Exhibit 10(bb)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made and entered into as of
this 2nd day of February, 2004, by and between BLOUNT INTERNATIONAL, INC., a
Delaware corporation (the "Company"), and JAMES S. OSTERMAN ("Executive").
W I T N E S S E T H:
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WHEREAS, the Company and Executive entered into an Employment
Agreement, which Agreement became effective on August 19, 1999, and which
Agreement has previously been amended by Amendment Nos. 1 and 2 (such
Agreement as so amended is hereinafter referred to as the "Prior Employment
Agreement"), providing for Executive's employment by the Company and
specifying the terms and conditions of such employment; and
WHEREAS, the parties now desire to amend the Prior Employment
Agreement in a number of respects and to restate such agreement 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 and Effective Date.
(a) The purpose of this Amended and Restated Employment Agreement is
to amend the Prior Employment Agreement, to recognize Executive's significant
contributions to the overall financial performance and success of the Company,
and to provide a single, integrated document which shall provide the basis for
Executive's continued employment by the Company. (b) This Agreement shall be
effective as of February __, 2004 ("Effective Date") and this Agreement shall
terminate as hereinafter provided.
2. Employment and Term; Consulting Agreement.
(a) Subject to the terms and conditions of this Agreement, the
Company hereby employs Executive and Executive hereby accepts employment as
the Chief Executive Officer of the Company and shall have such
responsibilities, duties and authority that are consistent with such position
as may be from time to time assigned to Executive by the Board of Directors.
Executive 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 and responsibilities for the Company. With the
consent of the Board of Directors, Executive may serve as a director on the
boards of directors or trustees of additional companies and organizations.
(b) Unless earlier terminated as provided herein, Executive's
employment under this Amended and Restated Employment Agreement shall commence
on the Effective Date and shall end on December 31, 2005 (the "Term"), unless
the Term is extended in accordance with subsection
(c) below (in which case such extended period shall constitute the
Term). (c) Not less than ninety (90) days prior to December 31, 2005 (and any
12-month extension of the Term), the Company may offer to extend the Term for
an additional 12-month period on such terms and conditions as may be specified
in the offer (which may be on the same terms and conditions as provided
herein). If Executive desires to accept such offer, he shall notify the
Company in writing within thirty (30) days of receipt of the offer and the
Agreement shall be extended on the terms and
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conditions agreed upon. If Executive's employment is terminated by the Company
or Executive terminates his employment prior to December 31, 2005, his rights
will be determined in accordance with Section 5 of this Agreement, as modified
by subsection 2(e) below.
(d) If Executive remains actively employed by the Company until the
end of the Term (whether such date is December 31, 2005, or a later date at
the end of any agreed upon extension pursuant to Section 2(c) of this
Agreement), the Company shall provide Executive with a consulting agreement
("Consulting Agreement") with the following terms:
(i) The Consulting Agreement shall be for a period of two (2) years
commencing January 1, 2006 and ending December 31, 2007 (or beginning on
his later termination date resulting from any mutually agreed upon
extension(s) of the initial Term pursuant to Section 2(c) of this
Agreement and ending two (2) years later). The period of the Consulting
Agreement may be terminated earlier by the Company in the event of
Executive's death, Disability, termination for Cause (as defined in
Section 6.2 below) or Executive's voluntary termination of service during
the two-year period of the Consulting Agreement.
(ii) Executive's title during the period of the Consulting Agreement
will be mutually agreed upon between Executive and the Company and his
duties will be to maintain and assist in managing relationships with
major customers, to attend, and participate as a Company representative
at, trade shows, and to consult and advise on products, services and
manufacturing facilities, including, without limitation, the
responsibility to arrange and organize
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customer outings (hunting, fishing, golf, etc.), making business trips to
visit the Company's largest customers and the Company's international
operations (including China), and providing the Board and senior Company
executives with consultation and advice on business matters affecting the
Company. Executive will be an independent contractor with respect to the
Company and not an employee.
(iii) Executive will be paid an annual retainer of $200,000 for his
consulting services, for which amount he will be available to perform
services up to ten (10) days per month. The Board of Directors and
Executive will agree on the days Executive will be performing services
under the Consulting Agreement. The Company may request Executive to
perform services for additional days per month at the rate of $1,600 per
day.
