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 28, 1995
-----------------
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-7002
------
BLOUNT, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0593908
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4520 Executive Park Drive, Montgomery, Alabama 36116-1602
- ---------------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (334) 244-4000
--------------
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, $1.00 par value American Stock Exchange
Class B Common Stock, $1.00 par value American Stock Exchange
- ------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None
----
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.
Yes No X
------- -------
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
------- -------
Page 1
<PAGE>
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 3,
- ---------------------------------------------------------------------------
1995: $288,180,272
- --------------------------
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 $1.00 par value, as of April 3, 1995: 8,570,789 shares
---------
Class B Common Stock $1.00 par value, as of April 3, 1995: 4,027,724 shares
---------
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 26, 1995, are incorporated by reference in Part III.
Page 2
<PAGE>
PART I
ITEM 1. BUSINESS
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. in 1985. The Company was founded
in 1946 as a general construction company and, over the succeeding years, grew
into one of the largest construction companies in the United States. In
February 1994, the Company discontinued its construction business. See
"Business - Acquisitions and Dispositions" on page 6.
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. 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 and arborists. Recent new products from
Oregon include the Woodzig power pruner and the Industrial Cutting System
("ICS") concrete cutter. Winner of an Industrial Design Excellence Award in
1991, the Woodzig is an electric power pruner designed primarily for use by
homeowners. 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,
the Company believes that it is able to produce durable, high-quality saw chain
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 1995, are generally more profitable than
sales of saw chain to OEMs.
The Company has Outdoor Products marketing personnel throughout the United
States and in a number of foreign countries. Sales derived from operations
outside the United States accounted for 35%, and export sales accounted for 19%,
of Outdoor Products sales during fiscal 1995. Oregon manufactures saw chain and
related products in Milwaukie, Oregon; Guelph, Ontario, Canada; and Curitiba,
Parana, Brazil.
Oregon's products compete on the basis of quality and price, primarily with the
products of other saw chain manufacturers as well as a small number of
international chainsaw manufacturers, some of whom are also customers. Segment
operating income is subject to seasonality with over half of annual operating
income generated during the last half of the fiscal year. Sales are seasonal to
a much lesser extent, reflecting the effect of volume sales to several OEMs at
lower margins typically than replacement sales. This segment's principal raw
material, strip steel, is generally purchased from two vendors, although it is
readily available from other sources.
Page 3
<PAGE>
Dixon, a manufacturer of ZTR (zero turning radius) riding lawn mowers and
related attachments, was acquired in early fiscal 1991. The maneuverability of
ZTR mowers significantly reduces mowing time and distinguishes them from
competitors' products. These mowers accounted for $38.1 million or 14% of
Outdoor Products sales.
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 1995 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
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 $20.7 million from Gear Products, Inc.
("Gear"), acquired by the Company early in fiscal 1992, and $12.9 million from
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. 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
Page 4
<PAGE>
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; and Weaver shooting mounts and scopes.
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 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, that 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.
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, scopes and
gun care equipment in Onalaska, Wisconsin; and shooting accessories in Grand
Junction, Colorado.
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 90%, 84% and
60%, respectively, of their production capacity in fiscal 1995.
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
--------------------------------------------
1995 1994 1993 1992
-------- -------- -------- --------
(In thousands)
Outdoor Products $ 44,421 $ 36,507 $ 31,369 $ 33,561
Industrial and Power Equipment 74,374 93,794 32,883 20,058
Sporting Equipment 15,555 16,750 3,048 5,437
-------- -------- -------- --------
$134,350 $147,051 $ 67,300 $ 59,056
======== ======== ======== ========
The total backlog as of February 28, 1995, is expected to be completed and
shipped within fiscal 1996.
Page 5
<PAGE>
ACQUISITIONS AND DISPOSITIONS
In March 1990, the Company acquired all of the outstanding capital stock of
Dixon Industries, Inc. for cash of approximately $25 million. Dixon
manufactures specialty riding lawn mowers and related attachments. The
transaction was accounted for as a purchase.
In fiscal 1991, the Company acquired certain product line manufacturing and
marketing rights for its Industrial and Power Equipment segment at a cost of
$5.5 million.
In fiscal 1991, the Company sold its rights to certain resource recovery
technology for cash and notes of approximately $5 million.
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 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"), the Company's wholly owned subsidiary headquartered in Los
Angeles, California. The Company has entered into a letter of intent for the
sale of Pozzo and expects the sale to be concluded during the first quarter of
fiscal 1996.
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.
See Note 4 of Notes to Consolidated Financial Statements on pages 26 and 27.
EMPLOYEES
At February 28, 1995, the Company employed approximately 4,600 individuals.
None of the Company's employees are unionized. The Company believes its
relations with its employees are satisfactory.
ENVIRONMENTAL MATTERS
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin (the "Site").
The waste complained of was placed in the landfill prior to 1981 by a
corporation, some of whose assets were purchased in 1981 by a predecessor of the
Company. It is the view of the Company that because its predecessor corporation
Page 6
<PAGE>
purchased assets rather than stock, the Company does not have successor
liability and is not properly a PRP. However, the EPA has indicated it does not
accept this position. The Company believes the EPA is wrong on the successor
liability issue. However, with other PRP's, the Company made a good faith offer
to the EPA to pay a portion of the clean-up costs. The offer was rejected and
the EPA is proceeding with the clean-up. The estimated past and future clean-up
costs are approximately $12 million. In 1989 the EPA named four PRP's. One of
the PRP's, the Town of Onalaska (the "Town") and the EPA and State of Wisconsin
negotiated a consent decree under which the Town would have been released from
future liability in return for paying $110 thousand, granting access to the Site
and adjacent properties and performing some future maintenance work. The United
States District Court for the District of Wisconsin found, on December 21, 1994,
that the settlement was not fair, reasonable or in the public interest, and
refused to approve and confirm it as the order of the Court. The Company denies
that it is a PRP and is unable to determine any other party's share of total
remediation costs. The Company does not know the financial status of the other
PRP's and other parties that, while not named by the EPA as PRP's, may have
liability with respect to the Site. The Company does not expect the situation
to have a material adverse effect on the Company's financial condition or
operating results.
The Company is closing a Resource Conservation and Recovery Act ("RCRA") Part B
Storage Permit at its Sporting Equipment Division's CCI operations facility in
Lewiston, Idaho. As part of the process, the Company is required by the State
of Idaho to undertake RCRA corrective action at the facility. This will require
the Company to investigate all areas at the facility where solid waste and
hazardous waste have historically been managed. The facility has been operating
since the 1950s. There are several areas where investigation and sampling are
required. In order to effect the investigation, the Company and the State of
Idaho entered into an Administrative Consent Order which governs the completion
of the corrective action activities. As a result of initial testing, some
contamination of the uppermost groundwater beneath the facility has been
encountered. This uppermost groundwater is not the drinking water supply source
and does not appear to be connected to the drinking water aquifer. Further
investigation is ongoing. It is expected that the range of remediation costs is
from $2.8 million to $6.2 million. The Company does not expect the situation to
have a material adverse effect on its financial condition or operating results
beyond amounts accrued.
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.
During fiscal 1995, the Company spent an aggregate of approximately $989
thousand on improvements in connection with environmental quality standards.
The Company expects to spend approximately $1.6 million, $1.1 million and $874
thousand during fiscal 1996, 1997 and 1998, respectively, on compliance costs.
Page 7
<PAGE>
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 and 34.
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:
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; Onalaska,
Wisconsin; and Grand Junction, Colorado.
All of these plants 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
-------------------
Owned Leased
------- -------
Outdoor Products 894,000 204,000
Sporting Equipment 705,000 39,000
Industrial & Power Equipment 726,000 0
Corporate Office 192,000 13,000
--------- -------
Total 2,517,000 256,000
========= =======
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.
Page 8
<PAGE>
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
1995, the quarterly high and low prices on the American Stock Exchange and cash
dividends declared for the Company's Common Stock. The Company had approximately
9,200 shareholders as of April 14, 1995.
Class A Common Stock Class B Common Stock
-------------------------- ----------------------------
High Low Dividend High Low Dividend
- ------------------------------------------------------------------------------
1995
First quarter $37 7/8 $28 1/8 $ .1250 $36 5/8 $29 $ .1125
Second quarter 41 7/8 35 .1250 41 1/2 36 1/8 .1125
Third quarter 45 3/4 39 3/4 .1250 45 40 3/8 .1125
Fourth quarter 49 1/8 42 5/8 .1425 48 7/8 42 3/4 .1300
1994
First quarter $16 1/2 $12 1/8 $ .1125 $16 5/8 $12 7/8 $ .1000
Second quarter 16 1/2 13 1/8 .1125 16 3/8 12 3/4 .1000
Third quarter 23 3/8 14 1/2 .1125 23 3/4 14 3/8 .1000
Fourth quarter 32 1/2 22 3/4 .1250 32 1/2 23 3/8 .1125
For information regarding restrictions on the Company's ability to pay cash
dividends, see Note 3 of Notes to Consolidated Financial Statements on pages 24
through 26.
For information regarding restrictions on the net assets of foreign
subsidiaries, see Note 11 of Notes to Consolidated Financial Statements on pages
35 and 36.
Page 9
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
For the years ended the last day of February 1995 1994 1993 1992 1991
Dollar amounts in thousands, except share data
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results:
Sales $ 588,419 $ 488,045 $ 426,492 $ 382,352 $ 355,012
Operating income from segments 101,887 73,631 43,404 25,372 28,384
Income (loss) from continuing operations
before extraordinary gain and cumulative
effect of accounting changes 40,090 24,396 11,888 (4,295) 644
Net income(1) 40,090 14,080 7,239 683 2,242
Per share:
Income (loss) from continuing operations
before extraordinary gain and cumulative
effect of accounting changes 3.10 1.92 .97 (.35) .06
Net income(1) 3.10 1.11 .59 .06 .19
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------
Year-End Financial Position:
Total assets $ 517,788 $ 492,901 $ 447,151 $ 466,243 $ 496,319
Working capital 122,105 104,346 58,340 63,671 86,911
Property, plant and equipment-gross 279,808 276,116 270,312 265,067 244,672
Property, plant and equipment-net 134,289 140,422 149,061 154,280 147,274
Long-term debt 99,754 107,651 82,046 105,654 124,052
Total debt 107,545 109,733 88,143 130,846 144,358
Net debt (total debt less cash, cash
equivalents and unexpended industrial
development revenue bond proceeds)
to total capitalization 17.7% 20.8% 29.0% 44.1% 40.7%
Shareholders' equity 203,067 166,853 155,071 151,129 155,409
Current ratio 1.7 to 1 1.6 to 1 1.4 to 1 1.4 to 1 1.5 to 1
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------
Other Data:
Property, plant and equipment additions(2) $ 14,822 $ 14,711 $ 20,373 $ 32,983 $ 27,145
Depreciation and amortization 22,945 22,801 23,361 22,251 17,261
Interest expense, net of interest income 8,846 9,551 9,687 14,384 11,099
Stock price Class A high 49 1/8 32 1/2 17 12 7/8 13 3/4
Class A low 28 1/8 12 1/8 7 5 3/4 6 7/8
Stock price Class B high 48 7/8 32 1/2 16 7/8 14 3/4 14 5/8
Class B low 29 12 3/4 7 1/8 5 5/8 7
Per common share dividends Class A .5175 .4625 .45 .45 .45
Class B .4675 .4125 .40 .40 .40
Weighted average common shares outstanding 12,931,020 12,730,733 12,283,592 11,958,557 12,000,207
Employees (approximate) 4,600 4,700 4,800 4,700 4,600
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------
(1) Includes income of $6,014 ($.50 per share) representing the cumulative effect of adopting Statement
of Financial Accounting Standards ("SFAS") No. 106 and SFAS No. 109 in 1992 and an extraordinary gain of
$1,205 ($.10 per share) on repurchase of debt in 1991.
(2) Includes property, plant and equipment of acquired companies at date of purchase of $5,020 in 1995,
$6,034 in 1992 and $4,675 in 1991 and $11,300 resulting from the adoption of SFAS No. 109 in 1992.
</TABLE>
Page 10
<PAGE>
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 1995 COMPARED TO FISCAL 1994
During fiscal 1995, the Company achieved record sales, operating income from
segments and income from continuing operations. 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 $40.1 million in fiscal
1995, a 64% increase over fiscal 1994. Net income was $40.1 million in fiscal
1995 compared to net income of $14.1 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 22% 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 anticipated litigation and settlement costs related to the
sale of a former subsidiary.
The Company's total backlog at February 28, 1995, was $134.4 million compared to
$147.1 million at February 28, 1994. The backlog at February 28, 1994, was
inordinately high as production lagged the market demand.
FISCAL 1994 COMPARED TO FISCAL 1993
Sales in fiscal 1994 were $488.0 million compared to $426.5 million in fiscal
1993. Income from continuing operations improved to $24.4 million in fiscal
1994, more than twice the $11.9 million in fiscal 1993. The improved sales and
operating results reflected continued strong performance by each of the
Company's manufacturing segments. Net income of $14.1 million in fiscal 1994
compared to net income of $7.2 million in fiscal 1993. Fiscal 1994 and fiscal
1993 net income included losses of $10.3 million and $4.6 million, respectively,
from discontinued operations.
Selling, general and administrative expenses increased by $9.9 million in fiscal
1994, principally as a result of accruals for expected legal costs related to
the sale of a former subsidiary and management incentive plans resulting from
the Company's improved earnings and increased stock price.
Net other expense in fiscal 1994 increased by $2.7 million over fiscal 1993
primarily due to losses resulting from disposals and reductions in carrying
value of certain property, plant and equipment.
In February 1994, the Company adopted a plan to discontinue its construction
business (see Note 4 of Notes to Consolidated Financial Statements) through the
orderly completion and close-out of the Company's principal domestic and foreign
construction projects and the sale of Pozzo Construction Company ("Pozzo"), the
Company's wholly owned subsidiary headquartered in Los Angeles, California. The
Page 11
<PAGE>
Company expects the sale of Pozzo to be concluded during the first quarter of
fiscal 1996. In fiscal 1994, an after-tax loss of $650 thousand was provided
for disposal of the construction segment. The results of construction
operations are classified as discontinued operations in the Company's
consolidated statements of income.
SEGMENTS
FISCAL 1995 COMPARED TO FISCAL 1994
The Company's Outdoor Products segment recorded an excellent performance with
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 the Company's Oregon Cutting Systems
Division ("Oregon"). This reflects a 7% increase in the sales volume of saw
chain and a 12% increase in the sales volume of saw bars, Oregon's two principal
products, and higher average selling prices. A significant part of Oregon's
operations are conducted in foreign countries, and as a result, fluctuations in
exchange rates impact the amount of reported sales, operating margins and the
amount of foreign exchange adjustments reflected in income. During fiscal 1995,
exchange rates in Canada, Europe and Japan were favorable 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. Official currency exchange rates
stabilized in Brazil during the last half of fiscal 1995. Operating income from
Brazil was $2.4 million in fiscal 1995 compared to $749 thousand in fiscal 1994.
Sales and operating income at other units of the Outdoor Products segment,
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 current demand for Oregon's products continues at high levels;
therefore, the Company expects another good sales year in fiscal 1996. The
Company also expects continued strong sales growth in fiscal 1996 for its riding
lawn mower business.
The upward trend of results by the Industrial and Power Equipment segment
continued during fiscal 1995. Over a three year span, this segment's sales have
more than doubled and operating income has improved to a record $33.0 million
from an approximate break-even level in fiscal 1992. Sales for the Industrial
and Power Equipment segment were $207.6 million in fiscal 1995 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. The Company's continued emphasis on
expanding international opportunities coupled with the expected strong demand
for this segment's products by its principal market, the forest products
industry, point to another successful year in fiscal 1996.
For the second consecutive year, the Sporting Equipment segment experienced
strong growth in both sales and operating income, with each increasing to record
levels in fiscal 1995. Operating income increased by 27% in fiscal 1995 as
compared to fiscal 1994 and has almost doubled since fiscal 1993. For fiscal
Page 12
<PAGE>
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). The inclusion of this acquisition's operating results for a full
fiscal year plus continued demand for the Company's existing products should
lead to another good year in fiscal 1996 for the Sporting Equipment segment,
however, this segment is currently encountering a softening of the exceptionally
strong demand experienced in fiscal 1995.
FISCAL 1994 COMPARED TO FISCAL 1993
Sales for the Outdoor Products segment in fiscal 1994 were $234.5 million
compared to $213.2 million during fiscal 1993. Operating income increased to
$34.0 million during fiscal 1994 from $20.6 million in fiscal 1993. The
improved results for this segment were primarily due to increased sales and
operating income of $15.3 million and $11.6 million, respectively, at Oregon,
reflecting an 11% increase in the sales volume of saw chain, Oregon's principal
product, and reduced unit costs. Operating income from operations in Brazil was
$749 thousand in fiscal 1994 compared to $384 thousand in fiscal 1993. Sales
and operating income at other units of the Outdoor Products segment were up by
20% to $33.8 million and 115% to $3.3 million, respectively, in fiscal 1994,
principally as a result of higher average selling prices and a 20% increase in
the sales volume of riding lawn mowers.
Sales for the Industrial and Power Equipment segment were $162.0 million during
fiscal 1994 compared to $128.9 million during fiscal 1993. Operating income
increased to $24.5 million during fiscal 1994 from $12.8 million during fiscal
1993. Demand for this segment's products remained high as the aggregate volume
of timber harvesting and industrial tractor and loader units sold during fiscal
1994 increased by 20% over the prior fiscal year. The improvement in operating
income was principally due to this increase in volume, improved parts sales and
increased average selling prices.
Sales for the Sporting Equipment segment were $91.5 million during fiscal 1994
compared to $84.4 million in fiscal 1993. Operating income increased to $15.2
million from $10.0 million during fiscal 1993. The increases in sales and
operating income were principally due to improved margins on higher volume and
income recognized in fiscal 1994 upon finalizing a license and technical
assistance agreement with a foreign company. This agreement is expected to lead
to future product sales as well as royalties.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be in a strong financial position. Growth has been
funded entirely through cash generated by operations, and recent acquisitions
have been made through use of the Company's cash reserves. In fiscal 1994, the
Company issued 9% senior subordinated notes ("the 9% notes") due in 2003 in the
principal amount of $100 million and retired $73.6 million 12% subordinated
notes. In fiscal 1995, approximately $20 million of the 9% notes were
repurchased and retired. Since issuing the 9% notes, the Company discontinued
the sale of receivables under a receivable sale agreement with a major bank
under which the Company can sell up to $25 million of eligible receivables. In
fiscal 1995, the Company (i) replaced its $60 million revolving credit agreement
with a new $100 million revolving credit agreement; (ii) extended the term of
Page 13
<PAGE>
the $25 million receivable sale agreement until May 1995 and plans to negotiate
a replacement agreement; and (iii) has entered into $11.8 million of industrial
development revenue bond arrangements. At February 28, 1995, no amounts were
outstanding under the $100 million revolving credit agreement. 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 $122.1 million at February 28, 1995, compared to $104.3
million at February 28, 1994. The principal reason for this increase was the
Company's improved earnings in fiscal 1995. The Company's operating cash flows
for fiscal 1995 were $31.6 million compared to $29.2 million in fiscal 1994 and
$68.1 million in fiscal 1993. The increased cash flows from operating
activities for fiscal 1995 resulted principally from the net income increase of
$26.0 million partially offset by cash used for residual construction
operations, the settlement of litigation initiated in a prior year and an
increase in inventories, primarily due to higher demand. The reduction in
operating cash flows in fiscal 1994 as compared to fiscal 1993 was primarily due
to the reduced sales of receivables under the receivable sale agreement, higher
income tax payments and an increase in inventories in the fourth quarter of
fiscal 1994 to meet expected demand early in fiscal 1995. Cash and cash
equivalent balances were $42.6 million at February 28, 1995, compared to $52.2
million at February 28, 1994, as the Company's operating cash flows were
exceeded by cash expenditures to acquire CTR Manufacturing, Inc. and the
operating assets of Ram-Line, Inc., repurchase approximately $20 million of the
9% notes and pay dividends (see Notes 3 and 4 of Notes to Consolidated Financial
Statements). The Company believes that its operating cash flows, working
capital and unused credit facilities will provide both short-term and long-term
liquidity. Additionally, the Company has approximately $10.1 million in
unexpended proceeds from industrial development revenue bonds to fund future
capital expenditures of certain operations.
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.
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, 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, Inc. and
subsidiaries as of the last day of February 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended February 28, 1995 in conformity with generally accepted
accounting principles. 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 10, 1995
Page 15
<PAGE>
MANAGEMENT RESPONSIBILITY
All information contained in the consolidated financial statements of Blount,
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 Coopers & Lybrand 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 Coopers
& Lybrand 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, Coopers & Lybrand, 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 Coopers & Lybrand 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, 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
Page 16
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Blount, Inc. and Subsidiaries
<CAPTION>
For the years ended the last day of February 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
In thousands, except share data
Sales $ 588,419 $ 488,045 $ 426,492
Cost of sales 390,818 330,059 299,399
- ------------------------------------------------------------- ------------ ------------ -----------
Gross profit 197,601 157,986 127,093
Selling, general and administrative expenses 120,681 107,401 97,544
- ------------------------------------------------------------- ------------ ------------ -----------
Income from operations 76,920 50,585 29,549
Interest expense (11,186) (11,052) (10,358)
Interest income 2,340 1,501 671
Other expense, net (2,179) (4,619) (1,922)
- ------------------------------------------------------------- ------------ ------------ -----------
Income before income taxes 65,895 36,415 17,940
Provision for income taxes 25,805 12,019 6,052
- ------------------------------------------------------------- ------------ ------------ -----------
Income from continuing operations 40,090 24,396 11,888
- ------------------------------------------------------------- ------------ ------------ -----------
Discontinued operations:
Loss from operations, net (9,666) (4,649)
Loss on disposal, net (650)
- ------------------------------------------------------------- ------------ ------------ -----------
Total loss from discontinued operations (10,316) (4,649)
- ------------------------------------------------------------- ------------ ------------ -----------
Net income $ 40,090 $ 14,080 $ 7,239
- ------------------------------------------------------------- ------------ ------------ -----------
Income (loss) per share of common stock:
Income from continuing operations $ 3.10 $ 1.92 $ .97
Discontinued operations (.81) (.38)
- ------------------------------------------------------------- ------------ ------------ -----------
Net income $ 3.10 $ 1.11 $ .59
- ------------------------------------------------------------- ------------ ------------ -----------
Weighted average number of common
shares outstanding 12,931,020 12,730,733 12,283,592
- ------------------------------------------------------------- ------------ ------------ -----------
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Blount, Inc. and Subsidiaries
<CAPTION>
For the years ended the last day of February 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
In thousands, except share data
Balance at beginning of period $ 137,440 $ 128,833 $ 126,813
Net income 40,090 14,080 7,239
- ------------------------------------------------------------- ------------ ------------ -----------
177,530 142,913 134,052
Less cash dividends declared:
Class A Common stock - $.5175 per share in 1995,
$.4625 per share in 1994 and $.45 per share in 1993 4,356 3,695 3,470
Class B Common stock - $.4675 per share in 1995,
$.4125 per share in 1994 and $.40 per share in 1993 1,914 1,778 1,749
- ------------------------------------------------------------- ------------ ------------ -----------
Balance at end of period $ 171,260 $ 137,440 $ 128,833
- ------------------------------------------------------------- ------------ ------------ -----------
The accompanying notes are an integral part of these statements.
</TABLE>
Page 17
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Blount, Inc. and Subsidiaries
<CAPTION>
As of the last day of February 1995 1994
- ---------------------------------------------------------------------------------------------------
In thousands, except share data
Assets
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents, including short-term
investments of $39,458 and $48,810 $ 42,576 $ 52,213
Accounts receivable, net of allowances for
doubtful accounts of $2,611 and $2,238 130,665 134,458
Inventories 77,075 60,180
Deferred income taxes 25,068 17,742
Other current assets 16,153 12,812
- -------------------------------------------------------------------------- ------------ -----------
Total current assets 291,537 277,405
Property, plant and equipment, net of accumulated
depreciation of $145,519 and $135,694 134,289 140,422
Cost in excess of net assets of acquired businesses, net 68,762 60,171
Other assets 23,200 14,903
- -------------------------------------------------------------------------- ------------ -----------
Total Assets $ 517,788 $ 492,901
- -------------------------------------------------------------------------- ------------ -----------
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------- ------------ -----------
Current liabilities:
Notes payable and current maturities of long-term debt $ 7,791 $ 2,082
Accounts payable 64,793 74,267
Accrued expenses 92,190 83,757
Billings in excess of costs and recognized profits
on uncompleted contracts 4,658 12,953
- -------------------------------------------------------------------------- ------------ -----------
Total current liabilities 169,432 173,059
Long-term debt, exclusive of current maturities 99,754 107,651
Deferred income taxes, exclusive of current portion 19,214 13,499
Other liabilities 26,321 31,839
- -------------------------------------------------------------------------- ------------ -----------
Total liabilities 314,721 326,048
- -------------------------------------------------------------------------- ------------ -----------
Commitments and Contingent Liabilities
- -------------------------------------------------------------------------- ------------ -----------
Shareholders' equity:
Common stock: par value $1.00 per share (see Note 5 for
voting rights by class);
Class A: 8,562,786 and 8,273,035 shares issued 8,563 8,273
Class B, convertible: 4,030,424 and 4,178,197 shares issued 4,030 4,178
Capital in excess of par value of stock 10,964 9,515
Retained earnings 171,260 137,440
Accumulated translation adjustment 8,250 7,447
- -------------------------------------------------------------------------- ------------ -----------
Total shareholders' equity 203,067 166,853
- -------------------------------------------------------------------------- ------------ -----------
Total Liabilities and Shareholders' Equity $ 517,788 $ 492,901
- -------------------------------------------------------------------------- ------------ -----------
The accompanying notes are an integral part of these statements.
</TABLE>
Page 18
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount, Inc. and Subsidiaries
<CAPTION>
For the years ended the last day of February 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 40,090 $ 14,080 $ 7,239
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and other noncash charges 23,539 23,435 24,537
Deferred income taxes (1,251) (15,031) (8,558)
Loss on disposals of property, plant and equipment 441 3,349 1,482
Changes in assets and liabilities, net of effects
of acquisitions of businesses:
Increase (decrease) in aggregate balance
of accounts receivable sold (17,637) 3,637
Decrease in accounts receivable 5,517 1,135 2,684
(Increase) decrease in inventories (12,991) (4,280) 9,569
(Increase) decrease in other assets (2,599) 12,337 140
Increase (decrease) in accounts payable (9,906) 7,975 2,929
Increase in accrued expenses 1,829 12,750 8,074
Increase (decrease) in other liabilities (13,100) (8,946) 16,402
- ------------------------------------------------------------- ------------ ------------ -----------
Net cash provided by operating activities 31,569 29,167 68,135
- ------------------------------------------------------------- ------------ ------------ -----------
Cash flows from investing activities:
Proceeds from sales of businesses and property, plant
and equipment 2,930 3,916 11,129
Purchases of property, plant and equipment (9,769) (14,605) (17,965)
Acquisitions of businesses (10,150)
- ------------------------------------------------------------- ------------ ------------ -----------
Net cash used in investing activities (16,989) (10,689) (6,836)
- ------------------------------------------------------------- ------------ ------------ -----------
Cash flows from financing activities:
Net reduction in short-term borrowings (478) (2,246) (15,903)
Issuance of long-term debt 11,800 97,327
Reduction of long-term debt (20,508) (75,325) (29,615)
Increase in restricted funds (10,095)
Dividends paid (6,270) (5,473) (5,219)
Issuance of stock under stock option and dividend
reinvestment plans 1,334 1,729 529
- ------------------------------------------------------------- ------------ ------------ -----------
Net cash provided by (used in) financing activities (24,217) 16,012 (50,208)
- ------------------------------------------------------------- ------------ ------------ -----------
Net increase (decrease) in cash and cash equivalents (9,637) 34,490 11,091
- ------------------------------------------------------------- ------------ ------------ -----------
Cash and cash equivalents at beginning of period 52,213 17,723 6,632
- ------------------------------------------------------------- ------------ ------------ -----------
Cash and cash equivalents at end of period $ 42,576 $ 52,213 $ 17,723
- ------------------------------------------------------------- ------------ ------------ -----------
The accompanying notes are an integral part of these statements.
