Document:

Exhibit 4.3.1

 

 

THE KROGER CO.

AND THE GUARANTORS NAMED
HEREIN

TO

U.S. BANK NATIONAL
ASSOCIATION

(formerly known as Firstar
Bank, N.A.)

Trustee

 

 

TWENTY-SECOND SUPPLEMENTAL
INDENTURE

Dated as of October 1,
2009

TO

INDENTURE

Dated as of June 25,
1999

 

 

3.90% SENIOR NOTES DUE 2015

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE
  ONE DEFINITIONS

  	
  2

  
	
   

  	
   

  
	
  Section 101.  Definitions

  	
  2

  
	
   

  	
   

  
	
  ARTICLE
  TWO SECURITY FORMS

  	
  6

  
	
   

  	
   

  
	
  Section 201.  Form of
  Securities of this Series

  	
  6

  
	
  Section 202.  Form of
  Face of Security

  	
  6

  
	
  Section 203.  Form of
  Reverse of Security

  	
  8

  
	
  Section 204.  Form of
  Guarantee

  	
  13

  
	
   

  	
   

  
	
  ARTICLE
  THREE THE SERIES OF SECURITIES

  	
  18

  
	
   

  	
   

  
	
  Section 301.
  Title and Terms

  	
  18

  
	
   

  	
   

  
	
  ARTICLE
  FOUR MODIFICATIONS AND ADDITIONS TO THE  INDENTURE 

  	
  19 

  
	
   

  	
   

  
	
  Section 401.  Modifications
  to the Consolidation, Merger, Conveyance, Transfer or Lease Provisions

  	
  19

  
	
  Section 402.  Other
  Modifications

  	
  20

  
	
  Section 403.  Additional
  Covenants; Defeasance and Covenant Defeasance

  	
  21

  
	
  Section 404.  Redemption of
  Securities

  	
  31

  
	
   

  	
   

  
	
  ARTICLE
  FIVE GUARANTEE

  	
  31

  
	
   

  	
   

  
	
  Section 501.  Guarantee

  	
  31

  
	
  Section 502.  Waiver of
  Demand

  	
  32

  
	
  Section 503.  Guarantee of
  Payment

  	
  32

  
	
  Section 504.  No Discharge
  or Diminishment of Guarantee

  	
  33

  
	
  Section 505.  Defenses of
  Company Waived

  	
  33

  
	
  Section 506.  Continued
  Effectiveness

  	
  33

  
	
  Section 507.  Subrogation

  	
  33

  
	
  Section 508.  Information

  	
  34

  
	
  Section 509.  Subordination

  	
  34

  
	
  Section 510.  Termination

  	
  34

  
	
  Section 511.  Guarantees of
  other Indebtedness

  	
  35

  
	
  Section 512.  Additional
  Guarantors

  	
  35

  
	
  Section 513.  Limitation of
  Guarantor’s Liability

  	
  35

  
	
  Section 514.  Contribution
  from Other Guarantors

  	
  36

  
	
  Section 515.  No Obligation
  to Take Action Against the Company

  	
  36

  

 

i

 

	
  Section 516.  Dealing with
  the Company and Others

  	
  36

  
	
  Section 517.  Execution and
  Delivery of the Guarantee

  	
  37

  
	
   

  	
   

  
	
  ARTICLE
  SIX MISCELLANEOUS

  	
  37

  
	
   

  	
   

  
	
  Section 601.  Miscellaneous

  	
  37

  

 

ii

 

TWENTY-SECOND SUPPLEMENTAL INDENTURE, dated as of October 1, 2009,
between The Kroger Co., a corporation duly organized and existing under the
laws of the State of Ohio (herein called the “Company”), having its principal
office at 1014 Vine Street, Cincinnati, Ohio 45202, the Guarantors listed on
the signature pages and Schedule I hereto (each, a “Guarantor”) and U.S.
Bank National Association (formerly known as Firstar Bank, N.A.), a banking
corporation duly organized and existing under the laws of the State of Ohio,  as Trustee (herein called the “Trustee”).

 

RECITALS OF THE COMPANY

 

The Company has heretofore executed and delivered to the Trustee an
Indenture dated as of June 25, 1999 (the “Indenture”), providing for the
issuance from time to time of the Company’s unsecured debentures, notes or
other evidences of indebtedness (herein and therein called the “Securities”),
to be issued in one or more series as in the Indenture provided.