Executive will be paid his consulting fees monthly. Executive will
also be reimbursed for the reasonable out-of-pocket expenses (including
business travel and entertainment) which he incurs in performing his
consulting services. Executive will be entitled to a bonus of $50,000 per
year for each Company fiscal year which ends coincident with, or prior
to, the termination of the Consulting Agreement, if the Company meets its
financial targets for such fiscal year (such determination will be made
by the Board of Directors).
(iv) Executive will be provided during the period of the Consulting
Agreement with health and life insurance coverages (including
Exec-U-Care) under the Company's existing benefit programs, but if such
coverages cannot be continued, the Company will arrange for comparable
coverages at its
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expense. Executive will continue to be responsible for
paying the costs of any dependent coverage.
(v) To assist in performing the consulting services, Executive will
be provided during the period of the Consulting Period, at the Company's
expense, with an equipped office and his current secretary/administrative
assistant (or a substitute acceptable to Executive). The
secretary/administrative assistant shall receive a level of compensation
and benefits comparable to that being received by such assistant at the
end of the Term. Executive's office will be at a location acceptable to
Executive, but will not be in the Portland headquarters building.
Executive will also be provided with an automobile (and related costs)
under terms similar to those the Company uses for senior executives, and
with reimbursement for membership dues and assessments at a country club.
At the end of the period of the Consulting Agreement, Executive will be
given the automobile he is then using (which will be a Cadillac Escalade
or equivalent vehicle) without additional payment.
(vi) During the period of the Consulting Agreement, it is the
intention of the Company that Executive shall continue to serve as a
member of the Board of Directors, subject to his nomination and election
to such position.
(e) In accordance with the provisions of the Prior Employment
Agreement, upon any termination of Executive's employment, for any reason,
whether before, on or after the end of the Term, he shall be entitled to the
contractual rights and benefits provided below (except to the extent Executive
acquires greater rights upon any such termination of employment) and to the
extent necessary or desirable to reflect the
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agreements set forth herein, the Company will amend the agreements affecting
such contractual rights or benefits:
(i) Executive's termination will be treated as qualifying as
"Retirement" for purposes of the Stock Option Agreements listed below
(and any future Option grants) and, as a result, Executive shall have the
right to exercise such Options until the end of the term of the Option
(except for such earlier date as may be provided in the event of death).
The following outstanding Stock Option Agreements are covered by this
subsection (e)(i):
(A) The Nonqualified Stock Option Agreement (Time Option),
dated August 19, 1999, for 60,000 shares and the Nonqualified Stock
Option Agreement (Performance Option), dated August 19, 1999, for
60,000 shares.
(B) The Nonqualified Stock Option Agreements, dated June 29,
2001, February 14, 2002 and March 15, 2002 for 150,000 shares,
39,400 shares and 150,000 shares, respectively.
(ii) Executive's termination will be treated as qualifying as
"Retirement" for purposes of Article IV of the Employee Stockholder
Agreement, dated as of August 19, 1999, and the other provisions of such
agreement.
(f) The Company shall provide a salary continuation death benefit
("Salary Continuation Death Benefit") to Executive's beneficiaries in an
amount equal to two (2) times Executive's Base Salary (as such Base Salary is
in effect on his date of death or, if he terminates employment prior to his
date of death, was in effect on his date of termination of employment) in
accordance with the provisions of the Omark
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Salary Continuation Plan (Executive's termination of employment for purposes
of this Section 2(f) shall occur when he ceases to be an employee, not when he
ceases to perform services as a consultant under the Consulting Agreement).
The Salary Continuation Death Benefit payable pursuant to this Section 2(f)
shall be payable upon Executive's death after termination of employment
regardless of the reason for his termination of employment. In the event of a
Change in Control of the Company prior to the end of the period of the
Consulting Agreement, the Company shall either fund the Salary Continuation
Death Benefit in a manner acceptable to Executive or provide Executive with a
separate letter agreement confirming the Company's contractual obligation to
pay the Salary Continuation Death Benefit.
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 (e) below:
(a) An annual base salary ("Base Salary") of Five Hundred Thousand
Dollars ($500,000.00), prorated for any partial year of employment.
