remedial action or (b) conduct the remedial investigation and action
and then seek reimbursement from the parties. Each party can be held jointly,
severally and strictly liable for all costs, but the parties can then bring
contribution actions against each other. As a result of the Superfund Act, the
Company may be required to expend amounts on remedial investigations and actions
which amounts cannot be determined at the present time but may ultimately prove
to be significant.
The Company expects to spend approximately $1.2 million, $1.1 million and $1.0
million during fiscal 1997, 1998 and 1999, respectively, on environmental
compliance costs.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND FOREIGN AND DOMESTIC
OPERATIONS
For information about industry segments and foreign and domestic operations, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 11 through 14 and Note 10 of Notes to Consolidated Financial
Statements on pages 33 through 35.
ITEM 2. PROPERTIES
The corporate headquarters of the Company occupies executive offices at 4520
Executive Park Drive, Montgomery, Alabama.
The other principal properties of the Company and its subsidiaries are as
follows:
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Cutting chain and accessories manufacturing plants are located in Milwaukie,
Oregon; Guelph, Ontario, Canada; and Curitiba, Parana, Brazil and sales and
distribution offices are located in Europe and Japan. Lawn mowers and related
attachments are manufactured at a plant in Coffeyville, Kansas. Log loaders,
feller-bunchers and accessories for automated forestry equipment are
manufactured at plants in Prentice and Spencer, Wisconsin; Zebulon and Union
Grove, North Carolina; and Owatonna, Minnesota. Rotation bearings and
mechanical power transmission components are manufactured at a plant in Tulsa,
Oklahoma. Sporting ammunition, reloading equipment products, gun care
equipment, industrial powerloads and shooting sports accessories are
manufactured at plants in Lewiston, Idaho; Oroville, California; and Onalaska,
Wisconsin. The Company's sporting optics and hunting accessory merchandiser
maintains executive offices in Tallahassee, Florida and a warehouse facility in
Thomasville, Georgia.
All of these facilities are in good condition, are currently in normal operation
and are generally suitable and adequate for the business activity conducted
therein. Approximate square footage of principal properties is as follows:
Area in Square Feet
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Owned Leased
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Outdoor Products 918,000 182,000
Sporting Equipment 695,000 147,000
Industrial & Power Equipment 726,000 0
Corporate Office 192,000 13,000
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Total 2,531,000 342,000
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ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings see Note 8 of Notes to Consolidated
Financial Statements on pages 31 and 32.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table presents for the two years ended the last day of February
1996, the quarterly high and low prices and cash dividends declared for the
Company's Common Stock. All applicable amounts have been restated for the
merger (see Note 1 of Notes to Consolidated Financial Statements). The Company
had approximately 9,300 shareholders as of April 15, 1996.
Class A Common Stock Class B Common Stock
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High Low Dividend High Low Dividend
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1996
First quarter $ 31.1 $ 25.2 $ .095 $ 31.0 $ 25.8 $ .087
Second quarter 33.4 24.5 .095 33.0 25.2 .087
Third quarter 35.2 26.5 .095 35.2 28.0 .087
Fourth quarter 31.1 25.0 .110 31.5 30.5 .102
1995
First quarter $ 25.3 $ 18.8 $ .083 $ 24.4 $ 19.3 $ .075
Second quarter 27.9 23.3 .083 27.7 24.1 .075
Third quarter 30.5 26.5 .083 30.0 26.9 .075
Fourth quarter 32.8 28.4 .095 32.6 28.5 .087
For information regarding restrictions on the Company's ability to pay cash
dividends, see Note 3 of Notes to Consolidated Financial Statements on pages 25
and 26.
For information regarding restrictions on the net assets of foreign
subsidiaries, see Note 11 of Notes to Consolidated Financial Statements on pages
36 and 37.
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
For the years ended the last day of February 1996 1995* 1994* 1993* 1992*
Dollar amounts in thousands, except share data
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<S> <C> <C> <C> <C> <C>
Operating Results:
Sales $ 644,301 $ 588,419 $ 488,045 $ 426,492 $ 382,352
Operating income from segments 112,804 101,887 73,631 43,404 25,372
Income (loss) from continuing operations
before cumulative effect of accounting
changes 53,555 40,731 21,568 10,258 (5,490)
Net income(1) 53,555 40,731 11,252 14,437 2,036
Per share:
Income (loss) from continuing operations
before cumulative effect of
accounting changes 2.75 2.10 1.13 .56 (.31)
Net income(1) 2.75 2.10 .59 .78 .11
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Year-End Financial Position:
Total assets $ 546,486 $ 520,792 $ 499,648 $ 459,379 $ 479,379
Working capital 136,161 123,296 105,108 58,222 70,001
Property, plant and equipment-gross 295,548 279,929 276,249 270,441 273,110
Property, plant and equipment-net 135,522 134,368 140,502 149,138 157,049
Long-term debt 95,920 98,254 106,151 82,046 126,124
Total debt 107,612 106,045 112,249 94,818 151,417
Net debt (total debt less cash, cash
equivalents and unexpended industrial
development revenue bond proceeds)
to total capitalization 23.6% 16.8% 20.5% 26.8% 48.9%
Shareholders' equity 254,998 207,714 171,008 156,609 144,926
Current ratio 1.9 to 1 1.7 to 1 1.6 to 1 1.3 to 1 1.4 to 1
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Other Data:
Property, plant and equipment additions(2) $ 19,281 $ 14,822 $ 14,715 $ 20,732 $ 33,266
Depreciation and amortization 22,181 22,949 22,814 23,388 22,251
Interest expense, net of interest income 7,349 8,470 9,479 10,405 15,542
Stock price Class A high 35.2 32.8 21.7 11.3 8.6
Class A low 24.5 18.8 8.1 4.7 3.8
Stock price Class B high 35.2 32.6 21.7 11.3 9.8
Class B low 25.2 19.3 8.5 4.8 3.8
Per common share dividends Class A .395 .345 .308 .300 .300
Class B .362 .312 .275 .267 .267
Weighted average common and common
equivalent shares outstanding 19,470,626 19,396,530 19,096,100 18,425,388 17,937,836
Employees (approximate) 4,400 4,600 4,700 4,800 4,700
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* Restated. See Note 1 of Notes to Consolidated Financial Statements.
(1) Includes income of $7,981 ($.44 per share) representing the cumulative effect of adopting Statement
of Financial Accounting Standards ("SFAS") No. 106 and SFAS No. 109 in 1992.
(2) Includes property, plant and equipment of acquired companies at date of purchase of $616 in 1996,
$5,020 in 1995 and $6,034 in 1992, and $11,300 resulting from the adoption of SFAS No. 109 in 1992.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes.
OPERATING RESULTS
TOTAL COMPANY
FISCAL 1996 COMPARED TO FISCAL 1995
On November 3, 1995, a merger agreement was approved in which Blount, Inc.
became a wholly-owned subsidiary of Blount International, Inc. ("the Company").
See Note 1 of Notes to Consolidated Financial Statements for a description of
the merger.
The Company reported record sales and income from continuing operations for
fiscal 1996. The Company's Outdoor Products and Industrial and Power Equipment
segments continued their excellent performance during fiscal 1996, while the
results from the Sporting Equipment segment were adversely affected by a general
industry slowdown. Overall, operating income from segments increased by 11%
during fiscal 1996. Sales for fiscal 1996 were $644.3 million compared to
$588.4 million for fiscal 1995. Net income was $53.6 million ($2.75 per share)
for fiscal 1996 compared to $40.7 million ($2.10 per share) for the prior year.
Selling, general and administrative expenses were 20% of sales in fiscal 1996
compared to 21% in fiscal 1995. Total selling, general and administrative
expenses increased during fiscal 1996, reflecting the increased sales activity
partially offset by lower corporate overhead expenses. Corporate overhead
expenses for the prior year included litigation and settlement costs of $7.1
million related to the sale of a former subsidiary. Corporate overhead expenses
for fiscal 1996 include transaction costs of $2.2 million associated with the
merger. The provision for income taxes for fiscal 1996 has been reduced by $1.7
million as a result of charitable contribution carryovers associated with the
merger. Total backlog at February 29, 1996, was approximately $112.8 million
compared to $134.4 million at February 28, 1995.
Beginning with results for the January-March 1996 calendar quarter, the Company
will begin reporting on a calendar year basis ending December 31, instead of the
previous fiscal year end of February 29.
FISCAL 1995 COMPARED TO FISCAL 1994
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 improved to $40.7 million in fiscal
1995, an 89% increase over fiscal 1994. Net income was $40.7 million in fiscal
1995 compared to net income of $11.3 million in fiscal 1994. Fiscal 1994 net
income 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 office expenses of $7.1 million in 1995 and $6.0
million in 1994 for litigation and settlement costs related to the sale of a
former subsidiary.
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SEGMENTS
FISCAL 1996 COMPARED TO FISCAL 1995
The Company's Outdoor Products segment established record levels of sales and
operating income again in fiscal 1996. Sales for the Outdoor Products segment
were $291.6 million in fiscal 1996 compared to $268.1 million during fiscal
1995. Operating income increased to $57.4 million during fiscal 1996 from $49.6
million in fiscal 1995. The improved results for this segment were primarily
due to an increase in sales and operating income of $20.2 million and $5.2
million, respectively, at the Company's Oregon Cutting Systems Division
("Oregon"). This reflects a 9% increase in the sales volume of saw chain and a
19% increase in the sales volume of saw bars, Oregon's two principal products,
principally to foreign markets. A significant part of Oregon's operations are
conducted in foreign countries and, as a result, fluctuations in foreign
exchange rates impact the amount of reported sales, operating margins and the
amount of foreign exchange adjustments reflected in income. During fiscal 1996,
the net effect of changes in exchange rates as compared to fiscal 1995 was not
material to 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. Due to a
deteriorating financial climate and the discontinuance of a local product line,
operations in Brazil incurred an operating loss of $.6 million in fiscal 1996
compared to operating income of $2.4 million in fiscal 1995. Sales and
operating income at other units of the Outdoor Products segment, principally
Dixon Industries, Inc., were up by 8% to $45.3 million and 38% to $9.7 million,
respectively, in fiscal 1996, principally as a result of a 17% increase in the
sales volume of riding lawn mowers. The current demand for Oregon's products
continues at high levels; therefore, the Company expects another good sales year
in the next fiscal year. The Company also expects continued strong sales growth
for its riding lawn mower business.
During fiscal 1996, the Industrial and Power Equipment segment continued its
impressive performance. Sales and operating income were $240.6 million and
$42.2 million, respectively, during fiscal 1996 compared to $207.6 million and
$33.0 million during the prior year. The improved operating results reflect
higher average selling prices and a better sales mix for timber harvesting
equipment, and improved sales and operating income at the Company's CTR
Manufacturing, Inc. and Gear Products, Inc. subsidiaries, primarily due to
higher volume. The Company expects the next fiscal year to be a reasonable year
for this segment, which is currently experiencing a reduction in order backlog.
The Sporting Equipment segment experienced a downturn during fiscal 1996. In
the aftermath of last year's booming domestic market, an industry slowdown
occurred. Sales for the Sporting Equipment segment were $112.1 million for
fiscal 1996, including $6.5 million from a late year acquisition (see below),
compared to $112.8 million during the prior year. Operating income was down to
$13.2 million for fiscal 1996 as compared to $19.3 million during fiscal 1995.
These results reflect the reduced demand, higher raw material costs, costs
associated with temporary plant shutdowns during the second quarter and a loss
from the Ram-Line operation acquired late in fiscal 1995. In December 1995, the
Company acquired Simmons Outdoor Corporation ("Simmons") (see Note 4 of Notes to
Consolidated Financial Statements), a major sports optics merchandiser, to
complement its existing sporting equipment product line. The Company expects
this acquisition plus improved demand to lead to improved results for this
segment during the next fiscal year.
FISCAL 1995 COMPARED TO FISCAL 1994
The Company's Outdoor Products segment recorded an excellent performance with
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<PAGE>
record levels of sales and operating income in fiscal 1995. Sales for the
Outdoor Products segment were $268.1 million in fiscal 1995 compared to $234.5
million during fiscal 1994. Operating income increased to $49.6 million during
fiscal 1995 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 Oregon. This reflects a 7% increase
in the sales volume of saw chain and a 12% increase in the sales volume of saw
bars, and higher average selling prices. During fiscal 1995, exchange rates in
Canada, Europe and Japan were favorable to Oregon's operating results.
Operating income from Brazil was $2.4 million in fiscal 1995 compared to $749
thousand in fiscal 1994. Sales and operating income at other Outdoor Products
units, principally Dixon Industries, Inc., were up by 24% to $42.0 million and
108% to $7.0 million, respectively, in fiscal 1995, principally as a result of
higher average selling prices and a 26% increase in the sales volume of riding
lawn mowers.
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 more
than doubled and operating income 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 compared to $162.0 million
during the prior fiscal year. Operating income was up 35% from $24.5 million in
fiscal 1994. The fiscal 1995 improvement in sales and operating income resulted
principally from an increase in the volume of forestry and industrial loaders
sold, improved operations at Gear Products, Inc., increased average selling
prices and the contribution from CTR Manufacturing, Inc. acquired on April 28,
1994 (see Note 4 of Notes to Consolidated Financial Statements), 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.
For the second consecutive year, the Sporting Equipment segment experienced
strong growth in sales and operating income, with each increasing to record
levels in fiscal 1995. Operating income increased by 27% in fiscal 1995 as
compared to fiscal 1994 and has almost doubled since fiscal 1993. For fiscal
1995, sales were $112.8 million compared to $91.5 million in fiscal 1994.
Operating income was $19.3 million in fiscal 1995 compared to $15.2 million
during the prior fiscal year. These improved results reflect increases in
volume, principally higher sales 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, the Company
expanded this segment's product line through the acquisition of the operating
assets of Ram-Line, Inc. (see Note 4 of Notes to Consolidated Financial
Statements).
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be in a strong financial position. Growth has been
funded through cash generated by operations, and recent acquisitions have been
made through use of the Company's cash reserves. At February 29, 1996, the
Company had 9% senior subordinated notes ("the 9% notes") outstanding in the
principal amount of $79.4 million which are due in 2003 and has had no amounts
outstanding under its $100 million or prior revolving credit agreement since
August 1992. In fiscal 1996, the Company entered into a new receivable sale
agreement with certain financial organizations under which the Company can sell
up to $25 million of eligible receivables. As of February 29, 1996, no
receivables had been sold under this or the prior agreement since July 1993.
Additionally, the Company has approximately $7.6 million in unexpended proceeds
from industrial development revenue bonds issued in fiscal 1995 to fund future
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<PAGE>
capital expenditures of certain operations. At February 29, 1996, the Company's
long-term debt to equity ratio was .4 to 1 compared to a ratio of .5 to 1 at the
prior fiscal year-end. See Note 3 of Notes to Consolidated Financial Statements
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 $136.2 million at February 29, 1996, compared to $123.3
million at February 28, 1995. Accounts receivable and inventories increased by
$19.0 million and $17.0 million, while accounts payable and accrued expenses
decreased by $13.4 million and $7.6 million, respectively, since February 28,
1995. The primary reasons for the increase in receivables are increased fourth
quarter sales in the current year, receivables from the Simmons acquisition and
estimated income taxes receivable, partially offset by the reduction in balances
attributable to the discontinued construction segment as those operations either
wind down or are sold (See Note 4 of Notes to Consolidated Financial
Statements). The inventory increase resulted primarily from the Simmons
acquisition. The reductions in accounts payable and accrued expenses also
reflect the reduced construction activity and the sale of the Injection Molding
Metal Products operations, partially offset by the Simmons' balances acquired.
The Company's operating cash flows for fiscal 1996 were $40.2 million compared
to $34.7 million in fiscal 1995 and $22.2 million in fiscal 1994. The improved
operating cash flows for fiscal 1996 reflect the improved year-to-date income
from operations and cash flows of approximately $9.0 million from the
discontinued construction segment, partially offset by higher estimated income
tax payments, contributions to benefit plans and year-end receivable balances.
The increased cash flows from operating activities for fiscal 1995 resulted
principally from the net income 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. Cash and cash equivalent balances were $14.6 million at February
29, 1996, compared to $43.4 million at February 28, 1995, as the Company's
operating cash flows were exceeded by cash expenditures for the Simmons
acquisition and other investing and financing activities. The Company believes
that its operating cash flows, working capital and unused credit facilities will
provide both short-term and long-term liquidity.
The ability of the Company to pay dividends is dependent upon Blount, Inc.'s
ability to pay dividends to the Company. Restrictions on the ability of Blount,
Inc. to pay cash dividends are contained in the indenture related to the 9%
subordinated notes and in certain financial covenants of the $100 million
revolving credit agreement. Under the most restrictive requirement, Blount,
Inc. retained earnings of approximately $61.8 million were available for the
payment of dividends at February 29, 1996.
The Company and its operations are subject to various environmental laws and
regulations. See "Business - Environmental Matters" and Note 8 of Notes to
Consolidated Financial Statements for a description of certain environmental
matters.
Management believes that the impact of domestic inflation on the Company has not
been material in recent years as inflation rates have remained low.
In its next fiscal year, the Company will adopt Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," and SFAS No. 123,
"Accounting for Stock-Based Compensation." No material effect on consolidated
financial condition or operating results is expected as the accounting methods
to be adopted will not differ materially from existing methods.
Page 14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the consolidated financial statements and the financial
statement schedules of Blount International, Inc. and subsidiaries listed in
Item 14(a) of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules 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 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended February 29, 1996 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
April 11, 1996
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<PAGE>
MANAGEMENT RESPONSIBILITY
All information contained in the consolidated financial statements of Blount,
International, Inc., has been prepared by management, which is responsible for
the accuracy and internal consistency of the information. Generally accepted
accounting principles have been followed. Reasonable judgments and estimates
have been made where necessary.
Management is responsible for establishing and maintaining a system of internal
accounting controls designed to provide reasonable assurance as to the integrity
and reliability of financial reporting. The system of internal accounting
controls is tested by the internal audit department as part of its normal
responsibilities and by the independent auditors to the extent deemed necessary
in accordance with generally accepted auditing standards. Management believes
the system of internal controls has been effective during the Company's most
recent fiscal year and that no matters have arisen which indicate a material
weakness in the system. Management follows the policy of responding to the
recommendations concerning the system of internal controls made both by the
independent auditors and by the internal audit department. Management implements
those recommendations that it believes would improve the system of internal
controls and be cost justified.
Seven directors of the Company, not members of management, serve as the Audit
Committee of the Board and are the principal means through which the Board
discharges its financial reporting responsibility. The Audit Committee meets
with management personnel, the internal auditors and the Company's independent
auditors several times each year to consider the results of internal and
external audits of the Company and to discuss internal accounting control,
auditing and financial reporting matters. At these meetings, the Audit Committee
also meets privately with the independent auditors and the General Auditor of
the Company to ensure free access by the independent auditors and internal
auditors to the committee.
The Company's independent auditors, Coopers & Lybrand L.L.P., audited the
financial statements prepared by the Company. Their opinion on these statements
is presented on page 15.
JOHN M. PANETTIERE HAROLD E. LAYMAN
President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Blount International, Inc. and Subsidiaries
<CAPTION>
For the years ended the last day of February 1996 1995* 1994*
- ------------------------------------------------------------- ----------- ----------- -----------
In thousands, except share data
<S> <C> <C> <C>
Sales $ 644,301 $ 588,419 $ 488,045
Cost of sales 427,322 390,818 330,059
- ------------------------------------------------------------- ----------- ----------- -----------
Gross profit 216,979 197,601 157,986
Selling, general and administrative expenses 126,508 121,051 114,107
- ------------------------------------------------------------- ----------- ----------- -----------
Income from operations 90,471 76,550 43,879
Interest expense (10,793) (11,078) (11,357)
Interest income 3,444 2,608 1,878
Other income (expense), net 554 (696) (549)
- ------------------------------------------------------------- ----------- ----------- -----------
Income before income taxes 83,676 67,384 33,851
Provision for income taxes 30,121 26,653 12,283
- ------------------------------------------------------------- ----------- ----------- -----------
Income from continuing operations 53,555 40,731 21,568
- ------------------------------------------------------------- ----------- ----------- -----------
Discontinued operations:
Loss from operations, net (9,666)
Loss on disposal, net (650)
- ------------------------------------------------------------- ----------- ----------- -----------
Total loss from discontinued operations (10,316)
- ------------------------------------------------------------- ----------- ----------- -----------
Net income $ 53,555 $ 40,731 $ 11,252
- ------------------------------------------------------------- ----------- ----------- -----------
Income (loss) per share of common stock:
Income from continuing operations $ 2.75 $ 2.10 $ 1.13
Discontinued operations (.54)
- ------------------------------------------------------------- ----------- ----------- -----------
Net income $ 2.75 $ 2.10 $ .59
- ------------------------------------------------------------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares outstanding 19,470,626 19,396,530 19,096,100
- ------------------------------------------------------------- ----------- ----------- -----------
* Restated.
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Blount International, Inc. and Subsidiaries
<CAPTION>
For the years ended the last day of February 1996 1995* 1994*
- ------------------------------------------------------------- ----------- ----------- -----------
In thousands, except share data
<S> <C> <C> <C>
Balance at beginning of period $ 170,595 $ 136,283 $ 130,371
Net income 53,555 40,731 11,252
- ------------------------------------------------------------- ----------- ----------- -----------
224,150 177,014 141,623
Less cash dividends declared:
Class A Common Stock - $.395 per share in 1996,
$.345 per share in 1995 and $.308 per share in 1994;
Class B Common Stock - $.362 per share in 1996,
$.312 per share in 1995 and $.275 per share in 1994 8,839 6,419 5,340
- ------------------------------------------------------------- ----------- ----------- -----------
Balance at end of period $ 215,311 $ 170,595 $ 136,283
- ------------------------------------------------------------- ----------- ----------- -----------
* Restated.