 

Section 201 of the Indenture permits the form of the Securities of
any series to be established pursuant to an indenture supplemental to the
Indenture.

 

Section 301 of the Indenture permits the terms of the Securities
of any series to be established in an indenture supplemental to the Indenture.

 

Section 901(7) of the Indenture provides that, without the
consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to the Indenture for the purpose of establishing the
form or terms of Securities of any series as permitted by Sections 201 and 301
of the Indenture.

 

Each of the Guarantors has
duly authorized the issuance of a guarantee of the Securities, as set forth
herein, and to provide therefor, each of the Guarantors has duly authorized the
execution and delivery of this Twenty-Second Supplemental Indenture.

 

The Company and the Guarantors, pursuant to the foregoing authority,
propose in and by this Twenty-Second Supplemental Indenture to establish the
terms and form of the Securities of a new series and to amend and supplement
the Indenture in certain respects with respect to the Securities of such
series.

 

1

 

All things necessary to make this Twenty-Second Supplemental Indenture
a valid agreement of the Company and the Guarantors, and a valid amendment of
and supplement to the Indenture, have been done.

 

NOW, THEREFORE, THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE WITNESSETH:

 

For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities of the series to be
created hereby, as follows:

 

ARTICLE
ONE

 

DEFINITIONS

 

Section 101.                              Definitions.

 

(a)                                  For all
purposes of this Twenty-Second Supplemental Indenture:

 

(1)           Capitalized
terms used herein without definition shall have the meanings specified in the
Indenture;

 

(2)           All
references herein to Articles and Sections, unless otherwise specified, refer
to the corresponding Articles and Sections of this Twenty-Second Supplemental
Indenture and, where so specified, to the Articles and Sections of the
Indenture as supplemented by this Twenty-Second Supplemental Indenture; and

 

(3)           The
terms “hereof”, “herein”, “hereby”, “hereto”, “hereunder” and “herewith” refer
to this Twenty-Second Supplemental Indenture.

 

(b)                                 For all
purposes of the Indenture and this Twenty-Second Supplemental Indenture, with
respect to the Securities of the series created hereby, except as otherwise
expressly provided or unless the context otherwise requires:

 

“Adjusted Treasury Rate” means, with respect
to any Redemption Date, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date.

 

“Attributable Debt” means, in connection with
a Sale and Lease-Back Transaction, as of any particular time, the aggregate of 

 

2

 

present values (discounted at a rate per annum equal to the interest
rate borne by the Securities of the series created by this Twenty- Second
Supplemental Indenture) of the obligations of the Company or any Restricted
Subsidiary for net rental payments during the remaining primary term of the applicable
lease, calculated in accordance with generally accepted accounting
principles.  The term “net rental
payments” under any lease for any period shall mean the sum of the rental and
other payments required to be paid in such period by the lessee thereunder, not
including, however, any amounts required to be paid by such lessee (whether or
not designated as rental or additional rental) on account of maintenance and
repairs, reconstruction, insurance, taxes, assessments, water rates, operating
and labor costs or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, reconstruction,
insurance, taxes, assessments, water rates or similar charges.

 

“Business Day” means any day other than a
Saturday or Sunday or a day on which banking institutions in New York City or
Cincinnati, Ohio are authorized or obligated by law or executive order to
close.

 

“Capital Lease” means any lease of property
which, in accordance with generally accepted accounting principles, should be
capitalized on the lessee’s balance sheet or for which the amount of the asset
and liability thereunder as if so capitalized should be disclosed in a note to
such balance sheet; and “Capitalized Lease Obligation” means the amount of the
liability which should be so capitalized or disclosed.

 

“Comparable Treasury Issue” means the United
States Treasury security selected by a Quotation Agent as having a maturity
comparable to the remaining term of the Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Securities.

 

“Comparable Treasury Price” means, with
respect to any Redemption Date, (i) the average of the Reference Treasury
Dealer Quotations, after excluding the highest and lowest such Reference
Treasury Dealer Quotations for such Redemption Date, or (ii) if the 

 

3

 

Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.

 

“Consolidated Net Tangible Assets” means, for
the Company and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles, the aggregate amounts
of assets (less depreciation and valuation reserves and other reserves and
items deductible from gross book value of specific asset accounts under
generally accepted accounting principles) which under generally accepted
accounting principles would be included on a balance sheet after deducting
therefrom (a) all liability items except deferred income taxes, commercial
paper, short-term bank Indebtedness, Funded Indebtedness, other long-term
liabilities and shareholders’ equity and (b) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, which in each case would be so included on such balance sheet.