Executive's Base Salary shall be increased each year in such amount so as to
maintain Executive's Base Salary competitive with the base salaries of chief
executive officers of companies of comparable size and similar industries at
such time as the Company increases salaries for its executive officers
generally. Executive's salary shall be payable in substantially equal
installments on a bi-monthly basis, 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 Annual Incentive Program ("Incentive Program") and such other
annual
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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 Program, and Executive's
annual Target Bonus shall be 65% of Base Salary; the maximum award for
exceeding the performance goals (which will be determined in accordance with
the current plan design) shall be 130% of Base Salary, provided, that, for the
Company's fiscal years ending December 31, 2004 and 2005, Executive's annual
bonus shall be a minimum of $500,000 for each year. The annual incentive bonus
payable under this subsection (b) shall be payable as a lump sum at the same
time bonuses are paid to other senior executives after certification by the
Compensation Committee of the Board, that the applicable performance
objectives have been met, unless Executive elects to defer all or a portion of
such amount pursuant to any deferral plan established by the Company for such
purpose.
(c) Except as otherwise provided herein, 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
generally available by the Company to its executive officers, including plans
providing retirement, 401(k) benefits, deferred compensation, health care
(including executive medical), life insurance, disability and similar
benefits. Executive shall not be eligible to participate in (i) the Blount,
Inc. and Subsidiaries Supplemental Retirement Benefit Plan ("SERP"), and (ii)
the Executive Supplemental Retirement Plan of Blount International, Inc.
("Executive SERP").
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The Company's retiree healthcare coverage for Executive and his
dependents shall commence at the date Executive terminates employment,
provided that if Executive is entitled to benefits pursuant to Section 5.1 or
Section 5.2, the retiree healthcare coverage shall commence at the end of the
Severance Period; provided, further, that if Executive is receiving healthcare
benefits pursuant to Section 2(d)(iv) under the Consulting Agreement, the
retiree healthcare coverage shall commence at the end of the period of the
Consulting Agreement. The level of coverage and costs under such plan for
Executive and his dependents will be the same coverage and costs provided
under the Company's retiree healthcare program for executives on the date
Executive terminates employment and the level of coverage and costs to
Executive for such coverage shall not be changed in the future (regardless of
any changes in such coverages or costs that may be made that affect other
executives). In the event of a Change in Control of the Company, the Company
shall pay Executive on the date of such Change in Control a lump sum payment
equal to the present value of the costs of continuing such retiree healthcare
coverage for a period equal to the remaining life expectancy of Executive and
his spouse, such costs being calculated in accordance with Financial
Accounting Standard 106 ("FAS 106"), using the same actuarial and other
assumptions used by the Company for financial reporting purposes with respect
to FAS 106 for the fiscal year ending immediately prior to the date of the
Change in Control.
(d) The Company will reimburse Executive for membership dues and
assessments at recreational and social clubs, consistent with the policies
under the Prior Employment Agreement. Executive will be provided an automobile
in accordance with the Company's automobile policy for Executives, and the
Company will pay all
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insurance, maintenance, fuel, oil and related operational
expenses for such automobile. Executive will receive five weeks vacation
during each year of the Term. Executive will be provided an annual physical
examination and a financial/tax consultant for personal financial and tax
planning. Executive will be promptly reimbursed by the Company for all
reasonable business expenses he incurs in carrying out his duties and
responsibilities under this Agreement.
(e) On February 2, 2004, the Company will grant Executive options to
purchase 50,000 shares of Common Stock under the Company's 2000 Stock
Incentive Plan ("2000 Plan"). The Option Exercise Price of the options will be
$5.05 per share. The options will be 50% vested and exercisable on the date of
grant and the remaining 50% shall become vested and exercisable one year after
the date of grant. The other terms and conditions of the options will be
established by the Committee in accordance with the terms of the 2000 Plan.
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.
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(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 at any time, including following the
termination of his employment with the Company for any reason; 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 for any reason, provided that Executive may
after such expiration or termination disclose Confidential Information with
the prior written consent 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 for a period of one (1) year from his date of
termination or until the end of the period for which he is entitled to receive
compensation
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under Section 5.1(a) below, whichever is longer, he shall not (i)
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, (ii) divert or attempt to divert any person,
concern or entity which is furnished products or services by the Company from
doing business with the Company or otherwise change its relationship with the
Company, or (iii) solicit, lure or attempt to hire away any of the employees
of the Company with whom the Executive interacted directly or indirectly while
employed with the Company.