</TABLE>
Page 19
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL STOCK ACCOUNTS
Blount, Inc. and Subsidiaries
<CAPTION>
Common Stock Capital Accumulated
----------------- In Excess Translation Treasury
In thousands Class A Class B of Par Adjustment Stock
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, February 29, 1992 $ 7,651 $ 4,376 $ 5,072 $ 7,642 $ (425)
Conversion of Class B Common Stock
into Class A Common Stock 35 (35)
Exercise of employee stock options 51 5 416
Issuance of shares under dividend
reinvestment plan 6 51
Aggregate adjustment resulting from
translation of foreign currency statements (407)
Issuance of shares to employee benefit plan 141 1,234 425
- --------------------------------------------- -------- ----------- ------------- ----------- ------
Balance, February 28, 1993 7,884 4,346 6,773 7,235 0
Conversion of Class B Common Stock
into Class A Common Stock 168 (168)
Exercise of employee stock options 142 1,511
Issuance of shares under dividend
reinvestment plan 5 71
Aggregate adjustment resulting from
translation of foreign currency statements 212
Issuance of shares to employee benefit plan 74 1,160
- --------------------------------------------- -------- ----------- ------------- ----------- ------
Balance, February 28, 1994 8,273 4,178 9,515 7,447 0
Conversion of Class B Common Stock
into Class A Common Stock 148 (148)
Exercise of employee stock options 133 1,110
Issuance of shares under dividend
reinvestment plan 3 88
Aggregate adjustment resulting from
translation of foreign currency statements 803
Issuance of shares to employee benefit plan 6 251
- --------------------------------------------- -------- ----------- ------------- ----------- ------
Balance, February 28, 1995 $ 8,563 $ 4,030 $10,964 $ 8,250 $ 0
- --------------------------------------------- -------- ----------- ------------- ----------- ------
The accompanying notes are an integral part of these statements.
</TABLE>
Page 20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Blount, Inc. and Subsidiaries
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation:
The consolidated financial statements include the accounts of Blount, Inc. and
its subsidiaries. All significant intercompany balances and transactions are
eliminated in consolidation.
Reclassifications:
Certain amounts in the 1994 and 1993 financial statements and notes to
consolidated financial statements have been reclassified to conform with the
1995 presentation.
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 $6.2 million and $5.5 million as of the last
day of February 1995 and 1994. All other checks in transit are recorded as
reductions of cash.
Inventories:
Inventories are stated at the lower of first-in, first-out cost or market.
Property, plant and equipment:
These assets are stated at cost and are depreciated principally on the straight-
line method over the estimated useful lives of the individual assets. Gains or
losses on disposal are reflected in income. Property, plant and equipment held
under leases which are essentially installment purchases are capitalized, with
the related obligations stated at the principal portion of future lease
payments. Depreciation charged to costs and expenses was $19.8 million, $19.9
million and $20.5 million in 1995, 1994 and 1993.
Interest cost incurred during the period of construction of plant and equipment
is capitalized. The interest cost capitalized on plant and equipment was minimal
in 1995 and 1994 and $620 thousand in 1993.
Cost in excess of net assets of acquired businesses:
The excess cost is being amortized by the straight-line method over periods
ranging from 30 to 40 years. Accumulated amortization was $17.4 million and
$15.3 million as of the last day of February 1995 and 1994. The excess cost is
evaluated for impairment based on the historic and estimated future
profitability of the business units to which it relates. Adjustments to
carrying value are made if required.
Insurance accruals:
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.
Page 21
<PAGE>
Foreign currency:
For foreign subsidiaries which have a majority of transactions denominated in
U.S. dollars or conduct operations in a highly inflationary economy, monetary
assets and liabilities are translated into U.S. dollars at the current exchange
rate, while other assets (principally property, plant and equipment and
inventories) and related costs and expenses are generally translated at historic
exchange rates. Revenues and other costs and expenses are translated at the
average exchange rate for the period and the resulting foreign exchange
adjustments are recognized in income. Assets and liabilities of the remaining
foreign operations are translated into U.S. dollars at the current exchange rate
and their statements of income are translated at the average exchange rate for
the period. Gains and losses resulting from translation of the financial
statements of these operations are accumulated in a separate component of
shareholders' equity. The amount of income taxes allocated to this translation
adjustment is not significant.
Foreign exchange forward contracts are recorded in the Company's balance sheet
at fair value as other current assets or accrued expenses. Changes in fair
values are recognized as other expense or income in the period in which the
changes occur (see Note 9 of Notes to Consolidated Financial Statements).
Foreign exchange adjustments, including gains or losses on foreign exchange
forward contracts, reduced pretax income by $662 thousand, $484 thousand and
$340 thousand in 1995, 1994 and 1993.
Revenue recognition:
The 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 $7.7 million, $7.0 million and $6.9 million for 1995, 1994 and 1993.
Net income per common share:
Net income per common share is based on the weighted average number of common
and common equivalent shares (stock options and performance shares) outstanding
in each period.
Page 22
<PAGE>
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 1995 1994 1993
- -----------------------------------------------------------------------------
In thousands
Current provision:
Federal $ 18,739 $ 17,657 $ 3,385
State 3,518 400 114
Foreign 5,159 8,993 9,851
Deferred provision (benefit):
Federal (1,048) (13,234) (6,314)
State (1,000)
Foreign (563) (1,797) 16
- -----------------------------------------------------------------------------
$ 25,805 $ 12,019 $ 6,052
- -----------------------------------------------------------------------------
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 1995 1994 1993
- -----------------------------------------------------------------------------
In thousands
Income before income taxes:
Domestic $ 55,973 $ 16,518 $ 673
Foreign 9,922 19,897 17,267
- -----------------------------------------------------------------------------
$ 65,895 $ 36,415 $ 17,940
- -----------------------------------------------------------------------------
% % %
Statutory tax rate 35.0 35.0 34.0
Impact of earnings of foreign operations (1.0) (.1) 10.7
State income taxes, net of federal
tax benefit 3.5 1.1 (4.9)
Adjustments to prior year estimates (4.3) (5.5)
Permanent differences between book
bases and tax bases 1.7 1.3 (1.8)
Other items, net 1.2
- -----------------------------------------------------------------------------
Effective income tax rate 39.2 33.0 33.7
- -----------------------------------------------------------------------------
All years reflect the allocation of substantially all corporate office expenses
and interest expense to domestic operations.
Page 23
<PAGE>
As of the last day of February 1995 and 1994, deferred income tax assets were
$37.7 million and $30.8 million and deferred income tax liabilities were $31.8
million and $26.5 million. Deferred income taxes applicable to principal
temporary differences are as follows:
For the years ended the last day of February 1995 1994
- -----------------------------------------------------------------------------
In thousands
Property, plant and equipment basis differences $ 18,584 $ 20,611
Employee benefits (11,999) (14,288)
Other accrued expenses (19,716) (15,832)
Other - net 7,277 5,266
- -----------------------------------------------------------------------------
$ (5,854) $ (4,243)
- -----------------------------------------------------------------------------
Deferred income taxes of approximately $1.9 million have not been provided on
undistributed earnings of foreign subsidiaries in the amount of $23.1 million as
the earnings are considered to be permanently reinvested.
The Company has settled its issues with the Internal Revenue Service through the
1990 fiscal year with no material adverse effect on the Company. The years 1991
through 1995 are still open for review.
NOTE 3:
DEBT AND FINANCING AGREEMENTS
Long-term debt consists of the following:
As of the last day of February 1995 1994
- -----------------------------------------------------------------------------
In thousands
9% subordinated notes $ 80,050 $ 100,000
Industrial Development Revenue Bonds payable,
maturing between 1996 and 2014, interest at varying
rates (approximately 4.3% at February 28, 1995) 16,741 5,288
Other long-term debt, interest from 8% to 10%,
payable in installments to 1997 8,953 1,582
Lease purchase obligations, interest at varying
rates, payable in installments to 2000 1,143 1,727
- -----------------------------------------------------------------------------
106,887 108,597
Less current maturities (7,133) (946)
- -----------------------------------------------------------------------------
$ 99,754 $ 107,651
- -----------------------------------------------------------------------------
Page 24
<PAGE>
Maturities of long-term debt and the principal and interest payments on capital
leases are as follows:
Fiscal Year Capital Leases
--------------------- Total
In thousands Debt Principal Interest Payments
- -----------------------------------------------------------------------------
1996 $ 7,133 $ 332 $ 88 $ 7,553
1997 3,194 347 65 3,606
1998 781 433 20 1,234
1999 372 24 2 398
2000 345 7 352
2001 and beyond 95,062 95,062
- -----------------------------------------------------------------------------
$ 106,887 $ 1,143 $ 175 $ 108,205
- -----------------------------------------------------------------------------
In December 1994, the Company replaced its three-year $60 million revolving
credit agreement expiring in December 1995 with a new five-year $100 million
revolving credit agreement expiring December 1999 with a group of five banks.
At February 28, 1995, no amounts were outstanding under the $100 million
agreement. The $100 million agreement provides for interest rates to be
determined at the time of borrowings based on a choice of formulas as specified
in the agreement. The interest rates may vary based on cash flow and leverage
ratios or, at the Company's irrevocable option, the debt rating for senior
unsecured long-term debt of the Company. In addition, a commitment fee which
varies to a maximum of 1/2% is charged on the total commitment. The new
agreement contains covenants relating to liens, subsidiary debt, transactions
with affiliates, acquisitions, consolidations, mergers and sales of assets, and
requires the Company to maintain certain specified debt-to-equity and fixed
charge coverage ratios.
During fiscal 1995, the Company entered into four industrial development revenue
bond arrangements to finance future capital expenditures. The related variable
rate bonds of $11.8 million issued by the governmental units are due in fiscal
2005 and are recorded as long-term debt. The proceeds from the bonds are held
in trust and released as qualified capital expenditures are made. At February
28, 1995, $10.1 million was held in trust and is included in "Other assets" in
the Company's consolidated balance sheet.
In July 1993, the Company issued 9% senior subordinated notes ("the 9% notes")
in the principal amount of $100 million maturing on June 15, 2003. During
fiscal 1995, the Company repurchased approximately $20 million of its 9%
subordinated notes with no material gain or loss. The 9% notes are redeemable
at the election of the Company, in whole or in part, at any time on or after
June 15, 1998, initially at 103 3/8% of the principal amount and thereafter at
prices declining to par on June 15, 2001. The 9% notes were issued under an
indenture ("the indenture") between the Company and a major bank as trustee.
The indenture restricts the Company's ability to incur additional debt, pay
dividends, make certain investments, dispose of assets, create liens on assets
and merge or consolidate with another entity. The majority of the net proceeds
from the 9% notes was used to retire the Company's 12% subordinated notes in the
principal amount of $73.6 million with no material gain or loss. During fiscal
1993, the Company repurchased $4.6 million of the 12% subordinated notes with no
material gain or loss.
Page 25
<PAGE>
In November 1991, the Company entered into an agreement with a major bank under
which it has the right to sell, on a limited recourse basis, up to $25 million
of undivided interests in a pool of eligible accounts receivable. The
purchaser's level of investment is subject to change based on the level of
eligible receivables. This agreement expired in December 1994 and was extended
until May 1995. The Company plans to negotiate a replacement agreement. During
fiscal 1994, the Company discontinued the sale of receivables under this
agreement and, since that time, there have been no sales of receivables under
this agreement. Other expense, net includes expenses of approximately $170
thousand, $405 thousand and $878 thousand in 1995, 1994 and 1993 related to this
agreement.
Under the most restrictive debt requirement, retained earnings of approximately
$40.0 million were available for the payment of dividends at February 28, 1995.
At February 28, 1995 and 1994, the Company had borrowings of $658 thousand and
$1.1 million outstanding under uncommitted short-term foreign lines of credit
with a weighted average interest rate of 10.3% and 5.1%, respectively.
NOTE 4:
ACQUISITIONS AND DISPOSALS
In April 1994, the Company acquired all the outstanding capital stock of CTR
Manufacturing, Inc. ("CTR"). CTR manufactures automated forestry harvesting
equipment. In November 1994, the Company acquired the operating assets of Ram-
Line, Inc. ("Ram-Line"), a manufacturer of stocks, magazines, lens caps and
other products for the shooting sports market. The purchase price paid for the
two businesses was approximately $18.2 million, including notes issued of $7.2
million. Both transactions have been accounted for by the purchase method and,
accordingly, the net assets and results of operations of the acquired businesses
have been included in the Company's consolidated financial statements since the
dates of acquisition. The excess of the purchase price over the fair value of
the net assets acquired is being amortized on a straight-line basis over 40
years. The Company's consolidated results of operations for 1995 and 1994 would
not have been materially different from reported amounts if the acquisitions had
occurred at the beginning of either year. The combined sales and pretax income
of CTR and Ram-Line for their most recent fiscal years prior to acquisition were
approximately $17.1 million and $1.6 million, respectively.
In February 1994, 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"), the Company's wholly owned subsidiary
headquartered in Los Angeles, California. In March 1994, the Company entered
into an agreement with Caddell Construction Co., Inc. ("Caddell") under which
Caddell provides the consulting and construction management services necessary
to complete the projects and acquired the Company's right to use the name
"Blount" in the construction business for a period of years. As of February 28,
1995, the remaining projects encompassed by the agreement with Caddell have a
remaining contract value of approximately $23.7 million and are expected to be
completed within one year. Although Caddell actively manages the projects, the
Company remains subject to the inherent risks associated with a general
construction contractor. The Company generally participates in future profits
of the projects and remains responsible for substantially all losses, if any, in
excess of agreed upon estimates of final project profit or loss. The Company
has entered into a letter of intent for the sale of Pozzo and expects the sale
to be concluded during the first quarter of fiscal 1996.
Page 26
<PAGE>
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 1995 1994 1993
- ------------------------------------------------------------------------------
Revenues $ 125,208 $ 210,090 $ 265,177
Cost of revenues 117,898 216,935 261,066
- ------------------------------------------------------------------------------
Gross profit (loss) 7,310 (6,845) 4,111
Selling, general and administrative
expenses (4,070) (8,093) (11,454)
Other income - net 320 67 299
- ------------------------------------------------------------------------------
Income (loss) before income taxes 3,560 (14,871) (7,044)
Provision (benefit) for income taxes 1,246 (5,205) (2,395)
- -------------------------------------------------------------------------------
Net income (loss) $ 2,314 $ (9,666) $ (4,649)
- ------------------------------------------------------------------------------
As the provision for loss on disposal of the construction segment recorded in
fiscal 1994 includes estimates of that segment's operating results until its
final termination, the above 1995 net income of $2.3 million has no impact on
the Company's fiscal 1995 statement of income. The 1994 loss before taxes of
$14.9 million is net of income of approximately $7.3 million from a less than
majority-owned foreign joint venture. Distributions to the Company from this
joint venture were approximately $21.2 million during fiscal 1994. In early
fiscal 1996, the final distribution of $4.9 million was received from this joint
venture.
The principal assets and liabilities of the discontinued operations included in
the Company's consolidated balance sheets are as follows (in thousands):
As of the last day of February 1995 1994
- -----------------------------------------------------------------------------
Accounts receivable $ 45,706 $ 59,265
Other current assets 11,911 7,922
Other assets 5,203 6,013
Accounts payable (24,588) (38,503)
Accrued expenses (12,578) (11,106)
Other current liabilities (4,659) (13,015)
Other liabilities (2,849) (7,312)
NOTE 5:
CAPITAL STRUCTURE
The Company has authorized 40 million shares of Class A Common Stock, 12 million
shares of Class B Common Stock and 4,456,855 shares of Preference Stock. 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 $.0125 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 Stock.
Page 27
<PAGE>
The Company has granted options to purchase its Class A Common Stock to certain
officers and key employees under a non-qualified plan approved in 1994 and a
qualified Incentive Stock Option Plan ("ISOP") approved in 1992. The non-
qualified plan terminates in January 2004 and provides for granting of options
for up to 400,000 shares with an option price not less than fair market value at
the time of grant. The ISOP terminates in January 2002 and provides for the
granting of options for up to 750,000 shares with an option price not less than
fair market value at the time of grant. The options granted are exercisable for
a period of up to ten years under both plans. As of the last day of February
1995 and 1994, there were options for 1,667 shares and 41,667 shares available
for grant under the non-qualified plan and 23,600 shares and 38,700 shares
available for grant under the ISOP. At February 28, 1995, options for 207,303
shares were exercisable. Changes with respect to options for each of the last
three years are as follows (in thousands, except per share prices):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Average Total Average Total Average Total
Per Option Per Option Per Option
Shares Share Price Shares Share Price Shares Share Price
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of period 948 $16.68 $15,812 729 $ 8.46 $ 6,160 649 $ 8.23 $ 5,346
Options granted 149 45.26 6,740 393 28.46 11,193 188 9.37 1,761
Options exercised (132) 8.43 (1,115) (142) 9.14 (1,294) (54) 8.56 (469)
Options cancelled (94) 7.63 (716) (32) 7.67 (247) (54) 8.84 (478)
------ ------- ------- ------ ------- ------- ------ ------- -------
Outstanding, end
of period 871 $23.79 $20,721 948 $16.68 $15,812 729 $ 8.46 $ 6,160
------ ------- ------- ------ ------- ------- ------ ------- -------
</TABLE>
NOTE 6:
PENSION PLANS
The Company maintains funded, non-contributory, trusteed, defined benefit
pension plans covering the majority of the domestic employees of the Company and
certain subsidiaries. In addition, the Company sponsors certain supplemental
defined benefit plans and employees of certain foreign operations participate in
local plans.
The formulas of defined benefit plans generally base pension benefits paid to
retired employees upon their length of service and a percentage of average
compensation during the years of employment. The plans' assets are invested
principally in equity funds, bond funds, and temporary cash investments. The
actuarial method used for financial reporting purposes is the projected unit
credit method. The components of pension expense for Company-sponsored defined
benefit plans for each of the last three years were (in thousands):
1995 1994 1993
- ----------------------------------------------------------------------------
Service cost-benefits earned $ 3,830 $ 3,814 $ 3,743
Interest cost 5,086 4,649 4,211
Actual return on plan assets (691) (2,462) (2,404)
Net amortization and deferral (2,418) 345 817
- ----------------------------------------------------------------------------
$ 5,807 $ 6,346 $ 6,367
- ----------------------------------------------------------------------------
Page 28
<PAGE>
The Company's general funding policy for qualified plans is to fund amounts
deductible for income tax purposes. Supplemental non-qualified plans are not
funded and benefit payments are made as they become due. The funded status of
qualified and non-qualified defined benefit plans as of the last day of February
1995 and 1994 was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------------------------- ---------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of projected
benefit obligation:
Vested $ 41,824 $ 3,014 $ 41,465 $ 3,501
Nonvested 1,737 138 2,061 41
- ------------------------------------------------- ------------ -------------- ------------ ---------
Accumulated benefit obligation 43,561 3,152 43,526 3,542
Effect of projected compensation increases 19,987 762 18,698 618
- ------------------------------------------------- ------------ -------------- ------------ ---------
Projected benefit obligation 63,548 3,914 62,224 4,160
Plan assets at fair value 57,499 85 49,424 85
- ------------------------------------------------- ------------ -------------- ------------ ---------
Projected benefit obligation
greater (less) than plan assets 6,049 3,829 12,800 4,075
Unrecognized transition asset (obligation) 838 (575) 1,065 (655)
Unrecognized prior service liability (3,335) (376) (4,596) (573)
Unrecognized net gain (loss) (6,568) 399 (6,005) 200
- ------------------------------------------------- ------------ -------------- ------------ ---------
Net accrued (prepaid) pension cost $ (3,016) $ 3,277 $ 3,264 $ 3,047
- ------------------------------------------------- ------------ -------------- ------------ ---------
</TABLE>
The weighted average rate assumptions used in 1995, 1994 and 1993 to determine
pension expense and related pension obligations for domestic and foreign defined
benefit plans were as follows:
1995 1994 1993
- -----------------------------------------------------------------------------
Discount rate 8.5% 7.6% 8.6%
Rate of increase in compensation levels 4.3% 4.4% 5.3%
Expected long-term rate of return on
plan assets 8.7% 8.6% 9.0%
- -----------------------------------------------------------------------------
The Company's share of unfunded liability, if any, related to multi-employer
pension plans is not determinable.
The Company provides a defined contribution 401(k) plan to the majority of
domestic employees and matches a portion of employee contributions. The expense
was $2.1 million, $1.9 million and $1.8 million in 1995, 1994 and 1993.
NOTE 7:
POSTRETIREMENT INSURANCE BENEFITS
The Company sponsors plans which provide postretirement health care and life
insurance benefits ("postretirement benefits") to eligible domestic retirees.
The Company has funded the estimated liability for retirees of certain
operations sold in a prior year. Other postretirement benefit plans are not
funded and benefit payments are made as they become due.
Page 29
<PAGE>
Net periodic postretirement benefit expense for 1995, 1994 and 1993 consisted of
the following components (in thousands):
1995 1994 1993
- ----------------------------------------------------------------------------
Service cost-benefits earned $ 299 $ 284 $ 275
Interest cost 1,223 1,406 1,200
Actual return on plan assets (33) (125) (215)
Net amortization and deferral (49) 47 (31)
- ----------------------------------------------------------------------------
$ 1,440 $ 1,612 $ 1,229
- ----------------------------------------------------------------------------
The accumulated postretirement benefit obligation for the funded plan was $2.5
million and $2.4 million as of the last day of February 1995 and 1994. A
reconciliation of the accumulated postretirement benefit obligation to the
accrued liability included in the Company's balance sheets as of the last day of
February 1995 and 1994 follows (in thousands):
1995 1994
- ----------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 11,234 $ 10,640
Fully eligible active plan participants 1,788 2,740
Other active plan participants 2,369 3,641
- ----------------------------------------------------------------------------
15,391 17,021
Plan assets at fair value 2,171 2,650
- ----------------------------------------------------------------------------
Postretirement benefits in excess of assets 13,220 14,371
Unrecognized net gain (loss) (1,263) (3,086)
- ----------------------------------------------------------------------------
Accrued postretirement benefit cost $ 11,957 $ 11,285
- ----------------------------------------------------------------------------
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8 1/2% in 1995 and 1993 and 7 1/2% in
1994. The expected long-term rate of return on plan assets was 8 3/4% in 1995
and 1994 and 9 1/4% in 1993. An 11% annual rate of increase in the cost of
health care benefits was assumed for 1995; the rate was assumed to decrease 1%
per year until 5% is reached and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rate by 1% in each year
would increase the accumulated postretirement benefit obligation as of February
28, 1995, by 9.3% and the aggregate of the service and interest cost components
of net periodic expense for 1995 by 10.7%.
Page 30
<PAGE>
NOTE 8:
COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space and equipment under operating leases expiring in
one to seven years. Most leases include renewal options and some contain
purchase options and escalation clauses. Future minimum rental commitments
required under operating leases having initial or remaining noncancelable lease
terms in excess of one year as of February 28, 1995, are as follows (in
thousands): 1996--$4,692; 1997--$3,342; 1998--$1,626; 1999--$1,161; 2000--$554
and 2001 and beyond--$861. Rentals charged to costs and expenses under
cancelable and noncancelable lease arrangements were $5.2 million, $5.7 million
and $5.1 million for 1995, 1994 and 1993.
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin (the "Site").
The waste complained of was placed in the landfill prior to 1981 by a
corporation, some of whose assets were purchased in 1981 by a predecessor of the
Company. It is the view of the Company that because its predecessor corporation
purchased assets rather than stock, the Company does not have successor
liability and is not properly a PRP. However, the EPA has indicated it does not
accept this position. The Company believes the EPA is wrong on the successor
liability issue. However, with other PRP's, the Company made a good faith offer
to the EPA to pay a portion of the clean-up costs. The offer was rejected and
the EPA is proceeding with the clean-up. The estimated past and future clean-up
costs are approximately $12 million. In 1989 the EPA named four PRP's. One of
the PRP's, the Town of Onalaska (the "Town") and the EPA and State of Wisconsin
negotiated a consent decree under which the Town would have been released from
future liability in return for paying $110 thousand, granting access to the Site
and adjacent properties and performing some future maintenance work. The United
States District Court for the District of Wisconsin found, on December 21, 1994,
that the settlement was not fair, reasonable or in the public interest, and
refused to approve and confirm it as the order of the Court. The Company denies
that it is a PRP and is unable to determine any other party's share of total
remediation costs. The Company does not know the financial status of the other
PRP's and other parties that, while not named by the EPA as PRP's, may have
liability with respect to the Site. The Company does not expect the situation
to have a material adverse effect on the Company's financial condition or
operating results.
The Company is closing a Resource Conservation and Recovery Act ("RCRA") Part B
Storage Permit at its Sporting Equipment Division's CCI operations facility in
Lewiston, Idaho. As part of the process, the Company is required by the State
of Idaho to undertake RCRA corrective action at the facility. This will require
the Company to investigate all areas at the facility where solid waste and
hazardous waste have historically been managed. The facility has been operating
since the 1950s. There are several areas where investigation and sampling are
required. In order to effect the investigation, the Company and the State of
Idaho entered into an Administrative Consent Order which governs the completion
of the corrective action activities. As a result of initial testing, some
contamination of the uppermost groundwater beneath the facility has been
encountered. This uppermost groundwater is not the drinking water supply source
and does not appear to be connected to the drinking water aquifer. Further
investigation is ongoing. It is expected that the range of remediation costs is
from $2.8 million to $6.2 million. The Company does not expect the situation to
have a material adverse effect on its financial condition or operating results
beyond amounts accrued.
The Company is a defendant in a number of product liability lawsuits, some of
which seek significant or unspecified damages, involving serious personal
Page 31
<PAGE>
injuries for which there are large deductible amounts under the Company's
insurance programs. In addition, the Company is a party to a number of other
suits arising out of the conduct of its business. While there can be no
assurance as to their ultimate outcome, the Company does not believe these
lawsuits will have a material adverse effect on its financial condition or
operating results.
The Company's contingencies include normal liabilities for performance and
completion of its remaining construction contracts. At February 28, 1995, the
Company had outstanding bank letters of credit in the approximate amount of
$20.2 million issued principally in connection with various foreign construction
contracts for which the Company is contingently liable to the issuing banks in
the event payment is demanded by the holder.