 

“Credit Facility” means any credit agreement,
loan agreement or credit facility, whether syndicated or not, involving the
extension of credit by banks or other credit institutions, entered into by the
Company and outstanding on the date of this Twenty-Second Supplemental
Indenture, and any refinancing or other restructuring of such agreement or
facility.

 

“Funded Indebtedness” means any Indebtedness
maturing by its terms more than one year from the date of the determination
thereof, including (i) any Indebtedness having a maturity of 12 months or
less but by its terms renewable or extendible at the option of the obligor to a
date later than 12 months from the date of the determination thereof and (ii) rental
obligations payable more than 12 months from the date of determination thereof
under Capital Leases (such rental obligations to be included as Funded
Indebtedness at the amount so capitalized at the date of such computation and
to be included for the purposes of the definition of Consolidated Net Tangible
Assets both as an asset and as Funded Indebtedness at the amount so
capitalized).

 

“Non-Restricted Subsidiary” means any
Subsidiary that the Company’s Board of Directors has in good faith declared
pursuant to a written resolution not to be of material importance, either
singly or together with all other Non-Restricted Subsidiaries, to the business
of the Company and its consolidated Subsidiaries taken as a whole.

 

4

 

“Operating Assets” means all merchandise
inventories, furniture, fixtures and equipment (including all transportation
and warehousing equipment but excluding office equipment and data processing
equipment) owned or leased pursuant to Capital Leases by the Company or a Restricted
Subsidiary.

 

“Operating Property” means all real property
and improvements thereon owned or leased pursuant to Capital Leases by the
Company or a Restricted Subsidiary and constituting, without limitation, any
store, warehouse, service center or distribution center wherever located,
provided that such term shall not include any store, warehouse, service center
or distribution center which the Company’s Board of Directors declares by
written resolution not to be of material importance to the business of the
Company and its Restricted Subsidiaries.

 

“Quotation Agent” means the Reference
Treasury Dealer appointed by the Company.

 

“Reference Treasury Dealer” means (i) Banc
of America Securities LLC and its successors; provided, however, that if the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a “Primary Treasury Dealer”), the Company shall substitute therefor
another Primary Treasury Dealer, and (ii) any other Primary Treasury
Dealer selected by the Company.

 

“Reference Treasury Dealer Quotations” means,
with respect to each Reference Treasury Dealer and any Redemption Date, the
average, as determined by the Company, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. on the third Business Day preceding such Redemption
Date.

 

“Restricted Subsidiaries” means all
Subsidiaries other than Non-Restricted Subsidiaries.

 

“Sale and Lease-Back Transaction” has the
meaning specified in Section 1010.

 

“Subsidiary” means (i) 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 

 

5

 

persons performing similar functions are at the time directly or
indirectly owned by the Company and/or one or more Subsidiaries or (ii) any
partnership of which more than 50% of the partnership interest is owned by the
Company or any Subsidiary.

 

ARTICLE
TWO

 

SECURITY
FORMS

 

Section 201.                             Form of
Securities of this Series.

 

The Securities of this series shall be in the form set forth in this
Article.

 

Section 202.                             Form of
Face of Security.

 

This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary.  This Security
is not exchangeable for Securities registered in the name of a Person other
than the Depositary or its nominee except in the limited circumstances
described in the Indenture, and no transfer of this Security (other than a
transfer of this Security as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in the limited
circumstances described in the Indenture.

 

Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation (“DTC”), to The Kroger Co.
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.

 

THE KROGER CO.

 

3.90% Senior Notes due 2015

 

	
  CUSIP
  No. 501044CM1

  	
   

  	
   

  
	
  ISIN
  No. US501044CM15

  	
   

  	
  $

  

 

The Kroger Co., a corporation duly organized and existing under the
laws of the State of Ohio (herein called the “Company”, which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to        
, or registered assigns, the principal sum of $                     on October 1, 2015 and to
pay interest 

 

6

 

thereon
from October 1, 2009, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on April 1
and October 1 in each year, commencing April 1, 2010 at the rate of
interest of 3.90% per annum until the principal hereof is paid or made
available for payment.  Interest on the
Security will be computed on the basis of a 360-day year of twelve 30-day
months.  The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the March 15
or September 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. 
Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than
10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.

 

Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in Cincinnati, Ohio, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.