(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(e).
5. Termination.
5.1 By Executive. Executive shall have the right to terminate his
employment hereunder at any time by Notice of Termination (as described in
Section 7). If Executive terminates his employment because (i) the Company has
materially breached this Agreement, and such breach has not been cured within
thirty (30) days
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after written notice of such breach is given by Executive to
the Company; or (ii) Executive has determined that his termination is for Good
Reason (as defined in Section 6.7), Executive shall be entitled to receive the
compensation and benefits set forth in subsections (a) through (g) below. 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. Unless specified otherwise, the time
periods in (a) through (g) below shall be twenty-four (24) months commencing
on the date of Executive's termination ("Severance Period"). The Company
agrees that if Executive terminates employment and is entitled to compensation
and 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 the
Severance Period 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 6.9) on the date Executive's employment under this Agreement is
terminated.
(b) Bonuses and Incentives - Executive shall receive bonus payments
from the Company for each month of the Severance Period in an amount for each
such
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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 be payable on the date such amounts are payable to other
executives and Executive's termination shall not affect the payment of such
bonus. Executive shall also receive a prorated bonus for any uncompleted
fiscal year at the date of termination (assuming a bonus at the Target Award
level has been achieved or, if greater, the minimum annual bonus amount
specified in Section 3(b) is payable), 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 representing the monthly bonus payments shall be determined by taking
the monthly bonus payments to be made and discounting them to their Present
Value on the date Executive's employment under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health (including
executive medical) and group term life insurance benefits coverage provided to
Executive at his date of termination shall be continued for the Severance
Period at the same level and in the same manner as then provided to actively
employed executive participants as if his employment under this Agreement had
not terminated. 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
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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
(including the same deductible and co-payment levels provided under the
Company's policy).
(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 and deferred
compensation plans maintained by the Company in which Executive participates
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 Excess 401(k) Plan (but not the SERP and the Executive SERP).
Executive's participation in such retirement plans shall continue for the
Severance Period and the compensation payable to Executive under (a) and (b)
above shall be treated (unless otherwise excluded) as compensation under the
plan as if it were paid on a monthly basis. For purposes of the Blount 401(k)
Plan and the Blount Excess 401(k) Plan, he will receive a Company contribution
at a level equal to the Company's customary contributions to participant
accounts under 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 or, 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
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of (i) the benefit Executive would have been paid under such plan if he had
continued to be covered for the Severance Period (less any amounts Executive
would have been required to contribute), over (ii) the benefit actually
payable under such plan. The Company shall pay the Present Value of such
additional benefits (if any) in a lump sum within 30 days of his termination
of employment.
(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 the Severance Period.
(f) Stock Options. As of his date of termination, all of the Time
Options and the Performance Options, and any other outstanding stock options
granted to Executive by the Company, shall become vested and exercisable as
provided in Section 2(e) above and, to the extent greater rights are provided
therein, in the Stock Option Agreements for such stock options.
(g) Office Space; Secretarial. Executive will be provided
appropriate office space, his then 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 reasonable
expenses related thereto for a period of twelve (12) months from Executive's
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). If the Company terminates
Executive's
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employment under this Agreement (i) for Cause, as defined in Section 6.2, (ii)
if Executive becomes Disabled, or (iii) upon Executive's death, the Company's
obligations under this Agreement shall cease as of the date of termination;
provided, however, that Executive will be entitled to whatever benefits are
payable pursuant to the terms of any health, life insurance, disability,
welfare, retirement or other plan or program maintained 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 the compensation and benefits provided in subsections (a)
through (g) of Section 5.1 above for the Severance Period, and subject to the
provisions (including the nonmitigation provision) and limitations therein.