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Blount International, Inc. and Subsidiaries
<CAPTION>
As of the last day of February 1996 1995*
- -------------------------------------------------------------------------- ----------- -----------
In thousands, except share data
Assets
- -------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents, including short-term
investments of $11,386 and $40,266 $ 14,590 $ 43,390
Accounts receivable, net of allowances for
doubtful accounts of $3,853 and $2,611 149,803 130,774
Inventories 94,113 77,075
Deferred income taxes 23,491 25,068
Other current assets 3,502 16,153
- -------------------------------------------------------------------------- ----------- -----------
Total current assets 285,499 292,460
Property, plant and equipment, net of accumulated
depreciation of $160,026 and $145,561 135,522 134,368
Cost in excess of net assets of acquired businesses, net 88,111 68,762
Other assets 37,354 25,202
- -------------------------------------------------------------------------- ----------- -----------
Total Assets $ 546,486 $ 520,792
- -------------------------------------------------------------------------- ----------- -----------
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------- ----------- -----------
Current liabilities:
Notes payable and current maturities of long-term debt $ 11,692 $ 7,791
Accounts payable 51,454 64,880
Accrued expenses 84,229 91,835
Other current liabilities 1,963 4,658
- -------------------------------------------------------------------------- ----------- -----------
Total current liabilities 149,338 169,164
Long-term debt, exclusive of current maturities 95,920 98,254
Deferred income taxes, exclusive of current portion 20,533 19,214
Other liabilities 25,697 26,446
- -------------------------------------------------------------------------- ----------- -----------
Total liabilities 291,488 313,078
- -------------------------------------------------------------------------- ----------- -----------
Commitments and Contingent Liabilities
- -------------------------------------------------------------------------- ----------- -----------
Shareholders' equity:
Common stock: par value $.01 per share (see Note 5 for
voting rights by class);
Class A: 13,176,357 and 12,844,179 shares issued 132 128
Class B, convertible: 5,923,358 and 6,045,636 shares issued 59 60
Capital in excess of par value of stock 31,317 28,681
Retained earnings 215,311 170,595
Accumulated translation adjustment 8,179 8,250
- -------------------------------------------------------------------------- ----------- -----------
Total shareholders' equity 254,998 207,714
- -------------------------------------------------------------------------- ----------- -----------
Total Liabilities and Shareholders' Equity $ 546,486 $ 520,792
- -------------------------------------------------------------------------- ----------- -----------
* Restated.
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount International, Inc. and Subsidiaries
<CAPTION>
For the years ended the last day of February 1996 1995 1994
- ------------------------------------------------------------- ----------- ----------- -----------
In thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 53,555 $ 40,731 $ 11,252
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and other noncash charges 22,271 23,543 25,593
Deferred income taxes 3,697 (1,251) (15,315)
Loss on disposals of property, plant and equipment 1,044 441 3,349
Changes in assets and liabilities, net of effects
of businesses acquired and sold:
Decrease in aggregate balance
of accounts receivable sold (17,637)
(Increase) decrease in accounts receivable (18,442) 8,226 (845)
Increase in inventories (251) (12,991) (4,167)
(Increase) decrease in other assets (2,809) (2,630) 12,087
Increase (decrease) in accounts payable (6,975) (9,833) 7,932
Increase (decrease) in accrued expenses (8,942) 1,574 8,882
Decrease in other liabilities (2,922) (13,136) (8,974)
- ------------------------------------------------------------- ----------- ----------- -----------
Net cash provided by operating activities 40,226 34,674 22,157
- ------------------------------------------------------------- ----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sales of businesses and property, plant
and equipment 5,066 2,930 3,916
Purchases of property, plant and equipment (18,545) (9,769) (14,609)
Acquisitions of businesses (37,396) (10,150)
- ------------------------------------------------------------- ----------- ----------- -----------
Net cash used in investing activities (50,875) (16,989) (10,693)
- ------------------------------------------------------------- ----------- ----------- -----------
Cash flows from financing activities:
Net increase (reduction) in short-term borrowings 818 (4,494) (4,905)
Issuance of long-term debt 800 11,800 97,327
Reduction of long-term debt (15,652) (20,508) (76,832)
(Increase) decrease in restricted funds 2,524 (10,096)
Dividends paid (8,839) (6,419) (5,340)
Other 2,198 1,334 4,935
- ------------------------------------------------------------- ----------- ----------- -----------
Net cash provided by (used in) financing activities (18,151) (28,383) 15,185
- ------------------------------------------------------------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (28,800) (10,698) 26,649
- ------------------------------------------------------------- ----------- ----------- -----------
Cash and cash equivalents at beginning of period 43,390 54,088 27,439
- ------------------------------------------------------------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 14,590 $ 43,390 $ 54,088
- ------------------------------------------------------------- ----------- ----------- -----------
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL STOCK ACCOUNTS
Blount International, Inc. and Subsidiaries
Common Stock Capital Accumulated
---------------- In Excess Translation
In thousands Class A Class B of Par Adjustment
- ------------------------------------------------------------------------------
Balance, February 28, 1993* $ 118 $ 65 $18,820 $ 7,235
Conversion of Class B Common Stock
into Class A Common Stock 2 (2)
Exercise of employee stock options 2 1,651
Issuance of shares under dividend
reinvestment plan 76
Aggregate adjustment resulting
from translation of foreign
currency statements 212
Other shares issued 2 6,544
- ------------------------------------------------------------------------------
Balance, February 28, 1994* 124 63 27,091 7,447
Conversion of Class B Common Stock
into Class A Common Stock 3 (3)
Exercise of employee stock options 1 1,242
Issuance of shares under dividend
reinvestment plan 91
Aggregate adjustment resulting
from translation of foreign
currency statements 803
Other shares issued 257
- ------------------------------------------------------------------------------
Balance, February 28, 1995* 128 60 28,681 8,250
Conversion of Class B Common Stock
into Class A Common Stock 1 (1)
Exercise of employee stock options 3 2,526
Issuance of shares under dividend
reinvestment plan 110
Aggregate adjustment resulting
from translation of foreign
currency statements (71)
- ------------------------------------------------------------------------------
Balance, February 29, 1996 $ 132 $ 59 $31,317 $ 8,179
- ------------------------------------------------------------------------------
* Restated.
The accompanying notes are an integral part of these statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Blount International, Inc. and Subsidiaries
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation:
The consolidated financial statements include the accounts of Blount
International, Inc. ("the Company") and its subsidiaries. All significant
intercompany balances and transactions are eliminated in consolidation.
On November 3, 1995, the stockholders of Blount, Inc. approved a merger
agreement dated August 17, 1995, among the Company, Blount, Inc., and a wholly-
owned subsidiary of the Company ("the subsidiary"). As a result, i) the
subsidiary was merged with and into Blount, Inc., ii) Blount, Inc. was the
surviving corporation in the merger and became a wholly-owned subsidiary of the
Company, iii) Blount, Inc. stockholders received three shares of Company Class A
Common Stock in exchange for each two shares held of Blount, Inc. Class A Common
Stock and three shares of Company Class B Common Stock in exchange for each two
shares held of Blount, Inc. Class B Common Stock, and iv) the Company assumed
all Blount, Inc. stock option plans. The Company filed a Form S-4 registration
statement with the Securities and Exchange Commission on October 3, 1995, for
the shares to be issued as a result of the merger. Immediately following the
merger, the equity ownership of the Company was the same as that which
previously existed for Blount, Inc. Blount, Inc. was delisted from the American
Stock Exchange effective November 3, 1995, and the Company began trading on the
New York Stock Exchange on November 6, 1995.
Prior to the merger, the Company was owned 100% by Blount, Inc.'s Chairman of
the Board, Winton M. Blount, and members of his family, and the Company owned an
approximate 62% voting interest and approximately 38% of the shares of Blount,
Inc.'s Common Stock outstanding. Except for the equity interest in Blount,
Inc., the Company has had no other operations or business since February 1993.
The merger has been accounted for in a manner similar to that in pooling of
interests accounting. The consolidated financial statements, and all related
share data, of the Company for periods prior to November 3, 1995, have been
restated to reflect the merger and the 3 for 2 common stock exchange ratio. The
assets and liabilities are stated at their historical recorded amounts. As of
the date of the merger, the Company's consolidated assets and liabilities did
not differ materially from those of Blount, Inc. and Subsidiaries. For the year
ended February 29, 1996, the Company incurred approximately $2.2 million of
expenses associated with the merger. Additionally, as a result of the merger,
charitable contribution carryovers reduced the Company's consolidated provision
for income taxes by approximately $1.7 million for fiscal 1996.
Reclassifications:
Certain amounts in the 1995 and 1994 financial statements and notes to
consolidated financial statements have been reclassified to conform with the
1996 presentation.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Estimates are used when accounting for the allowance for doubtful accounts,
inventory obsolescence, long-lived assets, product warranty expenses, casualty
insurance costs, employee benefit plans, income taxes, discontinued operations
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<PAGE>
and contingencies. It is reasonably possible that actual results could differ
significantly from those estimates and significant changes to estimates could
occur in the near term.
Cash and cash equivalents:
The Company considers 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 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 $7.0 million and $6.2 million as of the last
day of February 1996 and 1995. 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 $19.3 million, $19.8
million and $19.9 million in 1996, 1995 and 1994.
Interest cost incurred during the period of construction of plant and equipment
is capitalized. No material amounts of interest were capitalized on plant and
equipment during the three years ended February 29, 1996.
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 $19.5 million and
$17.4 million as of the last day of February 1996 and 1995. 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:
It is the Company's policy 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.
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. Sales 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
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<PAGE>
significant. Foreign exchange adjustments reduced pretax income by $1.9
million, $.7 million and $.5 million in 1996, 1995 and 1994.
At February 29, 1996, there were no significant foreign exchange forward
contracts outstanding. Previously, foreign exchange forward contracts were
recorded in the Company's balance sheet at fair value and changes in fair values
were recognized as other expense or income in the period in which the changes
occurred (see Note 9 of Notes to Consolidated Financial Statements).
Revenue recognition:
The Company's policy is to record sales as orders are shipped.
Research and development:
Expenditures for research and development are expensed as incurred. These costs
were $8.8 million, $7.7 million and $7.0 million for 1996, 1995 and 1994.
Net income per common share:
Net income per common share is based on the weighted average number of common
and common equivalent shares (stock options) outstanding in each period.
NOTE 2:
INCOME TAXES
The provision for income taxes attributable to continuing operations is as
follows:
For the years ended the last day of February 1996 1995 1994
- -----------------------------------------------------------------------------
In thousands
Current provision:
Federal $ 20,242 $ 19,407 $ 17,871
State 2,140 3,698 450
Foreign 3,953 5,159 8,993
Deferred provision (benefit):
Federal 4,441 (1,048) (13,234)
State 465
Foreign (1,120) (563) (1,797)
- -----------------------------------------------------------------------------
$ 30,121 $ 26,653 $ 12,283
- -----------------------------------------------------------------------------
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<PAGE>
A reconciliation of the provision for income taxes attributable to continuing
operations to the amount computed by applying the statutory federal income tax
rate to income from continuing operations before income taxes is as follows:
For the years ended the last day of February 1996 1995 1994
- -----------------------------------------------------------------------------
In thousands
Income before income taxes:
Domestic $ 77,610 $ 57,462 $ 13,954
Foreign 6,066 9,922 19,897
- -----------------------------------------------------------------------------
$ 83,676 $ 67,384 $ 33,851
- -----------------------------------------------------------------------------
% % %
Statutory tax rate 35.0 35.0 35.0
Impact of earnings of foreign operations .2 (1.0) (.1)
State income taxes, net of federal
tax benefit 2.3 3.7 1.2
Charitable contribution carryover (2.0)
Adjustments to prior year estimates (4.6)
Permanent differences between book
bases and tax bases 1.0 1.7 1.4
Other items, net (.5) .2 3.4
- -----------------------------------------------------------------------------
Effective income tax rate 36.0 39.6 36.3
- -----------------------------------------------------------------------------
All years reflect the allocation of substantially all corporate office expenses
and interest expense to domestic operations.
As of the last day of February 1996 and 1995, deferred income tax assets were
$37.6 million and $37.7 million and deferred income tax liabilities were $34.6
million and $31.8 million. Deferred income taxes applicable to principal
temporary differences are as follows:
As of the last day of February 1996 1995
- -----------------------------------------------------------------------------
In thousands
Property, plant and equipment basis differences $ 20,229 $ 18,584
Employee benefits (12,461) (11,999)
Other accrued expenses (19,192) (19,716)
Other - net 8,466 7,277
- -----------------------------------------------------------------------------
$ (2,958) $ (5,854)
- -----------------------------------------------------------------------------
Deferred income taxes of approximately $2.1 million have not been provided on
undistributed earnings of foreign subsidiaries in the amount of $24.9 million as
the earnings are considered to be permanently reinvested.
Blount, Inc. has settled its issues with the Internal Revenue Service through
the 1990 fiscal year with no material adverse effect. The years 1991 through
1996 are still open for review. The Company's separate tax years from 1993
through the date of the merger (see Note 1) are open for review.
Page 24
<PAGE>
NOTE 3:
DEBT AND FINANCING AGREEMENTS
Long-term debt consists of the following:
As of the last day of February 1996 1995
- -----------------------------------------------------------------------------
In thousands
9% subordinated notes $ 79,350 $ 78,550
Industrial Development Revenue Bonds payable,
maturing between 1997 and 2014, interest at varying
rates (principally 3.6% at February 29, 1996) 16,393 16,741
Other long-term debt, interest at 8%, payable in 1997 2,500 8,953
Lease purchase obligations, interest at varying
rates, payable in installments to 2000 892 1,143
- -----------------------------------------------------------------------------
99,135 105,387
Less current maturities (3,215) (7,133)
- -----------------------------------------------------------------------------
$ 95,920 $ 98,254
- -----------------------------------------------------------------------------
Maturities of long-term debt and the principal and interest payments on long-
term capital leases are as follows:
Fiscal Year Capital Leases
--------------------- Total
In thousands Debt Principal Interest Payments
- -----------------------------------------------------------------------------
1997 $ 2,848 $ 367 $ 71 $ 3,286
1998 347 466 22 835
1999 348 38 2 388
2000 337 21 358
2001 338 338
2002 and beyond 94,025 94,025
- -----------------------------------------------------------------------------
$ 98,243 $ 892 $ 95 $ 99,230
- -----------------------------------------------------------------------------
At February 29, 1996, no amounts were outstanding under the Company's $100
million revolving credit agreement with a group of five banks. The $100 million
agreement expires December 1999 and 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 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 proceeds from industrial development revenue bonds of $11.8 million issued
in fiscal 1995 are held in trust and released as qualified capital expenditures
are made. As of the last day of February 1996 and 1995, $7.6 million and $10.1
million were held in trust and are included in "Other assets" in the Company's
consolidated balance sheets.
Page 25
<PAGE>
Blount, Inc. has 9% senior subordinated notes ("the 9% notes") outstanding in
the principal amount of $79.4 million maturing on June 15, 2003. During fiscal
1995, approximately $20 million of the 9% subordinated notes were repurchased
with no material gain or loss. The 9% notes are redeemable at the election of
Blount, Inc., 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 Blount, Inc. and a major bank as trustee. The indenture
restricts Blount, Inc.'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.
In August 1995, the Company entered into an agreement expiring August 31, 1998
with certain financial organizations under which it may sell up to $25 million
of undivided interests in a pool of eligible accounts receivable in which the
purchasers retain a security interest. The purchasers' level of investment may
fluctuate based on the level of the eligible receivables in the pool. As of
February 29, 1996, no receivables have been sold under this agreement.
Under the most restrictive debt requirement, Blount, Inc. retained earnings of
approximately $61.8 million were available for the payment of dividends at
February 29, 1996.
As of the last day of February 1996 and 1995, the weighted average interest rate
on short-term borrowings was 8.4% and 10.3%, respectively.
NOTE 4:
ACQUISITIONS AND DISPOSALS
In December 1995, the Company acquired the outstanding capital stock of Simmons
Outdoor Corporation ("Simmons"), a sports optics merchandiser. The purchase
price was approximately $38 million. The acquisition has been accounted for by
the purchase method, and the net assets and results of operations of Simmons
have been included in the Company's consolidated financial statements since the
date 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. Sales and pretax income for Simmons for calendar 1995 were $40.9 million
and $1.6 million, respectively.
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. 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, the Company adopted a plan to discontinue its construction
business through the orderly completion and close-out of the Company's 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, the Company entered into an agreement with Caddell
Construction Co., Inc. ("Caddell") to provide the consulting and construction
management services necessary to complete the projects. As of February 29,
1996, the projects encompassed by the agreement with Caddell were complete.
During the first quarter of fiscal 1996, Pozzo was sold with no material effect
Page 26
<PAGE>
on the Company's financial condition.
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. Results of the discontinued operations are summarized as follows (in
thousands):
For the years ended the last day of February 1996 1995 1994
- ------------------------------------------------------------------------------
Revenues $ 31,158 $ 125,208 $ 210,090
Cost of revenues 28,941 117,898 216,935
- ------------------------------------------------------------------------------
Gross profit (loss) 2,217 7,310 (6,845)
Selling, general and administrative
expenses (748) (4,070) (8,093)
Other income - net 415 320 67
- ------------------------------------------------------------------------------
Income (loss) before income taxes 1,884 3,560 (14,871)
Provision (benefit) for income taxes 659 1,246 (5,205)
- ------------------------------------------------------------------------------
Net income (loss) $ 1,225 $ 2,314 $ (9,666)
- ------------------------------------------------------------------------------
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 net income for 1996 and 1995 has no impact on the
Company's fiscal 1996 and 1995 statements 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 to the Company from this
joint venture were approximately $21.2 million in fiscal 1994 and $4.9 million
in fiscal 1996.
The principal assets and liabilities of the discontinued operations included in
the Company's consolidated balance sheets are as follows (in thousands):
As of the last day of February 1996 1995
- -----------------------------------------------------------------------------
Accounts receivable $ 24,736 $ 45,706
Other current assets 1,263 11,911
Other assets 639 5,203
Accounts payable (10,885) (24,588)
Accrued expenses (7,453) (12,578)
Other current liabilities (1,963) (4,659)
Other liabilities (2,849)
NOTE 5:
CAPITAL STRUCTURE
The Company has authorized 60 million shares of Class A Common Stock, 14 million
shares of Class B Common Stock and 4,456,855 shares of Preferred Stock. As of
the last day of February 1996, no Preferred Stock was outstanding. The Class A
Common Stock is entitled to elect 25% of the Company's Board of Directors, is
entitled to one-tenth of one vote per share on all other matters and will
receive an additional dividend of $.00833 in any quarter that a cash dividend is
declared on the Class B Common Stock. The Class B Common Stock is entitled to
elect 75% of the Company's Board of Directors and is entitled to one vote per
share on all other matters. Each share of Class B Common Stock is convertible
at any time at the option of the shareholder into one share of Class A Common
Page 27
<PAGE>
Stock.
The Company may grant options to purchase its Class A Common Stock to certain
officers and key employees under a non-qualified plan approved in 1995 ("the
1995 plan"), a non-qualified plan approved in 1994 ("the 1994 plan") and a
qualified Incentive Stock Option Plan ("ISOP") approved in 1992. Each plan
terminates ten years from its effective date and provides for granting of
options 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 from
the date of grant. As of the last day of February 1996 and 1995, there were
options for 1,050,000 shares and no shares available for grant under the 1995
plan, no shares and 2,500 shares available for grant under the 1994 plan and
56,250 shares and 35,400 shares available for grant under the ISOP. At February
29, 1996, options for 571,590 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>
1996 1995 1994
---------------------- ---------------------- ----------------------
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 1,306 $15.86 $20,721 1,422 $11.12 $15,812 1,093 $ 5.64 $ 6,160
Options granted 86 28.30 2,420 223 30.18 6,740 590 18.97 11,193
Options exercised (207) 10.26 (2,122) (198) 5.62 (1,115) (212) 6.09 (1,294)
Options forfeited (104) 13.93 (1,447) (141) 5.08 (716) (49) 5.11 (247)
----- ------ ------- ----- ------ ------- ----- ------ -------
Outstanding, end
of period 1,081 $18.10 $19,572 1,306 $15.86 $20,721 1,422 $11.12 $15,812
----- ------ ------- ----- ------ ------- ----- ------ -------
</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 certain 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 Company-sponsored defined
benefit plans for each of the last three years were (in thousands):
1996 1995 1994
- ----------------------------------------------------------------------------
Service cost-benefits earned $ 3,426 $ 3,830 $ 3,814
Interest cost 5,780 5,086 4,649
Actual return on plan assets (11,042) (691) (2,462)
Net amortization and deferral 6,783 (2,418) 345
- ----------------------------------------------------------------------------
$ 4,947 $ 5,807 $ 6,346
- ----------------------------------------------------------------------------
Page 28
<PAGE>
The Company's general funding policy for qualified plans is to fund amounts
deductible for income tax purposes. A Rabbi Trust has been established for the
purpose of funding certain non-qualified benefits. The funded status of
qualified and non-qualified defined benefit plans as of the last day of February
1996 and 1995 was as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
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 $ 50,895 $ 3,749 $ 41,824 $ 3,014
Nonvested 2,665 431 1,737 138
- ------------------------------------------- -------- -------- -------- --------
Accumulated benefit obligation 53,560 4,180 43,561 3,152
Effect of projected compensation increases 23,615 996 19,987 762
- ------------------------------------------- -------- -------- -------- --------
Projected benefit obligation 77,175 5,176 63,548 3,914
Plan assets at fair value 79,856 57,499 85
- ------------------------------------------- -------- -------- -------- --------
Plan assets greater (less) than
projected benefit obligation 2,681 (5,176) (6,049) (3,829)
Unrecognized transition (asset) obligation (1,241) 403 (838) 575
Unrecognized prior service liability 2,082 382 3,335 376
Unrecognized net (gain) loss 7,990 832 6,568 (399)
- ------------------------------------------- -------- -------- -------- --------
Net prepaid (accrued) pension cost $ 11,512 $ (3,559) $ 3,016 $ (3,277)
- ------------------------------------------- -------- -------- -------- --------
</TABLE>
The weighted average rate assumptions used in 1996, 1995 and 1994 to determine
pension expense and related pension obligations for domestic and foreign defined
benefit plans were as follows:
1996 1995 1994
- -----------------------------------------------------------------------------
Discount rate 7.6% 8.5% 7.6%
Rate of increase in compensation levels 4.1% 4.3% 4.4%
Expected long-term rate of return on
plan assets 8.7% 8.7% 8.6%
- -----------------------------------------------------------------------------
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 $2.8 million, $2.1 million and $1.9 million in 1996, 1995 and 1994.