NOTE 9:
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
At February 28, 1995, approximately 66% of the Company's accounts receivable
arose from manufacturing operations with the remainder resulting principally
from the Company's discontinued construction 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. 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 customers within the United States and Kuwait. At February 28, 1995,
approximately 58% of accounts receivable from construction activities was from
governmental entities with the balance principally from customers in private
industry. Construction related accounts receivable are generally larger and
from a smaller base of customers than those from manufacturing operations.
From February 1994 until March 1995, 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, the Company
entered into contracts which offset its exposure under all outstanding foreign
exchange forward contracts. At February 28, 1995 and 1994, foreign exchange
forward contracts of $51.0 million and $23.4 million were outstanding.
The estimated fair values of certain of the Company's financial instruments are
as follows (in thousands):
<TABLE>
<CAPTION>
As of the last day of February 1995 1994
- ------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash and short-term investments $ 42,576 $ 42,576 $ 52,213 $ 52,213
Other current assets (foreign exchange
forward contracts) 119 119 5 5
Other assets (principally notes receivable) 1,675 1,675 3,012 3,301
Notes payable and long-term debt (see Note 3) (107,545) (106,957) (109,733) (113,295)
Accrued expenses (foreign exchange
forward contracts) (932) (932) (139) (139)
</TABLE>
Page 32
<PAGE>
The carrying amount of cash and short-term investments approximates fair value
because of the short maturity of those instruments. The fair value of notes
receivable is estimated based on the discounted value of estimated future cash
flows. The fair value of long-term debt is estimated based on recent market
transaction prices or on current rates available to the Company 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. 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.
In 1995, 1994 and 1993, no customer accounted for more than 10% of consolidated
sales.
Information on Geographic Areas
For the years ended the last day of February 1995 1994 1993
- -----------------------------------------------------------------------------
In thousands
Sales:
United States $ 493,293 $ 383,329 $ 318,380
Outside United States 95,126 104,716 108,112
- -----------------------------------------------------------------------------
$ 588,419 $ 488,045 $ 426,492
- -----------------------------------------------------------------------------
Operating income:
United States $ 91,950 $ 52,750 $ 24,568
Outside United States 9,937 20,881 18,836
- -----------------------------------------------------------------------------
Operating income from segments $ 101,887 $ 73,631 $ 43,404
- -----------------------------------------------------------------------------
Identifiable assets:
United States $ 422,017 $ 391,260 $ 328,450
Outside United States 95,771 101,641 118,701
- -----------------------------------------------------------------------------
$ 517,788 $ 492,901 $ 447,151
- -----------------------------------------------------------------------------
Included in United States sales were export sales of $94.3 million, $54.5
million and $39.9 million in 1995, 1994 and 1993. As a result of a contract
manufacturing agreement with a subsidiary, sales of approximately $35 million,
recorded as foreign sales in prior years, are classified as export sales in
fiscal 1995.
Page 33
<PAGE>
Information on Segments
For the years ended the last day of February 1995 1994 1993
- -----------------------------------------------------------------------------
In thousands
Sales:
Outdoor products $ 268,110 $ 234,502 $ 213,196
Industrial and power equipment 207,556 162,026 128,912
Sporting equipment 112,753 91,517 84,384
- -----------------------------------------------------------------------------
$ 588,419 $ 488,045 $ 426,492
- -----------------------------------------------------------------------------
Operating income:
Outdoor products $ 49,583 $ 33,974 $ 20,611
Industrial and power equipment 32,987 24,503 12,843
Sporting equipment 19,317 15,154 9,950
- -----------------------------------------------------------------------------
Operating income from segments 101,887 73,631 43,404
Corporate office expenses (24,967) (23,046) (13,855)
- -----------------------------------------------------------------------------
Income from operations 76,920 50,585 29,549
Interest expense (11,186) (11,052) (10,358)
Interest income 2,340 1,501 671
Other expense, net (2,179) (4,619) (1,922)
- -----------------------------------------------------------------------------
Income before income taxes $ 65,895 $ 36,415 $ 17,940
- -----------------------------------------------------------------------------
Identifiable assets:
Outdoor products $ 199,489 $ 202,671 $ 201,824
Industrial and power equipment 82,959 69,230 67,799
Sporting equipment 71,777 59,152 48,621
Corporate office 100,743 88,648 38,865
Discontinued operations 62,820 73,200 90,042
- -----------------------------------------------------------------------------
$ 517,788 $ 492,901 $ 447,151
- -----------------------------------------------------------------------------
Depreciation and amortization:
Outdoor products $ 13,771 $ 14,511 $ 14,653
Industrial and power equipment 3,820 3,616 3,770
Sporting equipment 3,774 3,594 3,685
Corporate office 1,580 1,080 1,253
- -----------------------------------------------------------------------------
$ 22,945 $ 22,801 $ 23,361
- -----------------------------------------------------------------------------
Capital expenditures:
Outdoor products $ 4,939 $ 5,335 $ 15,743
Industrial and power equipment 4,917 698 2,123
Sporting equipment 4,578 1,377 1,425
Corporate office 254 7,029 420
- -----------------------------------------------------------------------------
$ 14,688 $ 14,439 $ 19,711
- -----------------------------------------------------------------------------
Page 34
<PAGE>
NOTE 11:
SUPPLEMENTAL INFORMATION
The following balance sheet captions are comprised of the items specified below:
As of the last day of February 1995 1994
- -------------------------------------------------------------------------------
In thousands
Accounts receivable:
Trade accounts and other $ 89,790 $ 84,635
Billings on construction contracts:
Current 32,029 37,527
Retainage estimated to be collected
within one year 11,457 14,534
Allowance for doubtful accounts (2,611) (2,238)
- -------------------------------------------------------------------------------
$ 130,665 $ 134,458
- -------------------------------------------------------------------------------
Inventories:
Finished goods $ 35,769 $ 27,169
Work in process 14,075 13,329
Raw materials and supplies 27,231 19,682
- -------------------------------------------------------------------------------
$ 77,075 $ 60,180
- -------------------------------------------------------------------------------
Property, plant and equipment:
Land $ 6,575 $ 6,506
Buildings and improvements 82,948 80,948
Machinery and equipment 153,617 146,449
Furniture, fixtures and office equipment 21,892 28,036
Transportation equipment 11,083 11,582
Construction in progress 3,693 2,595
Accumulated depreciation (145,519) (135,694)
- -------------------------------------------------------------------------------
$ 134,289 $ 140,422
- -------------------------------------------------------------------------------
Accounts payable:
Trade accounts and other $ 58,301 $ 62,196
Retainage estimated to be paid within one year 6,492 12,071
- -------------------------------------------------------------------------------
$ 64,793 $ 74,267
- -------------------------------------------------------------------------------
Accrued expenses:
Salaries, wages and related withholdings $ 25,033 $ 19,777
Employee benefits 5,707 15,049
Casualty insurance costs 15,240 12,453
Income taxes payable 6,327 8,232
Other 39,883 28,246
- -------------------------------------------------------------------------------
$ 92,190 $ 83,757
- -------------------------------------------------------------------------------
Other liabilities:
Employee benefits $ 21,215 $ 20,534
Casualty insurance costs 3,749 8,276
Other 1,357 3,029
- --------------------------------------------------------------------------------
$ 26,321 $ 31,839
- --------------------------------------------------------------------------------
Page 35
<PAGE>
At February 28, 1995, the Company's manufacturing operation in Canada had net
assets of $10.7 million which were subject to withdrawal restrictions resulting
from a financing agreement. The majority of this amount was invested in
property, plant and equipment.
Advertising costs were $10.6 million, $8.9 million and $7.0 million for 1995,
1994 and 1993.
Supplemental cash flow information is as follows (in thousands):
1995 1994 1993
- -------------------------------------------------------------------------------
Interest paid $ 10,328 $ 12,121 $ 11,203
Income taxes paid 27,968 18,572 7,193
Capital lease obligations incurred 34 106 2,408
Issuance of Company stock to employee
benefits plan 257 1,234 1,800
Acquisitions of businesses (see Note 4):
Fair value of assets acquired 22,556
Liabilities assumed and incurred (12,406)
Cash paid 10,150
- -------------------------------------------------------------------------------
Page 36
<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 1995.
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 9,008 9,699 12,336 9,047 40,090
Net income per share .70 .75 .95 .70 3.10
The first and third quarters include after-tax charges of $2.4 million ($.18 per
share) and $2.3 million ($.18 per share), respectively, for anticipated
litigation and settlement costs related to the sale of a former subsidiary. The
third and fourth quarters include after-tax charges of $1.3 million ($.10 per
share) each for an environmental matter at the Company's Sporting Equipment
segment's Lewiston, Idaho facility.
In thousands, First Second Third Fourth Fiscal
except share data Quarter Quarter Quarter Quarter Year Total
- --------------------------------------------------------------------------------
1994
Sales $ 117,386 $ 118,454 $ 128,030 $ 124,175 $ 488,045
Gross profit 35,432 37,963 42,800 41,791 157,986
Net income 1,207 2,534 6,671 3,668 14,080
Net income per share .10 .20 .52 .29 1.11
The first quarter includes net income of $.9 million ($.07 per share) resulting
from finalizing a license and technical agreement for a Company product. The
third and fourth quarters include after-tax charges of $1.3 million ($.10 per
share) and $2.6 million ($.21 per share), respectively, resulting from accruals
for expected legal costs related to the sale of a former subsidiary. The fourth
quarter includes a net loss of $650 thousand ($.05 per share) for disposal of
the Company's construction business, an after-tax charge of $1.1 million ($.08
per share) for accruals for a management incentive plan and net income of $1.6
million ($.12 per share) resulting from the resolution of a prior year tax
issue.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 37
<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 26, 1995, Annual Meeting of Stockholders of
Blount, 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 26, 1995, Annual Meeting of Stockholders of Blount, 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 26,
1995, Annual Meeting of Stockholders of Blount, 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 26, 1995, Annual Meeting of Stockholders of Blount, Inc., which
section is incorporated herein by reference.
Page 38
<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 1995, 1994 and 1993 17
Consolidated Statements of Retained Earnings for the
years ended the last day of February 1995, 1994 and 1993 17
Consolidated Balance Sheets as of the last day of
February 1995 and 1994 18
Consolidated Statements of Cash Flows
for the years ended the last day of
February 1995, 1994 and 1993 19
Consolidated Statements of Changes in Capital Stock
Accounts for the years ended the last day of
February 1995, 1994 and 1993 20
Notes to Consolidated Financial Statements 21 - 36
Supplementary Data 37
(2) Schedules for the years ended the last day of
February 1995, 1994 and 1993 *
II. Valuation and qualifying accounts 43
* 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:
3(a) The Restated Certificate of Incorporation which was filed as an
exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-28-90 is
incorporated herein by reference.
3(b) The Amended Bylaws which were filed as an exhibit to the Blount, Inc.
Form 10-K for the fiscal year ended 2-29-92 is incorporated herein by reference.
4(a) The registration of 9% subordinated notes due June 2003 filed on Form
S-2, registration number 33-62728 including amendments and exhibits which became
effective June 30, 1993, is incorporated herein by reference.
Page 39
<PAGE>
10(a) The Insurance Agreements with the following individuals which were
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-
28-83, are incorporated herein by reference:
(i) Winton M. Blount
(ii) Frank H. McFadden
10(b) The Supplemental Retirement and Disability Plan which was filed as
an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-29-92, is
incorporated herein by reference.
10(c) A written description of the Management Incentive Plan which was
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-
28-83, is incorporated herein by reference.
10(d) The Supplemental Retirement Savings Plan which was filed as an
exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-29-92, is
incorporated herein by reference.
10(e) Stock Purchase Agreement between BI Holdings Corp. ("Seller") and
Mercury Stainless Corp. ("Buyer"), Amendments No. 1 and No. 2 to the Stock
Purchase Agreement, and Guaranty dated August 17, 1988, made by Blount, Inc.,
which were filed as exhibits to the Blount, Inc. Form 8-K dated November 1,
1988, are incorporated herein by reference.
10(f) The Insurance Agreements with the following individual which was
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-
28-91, is incorporated herein by reference:
(i) Duncan J. McInnes
10(g) The Supplemental Executive Retirement Plans with the following
individuals which were filed as an exhibit to the Blount, Inc. Form 10-K for the
fiscal year ended 2-28-91, are incorporated herein by reference:
(i) Winton M. Blount
(ii) Frank H. McFadden
10(h) The 1992 Blount Incentive Stock Option Plan which was filed as
Exhibit A to the Blount, Inc. Proxy Statement for the Annual Meeting of
Stockholders held June 22, 1992, is incorporated herein by reference.
10(i) The $25,000,000 Receivable Purchase Agreement which was filed as an
exhibit to the Blount, Inc., Form 10-K for the fiscal year ended 2-29-92, is
incorporated herein by reference.
10(j) Stock Purchase Agreement between Blount, Inc. ("Buyer") and Simon
United States Holding, Inc. ("Seller") which was filed as an exhibit to the
Blount, Inc., Form 10-K for the fiscal year ended 2-29-92, is incorporated
herein by reference.
10(k) The Supplemental Executive Retirement Plan with John M. Panettiere
which was filed as an exhibit to the Blount, Inc., Form 10-K for the fiscal year
ended 2-28-93, is incorporated herein by reference.
10(l) The 1994 Blount Executive Stock Option Plan filed as Exhibit A to
the Blount, Inc. Proxy Statement for the Annual Meeting of Stockholders held
June 27, 1994, is incorporated herein by reference.
Page 40
<PAGE>
10(m) The Blount, Inc. Executive Management Target Incentive Plan filed as
Exhibit B to the Blount, Inc. Proxy Statement for the Annual Meeting of
Stockholders held June 27, 1994, is incorporated herein by reference.
10(n) Amendments number 1 and 2 to the $25,000,000 Receivable Credit
Agreement which were filed as an exhibit to the Blount, Inc., Form 10-K for the
fiscal year ended 2-28-94, is incorporated herein by reference.
10(o) The 1995 Blount Long-Term Stock Option Plan filed as Exhibit A to
the Blount, Inc. Proxy Statement for the Annual Meeting of Stockholders to be
held June 26, 1995, is incorporated herein by reference.
10(p) The employment agreement with John M. Panettiere. *
10(q) The employment agreement with Harold E. Layman. *
10(r) The employment agreement with Duncan J. McInnes. *
10(s) The employment agreement with James S. Osterman. *
10(t) The employment agreement with Donald B. Zorn. *
10(u) The employment agreement with Thomas J. Fruechtel. *
10(v) The Supplemental Executive Retirement Plan with Donald B. Zorn. *
10(w) The Blount, Inc. $100 Million Revolving Credit Agreement. *
11. Computation of net income per common share included herein on page 44.
13. The 1995 Annual Report to Stockholders of Blount, Inc. and the Proxy
Statement have not been sent to the stockholders of Blount, Inc., and are to be
furnished subsequent to the filing of this Form 10-K.
21. A list of the significant subsidiaries of Blount, Inc. included herein on
page 45.
23. Consent of Independent Accountants included herein on page 46.
27. Financial Data Schedule.
* Filed electronically herewith. Copies of such exhibits may be obtained upon
written request from:
Corporate Communications
Blount, Inc.
P.O. Box 949
Montgomery, AL 36101-0949
Page 41
<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, INC.
By: /s/ Harold E. Layman
Harold E. Layman
Senior Vice President and
Chief Financial Officer
Dated: May 3, 1995
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 3, 1995
/s/ Winton M. Blount /s/ James W. Hargrove
Winton M. Blount James W. Hargrove
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/ Alfred M. Gleason
Alfred M. Gleason
Director
Page 42
<PAGE>
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE II
CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
For the years ended the last day of February 1993, 1994 and 1995
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 Decuctions Period
----------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1993
- ----
Allowance for doubtful
accounts receivable $ 2,478 $ 992 $ 907 (1) $ 2,563
======= ======= ======= =======
1994
- ----
Allowance for doubtful
accounts receivable $ 2,563 $ 967 $ 1,292 (1) $ 2,238
======= ======= ======= =======
1995
- ----
Allowance for doubtful
accounts receivable $ 2,238 $ 801 $ 97 $ 525 (1) $ 2,611
======= ======= ======= ======= =======
(1) Principally amounts written-off less recoveries of amounts previously written-off.
</TABLE>
Page 43
<PAGE>
<TABLE>
EXHIBIT 11
BLOUNT, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Primary Diluted Primary Diluted Primary Diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding 12,590,284 12,590,284 12,421,167 12,421,167 12,149,905 12,149,905
Incremental shares for
stock options 340,736 374,840 309,566 413,001 125,236 291,293
Incremental shares for
performance awards 8,451 8,451
---------- ---------- ---------- ---------- ---------- ----------
Total number of shares used
in per share calculations 12,931,020 12,965,124 12,730,733 12,834,168 12,283,592 12,449,649
========== ========== ========== ========== ========== ==========
Income from continuing
operations $ 40,090 $ 40,090 $ 24,396 $ 24,396 $ 11,888 $ 11,888
---------- ---------- ---------- ---------- ---------- ----------
Discontinued operations:
Loss from operations, net (9,666) (9,666) (4,649) (4,649)
Loss on disposal, net (650) (650)
---------- ---------- ---------- ---------- ---------- ----------
Total from discontinued
operations (10,316) (10,316) (4,649) (4,649)
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 40,090 $ 40,090 $ 14,080 $ 14,080 $ 7,239 $ 7,239
========== ========== ========== ========== ========== ==========
Income (loss) per common share:
Continuing operations $ 3.10 $ 3.09 $ 1.92 $ 1.90 $ .97 $ .95
Discontinued operations (.81) (.80) (.38) (.37)
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 3.10 $ 3.09 $ 1.11 $ 1.10 $ .59 $ .58
========== ========== ========== ========== ========== ==========
</TABLE>
Page 44
<PAGE>
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT
At February 28, 1995, consolidated, directly or indirectly, significant wholly-
owned subsidiaries of Blount, Inc. were as follows:
NAME OF PLACE OF
SUBSIDIARY INCORPORATION
- ---------- -------------
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
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 28, 1995.
Page 45
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Blount, 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 10, 1995, on our audits
of the consolidated financial statements and financial statement schedules of
Blount, Inc. and subsidiaries as of the last day of February 1995 and 1994, and
for each of the three years in the period ended February 28, 1995, which report
is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
April 30, 1995
Page 46
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> FEB-28-1995 FEB-28-1994
<PERIOD-END> FEB-28-1995 FEB-28-1994
<CASH> 42,576 52,213
<SECURITIES> 0 0
<RECEIVABLES> 133,276 136,696
<ALLOWANCES> 2,611 2,238
<INVENTORY> 77,075 60,180
<CURRENT-ASSETS> 291,537 277,405
<PP&E> 279,808 276,116
<DEPRECIATION> 145,519 135,694
<TOTAL-ASSETS> 517,788 492,901
<CURRENT-LIABILITIES> 169,432 173,059
<BONDS> 99,754 107,651
<COMMON> 12,593 12,451
0 0
0 0
<OTHER-SE> 190,474 154,402
<TOTAL-LIABILITY-AND-EQUITY> 517,788 492,901
<SALES> 588,419 488,045
<TOTAL-REVENUES> 588,419 488,045
<CGS> 390,818 330,059
<TOTAL-COSTS> 390,818 330,059
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,186 11,052
<INCOME-PRETAX> 65,895 36,415
<INCOME-TAX> 25,805 12,019
<INCOME-CONTINUING> 40,090 24,396
<DISCONTINUED> 0 (10,316)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 40,090 14,080
<EPS-PRIMARY> 3.10 1.11
<EPS-DILUTED> 3.09 1.10
</TABLE>
EXHIBIT 10 (p)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 28th
day of July, 1994, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and JOHN M. PANETTIERE
("Executive").
W I T N E S S E T H:
WHEREAS, effective May 1, 1992, the Company and
Executive entered into an agreement ("Initial Agreement")
providing for Executive's employment by Company and specifying
the terms and conditions of such employment; and
WHEREAS, Executive has diligently performed his duties
under the Initial Agreement and has contributed significantly to
the financial performance and success of the Company; and
WHEREAS, the Company desires to recognize Executive's
superior performance and value to the Company and its
shareholders by amending certain provisions of the Initial
Agreement and restating such agreement in a single document as
hereinafter provided; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to amend
the Initial Agreement to recognize Executive's significant
contributions to the overall financial performance and success of
the Company. In order to provide a single, integrated document,
the Initial Agreement and the amendments are hereby incorporated
into this restated Employment Agreement, which shall provide the
basis for Executive's continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as President
and Chief Executive Officer of the Company and shall have such
responsibilities, duties and authority that are consistent with
such position as may from time to time be assigned to Executive
by the Board. Executive shall also serve as a Director of the
Company and the Company agrees to continue to nominate Executive
for election as a Director during the Term of this Agreement.
Executive hereby agrees that during the Term of this Agreement he
will devote substantially all his working time, attention and
energies to the diligent performance of his duties as President
and Chief Executive Officer of the Company, provided that the
Executive may also serve on boards of directors or trustees of
other companies and organizations, as long as such service does
not materially interfere with the performance of his duties
hereunder and is with the prior approval of the Chairman of the
Board of the Company.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, five year term (the "Term") commencing on July 28th,
1994, and shall be deemed to automatically, without further
action by either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be five years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the five years following
the date of such notice and this Agreement shall terminate upon
the expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be five years from the date of such termination (or,
if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (h) below:
(a) An annual base salary ("Base Salary") of Five
Hundred Fifty Thousand and No/100 Dollars ($550,000.00), prorated
for any partial year of employment. Executive's Base Salary
shall be subject to annual review for increases at such time as
the Company conducts salary reviews for its executive officers
generally. Executive's salary shall be payable bi-monthly, or in
accordance with the Company's regular payroll practices in effect
from time to time for executive officers of the Company.
(b) Executive shall be eligible to participate in the
Executive Management Target Incentive Plan and such other annual
incentive plans as may be established by the Company from time to
time for its executive officers. The Board or a committee of the
Board will establish performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 65%
of Base Salary; the maximum award for exceeding the performance
goals shall be 130% of Base Salary. The annual incentive bonus
payable under this subsection (b) shall be payable as a lump sum
no later than fifteen (15) business days after approval of the
bonus by the Compensation Committee of the Board, unless
Executive elects to defer all or a portion of such amount to any
deferral plan established by the Company for such purpose.
(c) Executive will be eligible to participate in the
1992 Blount Incentive Stock Option Plan ("1992 Plan"), the 1994
Blount Executive Stock Option Plan ("1994 Plan") and such other
stock option programs as may be established from time to time by
the Company for its executive officers. Executive will
participate in any long-term incentive plans established by the
Company for executive officers at his level.
(d) Executive shall be covered by a Supplemental
Executive Retirement Plan ("SERP"), providing for the following:
(i) The SERP will pay Executive a benefit at age 65 in
the form of a single life annuity equal to fifty
percent (50%) of his final average earnings (as
defined in the Blount Retirement Plan, but without
the Code compensation limitations) less the amount
of any benefit he is entitled to receive at age 65
under the Blount Retirement Plan and the Blount
and Subsidiaries Supplemental Retirement Plan, and
the amount actually payable to Executive at age 65
under any pension plan of his former employer.
The benefit under the SERP shall be calculated in
accordance with the formula in the Blount
Retirement Plan (but without the Code compensation
limitations) and shall assume the Executive will
have 25 years of benefit service at age 65. The
SERP shall also provide pre-retirement death
benefits calculated in the same manner as under
the Blount Retirement Plan.
(ii) Executive shall be credited with years of benefit
service under the SERP equal to his years of
benefit service under the Blount Retirement Plan,
plus additional years of benefit service so that
at age 65 he will be credited with a total of 25
years of benefit service.
(iii) The benefit payable under the SERP may, in the
discretion of the Board and upon prior notice to
Executive, be forfeited, suspended, reduced or
terminated, but only in accordance with the
provisions and procedures set forth in the SERP
Agreement.
The Company's obligations under this subsection (d) shall be as
set forth in the separate SERP Agreement with Executive as
attached as Exhibit A.
(e) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(f) The Company will provide membership initiation
fees and dues at the Montgomery Country Club, the Capital City
Club and a hunting club (such as the Turtle Lake Club) for
Executive and his family. Executive will be provided the
automobile of his choice, and the Company will pay all insurance,
maintenance, fuel, oil and related operational expenses for such
automobile. Executive will receive four weeks vacation until
such time as he is eligible for additional weeks of vacation
under the Company's standard vacation policy. Executive will be
provided an annual physical examination and a financial/tax
consultant for personal financial and tax planning.
(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.
(h) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (f) and (g) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the Chairman of the Board.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of three (3) years from the date of
his termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (j) below. The time periods in (a)
through (j) below shall be the lesser of the 36-month or 3-year
periods stated therein or the time period remaining from the date
of Executive's termination to the end of the Term of this
Agreement. If Executive terminates his employment other than
pursuant to clauses (i) or (ii) of this Section 5.1, the
Company's obligations under this Agreement shall cease as of the
date of such termination. Except as provided in Section 5.4(c),
the Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
thirty-six (36) months from his date of termination in
the same manner as it was being paid as of the date of
termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(d)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the thirty-six (36)
months following the month in which his employment
under this Employment is terminated in an amount for
each such month equal to one-twelfth of the average of
the bonuses earned by him for the two fiscal years in
which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts
that Executive had previously earned from the Company
but which may not yet have been paid as of the date of
termination shall not be affected by this provision.
Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved),
based upon the number of days that he was employed
during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to
be paid not later than 30 days after termination of
employment; provided, that the amount of such lump sum
payment shall be determined by taking the bonus
payments (as of the payment date) to be made and
discounting them to their Present Value (as defined in
Section 5.4(d)) on the date Executive's employment
under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date thirty-six (36)
months from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, the Blount 401(k) Plan, and the Blount, Inc. and
Subsidiary Supplemental Retirement Plan. Executive's
participation in such retirement plans shall continue
for a period of thirty-six (36) months from the date of
termination of his employment under this Agreement (at
which point he will be considered to have terminated
employment within the meaning of the plans) and the
compensation payable to Executive under (a) and (b)
above shall be treated (unless otherwise excluded) as
compensation under the plan. For purposes of the
Blount 401(k) Plan, he will receive an amount equal to
the Company's contributions to the plan, assuming
Executive had participated in such plan at the maximum
permissible contributions level. If continued
participation in any plan is not permitted by the plan
or by applicable law, the Company shall pay to
Executive and, if applicable, his beneficiary, a
supplemental benefit equal to the present value on the
date of termination of employment under this Agreement
(calculated as provided in the plan) of the excess of
(i) the benefit Executive would have been paid under
such plan if he had continued to be covered for the 36-
month period (less any amounts Executive would have
been required to contribute), over (ii) the benefit
actually payable under such plan. The Company shall
pay such additional benefits (if any) in a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
thirty-six (36) months.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) SERP. On his date of termination, Executive shall
be treated for purposes of determining his benefit
under the SERP as if he had earned an additional three
(3) years of benefit service under the Blount
Retirement Plan (and received the corresponding
additional years of benefit service under the SERP),
and shall be deemed to be three (3) years older than
his actual age.
(h) Executive Life Insurance Program. On Executive's
date of termination, the Company will pay an amount
into the policy as if Executive had continued in
employment for three (3) additional years at the same
total compensation and was three (3) years older. At
Executive's option, the policy shall be delivered to
Executive or he shall be paid the cash value thereof
(after the payment referred to in the preceding
sentence).