5.3 Tax Equalization Payment.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined (as hereafter provided) that any payment or
distribution to or for the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or pursuant to or by
reason of any other agreement, policy, plan, program or arrangement, or
similar right (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provisions thereto), or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive or have paid on his behalf an additional payment or payments (a
"Gross-Up Payment") from the Company. The total amount of the Gross-Up Payment
shall be an amount such that, after payment by (or on behalf of) the Executive
of any Excise Tax and all federal, state and other taxes
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(including any interest or penalties imposed with respect to such taxes)
imposed upon the Gross-Up Payment, the remaining amount of the Gross-Up
Payment is equal to the Excise Tax imposed upon the Payments. For purposes of
clarity, the amount of the Gross-Up Payment shall be that amount necessary to
pay the Excise Tax in full and all taxes assessed upon the Gross-Up Payment.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this subsection (b) and the amount of such Gross-Up
Payment shall be made by an accounting firm selected by the Company and
reasonably acceptable to Executive which is then one of the four largest
accounting firms in the United States (the "Accounting Firm"). The Accounting
Firm shall provide its determination (the "Determination"), together with
detailed supporting calculations and documentation to the Company and the
Executive as promptly as practicable after such calculation is requested by
the Company or by the Executive, and if the Accounting Firm determines that no
Excise Tax is payable by the Executive with respect to a Payment or Payments,
it shall furnish the Executive with a substantial authority opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with respect to
any such Payment or Payments. Within fifteen (15) days of the delivery of the
Determination to the Executive, the Executive shall have the right to dispute
the Determination (the "Dispute") and Executive and the Company shall in good
faith discuss a resolution of the Dispute. The Gross-Up Payment, if any, as
determined pursuant to this Section 5.3(b) shall be paid by the Company to the
Executive for his benefit within fifteen (15) days of the receipt of the
Accounting Firm's Determination. The existence of the Dispute (and any
discussions to resolve the Dispute) shall not in any way affect the right
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of the Executive to receive the Gross-Up Payment in accordance with the
Determination. If there is no Dispute, the Determination shall be binding,
final and conclusive upon the Company and the Executive, subject to the other
provisions of this Section 5.3.
(c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a
portion thereof) will be paid which should not have been paid (an "Excess
Payment") or a Gross-Up Payment (or a portion thereof) which should have been
paid will not have been paid (an "Underpayment"). An Underpayment shall be
deemed to have occurred upon the earliest to occur of the following events:
(1) upon written notice to the Executive from any governmental taxing
authority that the tax liability of the Executive (whether in respect of the
then current taxable year of the Executive or in respect of any prior taxable
year of the Executive) may be increased by reason of the imposition of the
Excise Tax on a Payment or Payments with respect to which the Company has
failed to make a sufficient Gross-Up Payment, (2) upon a determination by a
court imposing the Excise Tax on a Payment or Payments with respect to which
the Company has failed to make a sufficient Gross-Up Payment, (3) by reason of
a determination by the Company (which shall include the position taken by the
Company, or its consolidated group, on its federal income tax return) that a
Payment or Payments were subject to the Excise Tax with respect to which the
Company has failed to make a sufficient Gross-Up Payment, or (4) upon the
resolution to the mutual satisfaction of Executive and the Company of the
Dispute. If any Underpayment occurs, the Executive shall promptly notify the
Company and the Company shall pay to the Executive within fifteen (15) days of
the
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date the Underpayment is deemed to have occurred under (1), (2), (3) or
(4) above, but in no event less than five days prior to the date on which the
applicable government taxing authority has requested payment, an additional
Gross-Up Payment equal to the amount of the Underpayment plus any interest and
penalties imposed on the Underpayment.
An Excess Payment shall be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the Excise Tax shall not be
imposed upon a Payment or Payments (or portion of a Payment) with respect to
which the Executive had previously received a Gross-Up Payment. A Final
Determination shall be deemed to have occurred when the Executive has received
from the applicable government taxing authority a refund of taxes or other
reduction in his tax liability by reason of the Excess Payment (Executive
shall promptly notify the Company of such an event) and either of the
following has occurred: (i) a determination is made by, or an agreement is
entered into with, the applicable governmental taxing authority which finally
and conclusively binds Executive and such taxing authority, or in the event
that a claim is brought before a court of competent jurisdiction, a final
determination has been made by such court and either all appeals have been
taken and finally resolved or the time for all appeals has expired, or (ii)
the statute of limitations with respect to the Executive's applicable tax
return has expired. If an Excess Payment is determined to have been made, the
amount of the Excess Payment shall be treated as a loan by the Company to the
Executive and the Executive shall pay to the Company within 15 days following
demand (but not less than 30 days after the determination of such Excess
Payment) the amount of the Excess Payment plus interest at an annual rate
equal to the rate provided for in
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Section 1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which
the Excess Payment relates) was paid to the Executive until the date of
repayment to the Company.