 

In the case where any Interest Payment Date or the maturity date of
this Security does not fall on a Business Day, payment of interest or principal
otherwise payable on such day need not be made on such day, but may be made on
the next succeeding Business Day with the same force and effect as if made on
such Interest Payment Date or the maturity date of this Security.

 

Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

 

7

 

Unless the certificate of
authentication hereon has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.

 

IN
WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its corporate seal.

 

Dated: October 1,
2009

 

	
   

  	
   

  	
  THE KROGER CO.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

This is one of the Securities of the series designated therein referred
to in the within mentioned Indenture.

 

	
   

  	
   

  	
  U.S. BANK NATIONAL
  ASSOCIATION,

  
	
   

  	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

	
  Section 203.

  	
   Form of Reverse of Security.

  

 

This Security is one of a duly authorized issue of Securities of the
Company (including the related Guarantees, the “Securities”) issued and to be
issued under an Indenture dated as of June 25, 1999, as supplemented by
the First Supplemental Indenture dated as of June 25, 1999, the Second
Supplemental Indenture dated as of June 25, 1999, the Third Supplemental
Indenture dated as of June 25, 1999, the Fourth Supplemental Indenture
dated as of September 22, 1999, the Fifth Supplemental Indenture dated as
of September 22, 1999, the Sixth Supplemental Indenture dated as of September 22,
1999, the Seventh Supplemental Indenture dated as of February 11, 2000,
the Eighth Supplemental Indenture dated as of 

 

8

 

February 11,
2000, the Ninth Supplemental Indenture dated as of August 21, 2000, the
Tenth Supplemental Indenture dated as of May 11, 2001, the Eleventh
Supplemental Indenture dated as of May 11, 2001, the Twelfth Supplemental
Indenture dated as of August 16, 2001, the Thirteenth Supplemental
Indenture dated as of April 3, 2002, the Fourteenth Supplemental Indenture
dated as of June 17, 2002, the Fifteenth Supplemental Indenture dated as
of January 28, 2003, the Sixteenth Supplemental Indenture dated as of December 20,
2004, the Seventeenth Supplemental Indenture dated as of August 15, 2007,
the Eighteenth Supplemental Indenture dated as of January 16, 2008, the
Nineteenth Supplemental Indenture dated as of March 27, 2008, the
Twentieth Supplemental Indenture dated as of March 27, 2008, the
Twenty-First Supplemental Indenture dated as of November 25, 2008 and the
Twenty-Second Supplemental Indenture dated as of October 1, 2009 (as so
supplemented, herein called the “Indenture”), each between the Company and the
Guarantors named therein, and Firstar Bank, N.A. (now known as U.S. Bank
National Association), as Trustee (herein called the “Trustee”, which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Guarantors named therein, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.  This
Security is one of the series designated on the face hereof, initially limited
in aggregate principal amount to $500,000,000.

 

The Company may from time to time, without notice to or consent of the
registered holders of the Securities issue further Securities (“Additional
Securities”). The Additional Securities will rank equal with the Securities in
all respects (or in all respects other than the payment of interest accruing
prior to the issue date of the Additional Securities, or except for the first
payment of interest following the issue date of the Additional Securities). The
Additional Securities may be consolidated and form a single series with the
Securities and may have the same terms as to status, redemption, or otherwise,
as the Securities.

 

The Securities of this series will be redeemable, in whole or in part,
at the option of the Company at any time at a redemption price equal to the
greater of (i) 100% of the principal amount of such Securities or (ii) as
determined by a Quotation Agent, the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any portion
of such payments of interest accrued as of the date of redemption) discounted
to the date of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate plus 25 basis
points, plus, in each case, accrued interest thereon to the date of redemption.

 

Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of the Securities to be
redeemed.  Unless the Company defaults in
payment of the redemption price, on and after the Redemption Date, interest
will cease to accrue on the Securities or portions thereof called for
redemption.