(i) Stock Options. For purposes of the 1992 Plan, the
1994 Plan and other stock option programs of the
Company, Executive shall be deemed to have completed
three (3) additional years of service with the Company.
(j) Office Space; Secretarial. Executive will be
provided appropriate office space, his current
administrative assistant (such assistant shall be paid
or provided similar compensation and benefits to that
being provided at the time Executive terminates
employment), and related expenses for a period of
thirty-six (36) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (j) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
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 of
Winton M. Blount, Jr., 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.
(a) SERP. As of his date of termination, Executive
shall be treated for purposes of the SERP as if he had remained
actively employed by the Company until the date he attained age
65 and had continued to receive compensation at the level in
effect on his date of termination to his 65th birthday. The
benefit payable to Executive shall be calculated to the date he
would attain age 65 and shall be reduced as provided in the SERP
agreement if Executive elects to commence payments prior to age
65.
(b) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1992
Plan, the 1994 Plan or any similar stock option programs shall
become 100% vested and immediately exercisable.
(c) Executive Life Insurance Program. The life
insurance policy described in Section 3(h) shall be delivered to
Executive as a fully paid-up policy within thirty (30) days after
his date of termination, regardless of Executive's age at such
time.
5.4 Tax Equilization Payment. (a) If all or any
portion of the compensation or benefits provided to Executive
under this Agreement are treated as Excess Severance Payments
(whether by action of the Internal Revenue Service or otherwise),
the Company shall protect Executive from depletion of the amount
of such compensation and benefits by payment of a tax
equalization payment in accordance with this subsection (a). In
connection with any Internal Revenue Service examination, audit
or other inquiry, the Company and Executive agree to take actions
to provide and to cooperate in providing evidence to the Internal
Revenue Service (and, if applicable, the State of Alabama) that
the compensation and benefits provided under this Agreement do
not result in the payment of Excess Severance Payments. The tax
equalization payment shall be an amount which when added to the
other amounts payable, or to be provided, to Executive under this
Agreement will place Executive in the same position as if the
excise tax penalty of Code Section 4999 (and any state tax
statute), or any successor statute of similar import, did not
apply to any of the compensation or benefits provided under this
Agreement. The amount of this tax equalization payment shall be
determined by the Company's independent accountants and shall be
paid to Executive not later than ten (10) days prior to the date
any excise tax under Code Section 4999 is due to be paid by
Executive.
(b) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments or benefits
he may be eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(c) If Executive becomes entitled to compensation and
benefits under Section 5.1 or Section 5.2 and such payments are
considered to be Severance Payments contingent upon a Change in
Control, Executive shall be required to mitigate damages (but
only with respect to amounts that would be treated as Severance
Payments) by reducing the amount of Severance Payments he is
entitled to receive by any compensation and benefits he earns
from subsequent employment (but shall not be required to seek
such employment) during the 36-month period after termination (or
such lesser period as he is entitled to extended benefits).
(d) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive by the Board pursuant to Section 7
sets forth with specificity (A) the conduct deemed to qualify as
Cause, (B) reasonable action that would remedy such objection,
and (C) a reasonable time (not less than thirty days) within
which Executive may take such remedial action, and Executive
shall not have taken such specified remedial action within such
specified reasonable time.
6.3 "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) 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
(iii) 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
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) 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.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive of any duties
inconsistent with Executive's status as the Chief Executive
Officer of the Company, or a substantial adverse alteration in
the nature or status of the Executive's responsibilities from
those in effect immediately prior to the Change in Control or
death of Mr. Blount (other than any such alteration primarily
attributable to the fact that the Company may no longer be a
public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of Company's principal executive
offices to a location more than fifty (50) miles from the
location of such offices immediately prior to the Change in
Control or death of Mr. Blount, or the Company's requiring
Executive to be based anywhere other than the Company's principal
executive offices, except for required travel on the Company's
business to an extent substantially consistent with Executive's
present business travel obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Executive Management Target Incentive
Plan, long-term incentive plan, and Supplemental Executive
Retirement Plan, or any substitute plans adopted prior to the
Change in Control or death of Mr. Blount, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by
the Company to continue the Executive's participation in such
plan (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of
benefits provided and the level of Executive's participation
relative to other participants, as existed at the time of the
Change in Control or death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance
(including the Executive Life Insurance Program), medical, health
and accident or disability plans in which Executive was
participating at the time of the Change in Control or death of
Mr. Blount, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive at the time of the Change in Control or death of Mr.
Blount, or the failure by the Company to provide Executive with
the number of paid vacation days to which the Executive is
entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such
termination (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to
be heard before the Board) finding that, in the good faith
opinion of the Board, Executive was guilty of conduct set forth
in clause (a) or (b) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given); provided, however, that the "Date of Termination" for
purposes of this Agreement shall not be the last day of the
Company's fiscal year and, in the event the last day of the
fiscal year is designated as the "Date of Termination", the "Date
of Termination" for purposes hereof shall automatically be the
first day of the next following fiscal year.
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: John M. Panettiere
2519 Wildwood Drive
Montgomery, Alabama 36111
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that Executive's claim has
been denied. To the extent permitted by applicable law, any
further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration
in Montgomery, Alabama, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having
jurisdiction. In the event the Executive incurs legal fees and
other expenses in seeking to obtain or to enforce any rights or
benefits provided by this Agreement and is successful, in whole
or in part, in obtaining or enforcing any such rights or benefits
through settlement, arbitration or otherwise, the Company shall
promptly pay Executive's reasonable legal fees and expenses
incurred in enforcing this Agreement and the fees of the
arbitrator. Except to the extent provided in the preceding
sentence, each party shall pay its own legal fees and other
expenses associated with any dispute.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
JOHN M. PANETTIERE
President & Chief Executive Officer
COMPANY:
BLOUNT, INC.
By: ___________________________
WINTON M. BLOUNT
Chairman of the Board
Witness:______________________
______________________________
Notary Public
EXHIBIT 10(q)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 22nd
day of August, 1994, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and Harold E. Layman ("Executive").
W I T N E S S E T H:
WHEREAS, effective January 1, 1994, the Company and
Executive entered into an agreement ("Initial Agreement")
providing for Executive's employment by Company and specifying
the terms and conditions of such employment; and
WHEREAS, Executive has diligently performed his duties
under the Initial Agreement and has contributed to the success of
the Company; and
WHEREAS, the Company desires to recognize Executive's
value to the Company and its shareholders by amending certain
provisions of the Initial Agreement and restating such agreement
in a single document as hereinafter provided; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to amend
the Initial Agreement to recognize Executive's contributions to
the overall success of the Company. In order to provide a
single, integrated document, the Initial Agreement and the
amendments are hereby incorporated into this restated Employment
Agreement, which shall provide the basis for Executive's
continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as Senior
Vice President and Chief Financial Officer of the Company or
other similar positions to which, with his consent, he may be
assigned and shall have such responsibilities, duties and
authority that are consistent with such positions as may from
time to time be assigned to Executive. Executive hereby agrees
that during the Term of this Agreement he will devote
substantially all his working time, attention and energies to the
diligent performance of his duties, provided that the Executive
may also serve on boards of directors or trustees of other
companies and organizations, as long as such service does not
materially interfere with the performance of his duties hereunder
and is with the prior approval of the President and Chief
Executive Officer.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, three year term (the "Term") commencing on August 22,
1994, and shall be deemed to automatically, without further
action by either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be three years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the three years following
the date of such notice and this Agreement shall terminate upon
the expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be three years from the date of such termination
(or, if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (f) below:
(a) An annual base salary ("Base Salary") of Two
Hundred Thirty-Seven Thousand and Six Hundred Dollars
($237,600.00), prorated for any partial year of employment.
Executive's Base Salary shall be subject to annual review for
increases at such time as the Company conducts salary reviews for
its executive officers generally. Executive's salary shall be
payable bi-monthly, or in accordance with the Company's regular
payroll practices in effect from time to time for executive
officers of the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish individual performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 45%
of Base Salary; the maximum award for exceeding the performance
goals shall be 90% of Base Salary. The annual incentive bonus
payable under this subsection (b) shall be payable as a lump sum
no later than fifteen (15) business days after approval of the
bonus by the Compensation Committee of the Board, unless
Executive elects to defer all or a portion of such amount to any
deferral plan established by the Company for such purpose.
(c) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(d) The Company will provide membership initiation
fees and dues at the Montgomery Country Club and the Capital City
Club for Executive and his family. Executive will be provided an
automobile per company policy, and the Company will pay all
insurance, maintenance, fuel, oil and related operational
expenses for such automobile. Executive is eligible for vacation
under the Company's standard vacation policy. Executive will be
provided an annual physical examination and a financial/tax
consultant for personal financial and tax planning.
(e) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a $250,000
death benefit. This insurance policy 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 (c) above.
(f) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (d) and (e) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the Chairman of the Board.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of two (2) years from the date of his
termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (i) below. The time periods in (a)
through (i) below shall be the lesser of the 24-month or 2-year
periods stated therein or the time period remaining from the date
of Executive's termination to the end of the Term of this
Agreement. If Executive terminates his employment other than
pursuant to clauses (i) or (ii) of this Section 5.1, the
Company's obligations under this Agreement shall cease as of the
date of such termination. Except as provided in Section 5.4(a),
the Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
twenty-four (24) months from his date of termination in
the same manner as it was being paid as of the date of
termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the twenty-four
(24) months following the month in which his employment
under this Employment is terminated in an amount for
each such month equal to one-twelfth of the average of
the bonuses earned by him for the two fiscal years in
which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts
that Executive had previously earned from the Company
but which may not yet have been paid as of the date of
termination shall not be affected by this provision.
Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved),
based upon the number of days that he was employed
during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to
be paid not later than 30 days after termination of
employment; provided, that the amount of such lump sum
payment shall be determined by taking the bonus
payments (as of the payment date) to be made and
discounting them to their Present Value (as defined in
Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date twenty-four (24)
months from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, the Blount 401(k) Plan, and, if applicable, the
Blount, Inc. and Subsidiary Supplemental Retirement
Plan. Executive's participation in such retirement
plans shall continue for a period of twenty-four (24)
months from the date of termination of his employment
under this Agreement (at which point he will be
considered to have terminated employment within the
meaning of the plans) and the compensation payable to
Executive under (a) and (b) above shall be treated
(unless otherwise excluded) as compensation under the
plan. For purposes of the Blount 401(k) Plan, he will
receive an amount equal to the Company's contributions
to the plan, assuming Executive had participated in
such plan at the maximum permissible contributions
level. If continued participation in any plan is not
permitted by the plan or by applicable law, the Company
shall pay to Executive and, if applicable, his
beneficiary, a supplemental benefit equal to the
present value on the date of termination of employment
under this Agreement (calculated as provided in the
plan) of the excess of (i) the benefit Executive would
have been paid under such plan if he had continued to
be covered for the 24-month period (less any amounts
Executive would have been required to contribute), over
(ii) the benefit actually payable under such plan. The
Company shall pay such additional benefits (if any) in
a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
twenty-four (24) months.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) Executive Life Insurance Program. On Executive's
date of termination, the Company will pay an amount
into the policy as if Executive had continued in
employment for two (2) additional years at the same
total compensation and was two (2) years older. At
Executive's option, the policy shall be delivered to
Executive or he shall be paid the cash value thereof
(after the payment referred to in the preceding
sentence).
(h) Stock Options. For purposes of the 1994 Plan and
other stock option programs of the Company in which the
Executive may participate, Executive shall be deemed to
have completed two (2) additional years of service with
the Company.
(i) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance and related expenses for a period of twelve
(12) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (i) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
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 of
Winton M. Blount, Jr., 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.
(a) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1994
Plan or any other stock option program in which Executive
participates shall become 100% vested and immediately
exercisable. Notwithstanding the other provisions of Executive's
stock options, Executive shall have a period of not less than 3
months from his date of termination to exercise such options.
(b) Executive Life Insurance Program. The life
insurance policy described in Section 3(h) shall be delivered to
Executive as a fully paid-up policy within thirty (30) days after
his date of termination, regardless of Executive's age at such
time.
5.4 Limitation on Benefits Upon Termination. (a)
Notwithstanding anything in this Agreement to the contrary, any
benefits payable or to be provided to Executive by the Company or
its affiliates, whether pursuant to this Agreement or otherwise,
which are treated as Severance Payments shall be modified or
reduced in the manner provided in (b) below to the extent
necessary so that the benefits payable or to be provided to
Executive under this Agreement that are treated as Severance
Payments, as well as any payments or benefits provided outside of
this Agreement that are so treated, shall not cause the Company
to have paid an Excess Severance Payment. In computing such
amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including
making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. If Executive becomes
entitled to compensation and benefits under Section 5.1 or
Section 5.2 and such payments are considered to be Severance
Payments contingent upon a Change in Control, Executive shall be
required to mitigate damages (but only with respect to amounts
that would be treated as Severance Payments) by reducing the
amount of Severance Payments he is entitled to receive by any
compensation and benefits he earns from subsequent employment
(but shall not be required to seek such employment) during the
24-month period after termination (or such lesser period as he is
entitled to extended benefits).
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of
Executive under this Agreement must be modified or reduced to
comply with this Section 5.4, Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment or change
in the timing of the payment shall be made without the consent of
the Company.
(c) This Section 5.4 shall be interpreted so as to
avoid the imposition of excise taxes on Executive under Section
4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to
amounts payable under this Agreement or otherwise.
Notwithstanding the foregoing, in no event will any of the
provisions of this Section 5.4 create, without the consent of
Executive, an obligation on the part of Executive to refund any
amount to the Company following payment of such amount.
(d) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments he may be
eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(e) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive pursuant to Section 7 sets forth
with specificity (A) the conduct deemed to qualify as Cause, (B)
reasonable action that would remedy such objection, and (C) a
reasonable time (not less than thirty days) within which
Executive may take such remedial action, and Executive shall not
have taken such specified remedial action within such specified
reasonable time.
6.3 "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) 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
(iii) 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
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) 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.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive without his consent of
any duties inconsistent with Executive's status as the Senior
Vice President and Chief Financial Officer of the Company, or a
substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately
prior to the Change in Control or death of Mr. Blount (other than
any such alteration primarily attributable to the fact that the
Company may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of Executive without his consent
to a location more than fifty (50) miles from the work location
immediately prior to the Change in Control or death of Mr.
Blount, or the Company's requiring Executive without his consent
to be based anywhere other than the Company's principal executive
offices, except for required travel on the Company's business to
an extent substantially consistent with Executive's present
business travel obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance
(including the Executive Life Insurance Program), medical, health
and accident or disability plans in which Executive was
participating at the time of the Change in Control or death of
Mr. Blount, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive at the time of the Change in Control or death of Mr.
Blount, or the failure by the Company to provide Executive with
the number of paid vacation days to which the Executive is
entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of the written reasons for such
termination (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to
be heard) finding that, in good faith opinion, Executive was
guilty of conduct set forth in clause (a) or (b) of the
definition of Cause herein, and specifying the particulars
thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: Harold E. Layman
6465 Wynwood Place
Montgomery, Alabama 36117
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be in writing. Any denial of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Company
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal a decision within sixty (60) days after notification
that Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Montgomery, Alabama, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. In the event the Executive incurs
legal fees and other expenses in seeking to obtain or to enforce
any rights or benefits provided by this Agreement and is
successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and
the fees of the arbitrator. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
HAROLD E. LAYMAN
Senior Vice President
& Chief Financial Officer
COMPANY:
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:_____________________
_____________________________
Notary Public
EXHIBIT 10 (r)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 22nd
day of August, 1994, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and D. Joseph McInnes ("Executive").
W I T N E S S E T H:
WHEREAS, effective March 31, 1992, the Company and
Executive entered into an agreement ("Initial Agreement")
providing for Executive's employment by Company and specifying
the terms and conditions of such employment; and
WHEREAS, Executive has diligently performed his duties
under the Initial Agreement and has contributed to the success of
the Company; and
WHEREAS, the Company desires to recognize Executive's
value to the Company and its shareholders by amending certain
provisions of the Initial Agreement and restating such agreement
in a single document as hereinafter provided; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to amend
the Initial Agreement to recognize Executive's contributions to
the overall success of the Company. In order to provide a
single, integrated document, the Initial Agreement and the
amendments are hereby incorporated into this restated Employment
Agreement, which shall provide the basis for Executive's
continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as Senior
Vice President - Administration and Corporate Secretary of the
Company or other similar positions to which, with his consent, he
may be assigned and shall have such responsibilities, duties and
authority that are consistent with such positions as may from
time to time be assigned to Executive. Executive hereby agrees
that during the Term of this Agreement he will devote
substantially all his working time, attention and energies to the
diligent performance of his duties, provided that the Executive
may also serve on boards of directors or trustees of other
companies and organizations, as long as such service does not
materially interfere with the performance of his duties hereunder
and is with the prior approval of the President and Chief
Executive Officer.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, five year term (the "Term") commencing on August 22,
1994, and shall be deemed to automatically, without further
action by either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be five years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the five years following
the date of such notice and this Agreement shall terminate upon
the expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be five years from the date of such termination (or,
if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (f) below:
(a) An annual base salary ("Base Salary") of Two
Hundred Thirty-Six Thousand and No/100 Dollars ($236,000.00),
prorated for any partial year of employment. Executive's Base
Salary shall be subject to annual review for increases at such
time as the Company conducts salary reviews for its executive
officers generally. Executive's salary shall be payable bi-
monthly, or in accordance with the Company's regular payroll
practices in effect from time to time for executive officers of
the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish performance goals each year under the incentive
plans, and Executive's annual Target Bonus shall be 45% of Base
Salary; the maximum award for exceeding the performance goals
shall be 90% of Base Salary. The annual incentive bonus payable
under this subsection (b) shall be payable as a lump sum no later
than fifteen (15) business days after approval of the bonus by
the Compensation Committee of the Board, unless Executive elects
to defer all or a portion of such amount to any deferral plan
established by the Company for such purpose.
(c) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(d) The Company will provide membership initiation
fees and dues at the Montgomery Country Club and the Capital City
Club for Executive and his family. Executive will be provided an
automobile per company policy, and the Company will pay all
insurance, maintenance, fuel, oil and related operational
expenses for such automobile. Executive is eligible for vacation
under the Company's standard vacation policy. Executive will be
provided an annual physical examination and a financial/tax
consultant for personal financial and tax planning.
(e) Executive shall participate in the Company's Key
Man Life Insurance Program, detailed in Exhibit A, which will
provide a death benefit equal to 2 l/2 times Executive's total
compensation (as determined each August 1), subject to a maximum
benefit of $2.5 million. A supplemental pension benefit, as
described in Exhibit A, may be taken at retirement in lieu of
paid-up insurance. The life insurance provided to Executive
under the Key Man Life Insurance Program shall be in addition to
any life insurance he receives under the Company's group term
policy under subsection (c) above.
(f) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (d) and (e) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the President and Chief Executive Officer.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of three (3) years from the date of
his termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (i) below. The time periods in (a)
through (i) below shall be the lesser of the 36-month or 3-year
periods stated therein or the time period remaining from the date
of Executive's termination to the end of the Term of this
Agreement. If Executive terminates his employment other than
pursuant to clauses (i) or (ii) of this Section 5.1, the
Company's obligations under this Agreement shall cease as of the
date of such termination. Except as provided in Section 5.4(c),
the Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
thirty-six (36) months from his date of termination in
the same manner as it was being paid as of the date of
termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(d)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the thirty-six (36)
months following the month in which his employment
under this Employment is terminated in an amount for
each such month equal to one-twelfth of the average of
the bonuses earned by him for the two fiscal years in
which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts
that Executive had previously earned from the Company
but which may not yet have been paid as of the date of
termination shall not be affected by this provision.
Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved),
based upon the number of days that he was employed
during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to
be paid not later than 30 days after termination of
employment; provided, that the amount of such lump sum
payment shall be determined by taking the bonus
payments (as of the payment date) to be made and
discounting them to their Present Value (as defined in
Section 5.4(d)) on the date Executive's employment
under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date thirty-six (36)
months from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, the Blount 401(k) Plan, and, if applicable, the
Blount, Inc. and Subsidiary Supplemental Retirement
Plan. Executive's participation in such retirement
plans shall continue for a period of thirty-six (36)
months from the date of termination of his employment
under this Agreement (at which point he will be
considered to have terminated employment within the
meaning of the plans) and the compensation payable to
Executive under (a) and (b) above shall be treated
(unless otherwise excluded) as compensation under the
plan. For purposes of the Blount 401(k) Plan, he will
receive an amount equal to the Company's contributions
to the plan, assuming Executive had participated in
such plan at the maximum permissible contributions
level. If continued participation in any plan is not
permitted by the plan or by applicable law, the Company
shall pay to Executive and, if applicable, his
beneficiary, a supplemental benefit equal to the
present value on the date of termination of employment
under this Agreement (calculated as provided in the
plan) of the excess of (i) the benefit Executive would
have been paid under such plan if he had continued to
be covered for the 36-month period (less any amounts
Executive would have been required to contribute), over
(ii) the benefit actually payable under such plan. The
Company shall pay such additional benefits (if any) in
a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
thirty-six (36) months.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) Key Man Life Insurance Program. On Executive's
date of termination, the Company will pay an amount
into the policy as if Executive had continued in
employment for three (3) additional years at the same
total compensation and was three (3) years older. At
Executive's option, the policy shall be delivered to
Executive or he shall be paid the supplemental pension
as described in Exhibit A.
(h) Stock Options. For purposes of the 1992 Plan, the
1994 Plan and other stock option programs of the
Company, Executive shall be deemed to have completed
three (3) additional years of service with the Company.
(i) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance and related expenses for a period of
eighteen (18) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (i) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
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 of
Winton M. Blount, Jr., 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.
(a) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1992
Plan, the 1994 Plan or any similar stock option programs shall
become 100% vested and immediately exercisable.
(b) Key Man Life Insurance Program. The life
insurance policy and the retirement benefit option described in
Section 3(e) shall become fully funded within thirty (30) days
after his date of termination, regardless of Executive's age at
such time.
5.4 Tax Equilization Payment. (a) If all or any
portion of the compensation or benefits provided to Executive
under this Agreement are treated as Excess Severance Payments
(whether by action of the Internal Revenue Service or otherwise),
the Company shall protect Executive from depletion of the amount
of such compensation and benefits by payment of a tax
equalization payment in accordance with this subsection (a). In
connection with any Internal Revenue Service examination, audit
or other inquiry, the Company and Executive agree to take actions
to provide, and to cooperate in providing, evidence to the
Internal Revenue Service (and, if applicable, the State of
Alabama) that the compensation and benefits provided under this
Agreement do not result in the payment of Excess Severance
Payments. The tax equalization payment shall be an amount which
when added to the other amounts payable, or to be provided, to
Executive under this Agreement will place Executive in the same
position as if the excise tax penalty of Code Section 4999 (and
any state tax statute), or any successor statute of similar
import, did not apply to any of the compensation or benefits
provided under this Agreement. The amount of this tax
equalization payment shall be determined by the Company's
independent accountants and shall be paid to Executive not later
than ten (10) days prior to the date any excise tax under Code
Section 4999 is due to be paid by Executive.
(b) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments or benefits
he may be eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(c) If Executive becomes entitled to compensation and
benefits under Section 5.1 or Section 5.2 and such payments are
considered to be Severance Payments contingent upon a Change in
Control, Executive shall be required to mitigate damages (but
only with respect to amounts that would be treated as Severance
Payments) by reducing the amount of Severance Payments he is
entitled to receive by any compensation and benefits he earns
from subsequent employment (but shall not be required to seek
such employment) during the 36-month period after termination (or
such lesser period as he is entitled to extended benefits).
(d) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive by the Board pursuant to Section 7
sets forth with specificity (A) the conduct deemed to qualify as
Cause, (B) reasonable action that would remedy such objection,
and (C) a reasonable time (not less than thirty days) within
which Executive may take such remedial action, and Executive
shall not have taken such specified remedial action within such
specified reasonable time.
6.3 "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) 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
(iii) 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
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) 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.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive of any duties
inconsistent with Executive's status as the Senior Vice President
- - Administration and Corporate Secretary of the Company, or a
substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately
prior to the Change in Control or death of Mr. Blount (other than
any such alteration primarily attributable to the fact that the
Company may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of Company's principal executive
offices to a location more than fifty (50) miles from the
location of such offices immediately prior to the Change in
Control or death of Mr. Blount, or the Company's requiring
Executive to be based anywhere other than the Company's principal
executive offices, except for required travel on the Company's
business to an extent substantially consistent with Executive's
present business travel obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance
(including the Key Man Life Insurance Program), medical, health
and accident or disability plans in which Executive was
participating at the time of the Change in Control or death of
Mr. Blount, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive at the time of the Change in Control or death of Mr.
Blount, or the failure by the Company to provide Executive with
the number of paid vacation days to which the Executive is
entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of the written reasons for such
termination (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to
be heard) finding that, in good faith opinion, Executive was
guilty of conduct set forth in clause (a) or (b) of the
definition of Cause herein, and specifying the particulars
thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
To the Executive: D. Joseph McInnes
2408 Midfield Drive
Montgomery, Alabama 36111
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that Executive's claim has
been denied. To the extent permitted by applicable law, any
further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration
in Montgomery, Alabama, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having
jurisdiction. In the event the Executive incurs legal fees and
other expenses in seeking to obtain or to enforce any rights or
benefits provided by this Agreement and is successful, in whole
or in part, in obtaining or enforcing any such rights or benefits
through settlement, arbitration or otherwise, the Company shall
promptly pay Executive's reasonable legal fees and expenses
incurred in enforcing this Agreement and the fees of the
arbitrator. Except to the extent provided in the preceding
sentence, each party shall pay its own legal fees and other
expenses associated with any dispute.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
D. JOSEPH MCINNES
Senior Vice President -
Administration &
Corporate Secretary
COMPANY:
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:______________________
______________________________
Notary Public
EXHIBIT 10 (s)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 12th
day of September, 1994, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and James S. Osterman ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive desire to enter into
an agreement providing for Executive's employment by Company and
specifying the terms and conditions of such employment; and
WHEREAS, Executive has diligently performed his duties
and has contributed to the success of the Company; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to
create an understanding which shall provide the basis for
Executive's continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as President
of its Oregon Cutting Systems Division or such other positions to
which, with his consent, he may be assigned and shall have such
responsibilities, duties and authority that are consistent with
such positions as may from time to time be assigned to Executive
by the President and Chief Executive Officer. Executive hereby
agrees that during the Term of this Agreement he will devote
substantially all his working time, attention and energies to the
diligent performance of his duties as President of the Oregon
Cutting Systems Division, provided that the Executive may also
serve on boards of directors or trustees of other companies and
organizations, as long as such service does not materially
interfere with the performance of his duties hereunder and is
with the prior approval of the President and Chief Executive
Officer of the Company.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, three year term (the "Term") commencing on September
___, 1994, and shall be deemed to automatically, without further
action by either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be three years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the three years following
the date of such notice and this Agreement shall terminate upon
the expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be three years from the date of such termination
(or, if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (f) below:
(a) An annual base salary ("Base Salary") of Two
Hundred Seventeen Thousand and Nine Hundred and No/100 Dollars
($217,000.00), prorated for any partial year of employment.