Executive shall promptly notify the Company in writing of any
written communication with any governmental taxing authority relating to the
Excise Tax. The Company shall be entitled, at its sole cost and expense, to
contest the imposition of the Excise Tax on Executive's behalf (including
filing a claim for refund of the Excise Tax) and Executive shall cooperate
with the Company in good faith in connection with any such contest or
proceeding. The Company's election to contest the Excise Tax shall not affect
its obligation to pay to Executive or on his behalf an additional Gross-Up
Payment with respect to an Underpayment pursuant to this subsection (c). Any
refund of taxes or other reduction in Executive's tax liability arising from
any such contest by the Company shall be treated as an Excess Payment under
this subsection (c).
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax
will be imposed on any Payment or Payments, the Company shall pay to the
applicable government taxing authorities as Excise Tax withholding, the amount
of any Excise Tax that the Company has actually withheld from the Payment or
Payments; provided that the Company's payment of withheld Excise Tax shall not
change the Company's obligation to pay the Gross-Up Payment required under
this Section 5.3.
(e) The Executive and the Company shall each provide the Accounting
Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be, reasonably
requested by the
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Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the Determination
contemplated by subsection (b) hereof.
(f) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by subsection
(b) shall be paid by the Company.
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" . The involuntary termination of Executive by the
Company for the following reasons shall constitute a termination for Cause:
(a) If the termination shall have been the result of an act or acts
by Executive which have been found in an applicable court of law to constitute
a felony (other than traffic-related offenses);
(b) If the termination shall have been the result of an act or acts
by Executive which are in the good faith judgment of the Board to be in
violation of law or of policies of the Company and which result in
demonstrably material injury to the Company;
(c) If the termination shall have been the result of an act or acts
of proven dishonesty by Executive resulting or intended to result directly or
indirectly in significant gain or personal enrichment to the Executive at the
expense of the Company; or
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(d) Upon the willful and continued failure by the Executive
substantially to perform his duties with the Company (other than any such
failure resulting from incapacity due to mental or physical illness not
constituting a Disability, as defined herein), after a demand in writing for
substantial performance is delivered by the Board, which demand specifically
identifies the manner in which the Board believes that Executive has not
substantially performed his duties.
With respect to clauses (b), (c) or (d) above of this Section,
Executive shall not be deemed to have been involuntarily terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board (after reasonable
notice to Executive and an opportunity for him, together with his counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, Executive was guilty of conduct set forth above in clauses (b), (c) or
(d) and specifying the particulars thereof in detail. For purposes of this
Agreement, no act or failure to act by Executive shall be deemed to be
"willful" unless done or omitted to be done by Executive not in good faith and
without reasonable belief that Executive's action or omission was in the best
interests of the Company.
6.3 "Change in Control". Either
(a) the acquisition, directly or indirectly, by any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended), other than LB MBP II or any of its affiliates, of
securities of the Company representing an aggregate of more than fifty percent
(50%) of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by
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persons who own such amount of securities on the date hereof, or acquisitions
by persons who acquire such amount through inheritance), or
(b) 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
(c) consummation of (i) a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
or affiliate thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of the Company
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into common stock of the surviving entity or
a parent or affiliate thereof) more than 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 (ii) a plan of complete liquidation of Company or an
agreement for the sale or disposition by Company of all or substantially all
of Company's assets;
(d) a Public Offering as defined in the Term Sheet; or
(e) a sale of more than 50% of the assets of the Company; provided
that none of the events described in clauses (b) through (e) shall be deemed a
Change in Control if, immediately following such event, Lehman Brothers
Merchant
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Banking Partners, II, L.P. and its affiliates own 50% or more of the
combined voting power of the Company's then outstanding securities.