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
Page 29
<PAGE>
operations sold in a prior year. Other postretirement benefit plans are not
funded and benefit payments are made as they become due.
Net periodic postretirement benefit expense for 1996, 1995 and 1994 consisted of
the following components (in thousands):
1996 1995 1994
- ----------------------------------------------------------------------------
Service cost-benefits earned $ 301 $ 299 $ 284
Interest cost 1,266 1,223 1,406
Actual return on plan assets (330) (33) (125)
Net amortization and deferral 142 (49) 47
- ----------------------------------------------------------------------------
$ 1,379 $ 1,440 $ 1,612
- ----------------------------------------------------------------------------
The accumulated postretirement benefit obligation for the funded plan was $2.3
million and $2.5 million as of the last day of February 1996 and 1995. A
reconciliation of the accumulated postretirement benefit obligation to the
accrued liability included in the Company's balance sheets as of the last day of
February 1996 and 1995 follows (in thousands):
1996 1995
- ----------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 10,466 $ 11,234
Fully eligible active plan participants 2,172 1,788
Other active plan participants 2,044 2,369
- ----------------------------------------------------------------------------
14,682 15,391
Plan assets at fair value 2,143 2,171
- ----------------------------------------------------------------------------
Postretirement benefits in excess of assets (12,539) (13,220)
Unrecognized net (gain) loss 781 1,263
- ----------------------------------------------------------------------------
Accrued postretirement benefit cost $(11,758) $(11,957)
- ----------------------------------------------------------------------------
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7 1/2% in 1996, 8 1/2% in 1995 and 7 1/2%
in 1994. The expected long-term rate of return on plan assets was 8 3/4% in
1996, 1995 and 1994. A 9% annual rate of increase in the cost of health care
benefits was assumed for 1996; the rate was assumed to decrease 1% per year
until 4% is reached, remain at that level for ten years and then decrease to the
ultimate trend rate of 3%. 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 29, 1996, by 10% and the aggregate of the
service and interest cost components of net periodic expense for 1996 by 11
1/2%.
Page 30
<PAGE>
NOTE 8:
COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space and equipment under operating leases expiring in
one to ten 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 29, 1996, are as follows (in millions): 1997--
$4.7; 1998--$2.7; 1999--$1.6; 2000--$.8; 2001--$.7 and 2002 and beyond--$1.3.
Rentals charged to costs and expenses under cancelable and noncancelable lease
arrangements were $6.3 million, $5.2 million and $5.7 million for 1996, 1995 and
1994.
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of Blount, Inc. 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
Blount, Inc. It is the view of management that because Blount, Inc.'s
predecessor corporation purchased assets rather than stock, Blount, Inc. does
not have successor liability and is not properly a PRP. However, the EPA has
indicated it does not accept this position. Management believes the EPA is
wrong on the successor liability issue. However, with other PRP's, Blount, Inc.
made a good faith offer to the EPA to pay a portion of the clean-up costs. The
offer was rejected and the EPA proceeded 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. Blount, Inc. denies that it is a PRP and is unable to
determine any other party's share of total remediation costs. Blount, Inc. 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
consolidated financial condition or operating results.
Blount, Inc. 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 closure process, Blount, Inc. is required by
the State of Idaho to undertake RCRA corrective action at the facility. This
requires Blount, Inc. 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. In order to effect the investigation, in March 1994,
Blount, Inc. and the State of Idaho Division of Environmental Quality ("IDEQ")
entered into an Administrative Consent Order which governs the completion of the
corrective action activities. The RCRA Facility Investigation has commenced and
the soils investigation is complete. Environmental sampling indicates the
presence of lead contamination in a limited number of shallow surface soils.
The IDEQ has approved Blount's proposal to excavate this limited lead
contamination and dispose of it at a RCRA permitted landfill. There is also
some trichloroethylene and perchloroethylene contamination of the uppermost
groundwater beneath the facility. This uppermost groundwater is not the
drinking water supply source and does not appear to be connected to the deeper
drinking water aquifer. Further groundwater 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
Page 31
<PAGE>
effect on consolidated financial condition or operating results beyond amounts
accrued.
Under the provisions of Washington State environmental laws, the Washington
State Department of Ecology ("WDOE") has notified Blount, Inc. that it is one of
many companies named as a Potentially Liable Party ("PLP"), for the Pasco
Sanitary Landfill site, Pasco, Washington ("the Site"). Although the cleanup
costs are believed to be substantial, accurate estimates will not be available
until the environmental studies have been completed at the Site. However, based
upon the total documented volume of waste sent to the Site, Blount, Inc.'s waste
volume compared to that total waste volume should cause Blount, Inc. to be
classified as a "de minimis" PLP. In July 1992, Blount, Inc. and thirty-eight
other PLPs entered into an Administrative Agreed Order with WDOE to perform a
Phase I Remedial Investigation at the Site. In October 1994, WDOE issued an
administrative Unilateral Enforcement Order to all PLPs to complete a Phase II
Remedial Investigation and Feasibility Study ("RI/FS") under the Scope of Work
established by WDOE. The results of the RI/FS investigation are not expected
until after the first quarter of 1997. Blount, Inc. is unable to determine, at
this time, the level of clean-up demands that may be ultimately placed on it.
Management believes that, given the number of PLPs named with respect to the
Site and their financial condition, Blount, Inc.'s potential response costs
associated with the Site will not have a material adverse effect on Blount,
Inc.'s financial condition or operating results.
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 insurance policies.
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 consolidated financial condition or operating
results.
At February 29, 1996, there were outstanding bank letters of credit in the
approximate amount of $16.1 million issued principally in connection with
various foreign construction contracts for which there is contingent liability
to the issuing banks in the event payment is demanded by the holder.
NOTE 9:
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
At February 29, 1996, substantially all of the Company's trade and other
accounts receivable of $121.1 million (see Note 11) arose from manufacturing
operations. The Company has manufacturing or distribution operations in Brazil,
Canada, Europe, Japan and the United States. The Company sells to customers in
these locations, primarily in the United States, and other countries throughout
the world (see Note 10). At February 29, 1996, approximately 70% of
manufacturing receivables were from customers within the United States.
Accounts receivable from manufacturing customers are principally from service
and dealer groups, distributors and chainsaw manufacturers, and are generally
not collateralized. The Company's remaining construction receivables are
primarily from governmental units in the United States and Kuwait.
From February 1994 until March 1995, the Company entered into foreign exchange
forward contracts 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
Page 32
<PAGE>
contracts and, as of February 29, 1996, no remaining contracts were outstanding.
At February 28, 1995, foreign exchange forward contracts of $51.0 million were
outstanding. Foreign exchange forward contracts reduced income by approximately
$.3 million, $1.3 million and $.1 million in fiscal 1996, 1995 and 1994,
respectively.
The estimated fair values of certain financial instruments are as follows (in
thousands):
As of the last day of February 1996 1995
- -------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
Cash and short-term investments $ 14,590 $ 14,590 $ 43,390 $ 43,390
Other current assets (foreign
exchange forward contracts 119 119
Other assets (principally restricted
trust funds and notes receivable) 17,112 18,095 13,800 13,800
Notes payable and long-term debt
(see Note 3) (107,612) (111,580) (106,045) (105,457)
Accrued expenses (foreign exchange
forward contracts) (932) (932)
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 restricted trust funds approximates fair value for
short-term instruments and is estimated by obtaining market quotes for longer
term instruments. 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
The Company's business consists of three segments: Outdoor Products, Industrial
and Power Equipment and Sporting Equipment. The Outdoor Products segment
manufactures and markets saw chain, bars, and sprockets for chain saws,
maintenance accessories, industrial cutting products and home and garden
products such as power trimmers and riding lawn mowers. The Outdoor Products
segment sells to original equipment manufacturers and to end users through a
diverse distribution and dealer network. The Industrial and Power Equipment
segment manufactures and markets large mechanical timber harvesting equipment as
well as power transmission and hydraulic and gear components. Customers include
timber harvesting, materials handling, construction and utility businesses. The
Sporting Equipment segment manufactures and markets small arms ammunition,
reloading equipment and components, gun care accessories, shooting sports
accessories and industrial powerloads, and markets and distributes sports
optical products. Major markets include two-step distributors, cooperative
buying groups, mass merchants and government agencies. 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.
Page 33
<PAGE>
In 1996, 1995 and 1994, no customer accounted for more than 10% of consolidated
sales. In 1996, approximately 16.5% of sales by the Outdoor Products segment
were to one customer. While the Company expects this business relationship to
continue, the loss of this customer could affect the operations of the Outdoor
Products segment. Each of the Company's segments purchase certain important
materials from a limited number of suppliers that meet quality criteria.
Although alternative sources of supply are available, the sudden elimination of
certain suppliers could result in manufacturing delays, a reduction in product
quality and a possible loss of sales in the near term.
Information on Geographic Areas
For the years ended the last day of February 1996 1995 1994
- -----------------------------------------------------------------------------
In thousands
Sales:
United States $ 536,047 $ 493,293 $ 383,329
Outside United States 108,254 95,126 104,716
- -----------------------------------------------------------------------------
$ 644,301 $ 588,419 $ 488,045
- -----------------------------------------------------------------------------
Operating income:
United States $ 106,192 $ 91,950 $ 52,750
Outside United States 6,612 9,937 20,881
- -----------------------------------------------------------------------------
Operating income from segments $ 112,804 $ 101,887 $ 73,631
- -----------------------------------------------------------------------------
Identifiable assets:
United States $ 461,200 $ 425,021 $ 398,007
Outside United States 85,286 95,771 101,641
- -----------------------------------------------------------------------------
$ 546,486 $ 520,792 $ 499,648
- -----------------------------------------------------------------------------
Included in United States sales were export sales of $106.2 million, $94.3
million and $54.5 million in 1996, 1995 and 1994. As a result of a contract
manufacturing agreement with a subsidiary, sales of approximately $39 million
and $35 million in fiscal 1996 and 1995, respectively, and the related operating
income, which were classified as foreign sales and operating income in 1994 and
prior years, are classified as United States export sales and operating income
in fiscal 1996 and 1995. Total sales from international activities, including
those in the above table and export sales, provided 33.3% of consolidated sales
in fiscal 1996, 32.2% in fiscal 1995 and 32.7% in fiscal 1994. In fiscal 1996,
1995 and 1994, approximately 56.4%, 54.3% and 54.2%, respectively, of sales by
the Outdoor Products segment were from international sources.
Page 34
<PAGE>
Information on Segments
For the years ended the last day of February 1996 1995 1994
- -----------------------------------------------------------------------------
In thousands
Sales:
Outdoor products $ 291,621 $ 268,110 $ 234,502
Industrial and power equipment 240,605 207,556 162,026
Sporting equipment 112,075 112,753 91,517
- -----------------------------------------------------------------------------
$ 644,301 $ 588,419 $ 488,045
- -----------------------------------------------------------------------------
Operating income:
Outdoor products $ 57,410 $ 49,583 $ 33,974
Industrial and power equipment 42,182 32,987 24,503
Sporting equipment 13,212 19,317 15,154
- -----------------------------------------------------------------------------
Operating income from segments 112,804 101,887 73,631
Corporate office expenses (22,333) (25,337) (29,752)
- -----------------------------------------------------------------------------
Income from operations 90,471 76,550 43,879
Interest expense (10,793) (11,078) (11,357)
Interest income 3,444 2,608 1,878
Other income (expense), net 554 (696) (549)
- -----------------------------------------------------------------------------
Income before income taxes $ 83,676 $ 67,384 $ 33,851
- -----------------------------------------------------------------------------
Identifiable assets:
Outdoor products $ 202,112 $ 199,489 $ 202,671
Industrial and power equipment 95,842 82,959 69,230
Sporting equipment 118,422 71,777 59,152
Corporate office 103,472 103,747 95,395
Discontinued operations 26,638 62,820 73,200
- -----------------------------------------------------------------------------
$ 546,486 $ 520,792 $ 499,648
- -----------------------------------------------------------------------------
Depreciation and amortization:
Outdoor products $ 12,720 $ 13,771 $ 14,511
Industrial and power equipment 3,625 3,820 3,616
Sporting equipment 4,302 3,774 3,594
Corporate office 1,534 1,584 1,093
- -----------------------------------------------------------------------------
$ 22,181 $ 22,949 $ 22,814
- -----------------------------------------------------------------------------
Capital expenditures:
Outdoor products $ 6,753 $ 4,939 $ 5,335
Industrial and power equipment 2,195 4,917 698
Sporting equipment 3,504 4,578 1,377
Corporate office 6,829 254 7,033
- -----------------------------------------------------------------------------
$ 19,281 $ 14,688 $ 14,443
- -----------------------------------------------------------------------------
Page 35
<PAGE>
NOTE 11:
SUPPLEMENTAL INFORMATION
The following balance sheet captions are comprised of the items specified below:
As of the last day of February 1996 1995
- -------------------------------------------------------------------------------
In thousands
Accounts receivable:
Trade accounts and other $ 121,059 $ 89,899
Billings on construction contracts:
Current 20,813 32,029
Retainage estimated to be collected
within one year 2,117 11,457
Income taxes receivable 9,667
Allowance for doubtful accounts (3,853) (2,611)
- -------------------------------------------------------------------------------
$ 149,803 $ 130,774
- -------------------------------------------------------------------------------
Inventories:
Finished goods $ 50,752 $ 35,769
Work in process 14,879 14,075
Raw materials and supplies 28,482 27,231
- -------------------------------------------------------------------------------
$ 94,113 $ 77,075
- -------------------------------------------------------------------------------
Property, plant and equipment:
Land $ 6,400 $ 6,639
Buildings and improvements 82,901 82,948
Machinery and equipment 154,626 153,617
Furniture, fixtures and office equipment 22,311 21,949
Transportation equipment 23,571 11,083
Construction in progress 5,739 3,693
Accumulated depreciation (160,026) (145,561)
- -------------------------------------------------------------------------------
$ 135,522 $ 134,368
- -------------------------------------------------------------------------------
Accounts payable:
Trade accounts and other $ 51,393 $ 58,388
Retainage estimated to be paid within one year 61 6,492
- -------------------------------------------------------------------------------
$ 51,454 $ 64,880
- -------------------------------------------------------------------------------
Accrued expenses:
Salaries, wages and related withholdings $ 24,437 $ 25,033
Employee benefits 7,885 5,707
Casualty insurance costs 15,849 15,240
Income taxes payable 4,229 5,963
Other 31,829 39,892
- -------------------------------------------------------------------------------
$ 84,229 $ 91,835
- -------------------------------------------------------------------------------
Other liabilities:
Employee benefits $ 23,898 $ 21,215
Casualty insurance costs 396 3,749
Other 1,403 1,482
- -------------------------------------------------------------------------------
$ 25,697 $ 26,446
- -------------------------------------------------------------------------------
Page 36
<PAGE>
At February 29, 1996, the Company's manufacturing operation in Canada had net
assets of $14.3 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 $11.9 million, $10.6 million and $8.9 million for 1996,
1995 and 1994.
Supplemental cash flow information is as follows (in thousands):
1996 1995 1994
- -------------------------------------------------------------------------------
Interest paid $ 10,452 $ 10,378 $ 12,447
Income taxes paid 35,541 28,915 21,668
Capital lease obligations incurred 7,124 34 106
Issuance of Company stock to employee
benefits plan 257 1,234
Acquisitions of businesses (see Note 4):
Assets acquired 49,930 22,556
Liabilities assumed and incurred (12,534) (12,406)
Cash paid 37,396 10,150
- -------------------------------------------------------------------------------
Page 37
<PAGE>
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 1996. All applicable amounts
have been restated for the merger (see Note 1 of Notes to Consolidated Financial
Statements).
In thousands, First Second Third Fourth Fiscal
except share data Quarter Quarter Quarter Quarter Year Total
- --------------------------------------------------------------------------------
1996
Sales $ 164,189 $ 147,166 $ 157,964 $ 174,982 $ 644,301
Gross profit 55,052 48,752 55,041 58,134 216,979
Net income 13,823 10,534 16,762 12,436 53,555
Net income per share .71 .54 .86 .64 2.75
The second and third quarters include after tax charges of $1.0 million ($.05
per share) and $.4 million ($.02 per share) for costs associated with the merger
(see Note 1 of Notes to Consolidated Financial Statements). The third quarter
includes net income of $1.7 million ($.09 per share) from the use of charitable
contribution carryovers resulting from the merger to reduce the provision for
income taxes.
In thousands, First Second Third Fourth Fiscal
except share data Quarter Quarter Quarter Quarter Year Total
- --------------------------------------------------------------------------------
1995
Sales $ 145,684 $ 138,781 $ 157,459 $ 146,495 $ 588,419
Gross profit 48,519 47,094 52,963 49,025 197,601
Net income 9,845 9,503 12,336 9,047 40,731
Net income per share .51 .49 .64 .46 2.10
The first and third quarters include after-tax charges of $2.4 million ($.12 per
share) and $2.3 million ($.12 per share), respectively, for anticipated
litigation and settlement costs related to the sale of a former subsidiary. The
second quarter includes net income of $.9 million ($.05 per share) from a loan
guarantee fee received from a related party. The third and fourth quarters
include after-tax charges of $1.3 million ($.07 per share) each for an
environmental matter at the Company's Sporting Equipment segment's Lewiston,
Idaho facility.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 38
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the "Directors", "Executive Officers" and "Filing Disclosure" sections of
the proxy statement for the June 24, 1996, Annual Meeting of Stockholders of
Blount International, Inc., which sections are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the "Executive Compensation and Other Information" section of the proxy
statement for the June 24, 1996, Annual Meeting of Stockholders of Blount
International, Inc., which section is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the "Principal Stockholders" section of the proxy statement for the June 24,
1996, Annual Meeting of Stockholders of Blount International, Inc., which
section is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the "Certain Transactions and Other Matters" section of the proxy statement
for the June 24, 1996, Annual Meeting of Stockholders of Blount International,
Inc., which section is incorporated herein by reference.
Page 39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
Reference
---------
(a) Certain documents filed as part of Form 10-K
(1) Financial Statements and Supplementary Data
Report of Independent Accountants 15
Consolidated Statements of Income for the years
ended the last day of February 1996, 1995 and 1994 17
Consolidated Statements of Retained Earnings for the
years ended the last day of February 1996, 1995 and 1994 17
Consolidated Balance Sheets as of the last day of
February 1996 and 1995 18
Consolidated Statements of Cash Flows
for the years ended the last day of
February 1996, 1995 and 1994 19
Consolidated Statements of Changes in Capital Stock
Accounts for the years ended the last day of
February 1996, 1995 and 1994 20
Notes to Consolidated Financial Statements 21 - 37
Supplementary Data 38
(2) Schedules for the years ended the last day of
February 1996, 1995 and 1994 *
II. Valuation and qualifying accounts 45
* All other schedules have been omitted because they are not required or
because the information is presented in the Notes to Consolidated Financial
Statements.
(b) Reports on Form 8-K in the Fourth Quarter
None.
(c) Exhibits required to be filed by Item 601 of Regulation S-K:
*2 Plan and Agreement of Merger among Blount International, Inc.,
HBC Transaction Subsidiary, Inc. and Blount, Inc., dated August 17, 1995 filed
as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).
*3(a) Restated Certificate of Incorporation of Blount International,
Inc. filed as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of
Blount International, Inc., including amendments and exhibits, which became
effective on October 4, 1995 (Commission File No. 33-63141).
Page 40
<PAGE>
*3(b) By-Laws of Blount International, Inc. filed as part of
Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount International,
Inc., including amendments and exhibits, which became effective on October 4,
1995 (Commission File No. 33-63141).
*4(a) Registration Rights and Stock Transfer Restriction agreement
filed as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of
Blount International, Inc., including amendments and exhibits, which became
effective on October 4, 1995 (Commission File No. 33-63141).
*4(b) 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).
*10(a) Form of Indemnification Agreement between Blount International,
Inc. and The Blount Holding Company, L.P. filed as part of Registration
Statement on Form S-4 (Reg. No. 33-63141) of Blount International, Inc.,
including amendments and exhibits, which became effective on October 4, 1995
(Commission File No. 33-63141).
*10(b) Insurance Agreement between Blount, Inc. and Winton M. Blount
which was filed as an exhibit to the Annual Report of Blount, Inc. on Form 10-K
for the fiscal year ended February 28, 1983.
*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).
*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. filed
as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).
*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. filed
as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).
Page 41
<PAGE>
*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. filed as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of
Blount International, Inc., including amendments and exhibits, which became
effective on October 4, 1995 (Commission File No. 33-63141).
*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.
**10(u) Blount, Inc. Non-Employee Directors' Stock Compensation Plan.
*10(v) Agreement and Plan of Merger By and Among Simmons Outdoor
Corporation, Blount, Inc., and S.O.C. Corporation filed as part of Schedule 14D-
1 and Schedule 13D of Simmons Outdoor Corporation, S.O.C. Corporation, Blount,
Inc., and Blount International, Inc., which was filed on November 17, 1995.
**10(w) Amendments to and Assumptions of Employment Agreements with the
following individuals:
John M. Panettiere
Harold E. Layman
D. Joseph McInnes
James S. Osterman
Donald B. Zorn
**10(x)(i) Blount, Inc. Executive Benefit Plans Trust Agreement.
Page 42
<PAGE>
**10(x)(ii) Amendment To and Assumption of Blount, Inc. Executive Benefit
Plans Trust.