Executive's Base Salary shall be subject to annual review for
increases at such time as the Company conducts salary reviews for
its executive officers generally. Executive's salary shall be
payable bi-monthly, or in accordance with the Company's regular
payroll practices in effect from time to time for executive
officers of the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish individual performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 45%
of Base Salary; the maximum award for exceeding the performance
goals shall be 90% of Base Salary. The annual incentive bonus
payable under this subsection (b) shall be payable as a lump sum
no later than fifteen (15) business days after approval of the
bonus by the Compensation Committee of the Board, unless
Executive elects to defer all or a portion of such amount to any
deferral plan established by the Company for such purpose.
(c) Executive will be eligible to participate in the
1992 Blount Incentive Stock Option Plan ("1992 Plan"), the 1994
Blount Executive Stock Option Plan ("1994 Plan") and such other
stock option programs as may be established from time to time by
the Company for its executive officers. Executive will
participate in any long-term incentive plans established by the
Company for executive officers at his level.
(d) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(e) The Company will provide membership initiation
fees and dues at The Waverly Country Club for Executive and his
family. Executive will be provided an automobile per company
policy, and the Company will pay all insurance, maintenance,
fuel, oil and related operational expenses for such automobile.
Executive will be eligible for vacation under the Company's
standard vacation policy. Executive will be provided an annual
physical examination and a financial/tax consultant for personal
financial and tax planning.
(f) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (d) and (e) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the President and Chief Executive Officer.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of two (2) years from the date of his
termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (h) below. The time periods in (a)
through (h) below shall be the lesser of the 24-month or 2-year
periods stated therein or the time period remaining from the date
of Executive's termination to the end of the Term of this
Agreement. If Executive terminates his employment other than
pursuant to clauses (i) or (ii) of this Section 5.1, the
Company's obligations under this Agreement shall cease as of the
date of such termination. Except as provided in Section 5.4(a),
the Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
twenty-four (24) months from his date of termination in
the same manner as it was being paid as of the date of
termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the twenty-four
(24) months following the month in which his employment
under this Employment is terminated in an amount for
each such month equal to one-twelfth of the average of
the bonuses earned by him for the two fiscal years in
which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts
that Executive had previously earned from the Company
but which may not yet have been paid as of the date of
termination shall not be affected by this provision.
Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved),
based upon the number of days that he was employed
during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to
be paid not later than 30 days after termination of
employment; provided, that the amount of such lump sum
payment shall be determined by taking the bonus
payments (as of the payment date) to be made and
discounting them to their Present Value (as defined in
Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date twenty-four (24)
months from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, and the Blount 401(k) Plan. Executive's
participation in such retirement plans shall continue
for a period of twenty-four (24) months from the date
of termination of his employment under this Agreement
(at which point he will be considered to have
terminated employment within the meaning of the plans)
and the compensation payable to Executive under (a) and
(b) above shall be treated (unless otherwise excluded)
as compensation under the plan. For purposes of the
Blount 401(k) Plan, he will receive an amount equal to
the Company's contributions to the plan, assuming
Executive had participated in such plan at the maximum
permissible contributions level. If continued
participation in any plan is not permitted by the plan
or by applicable law, the Company shall pay to
Executive and, if applicable, his beneficiary, a
supplemental benefit equal to the present value on the
date of termination of employment under this Agreement
(calculated as provided in the plan) of the excess of
(i) the benefit Executive would have been paid under
such plan if he had continued to be covered for the
24-month period (less any amounts Executive would have
been required to contribute), over (ii) the benefit
actually payable under such plan. The Company shall
pay such additional benefits (if any) in a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
twenty-four (24) months.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) Stock Options. For purposes of the 1992 Plan, the
1994 Plan and other stock option programs of the
Company in which Executive participates, Executive
shall be deemed to have completed two (2) additional
years of service with the Company.
(h) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance, and related expenses for a period of twelve
(12) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (h) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
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 of
Winton M. Blount, Jr., 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.
(a) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1992
Plan, the 1994 Plan or any similar stock option programs shall
become 100% vested and immediately exercisable. Notwithstanding
the other provisions of Executive's stock options, Executive
shall have a period of not less than 3 months from his date of
termination to exercise such options.
5.4 Limitation on Benefits Upon Termination. (a)
Notwithstanding anything in this Agreement to the contrary, any
benefits payable or to be provided to Executive by the Company or
its affiliates, whether pursuant to this Agreement or otherwise,
which are treated as Severance Payments shall be modified or
reduced in the manner provided in (b) below to the extent
necessary so that the benefits payable or to be provided to
Executive under this Agreement that are treated as Severance
Payments, as well as any payments or benefits provided outside of
this Agreement that are so treated, shall not cause the Company
to have paid an Excess Severance Payment. In computing such
amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including
making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. If Executive becomes
entitled to compensation and benefits under Section 5.1 or
Section 5.2 and such payments are considered to be Severance
Payments contingent upon a Change in Control, Executive shall be
required to mitigate damages (but only with respect to amounts
that would be treated as Severance Payments) by reducing the
amount of Severance Payments he is entitled to receive by any
compensation and benefits he earns from subsequent employment
(but shall not be required to seek such employment) during the
24-month period after termination (or such lesser period as he is
entitled to extended benefits).
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of
Executive under this Agreement must be modified or reduced to
comply with this Section 5.4, Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment or change
in the timing of the payment shall be made without the consent of
the Company.
(c) This Section 5.4 shall be interpreted so as to
avoid the imposition of excise taxes on Executive under Section
4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to
amounts payable under this Agreement or otherwise.
Notwithstanding the foregoing, in no event will any of the
provisions of this Section 5.4 create, without the consent of
Executive, an obligation on the part of Executive to refund any
amount to the Company following payment of such amount.
(d) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments he may be
eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(e) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive by the Board pursuant to Section 7
sets forth with specificity (A) the conduct deemed to qualify as
Cause, (B) reasonable action that would remedy such objection,
and (C) a reasonable time (not less than thirty days) within
which Executive may take such remedial action, and Executive
shall not have taken such specified remedial action within such
specified reasonable time.
6.3 "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) 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
(iii) 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
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) 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.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive of any duties
inconsistent with Executive's status as the President of the
Oregon Cutting Systems Division, or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control or death of Mr. Blount (other than any such
alteration primarily attributable to the fact that the Company
may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation without the consent of the
Executive of the Division's principal executive offices to a
location more than fifty (50) miles from the location of such
offices immediately prior to the Change in Control or death of
Mr. Blount, or the Company's requiring Executive to be based
anywhere other than the Company's principal executive offices,
except for required travel on the Company's business to an extent
substantially consistent with Executive's present business travel
obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance,
medical, health and accident or disability plans in which
Executive was participating at the time of the Change in Control
or death of Mr. Blount, the taking of any action by the Company
which would directly or indirectly materially reduce any of such
benefits or deprive Executive of any material fringe benefit
enjoyed by Executive at the time of the Change in Control or
death of Mr. Blount, or the failure by the Company to provide
Executive with the number of paid vacation days to which the
Executive is entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to establish that the Executive was guilty of conduct
set forth in clause (a) or (b) of the definition of Cause herein,
and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: James S. Osterman
19021 S. Central Point Road
Oregon City, Oregon 97045
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be in writing. Any denial of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Company
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal a decision within sixty (60) days after notification
that Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Montgomery, Alabama, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. In the event the Executive incurs
legal fees and other expenses in seeking to obtain or to enforce
any rights or benefits provided by this Agreement and is
successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and
the fees of the arbitrator. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
JAMES S. OSTERMAN
President
Oregon Cutting Systems Division
COMPANY:
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President &
Chief Executive Officer
Witness:___________________
___________________________
Notary Public
EXHIBIT 10 (t)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 14th
day of September, 1994, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and Donald B. Zorn ("Executive").
W I T N E S S E T H:
WHEREAS, effective December 10, 1993, the Company and
Executive entered into an agreement ("Initial Agreement")
providing for Executive's employment by Company and specifying
the terms and conditions of such employment; and
WHEREAS, Executive has performed his duties under the
Initial Agreement and has contributed to the financial
performance and success of the Company; and
WHEREAS, the Company desires to recognize Executive's
performance and value to the Company and its shareholders by
amending certain provisions of the Initial Agreement and
restating such agreement in a single document as hereinafter
provided; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to amend
the Initial Agreement to recognize Executive's contributions to
the overall financial performance and success of the Company. In
order to provide a single, integrated document, the Initial
Agreement and the amendments are hereby incorporated into this
restated Employment Agreement, which shall provide the basis for
Executive's continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as President
of its Forestry and Industrial Equipment Division or other
positions to which, with his consent, he may be assigned and
shall have such responsibilities, duties and authority that are
consistent with such positions as may from time to time be
assigned to Executive by the President and Chief Executive
Officer. Executive hereby agrees that during the Term of this
Agreement he will devote substantially all his working time,
attention and energies to the diligent performance of his duties
as President of the Forestry and Industrial Equipment Division,
provided that the Executive may also serve on boards of directors
or trustees of other companies and organizations, as long as such
service does not materially interfere with the performance of his
duties hereunder and is with the prior approval of the President
and Chief Executive Officer of the Company.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, three year term (the "Term") commencing on September
___, 1994, and shall be deemed to automatically, without further
action by either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be three years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the three years following
the date of such notice and this Agreement shall terminate upon
the expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be three years from the date of such termination
(or, if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (h) below:
(a) An annual base salary ("Base Salary") of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00), prorated
for any partial year of employment. Executive's Base Salary
shall be subject to annual review for increases at such time as
the Company conducts salary reviews for its executive officers
generally. Executive's salary shall be payable bi-monthly, or in
accordance with the Company's regular payroll practices in effect
from time to time for executive officers of the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish individual performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 45%
of Base Salary; the maximum award for exceeding the performance
goals shall be 90% of Base Salary. The annual incentive bonus
payable under this subsection (b) shall be payable as a lump sum
no later than fifteen (15) business days after approval of the
bonus by the Compensation Committee of the Board, unless
Executive elects to defer all or a portion of such amount to any
deferral plan established by the Company for such purpose.
(c) Executive will be eligible to participate in the
1992 Blount Incentive Stock Option Plan ("1992 Plan"), the 1994
Blount Executive Stock Option Plan ("1994 Plan") and such other
stock option programs as may be established from time to time by
the Company for its executive officers. Executive will
participate in any long-term incentive plans established by the
Company for executive officers at his level.
(d) Executive shall be covered by a Supplemental
Executive Retirement Plan ("SERP"), providing for the following:
(i) The SERP will pay Executive a benefit at age 65 in
the form of a single life annuity less the amount
of any benefit he is entitled to receive at age 65
under the Blount Retirement Plan and the Blount
and Subsidiaries Supplemental Retirement Plan, and
the amount actually payable to Executive at age 65
under any pension plan of his former employer.
The benefit under the SERP shall be calculated in
accordance with the formula in the Blount
Retirement Plan (but without the Code compensation
limitations) and shall assume the Executive will
have 1 year of benefit service earned under the
SERP for each corresponding year of service earned
under the qualified plan at age 65. The SERP
shall also provide pre-retirement death benefits
calculated in the same manner as under the Blount
Retirement Plan.
(ii) Executive shall be credited with years of benefit
service under the SERP equal to his years of
benefit service under the Blount Retirement Plan.
(iii) The benefit payable under the SERP may, in the
discretion of the Company and upon prior notice to
Executive, be forfeited, suspended, reduced or
terminated, but only in accordance with the
provisions and procedures set forth in the SERP
Agreement.
The Company's obligations under this subsection (d) shall be as
set forth in the separate SERP Agreement with Executive as
attached as Exhibit A.
(e) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(f) The Company will provide membership initiation
fees and dues at a Minnesota Country Club for Executive and his
family. Executive will be provided an automobile per company
policy, and the Company will pay all insurance, maintenance,
fuel, oil and related operational expenses for such automobile.
Executive will be eligible for vacation under the Company's
standard vacation policy. Executive will be provided an annual
physical examination and a financial/tax consultant for personal
financial and tax planning.
(g) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a death
benefit of $250,000. 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.
(h) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (e) and (f) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the President and Chief Executive Officer.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of three (3) years from the date of
his termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (j) below. The time periods in (a)
through (j) below shall be the lesser of the 24-month or 2-year
periods stated therein or the time period remaining from the date
of Executive's termination to the end of the Term of this
Agreement. If Executive terminates his employment other than
pursuant to clauses (i) or (ii) of this Section 5.1, the
Company's obligations under this Agreement shall cease as of the
date of such termination. Except as provided in Section 5.4(a),
the Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
twenty-four (24) months from his date of termination in
the same manner as it was being paid as of the date of
termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the twenty-four
(24) months following the month in which his employment
under this Employment is terminated in an amount for
each such month equal to one-twelfth of the average of
the bonuses earned by him for the two fiscal years in
which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts
that Executive had previously earned from the Company
but which may not yet have been paid as of the date of
termination shall not be affected by this provision.
Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved),
based upon the number of days that he was employed
during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to
be paid not later than 30 days after termination of
employment; provided, that the amount of such lump sum
payment shall be determined by taking the bonus
payments (as of the payment date) to be made and
discounting them to their Present Value (as defined in
Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date twenty-four (24)
months from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, and the Blount 401(k) Plan. Executive's
participation in such retirement plans shall continue
for a period of twenty-four (24) months from the date
of termination of his employment under this Agreement
(at which point he will be considered to have
terminated employment within the meaning of the plans)
and the compensation payable to Executive under (a) and
(b) above shall be treated (unless otherwise excluded)
as compensation under the plan. For purposes of the
Blount 401(k) Plan, he will receive an amount equal to
the Company's contributions to the plan, assuming
Executive had participated in such plan at the maximum
permissible contributions level. If continued
participation in any plan is not permitted by the plan
or by applicable law, the Company shall pay to
Executive and, if applicable, his beneficiary, a
supplemental benefit equal to the present value on the
date of termination of employment under this Agreement
(calculated as provided in the plan) of the excess of
(i) the benefit Executive would have been paid under
such plan if he had continued to be covered for the 24
-month period (less any amounts Executive would have
been required to contribute), over (ii) the benefit
actually payable under such plan. The Company shall
pay such additional benefits (if any) in a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
twenty-four (24) months.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) SERP. On his date of termination, Executive shall
be treated for purposes of determining his benefit
under the SERP as if he had earned an additional two
(2) years of benefit service under the Blount
Retirement Plan (and received the corresponding
additional years of benefit service under the SERP),
and shall be deemed to be two (2) years older than his
actual age.
(h) Executive Life Insurance Program. On Executive's
date of termination, the Company will pay an amount
into the policy as if Executive had continued in
employment for two (2) additional years at the same
total compensation and was two (2) years older. At
Executive's option, the policy shall be delivered to
Executive or he shall be paid the cash value thereof
(after the payment referred to in the preceding
sentence).
(i) Stock Options. For purposes of the 1992 Plan, the
1994 Plan and other stock option programs of the
Company in which Executive participates, Executive
shall be deemed to have completed two (2) additional
years of service with the Company.
(j) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance, and related expenses for a period of twelve
(12) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (j) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
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 of
Winton M. Blount, Jr., 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.
(a) SERP. As of his date of termination, Executive
shall be treated for purposes of the SERP as if he had remained
actively employed by the Company until the date he attained age
65 and had continued to receive compensation at the level in
effect on his date of termination to his 65th birthday. The
benefit payable to Executive shall be calculated to the date he
would attain age 65 and shall be reduced as provided in the SERP
agreement if Executive elects to commence payments prior to age
65.
(b) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1992
Plan, the 1994 Plan or any similar stock option programs shall
become 100% vested and immediately exercisable. Notwithstanding
the other provisions of Executive's stock options, Executive
shall have a period of not less than 3 months from his date of
termination to exercise such options.
(c) Executive Life Insurance Program. The life
insurance policy described in Section 3(g) shall be delivered to
Executive as a fully paid-up policy within thirty (30) days after
his date of termination, regardless of Executive's age at such
time.
5.4 Limitation on Benefits Upon Termination. (a)
Notwithstanding anything in this Agreement to the contrary, any
benefits payable or to be provided to Executive by the Company or
its affiliates, whether pursuant to this Agreement or otherwise,
which are treated as Severance Payments shall be modified or
reduced in the manner provided in (b) below to the extent
necessary so that the benefits payable or to be provided to
Executive under this Agreement that are treated as Severance
Payments, as well as any payments or benefits provided outside of
this Agreement that are so treated, shall not cause the Company
to have paid an Excess Severance Payment. In computing such
amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including
making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. If Executive becomes
entitled to compensation and benefits under Section 5.1 or
Section 5.2 and such payments are considered to be Severance
Payments contingent upon a Change in Control, Executive shall be
required to mitigate damages (but only with respect to amounts
that would be treated as Severance Payments) by reducing the
amount of Severance Payments he is entitled to receive by any
compensation and benefits he earns from subsequent employment
(but shall not be required to seek such employment) during the
24-month period after termination (or such lesser period as he is
entitled to extended benefits).
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of
Executive under this Agreement must be modified or reduced to
comply with this Section 5.4, Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment or change
in the timing of the payment shall be made without the consent of
the Company.
(c) This Section 5.4 shall be interpreted so as to
avoid the imposition of excise taxes on Executive under Section
4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to
amounts payable under this Agreement or otherwise.
Notwithstanding the foregoing, in no event will any of the
provisions of this Section 5.4 create, without the consent of
Executive, an obligation on the part of Executive to refund any
amount to the Company following payment of such amount.
(d) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments he may be
eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(e) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive by the Board pursuant to Section 7
sets forth with specificity (A) the conduct deemed to qualify as
Cause, (B) reasonable action that would remedy such objection,
and (C) a reasonable time (not less than thirty days) within
which Executive may take such remedial action, and Executive
shall not have taken such specified remedial action within such
specified reasonable time.
6.3 "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) 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
(iii) 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
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) 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.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive of any duties
inconsistent with Executive's status as the President of the
Forestry and Industrial Equipment Division, or a substantial
adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control or death of Mr. Blount (other than any such
alteration primarily attributable to the fact that the Company
may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of Company's principal executive
offices to a location more than fifty (50) miles from the
location of such offices immediately prior to the Change in
Control or death of Mr. Blount, or the Company's requiring
Executive to be based anywhere other than the Company's principal
executive offices, except for required travel on the Company's
business to an extent substantially consistent with Executive's
present business travel obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance
(including the Executive Life Insurance Program), medical, health
and accident or disability plans in which Executive was
participating at the time of the Change in Control or death of
Mr. Blount, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive at the time of the Change in Control or death of Mr.
Blount, or the failure by the Company to provide Executive with
the number of paid vacation days to which the Executive is
entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to establish that the Executive was guilty of conduct
set forth in clause (a) or (b) of the definition of Cause herein,
and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: Donald B. Zorn
22110 Wagon Wheel Trail
Lakeville, Minnesota 55044
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be in writing. Any denial of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Company
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal a decision within sixty (60) days after notification
that Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Montgomery, Alabama, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. In the event the Executive incurs
legal fees and other expenses in seeking to obtain or to enforce
any rights or benefits provided by this Agreement and is
successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and
the fees of the arbitrator. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
DONALD B. ZORN
President
Forestry & Industrial
Equipment Division
COMPANY:
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President &
Chief Executive Officer
Witness:___________________
___________________________
Notary Public
EXHIBIT 10 (u)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 14th
day of September, 1994, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and Thomas J. Fruechtel
("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive desire to enter into
an agreement providing for Executive's employment by Company and
specifying the terms and conditions of such employment; and
WHEREAS, Executive has diligently performed his duties
and has contributed to the success of the Company; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to
create an understanding which shall provide the basis for
Executive's continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as President
of its Sporting Equipment Division or other positions to which,
with his consent, he may be assigned and shall have such
responsibilities, duties and authority that are consistent with
such positions as may from time to time be assigned to Executive
by the President and Chief Executive Officer. Executive hereby
agrees that during the Term of this Agreement he will devote
substantially all his working time, attention and energies to the
diligent performance of his duties as President of the Sporting
Equipment Division, provided that the Executive may also serve on
boards of directors or trustees of other companies and
organizations, as long as such service does not materially
interfere with the performance of his duties hereunder and is
with the prior approval of the President and Chief Executive
Officer of the Company.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, three year term (the "Term") commencing on September
___, 1994, and shall be deemed to automatically, without further
action by either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be three years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the three years following
the date of such notice and this Agreement shall terminate upon
the expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be three years from the date of such termination
(or, if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (f) below:
(a) An annual base salary ("Base Salary") of One
Hundred Forty-Five Thousand and Two Hundred Dollars
($145,200.00), prorated for any partial year of employment.
Executive's Base Salary shall be subject to annual review for
increases at such time as the Company conducts salary reviews for
its executive officers generally. Executive's salary shall be
payable bi-monthly, or in accordance with the Company's regular
payroll practices in effect from time to time for executive
officers of the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish individual performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 45%
of Base Salary; the maximum award for exceeding the performance
goals shall be 90% of Base Salary. The annual incentive bonus
payable under this subsection (b) shall be payable as a lump sum
no later than fifteen (15) business days after approval of the
bonus by the Compensation Committee of the Board, unless
Executive elects to defer all or a portion of such amount to any
deferral plan established by the Company for such purpose.
(c) Executive will be eligible to participate in the
1992 Blount Incentive Stock Option Plan ("1992 Plan"), the 1994
Blount Executive Stock Option Plan ("1994 Plan") and such other
stock option programs as may be established from time to time by
the Company for its executive officers. Executive will
participate in any long-term incentive plans established by the
Company for executive officers at his level.
(d) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(e) The Company will provide membership initiation
fees and dues at The Clarkston Country Club for Executive and his
family. Executive will be provided an automobile per company
policy, and the Company will pay all insurance, maintenance,
fuel, oil and related operational expenses for such automobile.
Executive will be eligible for vacation under the Company's
standard vacation policy. Executive will be provided an annual
physical examination and a financial/tax consultant for personal
financial and tax planning.
(f) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (d) and (e) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the President and Chief Executive Officer.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of two (2) years from the date of his
termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (h) below. The time periods in (a)
through (h) below shall be the lesser of the 24-month or 2-year
periods stated therein or the time period remaining from the date
of Executive's termination to the end of the Term of this
Agreement. If Executive terminates his employment other than
pursuant to clauses (i) or (ii) of this Section 5.1, the
Company's obligations under this Agreement shall cease as of the
date of such termination. Except as provided in Section 5.4(a),
the Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
twenty-four (24) months from his date of termination in
the same manner as it was being paid as of the date of
termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the twenty-four
(24) months following the month in which his employment
under this Employment is terminated in an amount for
each such month equal to one-twelfth of the average of
the bonuses earned by him for the two fiscal years in
which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts
that Executive had previously earned from the Company
but which may not yet have been paid as of the date of
termination shall not be affected by this provision.
Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved),
based upon the number of days that he was employed
during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to
be paid not later than 30 days after termination of
employment; provided, that the amount of such lump sum
payment shall be determined by taking the bonus
payments (as of the payment date) to be made and
discounting them to their Present Value (as defined in
Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date twenty-four (24)
months from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination to the extent such plans are still
maintained by the Company. Executive's participation
in such retirement plans shall continue for a period of
twenty-four (24) months from the date of termination of
his employment under this Agreement (at which point he
will be considered to have terminated employment within
the meaning of the plans) and the compensation payable
to Executive under (a) and (b) above shall be treated
(unless otherwise excluded) as compensation under the
plan. For purposes of the Blount 401(k) Plan, he will
receive an amount equal to the Company's contributions
to the plan, assuming Executive had participated in
such plan at the maximum permissible contributions
level. If continued participation in any plan is not
permitted by the plan or by applicable law, the Company
shall pay to Executive and, if applicable, his
beneficiary, a supplemental benefit equal to the
present value on the date of termination of employment
under this Agreement (calculated as provided in the
plan) of the excess of (i) the benefit Executive would
have been paid under such plan if he had continued to
be covered for the 24-month period (less any amounts
Executive would have been required to contribute), over
(ii) the benefit actually payable under such plan. The
Company shall pay such additional benefits (if any) in
a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
twenty-four (24) months.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) Stock Options. For purposes of the 1992 Plan, the
1994 Plan and other stock option programs of the
Company in which Executive participates, Executive
shall be deemed to have completed two (2) additional
years of service with the Company.
(h) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance, and related expenses for a period of twelve
(12) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (h) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
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 of
Winton M. Blount, Jr., 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.
(a) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1992
Plan, the 1994 Plan or any similar stock option programs shall
become 100% vested and immediately exercisable. Notwithstanding
the other provisions of Executive's stock options, Executive
shall have a period of not less than 3 months from his date of
termination to exercise such options.
5.4 Limitation on Benefits Upon Termination. (a)
Notwithstanding anything in this Agreement to the contrary, any
benefits payable or to be provided to Executive by the Company or
its affiliates, whether pursuant to this Agreement or otherwise,
which are treated as Severance Payments shall be modified or
reduced in the manner provided in (b) below to the extent
necessary so that the benefits payable or to be provided to
Executive under this Agreement that are treated as Severance
Payments, as well as any payments or benefits provided outside of
this Agreement that are so treated, shall not cause the Company
to have paid an Excess Severance Payment. In computing such
amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including
making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. If Executive becomes
entitled to compensation and benefits under Section 5.1 or
Section 5.2 and such payments are considered to be Severance
Payments contingent upon a Change in Control, Executive shall be
required to mitigate damages (but only with respect to amounts
that would be treated as Severance Payments) by reducing the
amount of Severance Payments he is entitled to receive by any
compensation and benefits he earns from subsequent employment
(but shall not be required to seek such employment) during the
24-month period after termination (or such lesser period as he is
entitled to extended benefits).
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of
Executive under this Agreement must be modified or reduced to
comply with this Section 5.4, Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment or change
in the timing of the payment shall be made without the consent of
the Company.
(c) This Section 5.4 shall be interpreted so as to
avoid the imposition of excise taxes on Executive under Section
4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to
amounts payable under this Agreement or otherwise.
Notwithstanding the foregoing, in no event will any of the
provisions of this Section 5.4 create, without the consent of
Executive, an obligation on the part of Executive to refund any
amount to the Company following payment of such amount.
(d) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments he may be
eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(e) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive by the Board pursuant to Section 7
sets forth with specificity (A) the conduct deemed to qualify as
Cause, (B) reasonable action that would remedy such objection,
and (C) a reasonable time (not less than thirty days) within
which Executive may take such remedial action, and Executive
shall not have taken such specified remedial action within such
specified reasonable time.