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 during the Term (without the
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Executive's express written consent) of any one of the following acts by the
Company, or failures by the Company to act, and such act or failure to act has
not been corrected within thirty (30) days after written notice of such act or
failure to act is given by Executive to the Company:
(i) the assignment to Executive of any duties inconsistent with
Executive's status as Chief Executive Officer of the Company, or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those on the date hereof; provided, however, that
it shall not constitute a Good Reason for termination by Executive nor a
breach of this Agreement for the Company to promote or hire a replacement
for Executive during the Term for purposes of providing a transition of
all or part of Executive's duties and responsibilities so long as the
Company continues to provide Executive with the compensation and benefits
set forth in Section 3;
(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 his principal office on the date hereof
or requiring Executive to be based anywhere other than the Executive's
principal office on the date hereof, except for reasonably required
travel on the Company's business;
(iv) the failure by the Company, without Executive's consent, to pay
to Executive any portion of Executive's current compensation (including
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Base Salary and bonus), or to pay to the Executive any other compensation
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 on the date hereof,
which is material to Executive's total compensation, including but not
limited to the Company's Executive Management Target Incentive Plan, or
any long-term incentive plan, or any substitute plans, 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 in terms of the amount of benefits provided;
(vi) the failure by the Company to continue to provide Executive
with benefits substantially similar to those enjoyed by Executive on the
date hereof under any of the Company's pension, life insurance, medical,
health and accident or disability plans, 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 on the date hereof, 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) except with respect to the promotion or hiring of a
replacement to perform Executive's duties and responsibilities and the
selection of such replacement, and other actions or instructions related
to the transition of Executive's duties and responsibilities, the
issuance to the Executive by the
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Board of Directors of any order or instruction regarding the operation of
the Outdoor Products Group which (A) the Executive, in his good faith
opinion, considers to be reasonably likely to have a material adverse
effect on the business and long-term prospects of such Group and (B) is
not modified to the Executive's reasonable satisfaction within 30 days
after written notice to the Board from the Executive setting forth his
objection to such order or instruction; or
(viii) 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.
6.9 "Present Value". The term "Present Value" on any particular date
shall have the same meaning as provided in Section 280G(d)(4) of the Code.
7. Termination Procedures.
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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 the information set forth in Section 6.2.
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 thirty (30) 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
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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, or transferor of, the Company, the Company will require any successor to,
or transferor of, all or substantially all of the business and/or assets of
the Company (whether direct or indirect, by purchase, merger, reorganization,
liquidation, consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
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,
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,
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heirs, distributees, devisees and legatees and by the Company's
successors and assigns. 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 International, Inc.
4909 SE International Way
Portland, OR 97222
ATTN: General Counsel
To the Executive: James S. Osterman
22329 Clear Creek Road
Estacada, Oregon 97023
With a copy to: Kilpatrick Stockton LLP
ATTN: William J. Vesely, Jr.
Suite 2800
1100 Peachtree Street
Atlanta, GA 30309-4530
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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. Indemnification. During the term of this Agreement and after
Executive's termination for a period of three (3) years, the Company shall
indemnify Executive and hold Executive harmless from and against any claim,
loss or cause of action arising from or out of Executive's performance as an
officer, director or employee of the Company or any of its subsidiaries or
other affiliates or in any other capacity, including any fiduciary capacity,
in which Executive serves at the Company's request, in each case to the
maximum extent permitted by law and under the Company's Articles of
Incorporation and By-Laws (the "Governing Documents"), provided that in no
event shall the protection afforded to Executive hereunder be less than that
afforded under the
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Governing Documents as in effect on the date of this
Agreement except from changes mandated by law. During the Term and for a
period of three (3) years, Executive shall be covered by any policy of
directors and officers liability insurance maintained by the Company for the
benefit of its officers and directors.
15. Amendments and Modifications. This Agreement may be amended or
modified only by a writing signed by both parties hereto.
16. 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 Delaware.
17. 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 Atlanta, Georgia, 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
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provided by this Agreement and is successful, in whole or in part, in
obtaining or enforcing any material 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.
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Agreement as of the day and year first above written.
EXECUTIVE:
-----------------------------------
JAMES S. OSTERMAN
COMPANY:
BLOUNT INTERNATIONAL, INC.
By:
-------------------------------
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