**10(y)(i) Blount, Inc. Benefits Protection Trust Agreement.
**10(y)(ii) Amendment To and Assumption of Blount, Inc. Benefits Protection
Trust.
11. Computation of net income per common share included herein on page 46.
21. A list of the significant subsidiaries of Blount International, Inc.
included herein on page 47.
23. Consent of Independent Accountants included herein on page 48.
27. Financial Data Schedule.
* Incorporated by reference.
** Filed electronically herewith. Copies of such exhibits may be obtained
upon written request from:
Corporate Communications
Blount International, Inc.
P.O. Box 949
Montgomery, AL 36101-0949
Page 43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BLOUNT INTERNATIONAL, INC.
By: /s/ Harold E. Layman
Harold E. Layman
Senior Vice President and
Chief Financial Officer
Dated: May 13, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Dated: May 13, 1996
/s/ Winton M. Blount /s/ Alfred M. Gleason
Winton M. Blount Alfred M. Gleason
Chairman of the Board Director
and Director
/s/ W. Houston Blount /s/ Mary D. Nelson
W. Houston Blount Mary D. Nelson
Director Director
/s/ R. Eugene Cartledge /s/ John M. Panettiere
R. Eugene Cartledge John M. Panettiere
Director President and Chief Executive
Officer and Director
/s/ C. Todd Conover /s/ Arthur P. Ronan
C. Todd Conover Arthur P. Ronan
Director Director
/s/ H. Corbin Day /s/ Joab L. Thomas
H. Corbin Day Joab L. Thomas
Director Director
/s/ Herbert J. Dickson /s/ Rodney W. Blankenship
Herbert J. Dickson Rodney W. Blankenship
Director Chief Accounting Officer
/s/ Emory M. Folmar
Emory M. Folmar
Director
Page 44
<PAGE>
<TABLE>
BLOUNT INTERNATIONAL, INC. & SUBSIDIARIES
SCHEDULE II
CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
For the years ended the last day of February 1994, 1995 and 1996
In thousands
- ------------
Column A Column B Column C Column D Column E
-------- ------------ ------------------------- ----------- ----------
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning of Cost and Other End of
Description Period Expenses Accounts Deductions Period
----------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= =======
1996
- ----
Allowance for doubtful
accounts receivable $ 2,611 $ 1,064 $ 559 (2) $ 381 (1) $ 3,853
======= ======= ======= ======= =======
(1) Principally amounts written-off less recoveries of amounts previously written-off.
(2) Allowance established for company acquired by purchase.
</TABLE>
Page 45
<PAGE>
EXHIBIT 11
<TABLE>
BLOUNT INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Primary Diluted Primary Diluted Primary Diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding 19,098,566 19,098,566 18,885,426 18,885,426 18,631,751 18,631,751
Incremental shares for
stock options 372,060 382,148 511,104 562,260 464,349 619,501
---------- ---------- ---------- ---------- ---------- ----------
Total number of shares used
in per share calculations 19,470,626 19,480,714 19,396,530 19,447,686 19,096,100 19,251,252
========== ========== ========== ========== ========== ==========
Income from continuing
operations $ 53,555 $ 53,555 $ 40,731 $ 40,731 $ 21,568 $ 21,568
---------- ---------- ---------- ---------- ---------- ----------
Discontinued operations:
Loss from operations, net (9,666) (9,666)
Loss on disposal, net (650) (650)
---------- ---------- ---------- ---------- ---------- ----------
Total from discontinued
operations (10,316) (10,316)
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 53,555 $ 53,555 $ 40,731 $ 40,731 $ 11,252 $ 11,252
========== ========== ========== ========== ========== ==========
Income (loss) per common share:
Continuing operations $ 2.75 $ 2.75 $ 2.10 $ 2.09 $ 1.13 $ 1.12
Discontinued operations (.54) (.54)
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 2.75 $ 2.75 $ 2.10 $ 2.09 $ .59 $ .58
========== ========== ========== ========== ========== ==========
</TABLE>
Page 46
<PAGE>
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT
At February 29, 1996, consolidated, directly or indirectly, significant wholly-
owned subsidiaries of Blount International, Inc. were as follows:
NAME OF PLACE OF
SUBSIDIARY INCORPORATION
- ---------- -------------
Blount, Inc. Delaware
BI Holdings Corp. Delaware
Blount Holdings, Ltd. Canada
Blount Canada, Ltd. Canada
Blount Europe, SA Belgium
Blount Japan, Inc. Japan
Blount Industrial de Correntes LTDA Brazil
Omark Properties, Inc. Oregon
Dixon Industries, Inc. Kansas
Gear Products, Inc. Oklahoma
Simmons Outdoor Corporation Delaware
CTR Manufacturing, Inc. North Carolina
The names of particular subsidiaries have been omitted because when considered
in the aggregate or as a single subsidiary they would not constitute a
significant subsidiary as of February 29, 1996.
Page 47
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Blount International, Inc. on Form S-3 (File No. 33-46543), Form S-8 (File No.
33-51580), and Form S-8 (File No. 33-56801) of our report dated April 11, 1996,
on our audits of the consolidated financial statements and financial statement
schedules of Blount International, Inc. and subsidiaries as of the last day of
February 1996 and 1995, and for each of the three years in the period ended
February 29, 1996, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
April 11, 1996
Page 48
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BLOUNT INTERNATIONAL, INC. FOR THE PERIOD ENDED
FEBRUARY 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 14,590
<SECURITIES> 0
<RECEIVABLES> 153,656
<ALLOWANCES> 3,853
<INVENTORY> 94,113
<CURRENT-ASSETS> 285,499
<PP&E> 295,548
<DEPRECIATION> 160,026
<TOTAL-ASSETS> 546,486
<CURRENT-LIABILITIES> 149,338
<BONDS> 95,920
0
0
<COMMON> 191
<OTHER-SE> 254,807
<TOTAL-LIABILITY-AND-EQUITY> 546,486
<SALES> 644,301
<TOTAL-REVENUES> 644,301
<CGS> 427,322
<TOTAL-COSTS> 427,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,793
<INCOME-PRETAX> 83,676
<INCOME-TAX> 30,121
<INCOME-CONTINUING> 53,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,555
<EPS-PRIMARY> 2.75
<EPS-DILUTED> 2.75
</TABLE>
EXHIBIT 10 (t)
PERSONAL & CONFIDENTIAL
March 12, 1995
Mr. Richard H. Irving III
201 Maison Court
Elmhurst, Illinois 60126
Dear Dick:
On behalf of Red and other Senior Management of Blount, Inc., we
were delighted to have you and Kitty in Montgomery this weekend.
Obviously, our evaluation of you and your skills and experience in
relation to our company leads us to believe that you could and
would make a significant contribution to our efforts. We have an
exciting future planned for Blount and we all want you to be a part
of it.
Confirming our conversations with you, I would like to summarize
the specifics of our employment offer. These items would be
formalized in an employment contract once we reach agreement on the
following:
1. You would be elected Senior Vice President and General
Counsel of Blount, Inc. This position reports to me as
President and Chief Executive Officer of the company.
Your responsibilities, duties and authority have been
discussed in general and are detailed in the Senior Vice
President and General Counsel position description
furnished earlier. Hopefully, you can assume these
duties devoting your full time to the affairs of the
company as soon as possible but no later than May 15,
1995. Appropriate officers' insurance is provided to
this position as well as all other officers of the
company.
2. Your initial base salary will be $245,000 per year paid
semi-monthly. We normally review salaries every twelve
calendar months with raises being effective the first
quarter of each operating year. You will participate in
Page Two
our Management Incentive Bonus Program; your annual
target bonus will be 45% of your base salary. The target
bonus will be subject to decreases or increases up to
200% of target (maximum bonus) depending upon the
attainment of specific corporate and individual key base
objectives. For FY 96 you would have a guaranteed bonus
of not less than $100,000. Maximum bonuses have been
earned at Blount, Inc. in FY 94 and FY 95. Our bonuses
are normally paid in April. Specific key base objectives
for you will be developed and established; corporate
objectives are generally in concert with our strategic
plan. We will establish your individual objectives soon
after you begin your employment.
3. You will be provided options for 20,000 shares of Blount
"A" stock which will vest in equal $100,000 increments as
allowed by the IRS. These shares will be awarded under
our Incentive Stock Option Plan (copy attached) and will
be granted soon after the commencement of your
employment. The option price will be the average of the
high and low price of Blount "A" stock on the date the
options are granted.
4. You will participate in all of the company's standard
benefit programs. These provide first-day coverage for
medical, life, dental and vision insurance. The one-year
waiting period for our Long Term Disability Program will
be waived in your instance. Our group term life
insurance coverage is equal to 2 times base salary plus
an equal amount for accidental death. In addition, we
carry a $250,000 accidental death benefit for each
employee traveling on company business. A Summary Plan
Description booklet was given to you by Joe McInnes
during your last visit which further details these plans
and programs. Various cost sharing arrangements were
included in this material. You and your family, along
with other selected senior managers, will participate in
our Exec-U-Care supplemental health reimbursement
program. This program reimburses you for all expenses
not covered under our group medical, dental and vision
plan. This also carries a $250,000 Accidental Death and
Dismemberment policy. Participation in our 401(k) Plan
and Retirement Plan will be upon meeting the eligibility
Page Three
requirements in each instance. Our 401(k) Plan currently
matches 100% of the first 2% of employees' contribution,
50% of the next 2%, and 25% of the next 2%, all subject
to IRS rules.
5. You will be offered participation in our Executive Life
Insurance Program. While you are actively employed the
plan provides a death benefit of $250,000 payable to your
designated beneficiary. This is in addition to our group
term insurance coverage listed above. The Executive
Insurance would be paid up at age 65 and given to you as
paid up insurance upon your retirement from Blount on or
after age 65. Our group term insurance decreases to a
maximum $10,000 at retirement. This Executive program is
designed to offset some of the loss of group term life
insurance at retirement.
6. We will provide you an automobile under our standard
policy such as a Buick Park Avenue, Oldsmobile 98,
Chrysler New Yorker or Lincoln Continental. We normally
provide a new automobile each 40 months of 70,000 miles,
whichever occurs first. All fuel, maintenance, etc., is
provided consistent with our policy.
7. We will provide membership including initiation fees,
dues reimbursement and any assessments in the Montgomery
Country Club or Wynlakes Country Club (your choice) and
the Capital City Club (a luncheon club) for you and your
family. The country club membership may take time due to
a waiting list; however, we will work to circumvent the
lengthy waiting period in regard to your membership.
8. We will provide a furnished townhouse or apartment for
your use for three months or until you are permanently
relocated in Montgomery, whichever occurs first. Also
included will be reasonable and customary living expenses
during this three month period. We will provide an
interest-free bridge loan for a six month period for the
acquisition of a home in Montgomery, if necessary. In
anticipation of miscellaneous moving expenses not
otherwise covered, we would provide a payment of one
months compensation to take care of these incidentals.
This will be paid in conjunction with the arrival of your
Page Four
household goods in Montgomery. Blount will pay for the
packing, moving and unpacking of your household goods
from Chicago to Montgomery. Reasonable and customary
expenses for house hunting trips and returns to Chicago
during your transition period will be provided.
Nondeductible relocation expenses as well as points you
are required to pay on a home mortgage in Montgomery will
be reimbursed and grossed-up for tax consequences.
9. Your agreement will be on an annual basis and shall be
extended one day for each day worked until you attain age
64. The agreement may be terminated by either party upon
30 days written notice. If your employment is terminated
by Blount during your first twelve months of employment
for any reason except for cause (as defined below),
Blount will continue to pay your base salary for 6 months
after such termination offset by any salary earned in
subsequent employment during the 6 month payment period.
If termination, except for cause, occurs after your first
anniversary date but before your second anniversary date,
Blount will pay you 12 months severance pay. After your
second anniversary date, your severance, as above, would
be for 18 months. During any severance period you would
be provided office space, secretarial assistance and
related expenses if necessary. Termination for cause
would include, but would not be limited to, the following
conduct:
(1) Any act that is materially contrary to the
best interests of the company or its
affiliated entities including fraud,
conviction of a felony or gross malfeasance.
(2) Willful and continued failure by you to devote
your full business time and efforts to the
business affairs of the company, except that
you may serve as a director of other
corporations if such service involves no
conflict of interest, is within reasonable
time commitments, and permission to do so is
obtained from the President and Chief
Executive Officer of Blount, Inc.
Page Five
10. In addition to the consideration above, we will provide
for an annual physical examination and a consultant for
personal financial and tax planning. A separate
agreement covering confidentiality and disclosure matters
will need to be signed as you begin employment.
11. This entire offer is contingent on completion of a
physical examination.
Dick, we believe that you and your family will find Montgomery to
be a very fine environment in which to live and work. We all look
forward to your coming on both a personal and professional basis.
This letter outlines our offer which we believe is an outstanding
compensation package. If you agree with the items as outlined
above, please sign one of the copies and return to me at your
earliest convenience. This offer will remain valid until the
earlier of your acceptance or March 15, 1995. Upon your acceptance
of this letter of understanding, we will formalize our agreement in
our standard employment contract which covers change of control and
other matters.
We look forward to having you and Kitty with us.
Sincerely,
Date:__March 16, 1995____ Accepted:_/s/Richard H. Irving, III_
EXHIBIT 10 (u)
BLOUNT, INC.
NON-EMPLOYEE DIRECTORS' STOCK COMPENSATION PLAN
Blount considers it desirable that members of the board of directors, who
represent shareholders, be themselves shareholders. In order to supplement
the direct efforts of the directors themselves towards this end, Blount
wishes to increase the ownership interest of non-employee directors through
awards of Blount Class A Common Stock ("Stock"). Blount wishes by this
means to increase the community of interest of the shareholders at large
and the Blount directors and to make ownership a dynamic influence on the
attitudes of the board.
The following plan is therefore adopted:
1. Administration.
The plan shall be administered by the corporate secretary of Blount
("Administrator") who may delegate all or part of that authority and
responsibility. The Administrator shall interpret the plan, arrange for
the purchase and delivery of shares, determine forfeitures, and otherwise
assume general responsibility for administration of the plan. Any decision
by the Administrator shall be final and bind all parties. The
Administrator may be replaced from time to time in the discretion of the
President and Chief Executive Officer of Blount, Inc.
2. Awards.
2.1 Each non-employee director of Blount shall participate in this
plan as follows:
(a) Directors shall participate as of the later of the date of
their election at the annual meeting of shareholders in 1995 or
appointment.
(b) A director's date of participation shall be the award date.
Each annual meeting of shareholders after that date shall be an
anniversary date.
2.2 As of the award date a participant shall, subject to 2.3, be
awarded $25,000 worth of Stock as follows:
(a) As soon as practicable after the award date the Administrator
shall deliver cash in the amount of the award and applicable
commissions to one or more brokers or other third persons with
instructions to purchase Stock on the open market. It is understood
that market conditions or regulations affecting open market purchases
by a corporation of its own shares may extend the period of purchase
over several days or weeks when substantial sums are involved.
(b) When several participants have the same award date and if Stock
is purchased, all of the Stock shall be purchased and then divided
equally among the participants so that each receives the same number
of shares regardless of any changes in price that occur while
purchases are being carried out.
(c) When all of the Stock has been purchased or issued by Blount,
certificates in the names of the participants for their respective
shares shall be delivered to the Administrator. Each participant
shall deposit with the Administrator a blank stock power duly
executed and guaranteed in a form satisfactory to the Administrator
for each certificate for shares standing in the participant's name.
(d) the Administrator shall hold the certificates and stock powers
until the shares are vested and released from time to time as
provided in 3.7.
2.3 If, assuming that the participant were reelected, a
participant's term as a director would end because of age before the fifth
anniversary date after an award date, the amount awarded shall be reduced
by one-fifth for each anniversary date that would fall after the date the
term ends.
2.4 If a participant continues to be a non-employee director after
all of the shares from an award have vested, the award cycle shall be
repeated for such participant. The award date for the next award shall be
the date of the annual meeting of shareholders coinciding with the last
anniversary date for the prior award. The next award shall be $25,000
worth of Stock, subject to 2.3. Such Stock shall be acquired, vest and
otherwise be subject to all the provisions of this plan.
3. Vesting; Delivery of Shares; Forfeitures.
3.1 Subject to 3.2 through 3.6, awarded shares shall vest as follows:
Percent Vested Cumulative Percent
Award Date 0% 0%
First Anniversary Date 20 20
Second Anniversary Date 20 40
Third Anniversary Date 20 60
Fourth Anniversary Date 20 80
Fifth Anniversary Date 20 100
3.2 If a participant receives a reduced award under 2.3, the
vesting percentages shall be accelerated so that the entire award shall
vest evenly over the anniversary dates that fall on or before the date the
director's term ends. For example, if the award were reduced to $15,000
worth of stock, one-third of the shares would vest on each of the first
three anniversary dates.
3.3 Subject to 3.5 and 3.6, the following shall apply with respect
to awards to a participant whose award date is not the date of an annual
meeting of shareholders :
(a) The shares which would otherwise vest on the first anniversary
date shall instead vest on the date six months immediately following
the date certificates for the shares are delivered to the
Administrator under 2.2(c), or the first anniversary date for the
award, whichever is later.
(b) Notwithstanding (a), if the participant's term as a director
ends because of age on the first anniversary date, the shares which
would otherwise vest at a later date under (a) shall instead vest on
the first anniversary date.
3.4. If a participant ceases to be a non-employee director on an
anniversary date, that anniversary date shall be included in determining
the number of shares vested for that participant.
3.5 The following shall apply if a participant dies while serving
as a non-employee director:
(a) The participant's awarded shares scheduled to vest on the date
specified in 3.3 shall instead vest as of the date of death.
(b) If the date of death is not an anniversary date, the
participant's awarded shares scheduled to vest on the anniversary
date immediately following the date of death shall instead vest as of
the date of death.
(c) If the date of death is an anniversary date, the number of
shares vested for the participant shall be determined in accordance
with 3.4.
3.6 Subject to 3.5, if a participant ceases to be a non-employee
director on a date other than an anniversary date, the participant's
awarded shares scheduled to vest on the immediately following anniversary
date shall vest as of the date the participant ceases to be a non-employee
director pro-rata based on the number of days the participant served as a
non-employee director that year.
3.7 The certificate and stock power covering vested shares shall be
delivered to the participant or in accordance with 5.2 as soon as
practicable after the shares vest.
3.8 If a participant ceases to be a non-employee director, awarded
shares remaining unvested shall be forfeited. The Administrator, acting
for the participant pursuant to the blank stock power, shall transfer the
unvested shares to Blount. The participant or the participant's
representative shall execute any documents reasonably requested by the
Administrator to facilitate the transfer.
4. Status Before Full Vesting.
4.1 Each participant shall be a shareholder of record with respect
to all shares awarded, whether or not vested, and shall be entitled to all
of the rights of such a holder, except that a participant's share
certificates shall be held by the Administrator until delivered in
accordance with 3.7
4.2 Any dividend checks or communications to shareholders received
by the Administrator with respect to shares held by the Administrator shall
promptly be transmitted to the participant. The participant shall furnish
to the Administrator or Blount a current mailing address for such purpose.
4.3 No participant may transfer any interest in unvested shares to
any person other than Blount.
5. Death of a Participant.
5.1 Any vested shares held by the Administrator for a participant
who has died shall be delivered as soon as practicable to the participant's
death beneficiary under 5.2.
5.2 Any vested shares to be delivered on death of a participant
under 5.1 shall go to a participant's beneficiary in the following order of
priority:
(a) To the surviving beneficiary designated by the participant in
writing to the Administrator;
(b) To the participant's surviving spouse; or
(c) To the participant's estate.
6. Amendment or Termination; Miscellaneous.
6.1 The board of directors of Blount may amend or terminate this
plan at any time. No amendment or termination shall adversely affect any
then outstanding award.
6.2 Subject to the rights of amendment and termination in 6.1, this
plan shall continue indefinitely and future awards will be made in
accordance with 2.1 and 2.4.
6.3 Nothing in this plan shall create any obligation on the part of
the board of directors of Blount to nominate any director for reelection by
the shareholders or the board.
BLOUNT, INC.
By: /s/ Winton M. Blount
its Chairman of the Board
Date: April 10, 1995
EXHIBIT 10 (w)
AMENDMENT TO
AND ASSUMPTION OF
EMPLOYMENT AGREEMENT
This Amendment and Assumption Agreement dated as of the 3rd
day of November, 1995, by and among BLOUNT, INC. ("Blount"),
BLOUNT INTERNATIONAL, INC. ("BII") and JOHN M. PANETTIERE
("Executive");
W I T N E S S E T H:
WHEREAS, Executive entered into an agreement with Blount,
dated July 28, 1994, providing for Executive's employment by
Blount and specifying the terms and conditions of such employment
("Employment Agreement"); and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, Executive will assume significant duties and
responsibilities for BII; and
WHEREAS, the Merger Agreement provides for the continuation
of the Employment Agreement and the preservation of the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Employment Agreement, the parties hereby agree as follows:
1.
BII hereby agrees to assume all of the obligations,
responsibilities and liabilities of the "Company" under the
Employment Agreement and each place in the Employment Agreement
where a reference to "Company" appears shall now refer to and
mean BII. Further, in each place where the Employment Agreement
now refers to a benefit plan or program, compensation arrangement
or other similar plan or program maintained by Blount, such
reference shall now include a successor or substitute plan,
program or arrangement maintained or established by BII.
Executive hereby consents to the assumption of the Employment
Agreement by BII and the substitution of BII as the "Company"
thereunder.
2.
Section 3 of the Employment Agreement is hereby amended by
adding the following new subsection (i) to the end of the present
section:
"(i) The parties recognize that under this
Agreement as a result of a reorganization involving
Blount, Inc. that became effective November 3, 1995,
Executive will perform services for Blount, Inc. and
the Company, and Executive's compensation and benefits
may be paid or provided in part by Blount, Inc. and in
part by the Company, but that the aggregate amount of
such compensation and benefits shall be as provided in
this Section 3. For purposes of Section 5, the amounts
of compensation and benefits Executive shall be
entitled to receive after termination shall reflect the
amount of compensation and benefits he receives in the
aggregate from Blount, Inc. and the Company."