6.3 "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) 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
(iii) 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
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) 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.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive of any duties
inconsistent with Executive's status as the President of the
Blount Sporting Equipment Division, or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control or death of Mr. Blount (other than any such
alteration primarily attributable to the fact that the Company
may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation without the consent of the
Executive of the Division's principal executive offices to a
location more than fifty (50) miles from the location of such
offices immediately prior to the Change in Control or death of
Mr. Blount, or the Company's requiring Executive to be based
anywhere other than the Company's principal executive offices,
except for required travel on the Company's business to an extent
substantially consistent with Executive's present business travel
obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance,
medical, health and accident or disability plans in which
Executive was participating at the time of the Change in Control
or death of Mr. Blount, the taking of any action by the Company
which would directly or indirectly materially reduce any of such
benefits or deprive Executive of any material fringe benefit
enjoyed by Executive at the time of the Change in Control or
death of Mr. Blount, or the failure by the Company to provide
Executive with the number of paid vacation days to which the
Executive is entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to establish that the Executive was guilty of conduct
set forth in clause (a) or (b) of the definition of Cause herein,
and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: Thomas J. Fruechtel
1560 Hillcrest Court
Clarkston, Washington 99403
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be in writing. Any denial of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Company
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal a decision within sixty (60) days after notification
that Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Montgomery, Alabama, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. In the event the Executive incurs
legal fees and other expenses in seeking to obtain or to enforce
any rights or benefits provided by this Agreement and is
successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and
the fees of the arbitrator. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
THOMAS J. FRUECHTEL
President
Sporting Equipment Division
COMPANY:
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President &
Chief Executive Officer
Witness:___________________
___________________________
Notary Public
EXHIBIT 10 (v)
BLOUNT, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR DONALD B. ZORN
1. Purpose - The purpose of this Supplemental Executive
Retirement Plan (SERP) is to provide Donald B. Zorn with a
retirement benefit payable as a supplement to his vested
benefit under The Blount Retirement Plan.
2. Definitions
a. Blount Plan is The Blount Retirement Plan, as in effect
on January 19, 1994, including any future amendments or
restatements adopted and effective while Donald B. Zorn
is an employee of Blount, Inc.
b. Disability shall mean periods of time during which
(i) Donald B. Zorn is totally and permanent disabled,
and
(ii) Donald B. Zorn is receiving Social Security
disability benefits.
c. Effective Date of this SERP is January 19, 1994.
d. Excess Benefit Plan is the Blount, Inc. and
Subsidiaries Supplemental Retirement Benefit Plan, as
in effect on January 19, 1994, including any future
amendments or restatements adopted and effective while
Donald B. Zorn is an employee of Blount, Inc.
e. Internal Revenue Code shall mean the Internal Revenue
Code of 1986, as amended and in effect at Donald B.
Zorn's Termination Date.
f. Normal Retirement Date is May 24, 2001.
g. SERP is this Supplemental Executive Retirement Plan
sponsored by Blount, Inc. for Donald B. Zorn.
h. Termination Date is the date on which the employment
relationship between Donald B. Zorn and Blount, Inc.
(including any affiliated company as defined in the
Blount Plan) ceases.
3. Years of Benefit Service shall mean the years of benefit
service granted to Donald B. Zorn under this SERP and the
years of "Benefit Service" (as that term is defined in the
Blount Plan) granted to Donald B. Zorn under the Blount
Plan. Years of Benefit Service shall be determined in
accordance with the following schedule:
Years of Benefit Years of Benefit Total Years
Service under the Service under of Benefit
Age Blount Plan the SERP Service
58 1 + 1 = 2
59 2 + 2 = 4
60 3 + 3 = 6
61 4 + 4 = 8
62 5 + 5 = 10
63 6 + 6 = 12
64 7 + 7 = 14
65 8 + 8 = 16
Years of Benefit Service under the SERP shall continue
to accrue during any period of Disability provided that
Years of Benefit Service continue to accrue under the Blount
Plan.
4. Vested Retirement Benefits payable under this SERP shall
equal (a) less (b) where:
(a) is the monthly retirement income that would be
payable to Donald B. Zorn under the provisions of
the Blount Plan, assuming
(i) that in determining the fraction for purposes
of Section 6.1(a)(i) of the Blount Plan, the
numerator shall be his total Years of Benefit
Service determined in accordance with paragraph 3
at his age when his employment terminates and the
denominator of which is 16;
(ii) that for purposes of Section 6.1(a)(ii)(A) and
(B) of the Blount Plan, the Years of Benefit
Service he would accrue if he continued to
accrue Benefit Service to his Normal
Retirement Date would be 25;
(iii) that the Blount Plan does not contain the
$200,000 limitation on compensation imposed by
Section 401(a)(17) of the Internal Revenue
Code or the limitation on benefits imposed by
Section 415 of the Internal Revenue Code;
and
(b) is the sum of (i), (ii), and (iii), where
(i) is the monthly retirement income actually
payable to Donald B. Zorn under the Blount
Plan;
(ii) is the monthly retirement income actually
payable to Donald B. Zorn under the Excess
Benefit Plan; and
(iii) is the monthly retirement income actually paid
to Donald B. Zorn under any pension plan
maintained by a former employer of Donald B.
Zorn.
Vested retirement benefits are payable on or after Donald B.
Zorn's Termination Date provided he has obtained a fully
vested interest under the Blount Plan. No benefits shall be
payable under this SERP until Donald B. Zorn has obtained a
fully vested interest under the Blount Plan. No benefits
are payable during continued employment. The above benefit
is on a life annuity basis. If an optional form of benefit
is desired, the benefit above will be adjusted by the
actuarial factors used by the Blount Plan. In determining
benefits under this paragraph, amounts described in paragraphs
(b)(i), (b)(ii) and (b)(iii) above that are paid in a form other
than a straight life annuity shall be valued as a straight life
annuity using the actuarial factors used by the Blount Plan.
5. Donald B. Zorn shall receive the following benefits as
defined in the Blount Plan, which benefits shall be
calculated on the basis of the benefit formula set forth in
paragraph 4 above:
a. Benefits due to the pre-retirement death of Donald B.
Zorn;
b. Normal and optional forms of payment under the Blount
Plan provided that the form of payment under this
SERP shall be the same as the form of payment elected
by Donald B. Zorn under the Blount Plan;
c. If Donald B. Zorn elects for payment of his vested
retirement benefits to commence prior to his Normal
Retirement Date but after 10 Years of Benefit Service
as determined under paragraph 3, his vested
retirement benefits will be reduced by .3% for each
full month by which the date his benefits begin
precedes his Normal Retirement Date.
6. Non-Alienation of Benefits - To the maximum extent permitted
by law, no benefit under this SERP shall be assignable or
subject in any manner to alienation, sale, transfer, claims
of creditors, pledge, attachment or encumbrances of any
kind.
7. Administration - The Board of Directors of Blount, Inc. or
at its discretion, the Compensation Committee of the Board
of Directors, shall administer, construe, and interpret this
Plan. No member of the Board of Directors or the Committee,
as the case may be, shall be liable for any act done or
determination made in good faith. The construction and
interpretation by the Board of Directors or the Committee of
any provision of this Plan shall be final and conclusive.
The Board of Directors or the Committee may, in its
discretion, delegate its duties to an officer or employee or
committee composed of officers or employees of Blount, Inc.
8. Amendment or Termination - The Board of Directors and Donald
B. Zorn may amend this SERP from time to time in any respect
with the consent of the other party. This Plan may not be
terminated without the consent of Blount, Inc. through its
Board of Directors or its designated Committee or officer
and Donald B. Zorn.
9. Construction of the Plan - This SERP is unfunded. This SERP
shall be so construed that it will be maintained primarily
for the purpose of providing certain retirement and death
benefits for Donald B. Zorn.
This SERP and the rights and obligations of the parties
thereunder, shall be construed in accordance with the laws
of the State of Alabama.
10. Forfeiture of Benefits - At the discretion of the Board of
Directors and after a timely written notice to Donald B.
Zorn (or his spouse or other beneficiary if Donald B. Zorn
has no right or power to change such beneficiary, whether by
reason of his death or otherwise), rights to receive any
benefits under this SERP may be forfeited, suspended,
reduced or terminated by the Board of Directors if it determines
in good faith that good cause for the forfeiture,
suspension, reduction or termination has been shown. For
purposes of this Section 10, good cause shall mean (1)
Donald B. Zorn's engaging in competition with Blount, Inc.
without appropriate prior authorization from the Board of
Directors, (2) any material breach or violation of Donald B.
Zorn's duties as an employee including but not limited to
violation of any ethics or business conduct policies adopted
by the Board of Directors, or (3) any material misconduct,
including misconduct in the performance of duties which is
manifestly injurious to Blount, Inc. Written notice under
this Section 10 shall be timely if sent to Donald B. Zorn's
last known address within 12 months after the Board of Directors
discovers the existence of facts which could give rise to a loss
of benefits; provided, however, that said notice, to be effective,
must be sent to Donald B. Zorn within 18 months following his
termination of employment with Blount, Inc.
11. Denied Claims
a. If any application for payment of a benefit under
the SERP shall be denied, Blount, Inc. shall:
(i) Notify Donald B. Zorn within a reasonable time
of such denial setting forth the specific
reasons therefor; and
(ii) Afford Donald B. Zorn a reasonable opportunity
for a full and fair review of the decision
denying the claim.
b. Notice of such denial shall set forth, in addition
to the specific reasons for the denial, the
following:
(i) Reference to pertinent provisions of the SERP;
(ii) Such additional information as may be relevant
to denial of claim;
(iii) An explanation of the claims review procedure;
(iv) Advice that Donald B. Zorn may request the
opportunity to review pertinent plan
documents and submit a statement of issues
and comments.
c. Within 60 days following advice of denial of his
claim, upon request made by Donald B. Zorn for a
review of such denial, Blount, Inc. shall take
appropriate steps to review its decision in light of
any further information or comments submitted by
Donald B. Zorn. Blount, Inc. shall be empowered to
hold a hearing at which Donald B. Zorn shall be
entitled to present the basis of his claim for
review and at which he may be represented by counsel.
d. Blount, Inc. shall render a decision within 60 days
after Donald B. Zorn's request for review (which may
be extended to 120 days if circumstances so require)
and shall advice Donald B. Zorn in writing of its
decision on such review, specifying its reasons and
identifying appropriate provisions of the Plan.
Signed and agreed to this 14th day of September, 1994.
BLOUNT, INC.
By:
Its:
Donald B. Zorn
EXHIBIT 10 (w)
CONFORMED COPY
$100,000,000
CREDIT AGREEMENT
dated as of
December 22, 1994
among
Blount, Inc.
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 12
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend 13
SECTION 2.02. Method of Borrowing 13
SECTION 2.03. Notes 15
SECTION 2.04. Maturity of Loans 16
SECTION 2.05. Interest Rates 16
SECTION 2.06. Fees 19
SECTION 2.07. Optional Termination or Reduction
of Commitments 20
SECTION 2.08. Scheduled Termination of
Commitments 20
SECTION 2.09. Optional Prepayments 20
SECTION 2.10. General Provisions as to Payments 21
SECTION 2.11. Funding Losses 21
SECTION 2.12. Computation of Interest and Fees 22
SECTION 2.13. Maximum Interest Rate 22
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness 23
SECTION 3.02. Borrowings 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power 25
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention 25
SECTION 4.03. Binding Effect 25
SECTION 4.04. Financial Information 25
SECTION 4.05. Litigation 26
SECTION 4.06. Compliance with ERISA 26
SECTION 4.07. Environmental Matters 27
SECTION 4.08. Taxes 27
SECTION 4.09. Subsidiaries 27
SECTION 4.10. Not an Investment Company 28
SECTION 4.11. Full Disclosure 28
ARTICLE V
COVENANTS
SECTION 5.01. Information 28
SECTION 5.02. Payment of Obligations 30
SECTION 5.03. Maintenance of Property; Insurance 31
SECTION 5.04. Conduct of Business and Maintenance
of Existence 31
SECTION 5.05. Compliance with Laws 32
SECTION 5.06. Inspection of Property, Books and
Records 32
SECTION 5.07. Ratio of Consolidated Debt to
Consolidated Net Worth 32
SECTION 5.08. Acquisitions 33
SECTION 5.09. Negative Pledge 33
SECTION 5.10. Limitation on Subsidiary Debt 34
SECTION 5.11. Fixed Charge Coverage Ratio 34
SECTION 5.12. Consolidations, Mergers and Sales
of Assets 34
SECTION 5.13. Use of Proceeds 34
SECTION 5.14.Transactions with Affiliates 35
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default 35
SECTION 6.02. Notice of Default 38
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization 38
SECTION 7.02. Agent and Affiliates 38
SECTION 7.03. Action by Agent 38
SECTION 7.04. Consultation with Experts 38
SECTION 7.05. Liability of Agent 39
SECTION 7.06. Indemnification 39
SECTION 7.07. Credit Decision 39
SECTION 7.08. Successor Agent 40
SECTION 7.09. Agent's Fee 40
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 40
SECTION 8.02. Illegality 41
SECTION 8.03. Increased Cost and Reduced Return 42
SECTION 8.04. Taxes 43
SECTION 8.05. Base Rate Loans Substituted for
Affected Fixed Rate Loans 45
SECTION 8.06. Substitution of Bank 45
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices 46
SECTION 9.02. No Waivers 46
SECTION 9.03. Expenses; Indemnification 46
SECTION 9.04. Sharing of Set-Offs 47
SECTION 9.05. Amendments and Waivers 48
SECTION 9.06. Successors and Assigns 48
SECTION 9.07. Collateral 50
SECTION 9.08. Governing Law; Submission to
Jurisdiction 50
SECTION 9.09. Counterparts; Integration 50
SECTION 9.10. WAIVER OF JURY TRIAL 50
Exhibit A - Note
Exhibit B - Opinion of Counsel for the Borrower
Exhibit C - Opinion of Special Counsel for the Agent
Exhibit D - Assignment and Assumption Agreement
Exhibit E - Material Subsidiaries of the Borrower<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of December 22, 1994 among
BLOUNT, INC., the BANKS listed on the signature pages hereof
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms,
as used herein, have the following meanings:
"Acquisition" means the acquisition by purchase or
otherwise, other than with respect to the establishment in
connection with specific construction projects of joint
venture entities, of (x) all or substantially all of the
business, property or assets, in one or a series of related
transactions, of, or (y) any stock or other evidence of
beneficial ownership of, in each case, any Person or
division of any Person.
"Adjusted CD Rate" has the meaning set forth in
Section 2.05(b).
"Adjusted London Interbank Offered Rate" has the
meaning set forth in Section 2.05(c).
"Affiliate" means any Person (other than a
Subsidiary) directly or indirectly controlling or controlled
by or under direct or indirect common control with the
Borrower. For the purposes of this definition, "control"
when used with respect to any specified Person means the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
"Administrative Questionnaire" means, with respect
to each Bank, an administrative questionnaire in the form
prepared by the Agent and submitted to the Agent (with a
copy to the Borrower) duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New
York in its capacity as agent for the Banks hereunder, and
its successors in such capacity.
"Allowed Sales of Receivables" means at any date
(the "date of determination") (A) the Dixon Transaction and
(B) all other sales of accounts receivable or interests
therein made by the Borrower or any of its Subsidiaries for
an aggregate net unrecovered purchase price paid by the
purchaser of such accounts receivables or interests not to
exceed $25,000,000 at the date of determination.
"Applicable Lending Office" means, with respect to
any Bank, (i) in the case of its Domestic Loans, its
Domestic Lending Office and (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assessment Rate" has the meaning set forth in
Section 2.05(b).
"Assignee" has the meaning set forth in Section
9.06(c).
"Bank" means each bank listed on the signature
pages hereof, each Assignee which becomes a Bank pursuant to
Section 9.06(c), and their respective successors.
"Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate for such day and
(ii) the sum of 1/2 of 1% plus the Federal Funds Rate for
such day.
"Base Rate Loan" means a Loan to be made by a Bank
as a Base Rate Loan pursuant to the applicable Notice of
Borrowing or Article VIII.
"Benefit Arrangement" means at any time an
employee benefit plan within the meaning of Section 3(3) of
ERISA which is not a Plan or a Multiemployer Plan and which
is maintained or otherwise contributed to by any member of
the ERISA Group.
"Blount Family" means Winton M. Blount, his direct
descendants and his spouse, taken as a single Person.
"Borrower" means Blount, Inc., a Delaware
corporation, and its successors.
"Borrower's 1994 Form 10-K" means the Borrower's
annual report on Form 10-K for the fiscal year ended
February 28, 1994, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
"Borrowing" means a borrowing hereunder consisting
of Loans made to the Borrower at the same time by the Banks
pursuant to Article II. A Borrowing is a "Domestic
Borrowing" if such Loans are Domestic Loans or a
"Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans.
A Domestic Borrowing is a "CD Borrowing" if such Domestic
Loans are CD Loans or a "Base Rate Borrowing" if such
Domestic Loans are Base Rate Loans.
"CD Base Rate" has the meaning set forth in
Section 2.05(b).
"CD Loan" means a Loan to be made by a Bank as a
CD Loan pursuant to the applicable Notice of Borrowing.
"CD Reference Banks" means Bank of America
Illinois, NationsBank of Georgia, N.A. and Morgan Guaranty
Trust Company of New York.
"Commitment" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on the
signature pages hereof, as such amount may be reduced from
time to time pursuant to Sections 2.07 or 9.06(c) or
increased from time to time pursuant to Section 9.06(c); and
"Commitments" means, as of any date, the aggregate of all
such amounts on such date.
"Consolidated Debt" means at any date the Debt of
the Borrower and its Consolidated Subsidiaries, determined
on a consolidated basis as of such date.
"Consolidated Earnings Available for Fixed
Charges" means, for any period, the sum of (i) Consolidated
Ordinary Income for such period plus (ii) to the extent
deducted in determining Consolidated Ordinary Income for
such period (A) the aggregate amount of Consolidated Fixed
Charges, (B) depreciation, amortization and other similar
noncash charges plus (iii) to the extent reflected in
Consolidated Ordinary Income for such period, any increase
(or minus any decrease) during such period in deferred tax
liabilities of the Borrower and its Consolidated
Subsidiaries, taken as a whole.
"Consolidated Fixed Charges" means, with respect
to any period, to the extent deducted in determining
Consolidated Ordinary Income for such period, the sum of
(i) interest expense less interest income and (ii) rental
expense for leases with an initial term of at least one year
less rental income from such leases, in each case incurred
or accrued by the Borrower and its Consolidated
Subsidiaries.
"Consolidated Net Income" means, with respect to
any period, the consolidated net income of the Borrower and
its Consolidated Subsidiaries during such period, before the
cumulative effect of accounting changes during such period.
"Consolidated Net Worth" means at any date the
consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries determined as of such date.
"Consolidated Operating Cash Flow" means, for a
period, the sum of (i) Consolidated Net Income for such
period plus (ii) to the extent deducted in determining
Consolidated Net Income for such period, depreciation,
amortization and other similar noncash charges plus (iii) to
the extent reflected in Consolidated Net Income for such
period, any increase (or minus any decrease) during such
period in deferred tax liabilities of the Borrower and its
Consolidated Subsidiaries, taken as a whole.
"Consolidated Ordinary Income" means, for any
period, the consolidated net income of the Borrower and its
Consolidated Subsidiaries during such period, before
extraordinary gains (or losses) and the cumulative effect of
accounting changes during such period.
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would be
consolidated with those of the Borrower in its consolidated
financial statements if such statements were prepared as of
such date.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all
obligations of such Person as lessee that are capitalized in
accordance with generally accepted accounting principles,
(v) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such
Person, (vi) all Debt of others Guaranteed by such Person
and (vii) all contingent or non-contingent obligations of
such Person to reimburse any bank or other Person in respect
of amounts paid or payable (currently or in the future, on a
contingent or non-contingent basis) under a letter of credit
or similar instrument; provided that Debt shall not be
deemed to include (A) letters of credit or letters of
guaranty or keepwells on comfort letters with respect to
bids, payment or performance in connection with contracts
for construction or related work entered into in the
ordinary course of business of such Person, (B) contingent
liabilities up to a maximum of $20,000,000 relating to the
specialty steel operations previously owned by the Borrower
or (C) letters of credit and notes payable in an aggregate
amount (without duplication) at any time not to exceed
$30,000,000 with respect to insurance so long as all related
liabilities required by generally accepted accounting
principles to have been accrued by the Borrower or a
Consolidated Subsidiary have at the time been accrued as
liabilities. Except as provided in Section 5.10, Debt shall
be deemed to include an amount in respect of accounts
receivable or interests therein sold by such Person equal to
the greater of (1) the amount of any recourse obligation on
account of uncollectibility of such accounts receivable or
interests and (2) an amount equal to the unrecovered
purchase price paid by the purchaser of such accounts
receivable or interests.
"Default" means any condition or event that
constitutes an Event of Default or that with the giving of
notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Derivatives Obligations" of any Person means all
payment obligations of such Person in respect of any rate
swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any
option with respect to any of the foregoing transactions) or
any combination of the foregoing transactions.
"Dixon Transaction" means the sale with full
recourse by the Borrower to a commercial finance company of
outstanding floor plan receivables of Dixon Industries, Inc.
in an aggregate face amount at any time outstanding not to
exceed $25,000,000.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
New York City or, with respect to any Borrowing pursuant to
Section 2.02(a)(z), Chicago, Illinois are authorized by law
to close.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its
Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as
its Domestic Lending Office by notice to the Borrower and
the Agent; provided that any Bank may so designate separate
Domestic Lending Offices for its Base Rate Loans, on the one
hand, and its CD Loans, on the other hand, in which case all
references herein to the Domestic Lending Office of such
Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate
Loans or both.
"Domestic Reserve Percentage" has the meaning set
forth in Section 2.05(b).
"Effective Date" means the date this Agreement
becomes effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees,
injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment
on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes
into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or
the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary
and all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section
414(b) or (c) of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to each
Bank, its office, branch or affiliate located at its address
set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Euro-Dollar
Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Agent.
"Euro-Dollar Loan" means a Loan to be made by a
Bank as a Euro-Dollar Loan pursuant to the applicable Notice
of Borrowing.
"Euro-Dollar Reference Banks" means the principal
London offices of Bank of America Illinois, NationsBank of
Georgia, N.A. and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning
set forth in Section 2.05(c).
"Event of Default" has the meaning set forth in
Section 6.01.
"Existing Credit Agreement" means the Credit
Agreement dated as of December 23, 1992 among the Borrower,
the banks parties thereto and Morgan Guaranty Trust Company
of New York, as agent, as amended to the Effective Date.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upward, if necessary, to the nearest
1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New
York on the Domestic Business Day next succeeding such day,
provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business
Day, and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day on such transactions
as determined by the Agent.
"Fixed Charge Coverage Ratio" means, at any date,
the ratio of (i) Consolidated Earnings Available for Fixed
Charges for the period of four consecutive fiscal quarters
most recently ended on or prior to such date to (ii) the sum
of (x) Consolidated Fixed Charges for such period and (y)
scheduled reductions in the long-term portion of
Consolidated Debt of the Borrower and its Consolidated
Subsidiaries during such period. It is understood that a
refunding of outstanding borrowings under a revolving credit
facility with additional borrowings thereunder is not a
reduction in long-term debt within the meaning of clause (y)
above.
"Fixed Rate Borrowing" means a CD Borrowing or a
Euro-Dollar Borrowing.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or both.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such
Debt of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Hazardous Substances" means any toxic,
radioactive, caustic or otherwise hazardous substance,
including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section
9.03(b).
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date of
such Borrowing and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period that would otherwise end
on a day that is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period that begins on the last
Euro-Dollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day
in the calendar month at the end of such Interest
Period) shall end on the last Euro-Dollar Business Day
of a calendar month; and
(c) any Interest Period that would otherwise end
after the Termination Date shall end on the Termination
Date.
(2) with respect to each CD Borrowing, the period
commencing on the date of such Borrowing and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period that would otherwise end
on a day that is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period that would otherwise end
after the Termination Date shall end on the Termination
Date.
(3) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days
thereafter; provided that:
(a) any Interest Period that would otherwise end
on a day that is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period that would otherwise end
after the Termination Date shall end on the Termination
Date.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, or any successor statute.
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset that it
has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan
and "Loans" means Domestic Loans or Euro-Dollar Loans or
both.
"London Interbank Offered Rate" has the meaning
set forth in Section 2.05(c).
"Material Commitment" means an outstanding
commitment by a financial institution or a syndicate of
financial institutions to provide financial accommodations
to the Borrower and/or one or more of its Subsidiaries,
arising in one or more related or unrelated transactions, in
an amount exceeding in the aggregate $5,000,000.
"Material Debt" means Debt (other than the Notes)
of the Borrower and/or one or more of its Subsidiaries,
arising in one or more related or unrelated transactions, in
an aggregate principal amount exceeding $5,000,000.
"Material Financial Obligations" means a principal
or face amount of Debt and/or (in the case of Section
6.01(e)) payment obligations in respect of, or (in the case
of Section 6.01(f)) marked-to-market value of, Derivatives
Obligations of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated
transactions, exceeding in the aggregate $5,000,000.
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of
$5,000,000.
"Material Subsidiary" means any "significant
subsidiary" as defined under Regulation S-X of the
Securities Act of 1933, as amended, as in effect on the date
hereof.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section
4001(a)(3) of ERISA to which any member of the ERISA Group
is then making or accruing an obligation to make
contributions or has within the preceding five plan years
made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such
five year period but only with respect to the period during
which such Person was a member of the ERISA Group.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing
the obligation of the Borrower to repay the Loans, and
"Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" has the meaning set forth in
Section 2.02.
"Parent" means, with respect to any Bank, any
Person controlling such Bank.
"Participant" has the meaning set forth in Section
9.06(b).
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any
member of the ERISA Group for employees of any member of the
ERISA Group or (ii) where Section 4069(a) of ERISA would be
applicable, has at any time within the preceding five years
been maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA
Group.
"Pricing Schedule" means (i) Pricing Schedule A
attached hereto, unless and until the Borrower shall have
elected, by not less than five Domestic Business Days'
notice to the Banks, that Pricing Schedule B attached hereto
be the Pricing Schedule and (ii) on and after the effective
date of such notice, Pricing Schedule B attached hereto.
Such election, if made, shall be irrevocable.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in
New York City from time to time as its Prime Rate.
"Reference Banks" means the CD Reference Banks or
the Euro-Dollar Reference Banks, as the context may require,
and "Reference Bank" means any one of such Reference Banks.
"Refunding Borrowing" means a Borrowing that,
after application of the proceeds thereof, results in no net
increase in the outstanding principal amount of Loans made
by any Bank.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Required Banks" means at any time Banks having at
least 66 2/3% of the aggregate amount of the Commitments or,
if the Commitments shall have been terminated, holding Notes
evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from
and including the Effective Date to but not including the
Termination Date.
"Subsidiary" means any corporation or other entity
of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are
at the time directly or indirectly owned by the Borrower.
"Termination Date" means December 22, 1999 (or if
such date is not a Euro-Dollar Business Day, the next
preceding Euro-Dollar Business Day).
"Unfunded Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the
present value of all benefit liabilities under such Plan,
determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds (ii) the fair market value of all Plan assets
allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all
determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess
represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of
ERISA.
"Wholly-Owned Consolidated Subsidiary" means any
Consolidated Subsidiary all of the shares of capital stock
or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly
owned by the Borrower.