3.
Section 5.3 of the Employment Agreement is hereby amended by
deleting the first paragraph of the present section and
substituting the following therefor:
"5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death or
incapacity (as defined in the next two sentences) of Winton M.
Blount, the provisions set forth below shall apply, provided that
such provisions shall only apply in each case to the extent that
the damages payable to Executive for termination of his
employment under Sections 5.1 or 5.2 do not already provide such
benefits under the plan or program. For purposes of this
Agreement, Mr. Blount shall be considered incapacitated if he is
determined to be permanently unable to perform his duties as
Chairman of the Board of the Company. The Board of the Company
shall have the authority to make the determination whether Mr.
Blount is incapacitated under this Agreement and shall also have
the authority to determine whether Mr. Blount has ceased to be
incapacitated hereunder."
4.
Section 5.4 of the Employment Agreement is hereby amended by
changing the heading to "Tax Equalization Payment."
5.
Section 6.2(b) of the Employment Agreement is hereby amended
by changing the designations "(A)", "(B)", and "(C)", to "(i)",
"(ii)" and "(iii)", respectively.
6.
Section 6.3 of the Employment Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"6.3 "Change in Control" - Either
(a) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of the
Company representing an aggregate of fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who own such
amount of securities on the date hereof, or acquisitions by
persons who acquire such amount through inheritance); or
(b) Winton M. Blount (i) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of the Company, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (ii) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of the Company's
voting securities owned by the Blount Partnership; or
(c) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of the Company's then outstanding
securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company, cease for any reason to constitute at least
a majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(e) consummation of (i) a merger, consolidation or
other business combination of the Company with any other "person"
(as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of
the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common
stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such
merger, consolidation or business combination, or (ii) a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets; or
(f) the occurrence of any other event or circumstance
which is not covered by (a) through (e) above which the Board of
the Company determines affects control of the Company and adopts
a resolution that such event or circumstance constitutes a Change
in Control for the purposes of this Agreement."
7.
Section 6.7 of the Employment Agreement is hereby amended by
adding the words "or incapacity (as defined in Section 5.3)"
after the word "death" in the fifth line of the present section
and by adding the words "or incapacity" after the word "death" in
each other place in Section 6.7 where a reference to the "death
of Winton M. Blount" appears.
8.
Section 9.1 of the Employment Agreement is hereby amended by
deleting the first sentence of the present section in its
entirety and substituting the following therefor:
"9.1 In addition to any obligations imposed by law upon
any successor or transferor to the Company, the Company will
require any successor or transferor to all or substantially all
of the business and/or assets of the Company (whether direct or
indirect, by purchase, merger, reorganization, liquidation,
consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place."
9.
Blount agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the
Employment Agreement.
10.
Except as hereby modified, the terms and conditions of the
Employment Agreement shall remain in full force and effect. This
Amendment and Assumption Agreement shall be effective as of
November 3, 1995.
IN WITNESS WHEREOF, the parties have executed this Amendment
and Assumption Agreement as of the day and year first above
written.
EXECUTIVE:
/s/John M. Panettiere______________
JOHN M. PANETTIERE
BLOUNT, INC.
By:/s/Winton M. Blount____________
BLOUNT INTERNATIONAL, INC.
By:/s/Winton M. Blount____________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Employment Agreement between Blount,
Inc. ("Blount") and John M. Panettiere ("Executive"), dated July
28, 1994, as assumed by Blount International, Inc. (the
"Company") and as amended on November 3, 1995 (the "Agreement"),
and in further consideration of the Executive's performance of
valuable services for, and in the financial interests of, Blount,
Blount does hereby agree to pay and to perform all of the
obligations and responsibilities of the Company to the Executive
under the Agreement, including, without limitation, the
obligation to pay or provide the compensation and benefits under
Sections 5.1, 5.2, 5.3 and 5.4 of the Agreement.
IN WITNESS WHEREOF, Blount acting under authority of
its Board of Directors has caused this Guarantee Agreement to be
executed as of this 3rd day of November, 1995.
BLOUNT, INC.
By:/s/Winton M. Blount______________
<PAGE>
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Employment Agreement between Blount,
Inc. ("Blount") and John M. Panettiere ("Executive"), dated July
28, 1994, as assumed by Blount International, Inc. (the
"Company") and as amended on November 3, 1995 (the "Agreement"),
and in further consideration of the Executive's performance of
valuable services for, and in the financial interests of, Blount,
Blount does hereby agree to pay and to perform all of the
obligations and responsibilities of the Company to the Executive
under the Agreement, including, without limitation, the
obligation to pay or provide the compensation and benefits under
Sections 5.1, 5.2, 5.3 and 5.4 of the Agreement.
IN WITNESS WHEREOF, Blount acting under authority of
its Board of Directors has caused this Guarantee Agreement to be
executed as of this 3rd day of November, 1995.
BLOUNT, INC.
By:/s/John M. Panettiere____________
EXHIBIT 10 (w)
AMENDMENT TO
AND ASSUMPTION OF
EMPLOYMENT AGREEMENT
This Amendment and Assumption Agreement dated as of the 3rd
day of November, 1995, by and among BLOUNT, INC. ("Blount"),
BLOUNT INTERNATIONAL, INC. ("BII") and HAROLD E. LAYMAN
("Executive");
W I T N E S S E T H:
WHEREAS, Executive entered into an agreement with Blount,
dated August 22, 1994, providing for Executive's employment by
Blount and specifying the terms and conditions of such employment
("Employment Agreement"); and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, Executive will assume significant duties and
responsibilities for BII; and
WHEREAS, the Merger Agreement provides for the continuation
of the Employment Agreement and the preservation of the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Employment Agreement, the parties hereby agree as follows:
1.
BII hereby agrees to assume all of the obligations,
responsibilities and liabilities of the "Company" under the
Employment Agreement and each place in the Employment Agreement
where a reference to "Company" appears shall now refer to and
mean BII. Further, in each place where the Employment Agreement
now refers to a benefit plan or program, compensation arrangement
or other similar plan or program maintained by Blount, such
reference shall now include a successor or substitute plan,
program or arrangement maintained or established by BII.
Executive hereby consents to the assumption of the Employment
Agreement by BII and the substitution of BII as the "Company"
thereunder.
2.
Section 3 of the Employment Agreement is hereby amended by
adding the following new subsection (g) to the end of the present
section:
"(g) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a benefit
equal to 2 l/2 times Executive's total compensation (as
determined from time to time), subject to a maximum benefit of
$2.5 million. This insurance will be paid-up on the date
Executive attains 65 (assuming his employment continues until
that date) and will be delivered to Executive as a paid-up
insurance policy upon his retirement from the Company at or after
age 65. The life insurance provided to Executive under the
Executive Life Insurance Program shall be in addition to any life
insurance he receives under the Company's group term policy under
subsection (e) above."
3.
Section 5.3 of the Employment Agreement is hereby amended by
deleting the first paragraph of the present section and
substituting the following therefor:
"5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death or
incapacity (as defined in the next two sentences) of Winton M.
Blount, the provisions set forth below shall apply, provided that
such provisions shall only apply in each case to the extent that
the damages payable to Executive for termination of his
employment under Sections 5.1 or 5.2 do not already provide such
benefits under the plan or program. For purposes of this
Agreement, Mr. Blount shall be considered incapacitated if he is
determined to be permanently unable to perform his duties as
Chairman of the Board of the Company. The Board of the Company
shall have the authority to make the determination whether Mr.
Blount is incapacitated under this Agreement and shall also have
the authority to determine whether Mr. Blount has ceased to be
incapacitated hereunder."
4.
Section 6.2(b) of the Employment Agreement is hereby amended
by changing the designations "(A)", "(B)", and "(C)", to "(i)",
"(ii)" and "(iii)", respectively.
5.
Section 6.3 of the Employment Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"6.3 "Change in Control" - Either
(a) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of the
Company representing an aggregate of fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who own such
amount of securities on the date hereof, or acquisitions by
persons who acquire such amount through inheritance); or
(b) Winton M. Blount (i) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of the Company, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (ii) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of the Company's
voting securities owned by the Blount Partnership; or
(c) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of the Company's then outstanding
securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company, cease for any reason to constitute at least
a majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(e) consummation of (i) a merger, consolidation or
other business combination of the Company with any other "person"
(as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of
the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common
stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such
merger, consolidation or business combination, or (ii) a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets; or
(f) the occurrence of any other event or circumstance
which is not covered by (a) through (e) above which the Board of
the Company determines affects control of the Company and adopts
a resolution that such event or circumstance constitutes a Change
in Control for the purposes of this Agreement."
6.
Section 6.7 of the Employment Agreement is hereby amended by
adding the words "or incapacity (as defined in Section 5.3)"
after the word "death" in the fifth line of the present section
and by adding the words "or incapacity" after the word "death" in
each other place in Section 6.7 where a reference to the "death
of Winton M. Blount" appears.
7.
Section 9.1 of the Employment Agreement is hereby amended by
deleting the first sentence of the present section in its
entirety and substituting the following therefor:
"9.1 In addition to any obligations imposed by law upon
any successor or transferor to the Company, the Company will
require any successor or transferor to all or substantially all
of the business and/or assets of the Company (whether direct or
indirect, by purchase, merger, reorganization, liquidation,
consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place."
8.
Blount agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the
Employment Agreement.
9.
Except as hereby modified, the terms and conditions of the
Employment Agreement shall remain in full force and effect. This
Amendment and Assumption Agreement shall be effective as of
November 3, 1995.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
and Assumption Agreement as of the day and year first above
written.
EXECUTIVE:
/s/Harold E. Layman________________
HAROLD E. LAYMAN
BLOUNT, INC.
By:/s/John M. Panettiere__________
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere__________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Employment Agreement between Blount,
Inc. ("Blount") and Harold E. Layman ("Executive"), dated August
22, 1994, as assumed by Blount International, Inc. (the
"Company") and as amended on November 3, 1995 (the "Agreement"),
and in further consideration of the Executive's performance of
valuable services for, and in the financial interests of, Blount,
Blount does hereby agree to pay and to perform all of the
obligations and responsibilities of the Company to the Executive
under the Agreement, including, without limitation, the
obligation to pay or provide the compensation and benefits under
Sections 5.1, 5.2 and 5.3 of the Agreement.
IN WITNESS WHEREOF, Blount acting under authority of
its Board of Directors has caused this Guarantee Agreement to be
executed as of this 3rd day of November, 1995.
BLOUNT, INC.
By:/s/John M. Panettiere____________
EXHIBIT 10 (w)
AMENDMENT TO
AND ASSUMPTION OF
EMPLOYMENT AGREEMENT
This Amendment and Assumption Agreement dated as of the 3rd
day of November, 1995, by and among BLOUNT, INC. ("Blount"),
BLOUNT INTERNATIONAL, INC. ("BII") and D. JOSEPH MCINNES
("Executive");
W I T N E S S E T H:
WHEREAS, Executive entered into an agreement with Blount,
dated August 22, 1994, providing for Executive's employment by
Blount and specifying the terms and conditions of such employment
("Employment Agreement"); and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, Executive will assume significant duties and
responsibilities for BII; and
WHEREAS, the Merger Agreement provides for the continuation
of the Employment Agreement and the preservation of the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Employment Agreement, the parties hereby agree as follows:
1.
BII hereby agrees to assume all of the obligations,
responsibilities and liabilities of the "Company" under the
Employment Agreement and each place in the Employment Agreement
where a reference to "Company" appears shall now refer to and
mean BII. Further, in each place where the Employment Agreement
now refers to a benefit plan or program, compensation arrangement
or other similar plan or program maintained by Blount, such
reference shall now include a successor or substitute plan,
program or arrangement maintained or established by BII.
Executive hereby consents to the assumption of the Employment
Agreement by BII and the substitution of BII as the "Company"
thereunder.
2.
Section 3 of the Employment Agreement is hereby amended by
adding the following new subsection (g) to the end of the present
section:
"(g) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a benefit
equal to 2 l/2 times Executive's total compensation (as
determined from time to time), subject to a maximum benefit of
$2.5 million. This insurance will be paid-up on the date
Executive attains 65 (assuming his employment continues until
that date) and will be delivered to Executive as a paid-up
insurance policy upon his retirement from the Company at or after
age 65. The life insurance provided to Executive under the
Executive Life Insurance Program shall be in addition to any life
insurance he receives under the Company's group term policy under
subsection (e) above."
3.
Section 5.3 of the Employment Agreement is hereby amended by
deleting the first paragraph of the present section and
substituting the following therefor:
"5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death or
incapacity (as defined in the next two sentences) of Winton M.
Blount, the provisions set forth below shall apply, provided that
such provisions shall only apply in each case to the extent that
the damages payable to Executive for termination of his
employment under Sections 5.1 or 5.2 do not already provide such
benefits under the plan or program. For purposes of this
Agreement, Mr. Blount shall be considered incapacitated if he is
determined to be permanently unable to perform his duties as
Chairman of the Board of the Company. The Board of the Company
shall have the authority to make the determination whether Mr.
Blount is incapacitated under this Agreement and shall also have
the authority to determine whether Mr. Blount has ceased to be
incapacitated hereunder."
4.
Section 5.4 of the Employment Agreement is hereby amended by
changing the heading to "Tax Equalization Payment."
5.
Section 6.2(b) of the Employment Agreement is hereby amended
by changing the designations "(A)", "(B)", and "(C)", to "(i)",
"(ii)" and "(iii)", respectively.
6.
Section 6.3 of the Employment Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"6.3 "Change in Control" - Either
(a) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of the
Company representing an aggregate of fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who own such
amount of securities on the date hereof, or acquisitions by
persons who acquire such amount through inheritance); or
(b) Winton M. Blount (i) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of the Company, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (ii) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of the Company's
voting securities owned by the Blount Partnership; or
(c) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of the Company's then outstanding
securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company, cease for any reason to constitute at least
a majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(e) consummation of (i) a merger, consolidation or
other business combination of the Company with any other "person"
(as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of
the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common
stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such
merger, consolidation or business combination, or (ii) a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets; or
(f) the occurrence of any other event or circumstance
which is not covered by (a) through (e) above which the Board of
the Company determines affects control of the Company and adopts
a resolution that such event or circumstance constitutes a Change
in Control for the purposes of this Agreement."
7.
Section 6.7 of the Employment Agreement is hereby amended by
adding the words "or incapacity (as defined in Section 5.3)"
after the word "death" in the fifth line of the present section
and by adding the words "or incapacity" after the word "death" in
each other place in Section 6.7 where a reference to the "death
of Winton M. Blount" appears.
8.
Section 9.1 of the Employment Agreement is hereby amended by
deleting the first sentence of the present section in its
entirety and substituting the following therefor:
"9.1 In addition to any obligations imposed by law upon
any successor or transferor to the Company, the Company will
require any successor or transferor to all or substantially all
of the business and/or assets of the Company (whether direct or
indirect, by purchase, merger, reorganization, liquidation,
consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place."
9.
Blount agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the
Employment Agreement.
10.
Except as hereby modified, the terms and conditions of the
Employment Agreement shall remain in full force and effect. This
Amendment and Assumption Agreement shall be effective as of
November 3, 1995.
IN WITNESS WHEREOF, the parties have executed this Amendment
and Assumption Agreement as of the day and year first above
written.
EXECUTIVE:
/s/D. Joseph McInnes_______________
D. JOSEPH MCINNES
BLOUNT, INC.
By:/s/J. M. Panettiere____________
BLOUNT INTERNATIONAL, INC.
By:/s/J. M. Panettiere____________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Employment Agreement between Blount,
Inc. ("Blount") and D. Joseph McInnes ("Executive"), dated August
22, 1994, as assumed by Blount International, Inc. (the
"Company") and as amended on November 3, 1995 (the "Agreement"),
and in further consideration of the Executive's performance of
valuable services for, and in the financial interests of, Blount,
Blount does hereby agree to pay and to perform all of the
obligations and responsibilities of the Company to the Executive
under the Agreement, including, without limitation, the
obligation to pay or provide the compensation and benefits under
Sections 5.1, 5.2, 5.3 and 5.4 of the Agreement.
IN WITNESS WHEREOF, Blount acting under authority of
its Board of Directors has caused this Guarantee Agreement to be
executed as of this 3rd day of November, 1995.
BLOUNT, INC.
By:/s/John M. Panettiere____________
EXHIBIT 10 (w)
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment dated as of the 3rd day of November, 1995, by
and among BLOUNT, INC. ("Blount"), BLOUNT INTERNATIONAL, INC.
("BII") and JAMES S. OSTERMAN ("Executive");
W I T N E S S E T H:
WHEREAS, Executive entered into an agreement with Blount,
dated September 12, 1994, providing for Executive's employment by
Blount and specifying the terms and conditions of such employment
("Employment Agreement"); and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, the Merger Agreement provides for the continuation
of the Employment Agreement and the preservation of the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Employment Agreement, the parties hereby agree as follows:
1.
Each place in Section 6.3 of the Employment Agreement where
a reference to "Company" appears shall now refer to and mean BII.
Further, in each place where the Employment Agreement now refers
to a benefit plan or program, compensation arrangement or other
similar plan or program maintained by the Company, such reference
shall now include a successor or substitute plan, program or
arrangement maintained or established by BII.
2.
Section 3 of the Employment Agreement is hereby amended by
adding the following new subsection (g) to the end of the present
section:
"(g) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a benefit
equal to 2 l/2 times Executive's total compensation (as
determined from time to time), subject to a maximum benefit of
$2.5 million. This insurance will be paid-up on the date
Executive attains 65 (assuming his employment continues until
that date) and will be delivered to Executive as a paid-up
insurance policy upon his retirement from the Company at or after
age 65. The life insurance provided to Executive under the
Executive Life Insurance Program shall be in addition to any life
insurance he receives under the Company's group term policy under
subsection (e) above."
3.
Section 5.3 of the Employment Agreement is hereby amended by
deleting the first paragraph of the present section and
substituting the following therefor:
"5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death or
incapacity (as defined in the next two sentences) of Winton M.
Blount, the provisions set forth below shall apply, provided that
such provisions shall only apply in each case to the extent that
the damages payable to Executive for termination of his
employment under Sections 5.1 or 5.2 do not already provide such
benefits under the plan or program. For purposes of this
Agreement, Mr. Blount shall be considered incapacitated if he is
determined to be permanently unable to perform his duties as
Chairman of the Board of Blount International, Inc. The Board of
Blount International, Inc. shall have the authority to make the
determination whether Mr. Blount is incapacitated under this
Agreement and shall also have the authority to determine whether
Mr. Blount has ceased to be incapacitated hereunder."
4.
Section 6.2(b) of the Employment Agreement is hereby amended
by changing the designations "(A)", "(B)", and "(C)", to "(i)",
"(ii)" and "(iii)", respectively.
5.
Section 6.3 of the Employment Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"6.3 "Change in Control" - Either
(a) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of
Blount International, Inc. ("BII") representing an aggregate of
fifty percent (50%) or more of the combined voting power of BII's
then outstanding securities (excluding the acquisition by persons
who own such amount of securities on the date hereof, or
acquisitions by persons who acquire such amount through
inheritance); or
(b) Winton M. Blount (i) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of BII, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (ii) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of BII's voting
securities owned by the Blount Partnership; or
(c) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of BII's then outstanding securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of BII, cease for any reason to constitute at least a
majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(e) consummation of (i) a merger, consolidation or
other business combination of BII with any other "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) or affiliate thereof, other
than a merger, consolidation or business combination which would
result in the outstanding common stock of BII immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into common stock of the surviving entity
or a parent or affiliate thereof) at least fifty percent (50%) of
the outstanding common stock of BII (or such surviving entity or
parent or affiliate thereof) that is outstanding immediately
after such merger, consolidation or business combination, or (ii)
a plan of complete liquidation of BII or an agreement for the
sale or disposition by BII of all or substantially all of BII's
assets; or
(f) the occurrence of any other event or circumstance
which is not covered by (a) through (e) above which the Board of
BII determines affects control of BII and adopts a resolution
that such event or circumstance constitutes a Change in Control
for the purposes of this Agreement."
6.
Section 6.7 of the Employment Agreement is hereby amended by
adding the words "or incapacity (as defined in Section 5.3)"
after the word "death" in the fifth line of the present section
and by adding the words "or incapacity" after the word "death" in
each other place in Section 6.7 where a reference to the "death
of Winton M. Blount" appears.
7.
Section 9.1 of the Employment Agreement is hereby amended by
deleting the first sentence of the present section in its
entirety and substituting the following therefor:
"9.1 In addition to any obligations imposed by law upon
any successor or transferor to the Company, the Company will
require any successor or transferor to all or substantially all
of the business and/or assets of the Company (whether direct or
indirect, by purchase, merger, reorganization, liquidation,
consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place."
8.
BII agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the
Employment Agreement.
9.
Except as hereby modified, the terms and conditions of the
Employment Agreement shall remain in full force and effect. This
Amendment shall be effective as of November 3, 1995.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
EXECUTIVE:
/s/James S. Osterman_______________
JAMES S. OSTERMAN
BLOUNT, INC.
By:/s/John M. Panettiere__________
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere__________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Employment Agreement between Blount,
Inc. ("Blount") and James S. Osterman ("Executive"), dated
September 12, 1994, and as amended on November 3, 1995 (the
"Agreement"), and in further consideration of the Executive's
performance of valuable services in the financial interests of
Blount International, Inc. (the "Company"), the Company does
hereby agree to pay and to perform all of the obligations and
responsibilities of Blount to the Executive under the Agreement,
including, without limitation, the obligation to pay or provide
the compensation and benefits under Sections 5.1, 5.2 and 5.3 of
the Agreement.
IN WITNESS WHEREOF, the Company acting under authority
of its Board of Directors has caused this Guarantee Agreement to
be executed as of this 3rd day of November, 1995.
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere____________
EXHIBIT 10 (w)
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment dated as of the 3rd day of November, 1995, by
and among BLOUNT, INC. ("Blount"), BLOUNT INTERNATIONAL, INC.
("BII") and DONALD B. ZORN ("Executive");
W I T N E S S E T H:
WHEREAS, Executive entered into an agreement with Blount,
dated September 14, 1994, providing for Executive's employment by
Blount and specifying the terms and conditions of such employment
("Employment Agreement"); and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, the Merger Agreement provides for the continuation
of the Employment Agreement and the preservation of the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Employment Agreement, the parties hereby agree as follows:
1.
Each place in Section 6.3 of the Employment Agreement where
a reference to "Company" appears shall now refer to and mean BII.
Further, in each place where the Employment Agreement now refers
to a benefit plan or program, compensation arrangement or other
similar plan or program maintained by the Company, such reference
shall now include a successor or substitute plan, program or
arrangement maintained or established by BII.
2.
Section 3 of the Employment Agreement is hereby amended by
adding the following new subsection (i) to the end of the present
section:
"(i) The parties recognize that under this
Agreement as a result of a reorganization involving the
Company that became effective November 3, 1995,
Executive may perform services for the Company and
Blount International, Inc., and Executive's
compensation and benefits may be paid or provided in
part by Blount International, Inc. and in part by the
Company, but that the aggregate amount of such
compensation and benefits shall be as provided in this
Section 3. For purposes of Section 5, the amounts of
compensation and benefits Executive shall be entitled
to receive after termination shall reflect the amount
of compensation and benefits he receives in the
aggregate from Blount International, Inc. and the
Company."
3.
Section 5.3 of the Employment Agreement is hereby amended by
deleting the first paragraph of the present section and
substituting the following therefor:
"5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death or
incapacity (as defined in the next two sentences) of Winton M.
Blount, the provisions set forth below shall apply, provided that
such provisions shall only apply in each case to the extent that
the damages payable to Executive for termination of his
employment under Sections 5.1 or 5.2 do not already provide such
benefits under the plan or program. For purposes of this
Agreement, Mr. Blount shall be considered incapacitated if he is
determined to be permanently unable to perform his duties as
Chairman of the Board of Blount International, Inc. The Board of
Blount International, Inc. shall have the authority to make the
determination whether Mr. Blount is incapacitated under this
Agreement and shall also have the authority to determine whether
Mr. Blount has ceased to be incapacitated hereunder."
4.
Section 6.2(b) of the Employment Agreement is hereby amended
by changing the designations "(A)", "(B)", and "(C)", to "(i)",
"(ii)" and "(iii)", respectively.
5.
Section 6.3 of the Employment Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"6.3 "Change in Control" - Either
(a) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of
Blount International, Inc. ("BII") representing an aggregate of
fifty percent (50%) or more of the combined voting power of BII's
then outstanding securities (excluding the acquisition by persons
who own such amount of securities on the date hereof, or
acquisitions by persons who acquire such amount through
inheritance); or
(b) Winton M. Blount (i) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of BII, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (ii) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of BII's voting
securities owned by the Blount Partnership; or
(c) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of BII's then outstanding securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of BII, cease for any reason to constitute at least a
majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(e) consummation of (i) a merger, consolidation or
other business combination of BII with any other "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) or affiliate thereof, other
than a merger, consolidation or business combination which would
result in the outstanding common stock of BII immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into common stock of the surviving entity
or a parent or affiliate thereof) at least fifty percent (50%) of
the outstanding common stock of BII (or such surviving entity or
parent or affiliate thereof) that is outstanding immediately
after such merger, consolidation or business combination, or (ii)
a plan of complete liquidation of BII or an agreement for the
sale or disposition by BII of all or substantially all of BII's
assets; or
(f) the occurrence of any other event or circumstance
which is not covered by (a) through (e) above which the Board of
BII determines affects control of BII and adopts a resolution
that such event or circumstance constitutes a Change in Control
for the purposes of this Agreement."
6.
Section 6.7 of the Employment Agreement is hereby amended by
adding the words "or incapacity (as defined in Section 5.3)"
after the word "death" in the fifth line of the present section
and by adding the words "or incapacity" after the word "death" in
each other place in Section 6.7 where a reference to the "death
of Winton M. Blount" appears.
7.
Section 9.1 of the Employment Agreement is hereby amended by
deleting the first sentence of the present section in its
entirety and substituting the following therefor:
"9.1 In addition to any obligations imposed by law upon
any successor or transferor to the Company, the Company will
require any successor or transferor to all or substantially all
of the business and/or assets of the Company (whether direct or
indirect, by purchase, merger, reorganization, liquidation,
consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place."
8.
BII agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the
Employment Agreement.
9.
Except as hereby modified, the terms and conditions of the
Employment Agreement shall remain in full force and effect. This
Amendment shall be effective as of November 3, 1995.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
EXECUTIVE:
/s/Donald B. Zorn_________________
DONALD B. ZORN
BLOUNT, INC.
By:/s/John M. Panettiere__________
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere__________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Employment Agreement between Blount,
Inc. ("Blount") and Donald B. Zorn ("Executive"), dated September
14, 1994, and as amended on November 3, 1995 (the "Agreement"),
and in further consideration of the Executive's performance of
valuable services in the financial interests of Blount
International, Inc. (the "Company"), the Company does hereby
agree to pay and to perform all of the obligations and
responsibilities of Blount to the Executive under the Agreement,
including, without limitation, the obligation to pay or provide
the compensation and benefits under Sections 5.1, 5.2 and 5.3 of
the Agreement.
IN WITNESS WHEREOF, the Company acting under authority
of its Board of Directors has caused this Guarantee Agreement to
be executed as of this 3rd day of November, 1995.
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere___________
EXHIBIT 10 (x) (i)
BLOUNT, INC.
EXECUTIVE BENEFIT PLANS TRUST
THIS AGREEMENT made this 17th day of April, 1995, by
and between BLOUNT, INC., a Delaware corporation ("Company"), and
Trust Company Bank, a Georgia corporation ("Trustee");
W I T N E S S E T H
WHEREAS, the Company has adopted a number of plans
designed primarily to provide deferred compensation to its
executives (such plans are listed on Appendix A attached hereto
and are hereinafter referred to as the "Plans" or "Plan");
WHEREAS, the Company has incurred and expects to incur
substantial liabilities under the terms of the Plans with respect
to individuals participating in such Plans;
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of the Company's creditors in the
event of the Company's Insolvency (as herein defined), for the
benefit of certain executives of the Company (as listed on
Appendix A attached hereto; hereinafter referred to as the
"Covered Participants");
WHEREAS, the Covered Participants for whose benefit
this Trust has been established are management or highly
compensated employees of the Company;
WHEREAS, it is the intention of the Company to make
contributions to the Trust from time to time to provide itself
with a source of funds to assist it in the meeting of its
liabilities under the Plans;
WHEREAS, the Company desires to provide for additional
funding of the Trust upon a Change in Control (as defined herein)
and certain other significant corporate events affecting the
Company and its business;
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plans as unfunded plans maintained for
the purpose of providing deferred compensation for a select group
of management or highly compensated employees for purposes of
Title I of the Employee Retirement Income Security Act of 1974,
as amended;
NOW, THEREFORE, the parties do hereby establish the
Trust and agree that the Trust shall be comprised, funded, held
and disposed of, as follows:
Section 1. Establishment of Trust
(a) The Company hereby deposits with the Trustee in
trust Three Million Nine hundred fifty Thousand Dollars
($3,950,000), which shall become the principal of the Trust to be
held, administered and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established shall be irrevocable
by the Company and, except as provided in Section 3 and Section
12, no amounts contributed to the Trust shall be returned to the
Company; provided, however, that prior to (but not after) a
Change in Control, Threatened Change in Control or Significant
Corporate Event, the Trustee may forward amounts to the Company
to cover the payment of federal and state withholding taxes that
may be due with respect to a distribution to a Participant.
(c) The Trust is intended to be a grantor trust, of
which the Company is the grantor, within the meaning of subpart
E, part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended ("Code"), and shall be construed
accordingly.
(d) The principal of the Trust, and any earnings
thereon shall be held separate and apart from other funds of the
Company and shall be used exclusively for the uses and purposes
of Covered Participants and general creditors as herein set
forth. Covered Participants and their beneficiaries shall have
no preferred claim on, or any beneficial ownership interest in,
any specific assets of the Trust. Any rights created under the
Plans and this Trust Agreement shall be mere unsecured
contractual rights of Covered Participants and their
beneficiaries against the Company. Any assets held by the Trust
will be subject to the claims of the Company's general creditors
under federal and state law in the event of Insolvency, as
defined in Section 3(a) below.
(e) The Company may at any time, or from time to time,
make additional deposits of cash or other property in trust with
the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement,
it being the intention of the Company to make regular
contributions to this Trust in an amount sufficient to pay the
accrued benefits of Covered Participants under all of the Plans
and the expenses related to the operation of the Trust. Except
as provided in subsection (f) below and in Section 8(b), neither
the Trustee, nor any Covered Participant or beneficiary, shall
have any right to compel such additional deposits.
(f) Upon a Change in Control, Threatened Change in
Control or Significant Corporate Event (all as defined in Section
13(d) below), the Company shall, within ten (10) days of the
Change in Control, Threatened Change in Control or Significant
Corporate Event, make an additional contribution to the Trust in
cash of (i) an amount such that the Trust has sufficient assets
to pay each Covered Participant (or his beneficiary) the accrued
benefits to which the Covered Participant (or his beneficiary)
would be entitled (whether payable currently or on a deferred
basis) pursuant to the terms of the Plans as of the date on which
the Change in Control, Threatened Change in Control or
Significant Corporate Event occurred, (ii) an amount sufficient
to pay each Covered Participant (or his beneficiary) the
additional accrued benefits that would be due any Covered
Participant under the Plans as a result of the provisions of any
Employment Agreement between the Covered Participant and the
Company, assuming the Covered Participant's employment was
terminated involuntarily by the Company without Cause (as defined
in the Employment Agreement) immediately following the date on
which the Change in Control, Threatened Change in Control or
Significant Corporate Event occurred and (iii) an amount
sufficient for the expenses of operating this Trust for a period
of 24 months. The amounts to be deposited pursuant to this
subsection (f) shall be determined by the Company's independent
accountants within five (5) days of the Change in Control,
Threatened Change in Control or Significant Corporate Event and
shall be made in a manner consistent with the actuarial, earnings
and other assumptions historically used to record the liabilities
under the Plans. If the Company fails to deposit the amount in
the Trust required by this subsection (f) within the ten-day
period, the Trustee shall commence legal action to compel the
Company to pay the amounts to the Trust required by this
subsection (f). The Company shall be obligated to contribute an
additional amount to the Trust to pay for the costs and expenses
(including legal fees) of such legal action within ten (10) days
of the commencement of such action. As provided in Section 5(d),
the Trustee shall have the power and authority to hire legal
counsel to pursue such action against the Company and the costs
of such legal counsel shall be paid from the Trust.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
(a) (1) The Company shall, from time to time, deliver
to the Trustee a schedule (the "Payment Schedule") that indicates
the amounts payable (or that will be payable) in respect of each
Covered Participant (and his or her beneficiaries), that provides
a formula or other instructions acceptable to the Trustee for
determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), and
the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the
Covered Participants and their beneficiaries in accordance with
such Payment Schedule. In any month in which the Trustee
determines that the assets of the Trust are not sufficient to
provide for the payment of all amounts otherwise payable to
Covered Participants and beneficiaries in such month under a Plan
or Plans, the amount otherwise payable to each such Covered
Participant or beneficiary under such Plan or Plans during such
month shall be multiplied by a fraction, the numerator of which
is the amount of funds then available for the payment of benefits
under such Plan or Plans and the denominator of which is the
total of the benefits payable prior to such payment during such
month to all Covered Participants and beneficiaries under such
Plan or Plans. Prior to a Change in Control, Threatened Change
in Control or Significant Corporate Event, the Company shall be
responsible for notifying the Trustee of the federal and state
withholding taxes applicable to a distribution to a Participant
(and issuing a tax information return) and the Trustee will
forward such amount to the Company for payment to the appropriate
tax authority; upon a Change in Control, Threatened Change in
Control or Significant Corporate Event, the Trustee shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plans and
shall pay amounts withheld to the appropriate taxing authorities
(or determine that such amounts have been reported, withheld and
paid by the Company).
(2) The Covered Participants in the Plans for
whose benefit this Trust is established are listed on Appendix A;
other participants in the Plans shall not be covered by this
Trust and shall not be entitled to any benefits hereunder. Prior
to a Change in Control, Threatened Change in Control or
Significant Corporate Event, the Company may add deferred
compensation plans and participants to Appendix A by notifying
the Trustee in writing of such addition.
(b) Except as provided in subsection (d) below, the
entitlement of a Covered Participant or his or her beneficiaries
to benefits under a Plan shall be determined by the Company or
such party as it shall designate under the Plan, and any claim
for such benefits shall be considered and reviewed under the
procedures set out in the Plan.
(c) The Company may make payment of benefits directly
to Covered Participants or their beneficiaries as they become due
under the terms of a Plan. The Company shall notify the Trustee
of its decision to make payment of benefits directly prior to the
time amounts are payable to Covered Participants or their
beneficiaries. In addition, if the principal of the Trust, and
any earnings thereon, are not sufficient to make payments of
benefits in accordance with the terms of the Plan, the Company
shall make the balance of each such payment as it falls due. The
Trustee shall notify the Company where principal and earnings are
not sufficient to make Plan payments to Covered Participants.
(d) After the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event:
(1) The Trustee shall, without direction from the
Company, to the extent funds are available in the Trust for such
purpose, make payments to Covered Participants and beneficiaries
in such manner and in such amounts as the Trustee shall determine
they are entitled to be paid under the Plans based on the most
recent Covered Participant data furnished to the Trustee by the
Company and any supplemental information furnished to the Trustee
by a Covered Participant or beneficiary upon which the Trustee
may reasonably rely in making such determination. The Trustee
shall have the power to interpret the provisions of the Plans and
this Agreement in making its determination.
(2) The Company shall within thirty (30) days
furnish the Trustee with such data relating to Covered
Participants as may be necessary for the Trustee to calculate the
Covered Participants' benefits under the Plans and shall, from
time to time but not less frequently than annually, update such
data for all Plans. The Company shall also provide the Trustee
with such other information relating to Covered Participants'
benefits as the Trustee may request within thirty (30) days of
such request.
(3) As provided in Section 5(d), the Trustee
shall have the authority and power to retain actuaries,
consultants and other agents (who may but need not be the persons
providing such services to the Company with respect to the Plans)
to assist it in calculating the amount of payments that are due
to Participants.
Section 3. Trustee Responsibility Regarding Payments
to Covered Participants When Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to
Covered Participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company is subject
to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust,
as provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(1) The Chief Executive Officer of the Company (or
his designee) shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be
a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such determination,
the Trustee shall discontinue payment of benefits to Covered
Participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of
the Company's Insolvency, or has received notice from the Company
or a person claiming to be a creditor alleging that the Company
is Insolvent, the Trustee shall have no duty to inquire whether
the Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
(3) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Covered Participants (or their beneficiaries) and shall hold
the assets of the Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Covered Participants or their
beneficiaries to pursue their rights as general creditors of the
Company with respect to benefits due under the Plans or
otherwise.
(4) The Trustee shall resume the payment of
benefits to Covered Participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only after the
Trustee has determined that the Company is not Insolvent (or is
no longer Insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Covered
Participants or their beneficiaries under the terms of the Plans
for the period of such discontinuance, less the aggregate amount
of any payments made to Covered Participants or their
beneficiaries by the Company in lieu of the payments provided for
hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
Except as provided in Section 3 hereof, after the Trust
has become irrevocable, the Company shall have no right or power
to direct the Trustee to return to the Company or to divert to
others any of the Trust assets before all payment[s] of benefits
have been made to Covered Participants and their beneficiaries
pursuant to the terms of the Plans.
Section 5. Investment Authority.
(a) In no event may the Trustee invest in securities
(including stock or rights to acquire stock) or obligations
issued by the Company, other than a de minimis amount held in
common investment vehicles in which the Trustee invests. All
rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by Trustee, and shall in no
event be exercisable by or rest with Covered Participants,
provided, that the Trustee may consider for the affected account
in the Trust any deemed investment elections made by Participants
pursuant to a Plan which provides for such elections.
(b) Prior to a Change in Control, Threatened Change in
Control or Significant Corporate Event, the Trust's assets shall
be held, invested and reinvested by the Trustee in accordance
with written investment guidelines provided by the Company from
time to time. The Trustee shall not be under any duty to
question any such guidelines of the Company or to review any
securities or other property held pursuant to such guidelines, or
to make any suggestions to the Company in connection therewith;
and the Trustee shall as promptly as practicable comply with any
investment guidelines given by the Company hereunder. The
Trustee shall not be liable for following the investment
guidelines of the Company prior to a Change in Control,
Threatened Change in Control or Significant Corporate Event, if
there is a loss due to investments made in accordance with the
guidelines of the Company.
In the absence of written investment guidelines
provided by the Company, the Trustee shall invest the assets in
its discretion as provided in subsection (c).
(c) After the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Trustee shall have exclusive authority and discretion to manage
and control the Trust's assets and may employ investment
managers, including affiliates of the Trustee, to manage the
investment of the Trust's assets. Pursuant to such authority and
discretion, the Trustee shall invest and reinvest the principal
and income of the Trust and keep the Trust invested, without
distinction between principal and income, in such property, real
or personal, wherever situated, as it shall deem advisable and in
the interest of the Trust and the Covered Participants,
regardless of any limitations under state law on the investment
of trust funds. Without limiting the generality of the
foregoing, the funds of the Trust may be invested in stock, trust
shares, mutual fund shares, insurance or annuity contracts, bonds
and mortgages, and other evidences of indebtedness or ownership,
and in any deposits with the Trustee (if the Trustee is a bank),
"deposits" meaning any account, temporary or otherwise, upon
which a reasonable rate of interest is paid, including but not
limited to a certificate of deposit issued by said bank (except
as any such investment may be limited hereunder or under the
provisions of ERISA), including without limitation investments in
any common trust fund maintained by the Trustee or in any
qualified commingled trust maintained by the Trustee.
The Trustee may cause any investment held by the
Trustee to be registered in or transferred into its name as
Trustee or into the name of such nominee as it may appoint, or it
may retain the same unregistered and in such form as shall permit
transferability, but the books and records of the Trust shall at
all times show that all such investments are part of the Trust.
(d) The Trustee shall have the following powers and
authority in the administration and investment of the Trust, to
be exercised without being required to make or to file any
inventory or appraisal with, nor to give any bond or be a surety
thereon to, any officer, court or tribunal, and in accordance
with and subject to the provisions of this Trust Agreement:
(1) Purchase of Property - To purchase, or subscribe
for, any property, real and personal, and to retain the same in
trust.
(2) Sale, Exchange, Conveyance and Transfer of
Property - To sell, exchange, convey, transfer, or otherwise
dispose of property held by it, by public or private sale without
notice, advertisement or court order. No person dealing with the
Trustee shall be bound to see to the application of the purchase
money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition.
(3) Borrowing - To borrow or raise money for the
purpose of the Trust in such amount, and upon such terms and
conditions as the Trustee shall deem advisable, and, for any
funds so borrowed, to issue its promissory note as Trustee and to
secure the repayment thereof by pledging all, or any part, of the
Trust. No person lending money to the Trustee shall be bound to
see to the application of the money lent or to inquire into the
validity, expediency or propriety of any such borrowing.
(4) Retention of Cash - To keep such portion of the
Trust in cash or cash balances as the Trustee, from time to time,
may deem to be in the best interests of the Trust created hereby
without liability for interest thereon.
(5) Retention of Property Acquired - To accept and
retain for such time as it may deem advisable any property
received or acquired by it as Trustee hereunder, whether or not
such property would normally be purchased as investments
hereunder.
(6) Execution of Instruments - To make, execute,
acknowledge, and deliver any and all documents of transfer and
conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted.
(7) Settlement of Claims and Debts - To settle,
compromise, or submit to arbitration any claims, debts, or
damages due or owing to or from the Trust, to commence or defend
suits or legal or administrative proceedings, and to represent
the Trust in all suits and legal and administrative proceedings.
(8) Employment of Agents and Legal Counsel - To employ
suitable agents and legal counsel, and to pay their reasonable
expenses and compensation, and the Trustee shall be fully
protected in relying upon the advice of such counsel.
(9) Power to Do Any Necessary Act - To do all acts,
take all such proceedings, and exercise all such rights and
privileges, although not specifically mentioned herein, as the
Trustee may deem necessary to administer the Trust Fund and to
carry out the purposes of this Trust.
Section 6. Disposition of Income.
During the term of this Trust, all income received
by the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by the Trustee.
(a) The Trustee shall keep accurate and detailed
records of all investments, receipts, disbursements, and all
other transactions required to be made, including such specific
records as shall be agreed upon in writing between the Company
and the Trustee. Within sixty (60) days following the close of
each fiscal year of the Company (which is currently the last day
of February and shall also be the trust year of the Trust) and
within sixty (60) days after the removal or resignation of the
Trustee, the Trustee shall deliver to Company a written account
of its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
(b) The amounts contributed to the Trust by the
Company shall be credited to separate accounts established by the
Trustee with respect to each of the Plans. The Trustee may also
establish separate subaccounts for each Covered Participant to
reflect his benefits under the Plans and such other subaccounts
as may be necessary for the proper operation of the Trust. The
Trustee, for investment purposes only, may commingle all trust
assets and treat them as a single fund, but the records of the
Trustee shall at all times show the percentages of the Trust Fund
allocable to the separate Plan accounts.
Section 8. Responsibility of the Trustee.