SECTION 1.02. Accounting Terms and
Determinations. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder
shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred
in by the Borrower's independent public accountants) with
the most recent audited consolidated financial statements of
the Borrower and its Consolidated Subsidiaries delivered to
the Banks; provided that, if the Borrower notifies the Agent
that the Borrower wishes to amend any covenant in Article V
to eliminate a material variation in the operation of such
covenant by virtue of a change in generally accepted
accounting principles (or if the Agent notifies the Borrower
that the Required Banks wish to amend Article V for such
purpose), then the Borrower's compliance with such covenant
shall be determined on the basis of generally accepted
accounting principles in effect immediately before the
relevant change in generally accepted accounting principles
became effective, until either such notice is withdrawn or
such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend.During the
Revolving Credit Period each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to lend to
the Borrower from time to time amounts not to exceed in the
aggregate at any one time outstanding the amount of its
Commitment. Each Borrowing under this Section shall be in
an aggregate principal amount of $5,000,000 or any larger
multiple of $1,000,000 (except that any such Borrowing may
be in the aggregate amount of the unused Commitments) and
shall be made from the several Banks ratably in proportion
to their respective Commitments. Within the foregoing
limits, the Borrower may borrow under this Section, repay,
or to the extent permitted by Section 2.09, prepay Loans and
reborrow at any time during the Revolving Credit Period
under this Section.
SECTION 2.02. Method of Borrowing. (a) The
Borrower shall give the Agent notice (a "Notice of
Borrowing") not later than 10:00 A.M. (New York City time)
at least two Domestic Business Days before each CD
Borrowing, (y) at least three Euro-Dollar Business Days
before each Euro-Dollar Borrowing and (z) on the day of each
Base Rate Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic
Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing
are to be CD Loans, Base Rate Loans or Euro-Dollar
Loans, and
(iv) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest
Period.
(b) Upon receipt of a Notice of Borrowing, the
Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such Borrowing
and, except as provided in Section 8.01, such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
Notwithstanding the foregoing, no more than five Fixed Rate
Borrowings shall be outstanding at any one time, and any
Borrowing that would exceed such limitation shall be made as
a Base Rate Borrowing.
(c) Not later than 1:00 P.M. (New York City time)
on the date of each Borrowing, each Bank shall (except as
provided in subsection (d) of this Section) make available
its share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Agent at its
address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in
Article III has not been satisfied, the Agent will make the
funds so received from the Banks available to the Borrower
at the Agent's aforesaid address.
(d) If any Bank makes a new Loan hereunder on a
day on which the Borrower is to repay all or any part of an
outstanding Loan from such Bank, such Bank shall apply the
proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made
available by such Bank to the Agent as provided in
subsection (c) of this Section, or remitted by the Borrower
to the Agent as provided in Section 2.10, as the case may
be.
(e) Unless the Agent shall have received notice
from a Bank prior to the date of any Borrowing that such
Bank will not make available to the Agent such Bank's share
of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such
Borrowing in accordance with subsections (c) and (d) of this
Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank
shall not have so made such share available to the Agent,
such Bank and the Borrower severally agree to repay to the
Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such
amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.05 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the
Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for
purposes of this Agreement.
SECTION 2.03. Notes. (a) The Loans of each Bank
shall be evidenced by a single Note payable to the order of
such Bank for the account of its Applicable Lending Office
in an amount equal to the aggregate unpaid principal amount
of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and
the Agent, request that its Loans of a particular type be
evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each
reference in this Agreement to the "Note" of such Bank shall
be deemed to refer to and include any or all of such Notes,
as the context may require.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.01(b), the Agent shall forward such Note to such
Bank. Each Bank shall record the date, amount, type and
maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with
any transfer or enforcement of its Note, endorse on the
schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such
Loan then outstanding; provided that the failure of any Bank
to make any such recordation or endorsement shall not affect
the obligations of the Borrower hereunder or under the
Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and
when required.
SECTION 2.04. Maturity of Loans. Each Loan
included in any Borrowing shall mature, and the principal
amount thereof shall be due and payable, on the last day of
the Interest Period applicable to such Borrowing.
SECTION 2.05. Interest Rates. (a) Each Base
Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made
until it becomes due, at a rate per annum equal to the Base
Rate forsuch day. Such interest shall be payable for each
Interest Period on the last day thereof. Any overdue
principal of or interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a
rate per annum equal to the sum of 2% plus the rate
otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for each day during
the Interest Period applicable thereto, at a rate per annum
equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate for such Interest Period; provided that if
any CD Loan shall, as a result of clause (2)(b) of the
definition of Interest Period, have an Interest Period of
less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate
Loans during such period. Such interest shall be payable
for each Interest Period on the last day thereof and, if
such Interest Period is longer than 90 days, at intervals of
90 days after the first day thereof. Any overdue principal
of or interest on any CD Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal
to the sum of 2% plus the higher of (i) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to
such Loan and (ii) the rate applicable to Base Rate Loans
for such day.
"CD Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest
Period is the rate of interest determined by the Agent to be
the average (rounded upward, if necessary, to the next
higher 1/100 of 1%) of the prevailing rates per annum bid at
10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two
or more New York certificate of deposit dealers of
recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an
amount comparable to the principal amount of the CD Loan of
such CD Reference Bank to which such Interest Period applies
and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves)
for a member bank of the Federal Reserve System in New York
City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York
City having a maturity comparable to the related Interest
Period and in an amount of $100,000 or more. The Adjusted
CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as adequately
capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within
the meaning of 12 C.F.R. X 327.3(e) (or any successor
provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change
in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for each day
during the Interest Period applicable thereto, at a rate per
annum equal to the sum of the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate
applicable to such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum
determined in accordance with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate"
applicable to any Interest Period means a rate per annum
equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i)
the applicable London Interbank Offered Rate by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to
any Interest Period means the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time)
two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar
Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day
that percentage (expressed as a decimal) that is in effect
on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which
the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which
includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank
Offered Rate shall be adjusted automatically on and as of
the effective date of any change in the Euro-Dollar Reserve
Percentage.
(d) Any overdue principal of or interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for
each day from and including the date payment thereof was due
to but excluding the date of actual payment, at a rate per
annum equal to the sum of 2% plus the higher of (i) the sum
of the Euro-Dollar Margin for such day plus the Adjusted
London Interbank Offered Rate applicable to such Loan and
(ii) the Euro-Dollar Margin for such day plus the quotient
obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which one day (or, if such amount due
remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than three
months as the Agent may select) deposits in dollars in an
amount approximately equal to such overdue payment due to
each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market
for the applicable period determined as provided above by
(y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if
the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 2%
plus the rate applicable to Base Rate Loans for such day).
(e) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrower and the Banks of each rate of
interest so determined, and its determination thereof shall
be conclusive in the absence of manifest error.
(f) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Agent as contemplated
hereby. If any Reference Bank does not furnish a timely
quotation, the Agent shall determine the relevant interest
rate on the basis of the quotation or quotations furnished
by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of
Section 8.01 shall apply.
SECTION 2.06. Fees. (a) Facility Fee. The
Borrower shall pay to the Agent for the account of the Banks
ratably a facility fee at the Facility Fee Rate (determined
daily in accordance with the Pricing Schedule). Such
facility fee shall accrue (i) from and including the
Effective Date to but excluding the Termination Date (or
earlier date of termination of the Commitments in their
entirety), on the daily aggregate amount of the Commitments
(whether used or unused) and (ii) from and including the
Termination Date or such earlier date of termination to but
excluding the date the Loans shall be repaid in their
entirety, on the daily aggregate outstanding principal
amount of the Loans.
(b) Participation Fees. The Borrower shall pay
to the Agent on the Effective Date for the account of the
Banks in proportion to their respective Commitments,
participation fees in an amount equal to 1/20 of 1% of the
aggregate amount of the Commitments.
(c) Payments. Accrued fees under subsection (a)
shall be payable quarterly in arrears on each March 1, June
1, September 1 and December 1 during the Revolving Credit
Period and on the Termination Date.
SECTION 2.07. Optional Termination or Reduction
of Commitments. During the Revolving Credit Period, the
Borrower may, upon at least three Domestic Business Days'
notice to the Agent, (i) terminate the Commitments at any
time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of
$5,000,000 or any larger multiple of $1,000,000 thereof, the
aggregate amount of the Commitments in excess of the
aggregate outstanding principal amount of the Loans. If the
Commitments are terminated in their entirety, all accrued
facility fees shall be payable on the effective date of such
termination.
SECTION 2.08. Scheduled Termination of
Commitments. The Commitments shall terminate on the
Termination Date, and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on
such date.
SECTION 2.09. Optional Prepayments. (a) The
Borrower may, upon at least one Domestic Business Day's
notice to the Agent delivered prior to 10:00 A.M. (New York
City time) on the Domestic Business Day next preceding such
prepayment, prepay any Base Rate Borrowing in whole at any
time, or from time to time in part in amounts aggregating
$5,000,000 or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the
Loans of the several Banks included in such Borrowing.
(b) Except as provided in Section 8.02, the
Borrower may not prepay all or any portion of the principal
amount of any Fixed Rate Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment
pursuant to this Section, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's ratable
share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.10. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of,
and interest on, the Loans and of fees hereunder, not later
than 11:00 A.M. (New York City time) on the date when due,
in Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section
9.01. The Agent will promptly distribute to each Bank its
ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees
shall be due on a day that is not a Domestic Business Day,
the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be
due on a day that is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case
the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice
from the Borrower prior to the date on which any payment is
due to the Banks hereunder that the Borrower will not make
such payment in full, the Agent may assume that the Borrower
has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to
the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.11. Funding Losses. If the Borrower
makes any payment of principal with respect to any Fixed
Rate Loan (pursuant to Article VI or VIII or otherwise) on
any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed
pursuant to Section 2.05(d), or if the Borrower fails to
borrow any Fixed Rate Loans after notice has been given to
any Bank in accordance with Section 2.02(b), the Borrower
shall reimburse each Bank within 15 days after demand for
any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after
any such payment or failure to borrow, provided that such
Bank shall have delivered to the Borrower a certificate as
to the amount of such loss or expense, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.12. Computation of Interest and Fees.
Interest based on the Prime Rate hereunder shall be computed
on the basis of a year of 365 days (or 366 days in a leap
year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All
other interest and facility fees shall be computed on the
basis of a year of 360 days and paid for the actual number
of days elapsed (including the first day but excluding the
last day).
SECTION 2.13. Maximum Interest Rate. (a)
Nothing contained in this Agreement or the Notes shall
require the Borrower to pay interest at a rate exceeding the
maximum rate permitted by applicable law.
(b) If the amount of interest payable for the
account of any Bank on any interest payment date in respect
of the immediately preceding interest computation period,
computed pursuant to Section 2.05, would exceed the maximum
amount permitted by applicable law to be charged by such
Bank, the amount of interest payable for its account on such
interest payment date shall be automatically reduced to such
maximum permissible amount.
(c) If the amount of interest payable for the
account of any Bank in respect of any interest computation
period is reduced pursuant to clause (b) of this Section and
the amount of interest payable for its account in respect of
any subsequent interest computation period, computed
pursuant to Section 2.05, would be less than the maximum
amount permitted by applicable law to be charged by such
Bank, then the amount of interest payable for its account in
respect of such subsequent interest computation period shall
be automatically increased to such maximum permissible
amount; provided that at no time shall the aggregate amount
by which interest paid for the account of any Bank has been
increased pursuant to this clause (c) exceed the aggregate
amount by which interest paid for its account has
theretofore been reduced pursuant to clause (b) of this
Section.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement
shall become effective on the date that each of the
following conditions shall have been satisfied (or waived in
accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof
signed by each of the parties hereto (or, in the case
of any party as to which an executed counterpart shall
not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other
written confirmation from such party of execution of a
counterpart hereof by such party);
(b) receipt by the Agent for the account of each
Bank of a duly executed Note dated on or before the
Effective Date complying with the provisions of Section
2.03;
(c) receipt by the Agent of an opinion of the
Vice President, Legal Services of the Borrower,
substantially in the form of Exhibit B hereto and
covering such additional matters relating to the
transactions contemplated hereby as the Required Banks
may reasonably request;
(d) receipt by the Agent of an opinion of Davis
Polk & Wardwell, special counsel for the Agent,
substantially in the form of Exhibit C hereto and
covering such additional matters relating to the
transactions contemplated hereby as the Required Banks
may reasonably request;
(e) receipt by the Agent of evidence satisfactory
to it of the payment of all principal of and interest
on any loans outstanding under, and of all other
amounts payable under, the Existing Credit Agreement;
(f) receipt by the Agent for the account of each
Bank of payment of a participation fee in an amount
equal to 1/20 of 1% of the Commitment of such Bank; and
(g) receipt by the Agent of all documents it may
reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity
of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory
to the Agent;
provided that this Agreement shall not become effective or
be binding on any party hereto unless all of the foregoing
conditions are satisfied not later than December 31, 1994.
The Agent shall promptly notify the Borrower and the Banks
of the Effective Date, and such notice shall be conclusive
and binding upon all parties hereto. The Banks that are
parties to the Existing Credit Agreement, comprising the
"Required Banks" as defined therein, and the Borrower agree
to waive notice of the termination of the commitments under
such agreement, and that the commitments thereunder shall
terminate in their entirety simultaneously with and subject
to the effectiveness of this Agreement and that the Borrower
shall be obligated to pay on the Effective Date accrued
commitment fees under the Existing Credit Agreement to but
excluding the Effective Date.
SECTION 3.02. Borrowings. The obligation of any
Bank to make a Loan on the occasion of any Borrowing is
subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing
as required by Section 2.02;
(b) the fact that, immediately after such
Borrowing, the aggregate outstanding principal amount
of the Loans will not exceed the aggregate amount of
the Commitments;
(c) the fact that, immediately before and after
such Borrowing, no Default shall have occurred and be
continuing; and
(d) the fact that the representations and
warranties of the Borrower contained in this Agreement
(except, in the case of a Refunding Borrowing, the
representations and warranties set forth in Sections
4.04(c) and 4.05 as to any matter which has theretofore
been disclosed in writing by the Borrower to the Banks)
shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of
such Borrowing as to the facts specified in clauses (b), (c)
and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware,
and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. The execution, delivery
and performance by the Borrower of this Agreement and the
Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene,
or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment,
injunction, order, decree or other instrument binding upon
the Borrower or any of its Material Subsidiaries or result
in the creation or imposition of any Lien on any asset of
the Borrower or any of its Material Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower
and each Note, when executed and delivered in accordance
with this Agreement, will constitute a valid and binding
obligation of the Borrower, in each case enforceable in
accordance with its terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of February
28, 1994 and the related consolidated statements of
operations, retained earnings, cash flows and changes in
capital stock accounts for the fiscal year then ended,
reported on by Coopers & Lybrand and set forth in the
Borrower's 1994 Form 10-K, a copy of which has been
delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles,
the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
fiscal year.
(b) The unaudited consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of August
31, 1994 and the related unaudited consolidated statements
of operations and cash flows for the six months then ended,
set forth in the Borrower's quarterly report for the fiscal
quarter ended August 31, 1994 as filed with the Securities
and Exchange Commission on Form 10-Q, a copy of which has
been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles
applied on a basis consistent with the financial statements
referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
six month period (subject to normal year-end adjustments).
(c) Since August 31, 1994 there has been no
material adverse change in the business, financial position,
results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. Except as disclosed in
the footnotes to the financial statements delivered to each
of the Banks as described in Section 4.04 or as subsequently
delivered pursuant to Section 5.01, there is no action, suit
or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or
any of its Subsidiaries before any court or arbitrator or
any governmental body, agency or official in which there is
a reasonable possibility of an adverse decision that could
materially adversely affect the business, consolidated
financial position or consolidated results of operations of
the Borrower and its Consolidated Subsidiaries, considered
as a whole, or which in any manner draws into question the
validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member
of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue
Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions
of ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver
of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement,
or made any amendment to any Plan or Benefit Arrangement,
that has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC
for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the
ordinary course of its business, the Borrower conducts an
ongoing review of the effect of Environmental Laws on the
business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including,
without limitation, any capital or operating expenditures
required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures
required to achieve or maintain compliance with
environmental protection standards imposed by law or as a
condition of any license, permit or contract, any related
constraints on operating activities, including any periodic
or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations conducted
thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any
actual or potential liabilities to third parties, including
employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the
costs of compliance with Environmental Laws, are unlikely to
have a material adverse effect on the creditworthiness of
the Borrower.
SECTION 4.08. Taxes. United States Federal
income tax returns of the Borrower and its Subsidiaries have
been examined and closed through the fiscal year ended
February 28, 1990. The Borrower and its Subsidiaries have
filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books
of the Borrower and its Subsidiaries in respect of taxes or
other governmental charges are, in the opinion of the
Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the
Borrower's corporate Material Subsidiaries is a corporation
duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and has
all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on
its business as now conducted.
SECTION 4.10. Not an Investment Company. The
Borrower is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
SECTION 4.11. Full Disclosure. All information
heretofore furnished by the Borrower to the Agent or any
Bank for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent
or any Bank will be, true and accurate in all material
respects on the date as of which such information is stated
or certified. The Borrower has disclosed to the Banks in
writing any and all facts that materially and adversely
affect or may affect (to the extent the Borrower can now
reasonably foresee), the business, operations or financial
condition of the Borrower and its Consolidated Subsidiaries,
taken as a whole, or the ability of the Borrower to perform
its obligations under this Agreement.
ARTICLE V
COVENANTS
The Borrower agrees that, as long as any Bank has
any Commitment hereunder or any amount payable under any
Note remains unpaid:
SECTION 5.01. Information. The Borrower will
deliver to each of the Banks:
(a) as soon as available and in any event within
105 days after the end of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of
income, retained earnings, cash flows and changes in
capital stock accounts for such fiscal year, setting
forth in each case in comparative form the figures for
the previous fiscal year, all reported on in a manner
acceptable to the Securities and Exchange Commission by
Coopers & Lybrand or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within
60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter
and the related consolidated statement of income for
such quarter and the related consolidated statements of
income and cash flows for the portion of the Borrower's
fiscal year ended at the end of such quarter, setting
forth in comparative form in the case of such
statements of income and cash flows the figures for the
corresponding quarter and the corresponding portion of
the Borrower's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness
of presentation, generally accepted accounting
principles and, subject to Section 1.02, consistency by
the chief financial officer of the Borrower;
(c) simultaneously with the delivery of each set
of financial statements referred to in clauses (a) and
(b) above, a certificate of the chief financial officer
of the Borrower (i) setting forth in reasonable detail
the calculations required to establish (x) whether the
Borrower was in compliance with the requirements of
Sections 5.07 to 5.11, inclusive, on the date of such
financial statements and (y) for so long as Pricing
Schedule A is the Pricing Schedule, the Applicable Cash
Flow Ratio and Applicable Leverage Ratio (as such terms
are defined in Pricing Schedule A) derived from such
financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if
any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(d) simultaneously with the delivery of each set
of financial statements referred to in clause (a)
above, a statement of the firm of independent public
accountants which reported on such statements whether
anything has come to their attention to cause them to
believe that any Default existed on the date of such
statements;
(e) within five days after any officer of the
Borrower obtains knowledge of any Default, if such
Default is then continuing, a certificate of the chief
financial officer or the chief accounting officer of
the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of
all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or
its equivalent) and reports on Forms 10-K, 10-Q and 8-K
(or their equivalents) which the Borrower shall have
filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV
of ERISA, or knows that the plan administrator of any
Plan has given or is required to give notice of any
such reportable event, a copy of the notice of such
reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice
that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA)
in respect of, or appoint a trustee to administer any
Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application;
(v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives
notice of withdrawal from any Plan pursuant to Section
4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or
other security, a certificate of the chief financial
officer or the chief accounting officer of the Borrower
setting forth details as to such occurrence and action,
if any, which the Borrower or applicable member of the
ERISA Group is required or proposes to take; and
(i) from time to time such additional information
regarding the financial position or business of the
Borrower and its Subsidiaries as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The
Borrower will pay and discharge, and will cause each
Material Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and
liabilities, including, without limitation, tax liabilities,
except where the same may be contested in good faith by
appropriate proceedings, and will maintain, in accordance
with generally accepted accounting principles, appropriate
reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance.
(a) The Borrower will keep, and will cause each Material
Subsidiary to keep, all property useful and necessary in its
business in good working order and condition, ordinary wear
and tear excepted.
(b) The Borrower will maintain and will cause
each of its Subsidiaries to maintain (either in the name of
the Borrower or in such Subsidiary's own name) with
financially sound and responsible insurance companies,
insurance on all their respective properties in at least
such amounts and against at least such risks (and with such
risk retention) as are usually insured against by companies
of established repute engaged in the same or a similar
business; and will furnish to the Banks, upon request from
the Agent, information presented in reasonable detail as to
the insurance so carried. The Borrower will deliver to the
Banks (i) on or before the date of the first Borrowing
hereunder, a certificate dated such date showing the amount
of coverage as of such date, (ii) within five days of
receipt of notice from any insurer a copy of any notice of
cancellation or material change in coverage from that
existing on the date of this Agreement and (iii) forthwith,
notice of any cancellation or nonrenewal of coverage by the
Borrower.
SECTION 5.04. Conduct of Business and Maintenance
of Existence. The Borrower will continue, and will cause
each Material Subsidiary to continue, to engage in business
of the same general type as now conducted by the Borrower
and its Material Subsidiaries, and will preserve, renew and
keep in full force and effect, and will cause each Material
Subsidiary to preserve, renew and keep in full force and
effect their respective corporate existence and their
respective rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that
nothing in this Section 5.04 shall prohibit (i) the merger
of a Material Subsidiary into the Borrower or the merger or
consolidation of a Material Subsidiary with or into another
Person if the corporation surviving such consolidation or
merger is a Material Subsidiary and if, in each case, after
giving effect thereto, no Default shall have occurred and be
continuing or (ii) the termination of the corporate
existence of any Material Subsidiary or the disposition,
sale or other transfer of the assets or capital stock of any
Material Subsidiary if the Borrower in good faith determines
that such transaction is in the best interest of the
Borrower and is not materially disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. The
Borrower will comply, and cause each Material Subsidiary to
comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate
proceedings.
SECTION 5.06. Inspection of Property, Books and
Records. The Borrower will keep, and will cause each
Subsidiary to keep, proper books of record and account in
which entries which are full, true and correct in all
material respects shall be made of all dealings and
transactions in relation to its business and activities; and
will permit, and will cause each Subsidiary to permit,
representatives of any Bank at such Bank's expense to visit
and inspect any of their respective properties, to examine
and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times
and as often as may reasonably be desired.
SECTION 5.07. Ratio of Consolidated Debt to
Consolidated Net Worth. At no time during any period set
forth below will the ratio of Consolidated Debt to
Consolidated Net Worth exceed the ratio set forth below
opposite such period:
Period Ratio
Effective Date - 2/28/96 1.30:1
2/29/96 - 2/27/97 1.15:1
2/28/97 - 2/27/98 1.00:1
2/28/98 - 2/27/99 0.80:1
2/28/99 - Termination Date 0.75:1
For purposes of this Section any preferred stock of a
Consolidated Subsidiary held by a Person other than the
Borrower or a Wholly-Owned Consolidated Subsidiary shall be
included, at the higher of its voluntary or involuntary
liquidation value, in "Consolidated Debt".
SECTION 5.08. Acquisitions. Neither the Borrower
nor any Subsidiary will make any Acquisition if the
aggregate consideration paid for Acquisitions (exclusive of
(i) Debt assumed by the Borrower or any Subsidiary, and
existing Debt of any Person which becomes a Subsidiary, in
connection with an Acquisition which in either case was not
created in contemplation thereof and (ii) consideration in
the form of common stock of the Borrower) during the term of
this Agreement would exceed $150,000,000.
SECTION 5.09. Negative Pledge. Neither the
Borrower nor any Subsidiary will create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired
by it, except:
(a) Liens existing on the date of this Agreement
securing Debt outstanding on the date of this Agreement
in an aggregate principal amount not exceeding
$3,000,000;
(b) any Lien existing on any asset of any
corporation at the time such corporation becomes a
Subsidiary and not created in contemplation of such
event;
(c) any Lien on any asset securing Debt incurred
or assumed for the purpose of financing all or any part
of the cost of acquiring such asset, provided that such
Lien attaches to such asset concurrently with or within
90 days after the acquisition thereof;
(d) any Lien on any asset of any corporation
existing at the time such corporation is merged or
consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary and
not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by
any Lien permitted by any of the foregoing clauses of
this Section, provided that such Debt is not increased
and is not secured by any additional assets;
(g) any Lien arising out of Allowed Sales of
Receivables;
(h) Liens incidental to the conduct of its
business or the ownership of its assets which (i) do
not secure Debt or Derivatives Obligations, (ii) do not
secure any obligation in an amount exceeding
$20,000,000 and (iii) do not in the aggregate
materially detract from the value of its assets or
materially impair the use thereof in the operation of
its business; and
(i) Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate
amount of cash and cash equivalents subject to such
Liens may at no time exceed $5,000,000.
SECTION 5.10. Limitation on Subsidiary Debt. The
Borrower will not permit any Subsidiary to become or to be
liable in respect of any Debt, other than (i) Debt of a
corporation existing at the time such corporation becomes a
Subsidiary and not created in contemplation of such event
and (ii) other Debt of Subsidiaries in an aggregate
principal amount at any time outstanding not exceeding
$35,000,000; provided that for purposes of this Section
5.10, Allowed Sales of Receivables shall not be deemed to
give rise to Debt.
SECTION 5.11. Fixed Charge Coverage Ratio. As of
the last day of each fiscal quarter of the Borrower ending
during each period set forth below, the Fixed Charge
Coverage Ratio will not be less than the ratio set forth
below opposite such period.
Period Ratio
Effective Date - 2/28/96 2.50
2/29/96 - 2/27/97 2.75
2/28/97 - 2/27/98 3.25
2/28/98 - Termination Date 3.50
SECTION 5.12. Consolidations, Mergers and Sales
of Assets. Except as provided in Section 5.04 above, the
Borrower will not (i) consolidate or merge with or into any
other Person or (ii) sell, lease or otherwise transfer,
directly or indirectly, all or any substantial part of the
assets of the Borrower and its Subsidiaries, taken as a
whole, to any other Person; provided that this clause (ii)
shall not apply to Allowed Sales of Receivables.
SECTION 5.13. Use of Proceeds. The proceeds of
the Loans made under this Agreement will be used by the
Borrower for its general corporate purposes. None of such
proceeds will be used in violation of Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System.
SECTION 5.14.Transactions with Affiliates. The
Borrower will not, and will not permit any Subsidiary to,
directly or indirectly, pay any funds to or for the account
of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease,
sell, transfer or otherwise dispose of any assets, tangible
or intangible, to, or participate in, or effect, any
transaction with, any Affiliate except on an arms-length
basis on terms no less favorable to the Borrower or such
Subsidiary than could have been obtained from a third party
who was not an Affiliate; provided that this Section will
not apply to the compensation of officers and directors in
the ordinary course of business.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more
of the following events ("Events of Default") shall have
occurred and be continuing:
(a) the Borrower shall fail to pay when due any
principal of any Loan, or shall fail to pay within
three Domestic Business Days following the due date
thereof any interest on any Loan or any fees or any
other amount payable hereunder;
(b) the Borrower shall fail to observe or perform
any covenant contained in Sections 5.07 to 5.14,
inclusive;
(c) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement
(other than those covered by clause (a) or (b) above)
for 15 Domestic Business Days after written notice
thereof has been given to the Borrower by the Agent at
the request of any Bank;
(d) any representation, warranty, certification
or statement made by the Borrower in this Agreement or
in any certificate, financial statement or other
document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect
when made (or deemed made);
(e) the Borrower or any of its Subsidiaries shall
fail to make any payment in respect of any Material
Financial Obligation when due or, if later, within any
applicable grace period;
(f) (i) any event or condition shall occur which
results in the acceleration of the maturity, or
requires the early redemption or prepayment, of any
Material Financial Obligation or any event or condition
shall occur which enables (or, which the giving of
notice or lapse of time or both, would enable) the
holder of any Material Financial Obligation or any
Person acting on such holder's behalf to accelerate the
maturity, or require the early redemption or
prepayment, of such Material Financial Obligation or
(ii) any event or condition constituting a default or
event of default under the agreement, instrument or
other document relating thereto shall occur which
results in the termination of any Material Commitment
or any such event or condition shall occur and be
continuing which enables (or with the giving of notice
or lapse of time or both, would enable) the provider of
any Material Commitment or any Person acting on such
provider's behalf to require the early termination of
such Material Commitment;
(g) the Borrower or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its property,
or shall consent to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall
be commenced against the Borrower or any Material
Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its
property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of
60 days; or an order for relief shall be entered
against the Borrower or any Material Subsidiary under
the federal bankruptcy laws as now or hereafter in
effect;
(I) any member of the ERISA Group shall fail to
pay when due an amount or amounts aggregating in excess
of $5,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV
of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of
ERISA to terminate, to impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or
to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal
from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more
members of the ERISA Group to incur a current payment
obligation in excess of $5,000,000;
(j) a judgment or order against the Borrower for
the payment of money in excess of $5,000,000 or against
any Subsidiary for the payment of money in excess of
$2,500,000 shall be rendered and such judgment or order
shall continue unsatisfied and unstayed for a period of
30 days; or
(k) the Blount Family shall at any time cease to
be the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of capital stock
of the Borrower having the right to elect at least a
majority of the directors of the Borrower;
then, and in every such event, the Agent shall (i) if
requested by Banks having more than 50% in aggregate amount
of the Commitments, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in
aggregate principal amount of the Loans, by notice to the
Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
waived by the Borrower; provided that in the case of any of
the Events of Default specified in clause (g) or (h) above
with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become
immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall
give notice to the Borrower under Section 6.01(c) promptly
upon being requested to do so by any Bank and shall
thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization.
Each Bank irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement and the Notes as are delegated
to the Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan
Guaranty Trust Company of New York shall have the same
rights and powers under this Agreement as any other Bank and
may exercise or refrain from exercising the same as though
it were not the Agent, and Morgan Guaranty Trust Company of
New York and its affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with
the Borrower or any Subsidiary or affiliate of the Borrower
as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations
of the Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action with
respect to any Default, except as expressly provided in
Article VI.
SECTION 7.04. Consultation with Experts. The
Agent may consult with legal counsel (who may be counsel for
the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Agent. Neither the
Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for
any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers,
agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance
or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified
in Article III, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness
or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall,
ratably in accordance with its Commitment, indemnify the
Agent, its affiliates and their respective directors,
officers, agents and employees (to the extent not reimbursed
by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from such indemnitees'
gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.07. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action
under this Agreement.
SECTION 7.08. Successor Agent. The Agent may
resign at any time by giving notice thereof to the Banks and
the Borrower. Upon any such resignation, the Required Banks
shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30
days after the retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the Banks, appoint
a successor Agent, which shall be a commercial bank
organized or licensed under the laws of the United States of
America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties
of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After
any retiring Agent's resignation hereunder as Agent, the
provisions of this Article shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
Agent.
SECTION 7.09. Agent's Fee. The Borrower shall
pay to the Agent for its own account fees in the amounts and
at the times previously agreed upon between the Borrower and
the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of
any Interest Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts)
are not being offered to the Reference Banks in the
relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate
amount of the Commitments advise the Agent that the
Adjusted CD Rate or the Adjusted London Interbank
Offered Rate, as the case may be, as determined by the
Agent will not adequately and fairly reflect the cost
to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies
the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be,
shall be suspended. Unless the Borrower notifies the Agent
at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such
date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, on or after the
date of this Agreement, the adoption of any applicable law,
rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by
any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of
law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or
its Euro-Dollar Lending Office) to make, maintain or fund
its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Agent pursuant
to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such
Bank. If such Bank shall determine that it may not lawfully
continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the
then outstanding principal amount of each such Euro-Dollar
Loan, together with accrued interest thereon. Concurrently
with prepaying each such Euro-Dollar Loan, the Borrower
shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans
of the other Banks), and such Bank shall make such a Base
Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return.
(a) If on or after the date hereof the adoption of any
applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance
by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of
law) of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed
by the Board of Governors of the Federal Reserve System, but
excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar
Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its
Applicable Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United States
market for certificates of deposit or the London interbank
market any other condition affecting its Fixed Rate Loans,
its Note or its obligation to make Fixed Rate Loans and the
result of any of the foregoing is to increase the cost to
such Bank (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or to reduce the amount of
any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its
Note with respect thereto, by an amount deemed by such Bank
to be material, then, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after
the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any
such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank
or comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within 15
days after demand by such Bank (with a copy to the Agent),
the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its Parent) for
such reduction.
Each Bank will promptly notify the Borrower
and the Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this
Section and setting forth the additional amount or amounts
to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution
methods.
SECTION 8.04. Taxes. (a) For purposes of this
Section 8.04, the following terms have the following
meanings:
"Taxes" means any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings
with respect to any payment by the Borrower pursuant to this
Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and
the Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by a jurisdiction under the
laws of which such Bank or the Agent (as the case may be) is
organized or in which its principal executive office is
located or, in the case of each Bank, in which its
Applicable Lending Office is located and (ii) in the case of
each Bank, any United States withholding tax imposed on such
payments but only to the extent that such Bank is subject to
United States withholding tax at the time such Bank first
becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or
documentary taxes and any other excise or property taxes, or
similar charges or levies, which arise from any payment made
pursuant to this Agreement or under any Note or from the
execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
(b)Any and all payments by the Borrower to or
for the account of any Bank or the Agent hereunder or under
any Note shall be made without deduction for any Taxes or
Other Taxes; provided that, if the Borrower shall be
required by law to deduct any Taxes or Other Taxes from any
such payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions
(including deductions applicable to additional sums payable
under this Section 8.04) such Bank or the Agent (as the case
may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law and
(iv) the Borrower shall furnish to the Agent, at its address
referred to in Section 9.01, the original or a certified
copy of a receipt evidencing payment thereof.
(c)The Borrower agrees to indemnify each Bank
and the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable
under this Section 8.04) paid by such Bank or the Agent (as
the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be paid within 15 days
after such Bank or the Agent (as the case may be) makes
demand therefor.
(d)Each Bank organized under the laws of a
jurisdiction outside the United States, on or prior to the
date of its execution and delivery of this Agreement in the
case of each Bank listed on the signature pages hereof and
on or prior to the date on which it becomes a Bank in the
case of each other Bank, and from time to time thereafter if
requested in writing by the Borrower (but only so long as
such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Bank is
entitled to benefits under an income tax treaty to which the
United States is a party which exempts the Bank from United
States withholding tax or reduces the rate of withholding
tax on payments of interest for the account of such Bank or
certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a
trade or business in the United States.
(e)For any period with respect to which a Bank
has failed to provide the Borrower with the appropriate form
pursuant to Section 8.04(d) (unless such failure is due to a
change in treaty, law or regulation occurring subsequent to
the date on which such form originally was required to be
provided), such Bank shall not be entitled to
indemnification under Section 8.04(b) or (c) with respect to
Taxes imposed by the United States; providedthat if a Bank,
which is otherwise exempt from or subject to a reduced rate
of withholding tax, becomes subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower
shall take such steps as such Bank shall reasonably request
to assist such Bank to recover such Taxes.
(f)If the Borrower is required to pay additional
amounts to or for the account of any Bank pursuant to this
Section 8.04, then such Bank will change the jurisdiction of
its Applicable Lending Office if, in the judgment of such
Bank, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is
not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for
Affected Fixed Rate Loans. If (i) the obligation of any
Bank to make Euro-Dollar Loans has been suspended pursuant
to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03 or 8.04 with respect to its CD Loans or
Euro Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through
the Agent, have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank
notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by
such Bank as CD Loans or Euro-Dollar Loans, as the case
may be, shall be made instead as Base Rate Loans (on
which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of
the other Banks), and
(b) after each of its CD Loans or Euro-Dollar
Loans, as the case may be, has been repaid, all
payments of principal which would otherwise be applied
to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans instead.
SECTION 8.06. Substitution of Bank. If (i) the
obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03 or 8.04, the
Borrower shall have the right, with the assistance of the
Agent, to seek a mutually satisfactory substitute bank or
banks (which may be one or more of the Banks) to purchase
the Note and assume the Commitments of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and
other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission
or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address or
telex number or facsimile number set forth on the signature
pages hereof, (y) in the case of any Bank, at its address or
telex number or facsimile number set forth in its
Administrative Questionnaire or (z) in the case of any
party, such other address or telex number or facsimile
number as such party may hereafter specify for the purpose
by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if
given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is
received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by
any other means, when delivered at the address specified in
this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until
received.
SECTION 9.02. No Waivers. No failure or delay by
the Agent or any Bank in exercising any right, power or
privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses
of the Agent, including fees and disbursements of special
counsel for the Agent, in connection with the preparation
and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged
Default hereunder and (ii) if an Event of Default occurs,
all out-of-pocket expenses incurred by the Agent and each
Bank, including fees and disbursements of counsel, in
connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
(b) The Borrower agrees to indemnify the Agent
and each Bank, their respective affiliates and the
respective directors, officers, agents and employees of the
foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that
no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank
agrees that if it shall, by exercising any right of set-off
or counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater
than the proportion received by any other Bank in respect of
the aggregate amount of principal and interest due with
respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other
Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest
with respect to the Notes held by the Banks shall be shared
by the Banks pro rata; provided that nothing in this Section
shall impair the right of any Bank to exercise any right of
set-off or counterclaim it may have and to apply the amount
subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Notes.
The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off
or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any
provision of this Agreement or the Notes may be amended or
waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or
waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any
Bank to any additional obligation, (ii) reduce the principal
of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal
of or interest on any Loan or any fees hereunder or for
termination of any Commitment or (iv) change the percentage
of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Banks, which shall be
required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant")
participating interests in its Commitment or any or all of
its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations
hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that
such participation agreement may provide that such Bank will
not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii), (iii) or (iv) of
Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the
benefits of Article VIII with respect to its participating
interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given
effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this
subsection (b).
Any Bank may at any time assign to one or
more banks or other institutions (each an "Assignee") all,
or a proportionate part (equivalent to a Commitment of not
less than $5,000,000) of all, of its rights and obligations
under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the
form of Exhibit D hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed
consent of the Borrower, which shall not be unreasonably
withheld, and the Agent; provided that if an Assignee is an
affiliate of such transferor Bank or was a Bank immediately
prior to such assignment, no such consent shall be required.
Upon execution and delivery of such instrument and payment
by such Assignee to such transferor Bank of an amount equal
to the purchase price agreed between such transferor Bank
and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations
of a Bank with a Commitment as set forth in such instrument
of assumption, and the transferor Bank shall be released
from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant
to this subsection (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,500. If the Assignee is
not incorporated under the laws of the United States of
America or a state thereof, it shall, prior to the first
date on which interest or fees are payable hereunder for its
account, deliver to the Borrower and the Agent certification
as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the
transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee
of any Bank's rights shall be entitled to receive any
greater payment under Section 8.03 or 8.04 than such Bank
would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the
provisions of Section 8.02, 8.03 or 8.04 requiring such Bank
to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances
giving rise to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it
in good faith is not relying upon any "margin stock" (as
defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to
Jurisdiction. This Agreement and each Note shall be
governed by and construed in accordance with the laws of the
State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New
York State court sitting in New York City for purposes of
all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to
the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought
in such a court has been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This
Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire
agreement and understanding among the parties hereto and
supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE
BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.
BLOUNT, INC.
By/s/ Harold E. Layman
Title: Senior Vice President and
Chief Financial Officer
4520 Executive Park Drive
P.O. Box 949
Montgomery, Alabama 36102
Attention: Treasurer
Telex number: 8107283252
Commitments
$20,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By/s/ Stephen B. King
Title: Vice President
$20,000,000 ABN AMRO BANK N.V., ATLANTA AGENCY
By/s/ Steven L. Hissman
Title: Vice President
By/s/ Bruce W. Swords
Title: Vice President
$20,000,000 BANK OF AMERICA ILLINOIS
By/s/ Bruce A. Simons
Title: Senior Vice President
$20,000,000 NATIONSBANK OF GEORGIA, N.A.
By/s/ James S. Scully
Title: Vice President
$20,000,000 SOUTHTRUST BANK OF ALABAMA, N.A.
By/s/ Neel Elliott
Title: Vice President
_________________
Total Commitments
$100,000,000
===========
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By/s/ Stephen B. King
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Telex number: 177615
<PAGE>
PRICING SCHEDULE A
The "Euro-Dollar Margin," "CD Margin, and
"Facility Fee Rate" for any day are the respective
percentages set forth below in the applicable row under the
column corresponding to the Status that exists on such day:
Status Level I Level II Level III Level IV Level V
Facility Fee
Rate .1875 .2000 .2500 .3125 .5000
Eurodollar
Margin
Usage <50% .1875 .3000 .5000 .6875 .8750
Usage =>50% .2500 .4000 .6250 .8125 1.1250
CD Margin .3750 .5250 .7500 .9375 1.2500
For purposes of this Schedule, the following terms
have the following meanings:
"Level I Status" exists at any date if the
Applicable Cash Flow Ratio is greater than 0.50 and the
Applicable Leverage Ratio is less than 0.75.
"Level II Status" exists at any date if (i) the
Applicable Cash Flow Ratio is greater than 0.40 and the
Applicable Leverage Ratio is less than 0.85 and (ii) Level I
Status does not exist.
"Level III Status" exists at any date if (i) the
Applicable Cash Flow Ratio is greater than 0.30 and the
Applicable Leverage Ratio is less than 1.00 and (ii) neither
Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if (i) the
Applicable Cash Flow Ratio is greater than 0.25 and the
Applicable Leverage Ratio is less than 1.15 and (ii) neither
Level I Status, Level II Status nor Level III Status exists.
"Level V Status" exists at any date if the
Applicable Cash Flow Ratio is less than or equal to 0.25 or
the Applicable Leverage Ratio is greater than or equal to
1.15.
"Applicable Cash Flow Ratio" means, with respect
to each day during any Quarter, the ratio of Consolidated
Operating Cash Flow for the period of four consecutive
Quarters ending with the immediately preceding Quarter to
Consolidated Debt as at the last day of such immediately
preceding Quarter.
"Applicable Leverage Ratio" means, for each day
during any Quarter, the ratio of Consolidated Debt to
Consolidated Net Worth as at the last day of the immediately
preceding Quarter.
"Quarter" means each period of three consecutive
calendar months consisting of (i) December, January and
February; (ii) March, April and May; (iii) June, July and
August and (iv) September, October and November.
"Status" refers to the determination of which of
Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status exists at any date.
"Usage" means at any date the percentage
equivalent of a fraction (i) the numerator of which is the
aggregate outstanding principal amount of the Loans at such
date, after giving effect to any borrowing or payment on
such date, and (ii) the denominator of which is the
aggregate amount of the Commitments at such date, after
giving effect to any reduction of the Commitments on such
date. For purposes of this Schedule, if for any reason any
Loans remain outstanding after termination of the
Commitments, the Usage for each date on or after the date of
such termination shall be deemed to be greater than 50%.
The Applicable Leverage Ratio and Applicable Cash Flow Ratio
for each Quarter shall be determined initially on the basis
of an estimate which shall be furnished by the Borrower to
the Agent not later than the earlier of (i) the 60th day of
such Quarter and (ii) the tenth day prior to the first day
(if any) during such Quarter on which interest is payable in
respect of Euro-Dollar Loans or CD Loans. If when finally
determined the actual Applicable Leverage Ratio or
Applicable Cash Flow Ratio differs from the estimate,
appropriate adjustments shall be made as determined by the
Agent.
<PAGE>
PRICING SCHEDULE B
The "Euro-Dollar Margin," "CD Margin," and
"Facility Fee Rate" for any day are the respective
percentages set forth below in the applicable row under the
column corresponding to the Status that exists on such day:
Status Level I Level II Level III Level IV Level V Level VI
Facility
Fee Rate .1250 .1500 .1750 .2500 .3750 .5000
Euro-Dollar
Margin .2500 .3500 .4500 .5000 .6250 1.0000
CD Margin .3750 .4750 .5750 .6250 .7500 1.1250
For purposes of this Schedule, the following terms
have the following meanings:
"Level I Status" exists at any date if, at such
date, the Borrower's senior unsecured long-term debt is
rated BBB+/Baa1 or higher.
"Level II Status" exists at any date if, at such
date, the Borrower's senior unsecured long-term debt is
rated BBB/Baa2.
"Level III Status" exists at any date if, at such
date, the Borrower's senior unsecured long-term debt is
rated BBB-/Baa3.
"Level IV Status" exists at any date if, at such
date, the Borrower's senior unsecured long-term debt is
rated BB+/Ba1.
"Level V Status" exists at any date if, at such
date, the Borrower's senior unsecured long-term debt is
rated BB/Ba2.
"Level VI Status" exists at any date if, at such
date, (i) the Borrower's senior unsecured long-term debt is
rated below BB by S&P or below Ba2 by Moody's or (ii)
neither S&P nor Moody's has an effective rating of the
Borrower's senior unsecured long-term debt.
"Moody's" means Moody's Investor Service, Inc.
"S&P" means Standard & Poor's Ratings Group.
"Status" refers to the determination of which of
Level I Status, Level II Status, Level III Status, Level IV,
Status, Level V Status or Level VI Status exists at any
date.
The credit ratings to be utilized for purposes of this
Schedule are those assigned by S&P or Moody's to the senior
unsecured long-term debt of the Borrower without third-party
credit enhancement, and any rating assigned to any other
debt of the Borrower shall be disregarded. The rating in
effect at any date is that in effect at the close of
business on such date. In the case of split ratings from
S&P and Moody's, the rating to be used to determine Status
is the higher of the two, provided that (i) in the event the
split is more than one full category, the average (or the
higher of two median ratings) shall be used (e.g., BBB+/Baa3
results in Level II Status, as does BBB+/Ba1) and (ii) the
lower rating applies for purposes of determining Level VI
Status.
<PAGE>
EXHIBIT A
NOTE
New York, New York
December 22, 1994
For value received, Blount, Inc., a Delaware
corporation (the "Borrower"), promises to pay to the order
of (the "Bank"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Loan made by the
Bank to the Borrower pursuant to the Credit Agreement
referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on
the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States
in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types
and maturities thereof and all repayments of the principal
thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any enforcement or transfer
hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding
may be endorsed by the Bank on the schedule attached hereto,
or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make
any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Credit
Agreement.
This note is one of the Notes referred to in the
Credit Agreement dated as of December 22, 1994 among the
Borrower, the banks listed on the signature pages thereof
and Morgan Guaranty Trust Company of New York, as Agent (as
the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof
and the acceleration of the maturity hereof.
BLOUNT, INC.
By________________________
Title:
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
_________________________________________________________________
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
<PAGE>
EXHIBIT B
OPINION OF
COUNSEL FOR THE BORROWER
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
I am the Vice President, Legal Services of Blount,
Inc. (the "Borrower") and I have acted as counsel for the
Borrower in connection with the Credit Agreement (the
"Credit Agreement") dated as of December 22, 1994 among the
Borrower, the banks listed on the signature pages thereof
and Morgan Guaranty Trust Company of New York, as Agent.
Terms defined in the Credit Agreement are used herein as
therein defined. This opinion is being rendered to you at
the request of my client pursuant to Section 3.01(c) of the
Credit Agreement.
I have examined originals or copies, certified or
otherwise identified to my satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments and have conducted such other
investigations of fact and law as I have deemed necessary
for purposes of this opinion.
With respect to my opinion in paragraph (5) below,
I have assumed that any action, suit or proceeding which
could result in an adverse financial impact to the Borrower
or its Subsidiaries of less than One Million Dollars would
not materially adversely affect the business, consolidated
financial position or consolidated results of operations of
the Borrower and its Subsidiaries.
My opinion in paragraph (6) below with respect to
the Material Subsidiaries of the Borrower that are
incorporated in states of the United States of America is
based solely on certificates of public officials pertaining
thereto, and such opinion with respect to the Subsidiaries
that are incorporated in Belgium and Canada is based solely
on the verbal opinions of local counsel.
Upon the basis of the foregoing, I am of the
opinion that:
1. The Borrower is a corporation duly
incorporated, validly existing and in good standing under
the laws of Delaware, and has all corporate powers required
to carry on its business as now conducted.
2. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within
the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency
or official and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower,
or of any agreement, judgment, injunction, order, decree or
other instrument known to me to which the Borrower is a
party or otherwise bound or result in the creation or
imposition of any direct Lien on any asset of the Borrower
or any of its Subsidiaries under any of the foregoing.
3. The Credit Agreement and the Notes constitute
valid and binding obligations of the Borrower, enforceable
in accordance with their terms, except as such obligations
may be (a) limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditor's rights
generally or (b) subject to general principles of equity
(whether considered in a proceeding in equity or at law).
4. Neither the Agent nor any of the Banks is
required to be qualified to do business or file any
designation for service of process or file any reports in
the State of Alabama, or comply with any statutory or
regulatory rule or requirement applicable only to financial
institutions chartered or qualified to do business in the
State of Alabama, solely by reason of its execution and
delivery of the Credit Agreement or by reason of its
participation in any of the transactions under or
contemplated by the Credit Agreement, including, without
limitation, the making of any loan contemplated thereby and
the making and receipt of payments to be made by the
Borrower pursuant to the Credit Agreement, and the validity
and enforceability of the Credit Agreement will not be
affected by the failure to so qualify or file.
5. Except as disclosed in the footnotes to the
financial statements delivered to each of the Banks as
described in Section 4.04 of the Credit Agreement, there is
not to my knowledge after due inquiry, any action, suit or
proceeding pending against or affecting the Borrower or any
of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official, or to the best of my
knowledge threatened, in which there is a reasonable
possibility of an adverse decision that could materially
adversely affect the business, consolidated financial
position or consolidated results of operations of the
Borrower and its Subsidiaries, considered as a whole, or
which challenges the validity of the Credit Agreement or the
Notes.
6. Each of the Borrower's Material Subsidiaries
that are incorporated in states of the United States of
America and each of the Borrower's Subsidiaries incorporated
in Belgium, Brazil or Canada, is a corporation validly
existing and in good standing under the laws of its
jurisdiction of incorporation.
7. With respect to the choice of law provisions
of the Notes and of Section 9.08 of the Credit Agreement, an
Alabama court should conclude that the laws of the State of
New York would govern the rights and duties of the parties
thereto.
This opinion is limited in all respects to the
laws of the State of Alabama, the federal laws of the United
States of America and the General Corporation Law of the
State of Delaware, and no opinion is hereby expressed with
respect to any matters which may arise under laws of any
other jurisdiction or any effect which such laws might have
on the opinions herein set forth. This opinion is furnished
by me for your sole benefit and no other person or entity
shall be entitled to rely on this opinion without my express
prior written consent in each instance. This opinion is
limited to the matters expressly stated herein as of the
date hereof, and no other opinions are implied or may be
inferred.
Very truly yours,
<PAGE>
EXHIBIT C
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the
Credit Agreement (the "Credit Agreement") dated as of
December 22, 1994 among Blount, Inc., a Delaware corporation
(the "Borrower"), the banks listed on the signature pages
thereof (the "Banks") and Morgan Guaranty Trust Company of
New York, as Agent (the "Agent"), and have acted as special
counsel for the Agent for the purpose of rendering this
opinion pursuant to Section 3.01(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments and have conducted such other
investigations of fact and law as we have deemed necessary
or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the
opinion that:
1. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within
the Borrower's corporate powers and have been duly
authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and
binding agreement of the Borrower and each Note constitutes
a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York
and the foregoing opinion is limited to the laws of the
State of New York, the federal laws of the United States of
America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no
opinion as to the effect (if any) of any law of any
jurisdiction (except the State of New York) in which any
Bank is located which limits the rate of interest that such
Bank may charge or collect.
This opinion is rendered solely to you in
connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by
any other person without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among
[ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"),
BLOUNT, INC. (the "Borrower") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement
(the "Agreement") relates to the Credit Agreement dated as
of December 22, 1994 among the Borrower, the Assignor and
the other Banks party thereto, as Banks, and the Agent (the
"Credit Agreement");
WHEREAS, as provided under the Credit Agreement,
the Assignor has a Commitment to make Loans to the Borrower
in an aggregate principal amount at any time outstanding not
to exceed $__________;
WHEREAS, Loans made to the Borrower by the
Assignor under the Credit Agreement in the aggregate
principal amount of $__________ are outstanding at the date
hereof; and
WHEREAS, the Assignor proposes to assign to the
Assignee all of the rights of the Assignor under the Credit
Agreement in respect of a portion of its Commitment
thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its
outstanding Loans, and the Assignee proposes to accept
assignment of such rights and assume the corresponding
obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing
and the mutual agreements contained herein, the parties
hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not
otherwise defined herein shall have the respective meanings
set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby
assigns and sells to the Assignee all of the rights of the
Assignor under the Credit Agreement to the extent of the
Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the
obligations of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the
principal amount of the Loans made by the Assignor
outstanding at the date hereof. Upon the execution and
delivery hereof by the Assignor, the Assignee, the Borrower
and the Agent and the payment of the amounts specified in
Section 3 required to be paid on the date hereof (i) the
Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Bank under
the Credit Agreement with a Commitment in an amount equal to
the Assigned Amount, and (ii) the Commitment of the Assignor
shall, as of the date hereof, be reduced by a like amount
and the Assignor released from its obligations under the
Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein
shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in
Federal funds an amount equal to $_________. Amount should
combine principal together with accrued
interest and breakage compensation, if any, to be paid by
the Assignee, net of any portion of any upfront fee to be
paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically
or by formula rather than as a fixed sum. It is
understood that commitment and/or facility fees accrued to
the date hereof are for the account of the Assignor and such
fees accruing from and including the date hereof are for the
account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other
party hereto, it shall receive the same for the account of
such other party to the extent of such other party's
interest therein and shall promptly pay the same to such
other party.
[SECTION 4. Consent of the Borrower and the
Agent. This Agreement is conditioned upon the consent of
the Borrower and the Agent pursuant to Section 9.06(c) of
the Credit Agreement. The execution of this Agreement by
the Borrower and the Agent is evidence of this consent.
Pursuant to Section 9.06(c) the Borrower agrees to execute
and deliver a Note payable to the order of the Assignee to
evidence the assignment and assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The
Assignor makes no representation or warranty in connection
with, and shall have no responsibility with respect to, the
solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of the Credit
Agreement or any Note. The Assignee acknowledges that it
has, independently and without reliance on the Assignor, and
based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to
enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the
business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of
the State of New York.
SECTION 7. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
BLOUNT, INC.
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By__________________________
Title:
<PAGE>
EXHIBIT E
MATERIAL SUBSIDIARIES OF THE BORROWER
BI Holdings, Corp.
Dixon Industries, Inc.