(a) The Trustee shall act with the care, skill,
prudence and diligence under the circumstances then prevailing
that a prudent person acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that the Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Company
which is contemplated by, and in conformity with, the terms of a
Plan or this Trust and is given in writing by the Company.
(b) If the Trustee undertakes or defends any
litigation arising in connection with this Trust, the Company
agrees to indemnify the Trustee against the Trustee's costs,
expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and the Company
agrees to be primarily liable for such payments. If the Company
does not directly pay such costs, expenses and liabilities in a
reasonably timely manner, the Company agrees to immediately
deposit in the Trust an amount sufficient to pay such costs,
expenses and liabilities.
(c) The Trustee may consult with legal counsel (who
may also be counsel for Company generally) with respect to any of
its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants, or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all
powers conferred on Trustees by applicable law, including all
fiduciary powers enumerated in Official Code of Georgia Annotated
Section 53-12-232, which are incorporated herein by reference,
unless expressly provided otherwise herein, provided, however,
that if an insurance policy is held as an asset of the Trust, the
Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
Section 9. Compensation and Expenses of Trustee.
The Company shall pay all administrative expenses of
the Trust and the Trustee's fees and expenses and agrees to
deposit in the Trust not less often than annually an amount
sufficient to pay such fees and expenses. If not so paid, the
fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written
notice to the Company, which shall be effective thirty (30) days
after receipt of such notice unless the Company and the Trustee
agree otherwise.
(b) Prior to the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Trustee may be removed by the Company on thirty (30) days notice
or upon shorter notice accepted by the Trustee. Upon the
occurrence of a Change in Control, Threatened Change in Control
or Significant Corporate Event, the Trustee may not be removed by
the Company for a period of twenty-four (24) months.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently
be transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after appointment of the
successor Trustee, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor
shall be appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraph(s) (a)
or (b) of this section. If no such appointment has been made for
a resignation or removal that occurs prior to a Change in
Control, Threatened Change in Control or Significant Corporate
Event, the Trustee may apply to a court of competent jurisdiction
for appointment of a successor or for instructions. All expenses
of the Trustee in connection with the proceeding shall be allowed
as administrative expenses of the Trust and the Company agrees to
pay such expenses directly.
Section 11. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance
with Section 10(a) or (b) hereof prior to a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee
powers under state law, as a successor to replace the Trustee
upon resignation or removal. If the Trustee resigns after (or is
removed more than 24 months after) a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Trustee shall as soon as possible apply to a court of competent
jurisdiction for the appointment of a successor Trustee. The
appointment shall be effective when accepted in writing by the
new Trustee, who shall have all of the rights and powers of the
former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instrument necessary or
reasonably requested by the Company or the successor Trustee to
evidence the transfer.
(b) The successor Trustee need not examine the records
and acts of any prior Trustee and may retain or dispose of
existing Trust assets, subject to Sections 5, 7 and 8 hereof.
The successor Trustee shall not be responsible for and the
Company shall indemnify and defend the successor Trustee from any
claim or liability resulting from any action or inaction of any
prior Trustee or from any other past event, or any condition
existing at the time it becomes successor Trustee.
Section 12. Amendment or Termination.
(a) Prior to a Change in Control, Threatened Change in
Control or Significant Corporate Event, this Trust Agreement may
be amended by a written instrument executed by the Trustee and
the Company, provided that no such amendment shall adversely
affect the rights of Covered Participants under this Trust, and
no such amendment shall conflict with the terms of the Plans or
shall make the Trust revocable after it has become irrevocable.
Upon the occurrence of a Change in Control, Threatened Change in
Control or Significant Corporate Event, this Trust may only be
amended if all Covered Participants (and beneficiaries who have
become entitled to payments under a Plan) consent in writing to
such amendment.
(b) Except as provided in (c) below, the Company shall
not have the right to terminate this Trust until the date on
which Covered Participants and their beneficiaries are no longer
entitled to benefits pursuant to the terms of the Plans. Upon
termination of the Trust after all such liabilities have been
satisfied, any assets remaining in the Trust shall be returned to
Company.
(c) Upon written approval of all Covered Participants
(and beneficiaries who have become entitled to payment of
benefits under the Plans), the Company may terminate this Trust
prior to the time all benefit payments have been made. Upon any
such termination, the assets of the Trust shall be distributed in
the manner approved by all Covered Participants (and
beneficiaries receiving benefits).
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited
by law shall be ineffective to the extent of any such
prohibition, without invalidating the remaining provisions
hereof.
(b) Benefits payable to Covered Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) The Company shall deliver to the Trustee copies of
the Plans as in effect on the date of this Agreement and shall
deliver to the Trustee as soon as practical any modifications or
amendments to the Plans.
(d) For purposes of this Trust, the following
definitions shall apply:
(1) "Change in Control" - Either
(i) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended) within any twelve (12) month period of
securities of the Company representing an aggregate of
fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities
(excluding the acquisition by persons who own such
amount of securities on the date hereof, or
acquisitions by persons who acquire such amount through
inheritance), provided, however, that the threshold
percentage in this subparagraph (i) shall be
automatically reduced to an aggregate of twenty-five
percent (25%) or more of the combined voting power of
the Company's then outstanding securities at such time
that either of the following events occurs:
(A) Winton M. Blount's ownership of the combined voting
power of HBC, Incorporated's then outstanding
securities is less than 50.1%, or (B) HBC,
Incorporated's ownership of the combined voting power
of the Company's then outstanding securities is less
than 50.1%.; or
(ii) Winton M. Blount's ownership of the combined
voting power of HBC, Incorporated's then outstanding
securities is less than 50.1%; or
(iii) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, cease for any reason to
constitute at least a majority thereof, unless the
election of each new director was approved in advance
by a vote of at least a majority of the directors then
still in office who were directors at the beginning of
the period; or
(iv) consummation of (A) a merger, consolidation or
other business combination of the Company with any
other "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended) or affiliate thereof, other than a merger,
consolidation or business combination which would
result in the outstanding common stock of the Company
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent
or affiliate thereof) at least fifty percent (50%) of
the outstanding common stock of the Company or such
surviving entity or parent or affiliate thereof
outstanding immediately after such merger,
consolidation or business combination, or (B) a plan of
complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(v) the occurrence of any other event or circumstance
which is not covered by (i) through (iv) above which
the Board determines affects control of the Company and
adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of
this Agreement.
(2) "Threatened Change in Control" - Any pending
tender offer for any class of the Company's outstanding shares of
Common Stock, or any pending bona fide offer to acquire the
Company by merger or consolidation, or any other pending action
or plan to effect, or which would lead to, a Change in Control of
the Company. A Threatened Change in Control shall commence on
the first day the actions described in the preceding sentence
become manifest and shall end when such actions are abandoned or
the Change in Control occurs.
(3) "Significant Corporate Event" - The death of
Winton M. Blount or the sale, transfer or other disposition by
the Company of the business, assets or stock of a subsidiary or
division of the Company that: (i) constituted 25% or more of the
Company's net dollar sales; or (ii) represented 25% or more of
the Company's assets. For purposes of this determination, the
net dollar sales percentage test shall be measured by the sales
represented by the assets, division or subsidiary sold from the
first day of the current fiscal year through the day immediately
preceding the date of sale divided by the gross dollar sales of
the Company. For purposes of this determination, the percentage
of assets sold shall be calculated as the assets being sold
divided by the Company's total assets immediately prior to such
sale. The determination of a Significant Corporate Event shall
be made by the Company's independent accountants based upon
information relating to the transactions provided by the Company.
(e) All interest, earnings and gains on the
investments of the Trust shall be considered interest, earnings
or gains of the Company and shall be taxable to the Company. The
Company agrees to pay directly all taxes resulting from the
interest, earnings or gains of the Trust.
(f) This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia
except where federal law applies.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be
April 17, 1995.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized corporate
officers and its corporate seal to be hereunto affixed, and the
Trustee has executed same and thereby accepted the trust as of
the date first above written.
(CORPORATE SEAL) COMPANY:
Attest:/s/D.J. McInnes BLOUNT, INC.
By:/s/John M. Panettiere
(CORPORATE SEAL) TRUSTEE: TRUST COMPANY BANK
Attest:/s/David L. Harrison By:/s/Patrick A. Paprelli
<PAGE>
APPENDIX A
TO
BLOUNT, INC.
EXECUTIVE BENEFIT PLANS TRUST
The following Company plans, agreements and
arrangements ("Plans") as they apply to the named executives
("Covered Participants") are covered by, and subject to, this
Trust:
1. Blount Inc. and Subsidiaries Supplemental
Retirement Benefit Plan
(i) Winton M. Blount
(ii) John M. Panettiere
(iii) D. Joseph McInnes
(iv) Frank McFadden
(v) Harold E. Layman
(vi) Donald B. Zorn
(vii) James S. Osterman
2. Supplemental Executive Retirement Plan for John M.
Panettiere
3. Supplemental Executive Retirement Plan for Winton
M. Blount
4. Supplemental Retirement Plan for Frank McFadden.
5. Supplemental Executive Retirement Plan for Donald
B. Zorn.
6. Executive Benefit Life Insurance and Supplemental
Retirement Plan for ("Keyman Insurance Plan")
(i) Winton M. Blount
(ii) D. Joseph McInnes
(iii) Frank H. McFadden
(iv) Winton M. Blount, III
7. Blount, Inc. and Subsidiaries Supplemental
Retirement Savings Plan
(i) Winton M. Blount
(ii) Frank H. McFadden
(iii) John M. Panettiere
(iv) D. Joseph McInnes
(v) James S. Osterman
(vi) Donald B. Zorn
(vii) Harold E. Layman
8. Blount, Inc. Supplemental Retirement and
Disability Plan For Corporate Office Employees
(i) Winton M. Blount
(ii) John M. Panettiere
(iii) D. Joseph McInnes
(iv) Harold E. Layman
Dated: April 17, 1995
EXHIBIT 10 (x) (ii)
AMENDMENT TO
AND ASSUMPTION OF
BLOUNT, INC. EXECUTIVE BENEFIT PLANS TRUST
This Amendment and Assumption Agreement dated as of the 3rd
day of November, 1995, by and among BLOUNT, INC. ("Blount"),
BLOUNT INTERNATIONAL, INC. ("BII") and TRUST COMPANY BANK
("Trustee");
W I T N E S S E T H:
WHEREAS, Blount entered into an agreement ("Trust
Agreement") with the Trustee, dated April 17, 1995, establishing
a trust for the benefit of certain executives ("Covered
Participants") who participate in executive benefit plans or
programs of Blount and providing for additional funding of the
trust upon a Change in Control of Blount; and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, the benefit plans and programs will continue after
the Merger and Blount and BII desire to preserve the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the Trust
Agreement, the parties hereby agree as follows:
1.
BII hereby agrees to assume all of the obligations,
responsibilities and liabilities of the "Company" under the Trust
Agreement and each place in the Trust Agreement where a reference
to "Company" appears shall now refer to and mean BII. Further,
in each place where the Trust Agreement now refers to a benefit
plan or program, compensation arrangement or other similar plan
or program maintained by Blount, such reference shall now include
a successor or substitute plan, program or arrangement maintained
or established by BII. The Trustee hereby consents to the
assumption of the Trust Agreement by BII and the substitution of
BII as the "Company" thereunder.
2.
Section 13(d)(1) of the Trust Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"(1) "Change in Control" - Either
(i) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of the
Company representing an aggregate of fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who own such
amount of securities on the date hereof, or acquisitions by
persons who acquire such amount through inheritance); or
(ii) Winton M. Blount (A) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of the Company, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (B) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of the Company's
voting securities owned by the Blount Partnership; or
(iii) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of the Company's then outstanding
securities; or
(iv) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company, cease for any reason to constitute at least
a majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(v) consummation of (A) a merger, consolidation or
other business combination of the Company with any other "person"
(as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of
the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common
stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such
merger, consolidation or business combination, or (B) a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets; or
(vi) the occurrence of any other event or circumstance
which is not covered by (i) through (v) above which the Board of
the Company determines affects control of the Company and adopts
a resolution that such event or circumstance constitutes a Change
in Control for the purposes of this Agreement."
3.
Section 13(d)(3) of the Trust Agreement is hereby amended by
adding the words "or incapacity (as defined below)" after the
word "death" in the first line of the present section and adding
the following two sentences at the end of the present section:
"For purposes of this Agreement, Mr. Blount shall be
considered incapacitated if he is determined to be permanently
unable to perform his duties as Chairman of the Board of the
Company. The Board of the Company shall have the authority to
make the determination whether Mr. Blount is incapacitated under
this Agreement and shall also have the authority to determine
whether Mr. Blount has ceased to be incapacitated hereunder."
4.
Blount agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the Trust
Agreement.
5.
Except as hereby modified, the terms and conditions of the
Trust Agreement shall remain in full force and effect. This
Amendment and Assumption Agreement shall be effective as of
November 3, 1995.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
and Assumption Agreement as of the day and year first above
written.
TRUSTEE:
TRUST COMPANY BANK
By:_______________________________
BLOUNT, INC.
By:/s/John M. Panettiere__________
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere__________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Trust Agreement for the Blount, Inc.
Executive Benefit Plans Trust between Blount, Inc. ("Blount") and
Trust Company Bank ("Trustee"), dated April 17, 1995, as assumed
by Blount International, Inc. (the "Company") and as amended on
November 3, 1995 (the "Agreement"), and in further consideration
of the financial and other benefits accruing to Blount from the
Trust Agreement, Blount does hereby agree to pay and to perform
all of the obligations and responsibilities of the Company under
the Trust Agreement, including, without limitation, the
obligation to make additional contributions to the Trust under
Section 1(f) of the Trust Agreement.
IN WITNESS WHEREOF, Blount acting under authority of
its Board of Directors has caused this Guarantee Agreement to be
executed as of this 3rd day of November, 1995.
BLOUNT, INC.
By:/s/John M. Panettiere____________
EXHIBIT 10 (y) (i)
BLOUNT, INC.
BENEFITS PROTECTION TRUST
THIS AGREEMENT made this 17th day of April, 1995, by
and between BLOUNT, INC., a Delaware corporation ("Company"), and
Trust Company Bank, a Georgia corporation ("Trustee");
W I T N E S S E T H
WHEREAS, the Company has entered into Employment
Agreements with a number of its executive which provide for
payments and benefits to the executives in the event their
employment is terminated prior to the end of the term of the
agreements (such Employment Agreements are listed on Appendix A
attached hereto and are hereinafter referred to as the
"Employment Agreements" or "Employment Agreement");
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of the Company's creditors in the
event of the Company's Insolvency (as herein defined), for the
benefit of the executives of the Company whose Employment
Agreements are listed on Appendix A attached hereto (such
executives are hereinafter referred to as the "Covered
Participants");
WHEREAS, the Covered Participants for whose benefit
this Trust has been established are management or highly
compensated employees of the Company;
WHEREAS, the Company may make contributions to the
Trust from time to time to provide itself with a source of funds
to assist it in the meeting of its obligations under the
Employment Agreements;
WHEREAS, the Company desires to provide for additional
funding of the Trust upon a Change in Control (as defined herein)
and certain other significant corporate events affecting the
Company and its business;
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Employment Agreements as unfunded;
NOW, THEREFORE, the parties do hereby establish the
Trust and agree that the Trust shall be comprised, funded, held
and disposed of, as follows:
Section 1. Establishment of Trust
(a) The Company hereby deposits with the Trustee in
trust Fifty Thousand Dollars ($50,000), which shall become the
principal of the Trust to be held, administered and disposed of
by the Trustee as provided in this Trust Agreement.
(b) Except as provided in subsection (g) below,
Section 3 and Section 12, the Trust hereby established shall be
irrevocable by the Company and no amounts contributed to the
Trust shall be returned to the Company; provided, however, that
prior to (but not after) a Change in Control, Threatened Change
in Control or Significant Corporate Event, the Trustee may
forward amounts to the Company to cover the payment of federal
and state withholding taxes that may be due with respect to a
distribution to a Participant.
(c) The Trust is intended to be a grantor trust, of
which the Company is the grantor, within the meaning of subpart
E, part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended ("Code"), and shall be construed
accordingly.
(d) The principal of the Trust, and any earnings
thereon shall be held separate and apart from other funds of the
Company and shall be used exclusively for the uses and purposes
of Covered Participants and general creditors as herein set
forth. Covered Participants and their beneficiaries shall have
no preferred claim on, or any beneficial ownership interest in,
any specific assets of the Trust. Any rights created under the
Employment Agreements and this Trust Agreement shall be mere
unsecured contractual rights of Covered Participants and their
beneficiaries against the Company. Any assets held by the Trust
will be subject to the claims of the Company's general creditors
under federal and state law in the event of Insolvency, as
defined in Section 3(a) below.
(e) The Company may at any time, or from time to time,
make additional deposits of cash or other property in trust with
the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement.
Except as provided in subsection (f) below and in Section 8(b),
neither the Trustee, nor any Covered Participant or beneficiary,
shall have any right to compel such additional deposits.
(f) Upon a Change in Control, Threatened Change in
Control or Significant Corporate Event (all as defined in Section
13(d) below), the Company shall, within ten (10) days of the
Change in Control, Threatened Change in Control or Significant
Corporate Event, make an additional contribution to the Trust in
cash of an amount sufficient to pay (or provide) each Covered
Participant the compensation and benefits to which the Covered
Participant would be entitled (whether payable currently or on a
deferred basis) pursuant to the terms of the Employment
Agreement, if his employment was terminated involuntarily by the
Company without Cause (as defined in the Employment Agreement) as
of the date on which the Change in Control, Threatened Change in
Control or Significant Corporate Event occurred. The amount the
Company shall be required to contribute pursuant to this
subsection (f) shall be (i) an amount equal to the aggregate
amount of compensation and benefits that would be payable to, or
provided for (whether currently or in the future), Covered
Participants pursuant to the terms of their Employment Agreements
if their employment was terminated involuntarily without Cause by
the Company as of the date of the Change in Control, Threatened
Change in Control or Significant Corporate Event (minus the
amount of benefits due under an Employment Agreement to any
Covered Participant that have been provided for by contributions
by the Company to the Executive Benefit Plans Trust established
by the Company), and (ii) an amount sufficient for the expenses
of operating this Trust for a period of 24 months. The amounts
to be deposited pursuant to this subsection (f) shall be
determined by the Company's independent accountants within five
(5) days of the Change in Control, Threatened Change in Control
or Significant Corporate Event. If the Company fails to deposit
the amount in the Trust required by this subsection (f) within
the ten-day period, the Trustee shall commence legal action to
compel the Company to pay the amounts to the Trust required by
this subsection (f). The Company shall be obligated to
contribute an additional amount to the Trust to pay for the costs
and expenses (including legal fees) of such legal action within
ten (10) days of the commencement of such action. As provided in
Section 5(d), the Trustee shall have the power and authority to
hire legal counsel to pursue such action against the Company and
the costs of such legal counsel shall be paid from the Trust.
(g) If twenty-four (24) months have elapsed after the
date of a Change in Control, Threatened Change in Control or
Significant Corporate Event which requires the Company to make
contributions to the Trust pursuant to subsection (f) above and
the amounts paid Covered Participants by the end of such 24-month
period are less than 10% of the total assets of the Trust, then
(i) an amount of assets shall be transferred from this Trust to
the Executive Benefit Plans Trust established by the Company so
that the assets of the Executive Benefit Plans Trust are
sufficient to pay all accrued benefits for Covered Participants
under the Plans covered by such trust, and (ii) the assets
remaining in this Trust (less all expenses) shall be returned to
the Company.
Section 2. Payments to Employment Agreement
Participants and Their Beneficiaries.
(a) (1) The Company shall, from time to time, deliver
to the Trustee a schedule (the "Payment Schedule") that indicates
the amounts payable (or that will or could be payable) in respect
of each Covered Participant (and his or her beneficiaries) under
the Employment Agreements, the form in which such amount is to be
paid, and the time of commencement for payment of such amounts.
Except as otherwise provided herein, Trustee shall make payments
to the Covered Participants and their beneficiaries in accordance
with such Payment Schedule. In any month in which the Trustee
determines that the assets of the Trust are not sufficient to
provide for the payment of all amounts otherwise payable to
Covered Participants and beneficiaries in such month under the
Employment Agreements, the amount otherwise payable to each such
Covered Participant or beneficiary under the Employment
Agreements during such month shall be multiplied by a fraction,
the numerator of which is the amount of funds then available for
the payment of benefits under the Employment Agreements and the
denominator of which is the total of the benefits payable prior
to such payment during such month to all Covered Participants and
beneficiaries under the Employment Agreements. Prior to a Change
in Control, Threatened Change in Control or Significant Corporate
Event, the Company shall be responsible for notifying the Trustee
of the federal and state withholding taxes applicable to a
distribution to a Participant (and issuing a tax information
return) and the Trustee will forward such amount to the Company
for payment to the appropriate tax authority; upon a Change in
Control, Threatened Change in Control or Significant Corporate
Event, the Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits
or compensation pursuant to the terms of the Employment
Agreements and shall pay amounts withheld to the appropriate
taxing authorities (or determine that such amounts have been
reported, withheld and paid by the Company). The Trustee shall
make provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect to the payment of compensation or benefits pursuant to
the terms of the Employment Agreements and shall pay amounts
withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by the
Company.
(2) The Covered Participants for whose benefit
this Trust is established are listed on Appendix A; other
employees with employment agreements with the Company shall not
be covered by this Trust and shall not be entitled to any
benefits hereunder. Prior to a Change in Control, Threatened
Change in Control or Significant Corporate Event, the Company may
add participants to Appendix A by notifying the Trustee in
writing of such addition.
(b) Except as provided in subsection (d) below, the
entitlement of a Covered Participant or his or her beneficiaries
to benefits under an Employment Agreement shall be determined by
the Company or such party as it shall designate under the
Employment Agreement, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the
Employment Agreement.
(c) The Company may make payment of benefits directly
to Covered Participants or their beneficiaries as they become due
under the terms of an Employment Agreement. The Company shall
notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to Covered
Participants or their beneficiaries. In addition, if the
principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the
terms of the Employment Agreement, the Company shall make the
balance of each such payment as it falls due. The Trustee shall
notify the Company where principal and earnings are not
sufficient to make Employment Agreement payments to Covered
Participants.
(d) After the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event:
(1) The Trustee shall, without direction from the
Company, to the extent funds are available in the Trust for such
purpose, make payments to Covered Participants and beneficiaries
in such manner and in such amounts as the Trustee shall determine
they are entitled to be paid under the Employment Agreements
based on the most recent Covered Participant data furnished to
the Trustee by the Company and any supplemental information
furnished to the Trustee by a Covered Participant or beneficiary
upon which the Trustee may reasonably rely in making such
determination. The Trustee shall have the power to interpret the
provisions of the Employment Agreements and this Agreement in
making its determination.
(2) The Company shall within ten (10) days
furnish the Trustee with such data relating to Covered
Participants as may be necessary for the Trustee to calculate the
Covered Participants' benefits under the Employment Agreements
and shall, from time to time but not less frequently than
annually, update such data for all Employment Agreements. The
Company shall also provide the Trustee with such other
information relating to Covered Participants' benefits as the
Trustee may request within ten (10) days of such request.
(3) As provided in Section 5(d), the Trustee
shall have the authority and power to retain actuaries,
consultants and other agents (who may but need not be the persons
providing such services to the Company with respect to the
compensation or benefits under the Employment Agreements) to
assist it in calculating the amount of payments that are due to
Participants.
Section 3. Trustee Responsibility Regarding Payments
to Covered Participants When Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to
Covered Participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company is subject
to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust,
as provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(1) The Chief Executive Officer of the Company (or
his designee) shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be
a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such determination,
the Trustee shall discontinue payment of benefits to Covered
Participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of
the Company's Insolvency, or has received notice from the Company
or a person claiming to be a creditor alleging that the Company
is Insolvent, the Trustee shall have no duty to inquire whether
the Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
(3) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Covered Participants (or their beneficiaries) and shall hold
the assets of the Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Covered Participants or their
beneficiaries to pursue their rights as general creditors of the
Company with respect to benefits due under the Employment
Agreements or otherwise.
(4) The Trustee shall resume the payment of
benefits to Covered Participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only after the
Trustee has determined that the Company is not Insolvent (or is
no longer Insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Covered
Participants or their beneficiaries under the terms of the
Employment Agreements for the period of such discontinuance, less
the aggregate amount of any payments made to Covered Participants
or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
Except as provided in Section 1(g) and Section 3
hereof, after the Trust has become irrevocable, the Company shall
have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust assets before all
payment[s] of benefits have been made to Covered Participants and
their beneficiaries pursuant to the terms of the Employment
Agreements.
Section 5. Investment Authority.
(a) In no event may the Trustee invest in securities
(including stock or rights to acquire stock) or obligations
issued by the Company, other than a de minimis amount held in
common investment vehicles in which the Trustee invests. All
rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by Trustee, and shall in no
event be exercisable by or rest with Covered Participants.
(b) Prior to a Change in Control, Threatened Change in
Control or Significant Corporate Event, the Trust's assets shall
be held, invested and reinvested by the Trustee in accordance
with written investment guidelines provided by the Company from
time to time. The Trustee shall not be under any duty to
question any such guidelines of the Company or to review any
securities or other property held pursuant to such guidelines, or
to make any suggestions to the Company in connection therewith;
and the Trustee shall as promptly as practicable comply with any
investment guidelines given by the Company hereunder. The
Trustee shall not be liable for following the investment
guidelines of the Company prior to a Change in Control,
Threatened Change in Control or Significant Corporate Event, if
there is a loss due to investments made in accordance with the
guidelines of the Company.
In the absence of written investment guidelines
provided by the Company, the Trustee shall invest the assets in
its discretion as provided in subsection (c).
(c) After the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Trustee shall have exclusive authority and discretion to manage
and control the Trust's assets and may employ investment
managers, including affiliates of the Trustee, to manage the
investment of the Trust's assets. Pursuant to such authority and
discretion, the Trustee shall invest and reinvest the principal
and income of the Trust and keep the Trust invested, without
distinction between principal and income, in such property, real
or personal, wherever situated, as it shall deem advisable and in
the interest of the Trust and the Covered Participants,
regardless of any limitations under state law on the investment
of trust funds. Without limiting the generality of the
foregoing, the funds of the Trust may be invested in stock, trust
shares, mutual fund shares, insurance or annuity contracts, bonds
and mortgages, and other evidences of indebtedness or ownership,
and in any deposits with the Trustee (if the Trustee is a bank),
"deposits" meaning any account, temporary or otherwise, upon
which a reasonable rate of interest is paid, including but not
limited to a certificate of deposit issued by said bank (except
as any such investment may be limited hereunder or under the
provisions of ERISA), including without limitation investments in
any common trust fund maintained by the Trustee or in any
qualified commingled trust maintained by the Trustee.
The Trustee may cause any investment held by the
Trustee to be registered in or transferred into its name as
Trustee or into the name of such nominee as it may appoint, or it
may retain the same unregistered and in such form as shall permit
transferability, but the books and records of the Trust shall at
all times show that all such investments are part of the Trust.
(d) The Trustee shall have the following powers and
authority in the administration and investment of the Trust, to
be exercised without being required to make or to file any
inventory or appraisal with, nor to give any bond or be a surety
thereon to, any officer, court or tribunal, and in accordance
with and subject to the provisions of this Trust Agreement:
(1) Purchase of Property - To purchase, or subscribe
for, any property, real and personal, and to retain the same in
trust.
(2) Sale, Exchange, Conveyance and Transfer of
Property - To sell, exchange, convey, transfer, or otherwise
dispose of property held by it, by public or private sale without
notice, advertisement or court order. No person dealing with the
Trustee shall be bound to see to the application of the purchase
money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition.
(3) Borrowing - To borrow or raise money for the
purpose of the Trust in such amount, and upon such terms and
conditions as the Trustee shall deem advisable, and, for any
funds so borrowed, to issue its promissory note as Trustee and to
secure the repayment thereof by pledging all, or any part, of the
Trust. No person lending money to the Trustee shall be bound to
see to the application of the money lent or to inquire into the
validity, expediency or propriety of any such borrowing.
(4) Retention of Cash - To keep such portion of the
Trust in cash or cash balances as the Trustee, from time to time,
may deem to be in the best interests of the Trust created hereby
without liability for interest thereon.
(5) Retention of Property Acquired - To accept and
retain for such time as it may deem advisable any property
received or acquired by it as Trustee hereunder, whether or not
such property would normally be purchased as investments
hereunder.
(6) Execution of Instruments - To make, execute,
acknowledge, and deliver any and all documents of transfer and
conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted.
(7) Settlement of Claims and Debts - To settle,
compromise, or submit to arbitration any claims, debts, or
damages due or owing to or from the Trust, to commence or defend
suits or legal or administrative proceedings, and to represent
the Trust in all suits and legal and administrative proceedings.
(8) Employment of Agents and Legal Counsel - To employ
suitable agents and legal counsel, and to pay their reasonable
expenses and compensation, and the Trustee shall be fully
protected in relying upon the advice of such counsel.
(9) Power to Do Any Necessary Act - To do all acts,
take all such proceedings, and exercise all such rights and
privileges, although not specifically mentioned herein, as the
Trustee may deem necessary to administer the Trust Fund and to
carry out the purposes of this Trust.
Section 6. Disposition of Income.
During the term of this Trust, all income received
by the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by the Trustee.
(a) The Trustee shall keep accurate and detailed
records of all investments, receipts, disbursements, and all
other transactions required to be made, including such specific
records as shall be agreed upon in writing between the Company
and the Trustee. Within sixty (60) days following the close of
each fiscal year of the Company (which is currently the last day
of February and shall also be the trust year of the Trust) and
within sixty (60) days after the removal or resignation of the
Trustee, the Trustee shall deliver to Company a written account
of its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
(b) The amounts contributed to the Trust by the
Company shall be credited to separate accounts established by the
Trustee with respect to each of the Employment Agreements. The
Trustee may also establish such separate subaccounts as may be
necessary for the proper operation of the Trust. The Trustee,
for investment purposes only, may commingle all trust assets and
treat them as a single fund, but the records of the Trustee shall
at all times show the percentages of the Trust Fund allocable to
the separate Employment Agreement accounts.
Section 8. Responsibility of the Trustee.
(a) The Trustee shall act with the care, skill,
prudence and diligence under the circumstances then prevailing
that a prudent person acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that the Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Company
which is contemplated by, and in conformity with, the terms of a
Employment Agreement or this Trust and is given in writing by the
Company.
(b) If the Trustee undertakes or defends any
litigation arising in connection with this Trust, the Company
agrees to indemnify the Trustee against the Trustee's costs,
expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and the Company
agrees to be primarily liable for such payments. If the Company
does not directly pay such costs, expenses and liabilities in a
reasonably timely manner, the Company agrees to immediately
deposit in the Trust an amount sufficient to pay such costs,
expenses and liabilities.
(c) The Trustee may consult with legal counsel (who
may also be counsel for Company generally) with respect to any of
its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants, or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all
powers conferred on Trustees by applicable law, including all
fiduciary powers enumerated in Official Code of Georgia Annotated
Section 53-12-232, which are incorporated herein by reference,
unless expressly provided otherwise herein, provided, however,
that if an insurance policy is held as an asset of the Trust, the
Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
Section 9. Compensation and Expenses of Trustee.
The Company shall pay all administrative expenses of
the Trust and the Trustee's fees and expenses and agrees to
deposit in the Trust not less often than annually an amount
sufficient to pay such fees and expenses. If not so paid, the
fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written
notice to the Company, which shall be effective thirty (30) days
after receipt of such notice unless the Company and the Trustee
agree otherwise.
(b) Prior to the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Trustee may be removed by the Company on thirty (30) days notice
or upon shorter notice accepted by the Trustee. Upon the
occurrence of a Change in Control, Threatened Change in Control
or Significant Corporate Event, the Trustee may not be removed by
the Company for a period of twenty-four (24) months.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently
be transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after appointment of the
successor Trustee, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor
shall be appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraph(s) (a)
or (b) of this section. If no such appointment has been made for
a resignation or removal that occurs prior to a Change in
Control, Threatened Change in Control or Significant Corporate
Event, the Trustee may apply to a court of competent jurisdiction
for appointment of a successor or for instructions. All expenses
of the Trustee in connection with the proceeding shall be allowed
as administrative expenses of the Trust and the Company agrees to
pay such expenses directly.
Section 11. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance
with Section 10(a) or (b) hereof prior to a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee
powers under state law, as a successor to replace the Trustee
upon resignation or removal. If the Trustee resigns after (or is
removed more than 24 months after) a Change in Control,
Threatened Change in Control or Significant Corporate Event, the
Trustee shall as soon as possible apply to a court of competent
jurisdiction for the appointment of a successor Trustee. The
appointment shall be effective when accepted in writing by the
new Trustee, who shall have all of the rights and powers of the
former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instrument necessary or
reasonably requested by the Company or the successor Trustee to
evidence the transfer.
(b) The successor Trustee need not examine the records
and acts of any prior Trustee and may retain or dispose of
existing Trust assets, subject to Sections 5, 7 and 8 hereof.
The successor Trustee shall not be responsible for and the
Company shall indemnify and defend the successor Trustee from any
claim or liability resulting from any action or inaction of any
prior Trustee or from any other past event, or any condition
existing at the time it becomes successor Trustee.
Section 12. Amendment or Termination.
(a) Prior to a Change in Control, Threatened Change in
Control or Significant Corporate Event, this Trust Agreement may
be amended by a written instrument executed by the Trustee and
the Company, provided that no such amendment shall adversely
affect the rights of Covered Participants under this Trust, and
no such amendment shall conflict with the terms of the Employment
Agreements or shall make the Trust revocable after it has become
irrevocable. Upon the occurrence of a Change in Control,
Threatened Change in Control or Significant Corporate Event, this
Trust may only be amended if all Covered Participants (and
beneficiaries who have become entitled to payments under an
Employment Agreement) consent in writing to such amendment.
(b) Except as provided in (c) below, the Company shall
not have the right to terminate this Trust until the date on
which Covered Participants are no longer entitled to benefits
pursuant to the terms of the Employment Agreements. Upon
termination of the Trust after all such liabilities have been
satisfied, any assets remaining in the Trust shall be returned to
Company.
(c) Upon written approval of all Covered Participants
(and beneficiaries who have become entitled to payment of
benefits under the Employment Agreements), the Company may
terminate this Trust prior to the time all benefit payments have
been made. Upon any such termination, the assets of the Trust
shall be distributed in the manner approved by all Covered
Participants and beneficiaries receiving benefits.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited
by law shall be ineffective to the extent of any such
prohibition, without invalidating the remaining provisions
hereof.
(b) Benefits payable to Covered Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) The Company shall deliver to the Trustee copies of
the Employment Agreements as in effect on the date of this
Agreement and shall deliver to the Trustee as soon as practical
any modifications or amendments to the Employment Agreements.
(d) For purposes of this Trust, the following
definitions shall apply:
(1) "Change in Control" - Either
(i) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended) within any twelve (12) month period of
securities of the Company representing an aggregate of
fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities
(excluding the acquisition by persons who own such
amount of securities on the date hereof, or
acquisitions by persons who acquire such amount through
inheritance), provided, however, that the threshold
percentage in this subparagraph (i) shall be
automatically reduced to an aggregate of twenty-five
percent (25%) or more of the combined voting power of
the Company's then outstanding securities at such time
that either of the following events occurs:
(A) Winton M. Blount's ownership of the combined voting
power of HBC, Incorporated's then outstanding
securities is less than 50.1%, or (B) HBC,
Incorporated's ownership of the combined voting power
of the Company's then outstanding securities is less
than 50.1%.; or
(ii) Winton M. Blount's ownership of the combined
voting power of HBC, Incorporated's then outstanding
securities is less than 50.1%; or
(iii) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, cease for any reason to
constitute at least a majority thereof, unless the
election of each new director was approved in advance
by a vote of at least a majority of the directors then
still in office who were directors at the beginning of
the period; or
(iv) consummation of (A) a merger, consolidation or
other business combination of the Company with any
other "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended) or affiliate thereof, other than a merger,
consolidation or business combination which would
result in the outstanding common stock of the Company
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent
or affiliate thereof) at least fifty percent (50%) of
the outstanding common stock of the Company or such
surviving entity or parent or affiliate thereof
outstanding immediately after such merger,
consolidation or business combination, or (B) a plan of
complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(v) the occurrence of any other event or circumstance
which is not covered by (i) through (iv) above which
the Board determines affects control of the Company and
adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of
this Agreement.
(2) "Threatened Change in Control" - Any pending
tender offer for any class of the Company's outstanding shares of
Common Stock, or any pending bona fide offer to acquire the
Company by merger or consolidation, or any other pending action
or plan to effect, or which would lead to, a Change in Control of
the Company. A Threatened Change in Control shall commence on
the first day the actions described in the preceding sentence
become manifest and shall end when such actions are abandoned or
the Change in Control occurs.
(3) "Significant Corporate Event" - The death of
Winton M. Blount or the sale, transfer or other disposition by
the Company of the business, assets or stock of a subsidiary or
division of the Company that: (i) constituted 25% or more of the
Company's net dollar sales; or (ii) represented 25% or more of
the Company's assets. For purposes of this determination, the
net dollar sales percentage test shall be measured by the sales
represented by the assets, division or subsidiary sold from the
first day of the current fiscal year through the day immediately
preceding the date of sale divided by the gross dollar sales of
the Company. For purposes of this determination, the percentage
of assets sold shall be calculated as the assets being sold
divided by the Company's total assets immediately prior to such
sale. The determination of a Significant Corporate Event shall
be made by the Company's independent accountants based upon
information relating to the transactions provided by the Company.
(e) All interest, earnings and gains on the
investments of the Trust shall be considered interest, earnings
or gains of the Company and shall be taxable to the Company. The
Company agrees to pay directly all taxes resulting from the
interest, earnings or gains of the Trust.
(f) This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia,
except where federal law applies.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be
April 17, 1995.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized corporate
officers and its corporate seal to be hereunto affixed, and the
Trustee has executed same and thereby accepted the trust as of
the date first above written.
(CORPORATE SEAL) COMPANY:
Attest:/s/D.J. McInnes BLOUNT, INC.
By:/s/John M. Panettiere
(CORPORATE SEAL) TRUSTEE: TRUST COMPANY BANK
Attest:/s/David L. Harrison By:/s/Patrick A. Paprelli
<PAGE>
APPENDIX A
TO
BLOUNT, INC.
BENEFITS PROTECTION TRUST
The oblitgations under the Employment Agreements between
the Company and the following executives ("Covered Participants")
are covered by this Trust:
1. John M. Panettiere
2. D. Joseph McInnes
3. Harold E. Layman
4. James S. Osterman
5. Donald B. Zorn
Dated: April 17, 1995
EXHIBIT 10 (y) (ii)
AMENDMENT TO
AND ASSUMPTION OF
BLOUNT, INC. BENEFITS PROTECTION TRUST
This Amendment and Assumption Agreement dated as of the 3rd
day of November, 1995, by and among BLOUNT, INC. ("Blount"),
BLOUNT INTERNATIONAL, INC. ("BII") and TRUST COMPANY BANK
("Trustee");
W I T N E S S E T H:
WHEREAS, Blount entered into an agreement ("Trust
Agreement") with the Trustee, dated April 17, 1995, establishing
a trust for the benefit of certain executives ("Covered
Participants") of Blount who have Employment Agreements and
providing for additional funding of the trust upon a Change in
Control of Blount; and
WHEREAS, pursuant to a Plan and Agreement of Merger ("Merger
Agreement"), dated August 17, 1995, among Blount, BII and HBC
Transaction Subsidiary, Inc. ("Subsidiary"), a subsidiary of BII,
Subsidiary will be merged ("Merger") with and into Blount, and
Blount will be the survivor of the Merger; and
WHEREAS, as a result of the Merger, Blount will become a
wholly-owned subsidiary of BII and BII will become the publicly-traded
company; and
WHEREAS, the Merger Agreement provides for the continuation
of the Employment Agreements and the preservation of the relative
rights and obligations of the parties thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the Trust
Agreement, the parties hereby agree as follows:
1.
BII hereby agrees to assume all of the obligations,
responsibilities and liabilities of the "Company" under the Trust
Agreement and each place in the Trust Agreement where a reference
to "Company" appears shall now refer to and mean BII. Further,
in each place where the Trust Agreement now refers to an
Employment Agreement with Blount, such reference shall now
include an Employment Agreement with BII. The Trustee hereby
consents to the assumption of the Trust Agreement by BII and the
substitution of BII as the "Company" thereunder.
2.
Section 13(d)(1) of the Trust Agreement is hereby amended by
deleting the present section in its entirety and substituting the
following therefor:
"(1) "Change in Control" - Either
(i) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of the
Company representing an aggregate of fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who own such
amount of securities on the date hereof, or acquisitions by
persons who acquire such amount through inheritance); or
(ii) Winton M. Blount (A) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of the Company, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (B) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of the Company's
voting securities owned by the Blount Partnership; or
(iii) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of the Company's then outstanding
securities; or
(iv) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company, cease for any reason to constitute at least
a majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(v) consummation of (A) a merger, consolidation or
other business combination of the Company with any other "person"
(as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of
the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common
stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such
merger, consolidation or business combination, or (B) a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets; or
(vi) the occurrence of any other event or circumstance
which is not covered by (i) through (v) above which the Board of
the Company determines affects control of the Company and adopts
a resolution that such event or circumstance constitutes a Change
in Control for the purposes of this Agreement."
3.
Section 13(d)(3) of the Trust Agreement is hereby amended by
adding the words "or incapacity (as defined below)" after the
word "death" in the first line of the present section and adding
the following two sentences at the end of the present section:
"For purposes of this Agreement, Mr. Blount shall be
considered incapacitated if he is determined to be permanently
unable to perform his duties as Chairman of the Board of the
Company. The Board of the Company shall have the authority to
make the determination whether Mr. Blount is incapacitated under
this Agreement and shall also have the authority to determine
whether Mr. Blount has ceased to be incapacitated hereunder."
4.
Blount agrees to execute the Guarantee Agreement attached
hereto as Exhibit A, agreeing to pay and perform all of the
obligations and responsibilities of the "Company" under the Trust
Agreement.
5.
Except as hereby modified, the terms and conditions of the
Trust Agreement shall remain in full force and effect. This
Amendment and Assumption Agreement shall be effective as of
November 3, 1995.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
and Assumption Agreement as of the day and year first above
written.
TRUSTEE:
TRUST COMPANY BANK
By:_______________________________
BLOUNT, INC.
By:/s/John M. Panettiere__________
BLOUNT INTERNATIONAL, INC.
By:/s/John M. Panettiere__________
<PAGE>
EXHIBIT A
GUARANTEE AGREEMENT
For and in consideration of the covenants and
agreements contained in the Trust Agreement for the Blount, Inc.
Benefits Protection Trust between Blount, Inc. ("Blount") and
Trust Company Bank ("Trustee"), dated April 17, 1995, as assumed
by Blount International, Inc. (the "Company") and as amended on
November 3, 1995 (the "Agreement"), and in further consideration
of the financial and other benefits accruing to Blount from the
Trust Agreement, Blount does hereby agree to pay and to perform
all of the obligations and responsibilities of the Company under
the Trust Agreement, including, without limitation, the
obligation to make additional contributions to the Trust under
Section 1(f) of the Trust Agreement.
IN WITNESS WHEREOF, Blount acting under authority of
its Board of Directors has caused this Guarantee Agreement to be
executed as of this 3rd day of November, 1995.
BLOUNT, INC.
By:/s/John M. Panettiere____________