 

If a Change of Control Triggering Event occurs, unless the Company has
exercised its right to redeem the Securities, Holders of Securities will have
the right to require 

 

9

 

the
Company to repurchase all or any part (equal to $2,000 or an integral multiple
of $1,000 in excess thereof) of their Securities pursuant to the offer
described below (the “Change of Control Offer”).  In the Change of Control Offer, the Company
shall offer payment in cash equal to 101% of the aggregate principal amount of
Securities repurchased plus accrued and unpaid interest, if any, on the
Securities repurchased, to the date of purchase (the “Change of Control Payment”).  Within 30 days following any Change of
Control Triggering Event, or, at the Company’s option, prior to any Change of
Control, but after the public announcement of the Change of Control, the
Company shall mail a notice to Holders of Securities describing the transaction
or transactions that constitute or may constitute the Change of Control
Triggering Event and offering to repurchase the Securities on the date
specified in the notice, which date will be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the “Change of Control
Payment Date”), pursuant to the procedures described herein and in such
notice.  The notice shall, if mailed
prior to the date of consummation of the Change of Control, state that the
offer to purchase is conditioned on the Change of Control Triggering Event
occurring on or prior to the payment date specified in the notice.  The Company shall comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and any other securities laws and regulations
thereunder to the extent those laws and regulations are applicable in
connection with the repurchase of the Securities as a result of a Change of
Control Triggering Event.  To the extent
that the provisions of any securities laws or regulations conflict with the
Change of Control provisions herein, the Company shall be required to comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the Change of Control provisions herein by
virtue of such conflicts.

 

On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment all Securities or portions of Securities
properly tendered pursuant to the Change of Control Offer; (ii) deposit
with the paying agent an amount equal to the Change of Control Payment in
respect of all Securities or portions of Securities properly tendered; and (iii) deliver
or cause to be delivered to the Trustee the Securities properly accepted,
together with an officers’ certificate stating the aggregate principal amount
of Securities or portions of Securities being purchased.

 

“Below Investment Grade Rating Event” means the Securities are rated
below an Investment Grade Rating by any two of the three Rating Agencies (as
defined below) on any date from the date of the public notice of an arrangement
that could result in a Change of Control until the end of the 60-day period
following public notice of the occurrence of the Change of Control (which
60-day period shall be extended so long as the rating of the Securities is
under publicly announced consideration for possible downgrade below investment
grade by any of the Rating Agencies); provided that a Below Investment Grade
Rating Event otherwise arising by virtue of a particular reduction in rating
shall not be deemed to have occurred in respect of a particular Change of
Control (and thus shall not be deemed a Below Investment Grade Rating Event for
purposes of the definition of Change of Control Triggering Event) if the Rating
Agencies making the reduction in rating to which this definition would
otherwise apply do not announce or publicly confirm or inform the Trustee in
writing at the 

 

10

 

Company’s request that the reduction was the result, in whole or in
part, of any event or circumstance comprised of or arising as a result of, or
in respect of, the applicable Change of Control (whether or not the applicable
Change of Control shall have occurred at the time of the Below Investment Grade
Rating Event).

 

“Change
of Control” means the occurrence of any of the following:  (1) the direct or indirect sale,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of the Company and its
subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3) of
the Exchange Act) other than the Company or one of its subsidiaries; (2) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” (as that term is used
in Section 13(d)(3) of the Exchange Act) becomes the beneficial
owner, directly or indirectly, of more than 50% of the then outstanding number
of shares of the Company’s voting stock; or (3) the first day on which a
majority of the members of the Company’s Board of Directors are not Continuing
Directors.  Notwithstanding the foregoing,
a transaction will not be deemed to involve a Change of Control if (1) the
Company becomes a wholly owned subsidiary of a holding company that has agreed
to be bound by the terms of the Securities and (2) the Holders of the
voting stock of such holding company immediately following that transaction are
substantially the same as the Holders of the Company’s voting stock immediately
prior to that transaction.

 

“Change of Control Triggering Event” means the occurrence of both a
Change of Control and a Below Investment Grade Rating Event.

 

“Continuing
Directors” means, as of any date of determination, members of the Board of
Directors of the Company who (1) were members of such Board of Directors
on the date of original issuance of the Securities; or (2) were nominated
for election or elected to such Board of Directors with the approval of a
majority of the continuing directors under clause (1) or (2) of this
definition who were members of such Board of Directors at the time of such
nomination or election (either by a specific vote or by approval of the Company’s
proxy statement in which such member was named as a nominee for election as a
director, without objection to such nomination).

 

“Fitch” means Fitch, Inc.

 

“Investment Grade Rating” means a rating equal to or higher than Baa3
(or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P and
Fitch, and the equivalent investment grade credit rating from any replacement
rating agency or rating agencies selected by the Company.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Person” means any individual, partnership, corporation, limited
liability company, joint stock company, business trust, trust, unincorporated
association, joint venture or other entity, or a government or political
subdivision or agency thereof.

 

11

 

“Rating Agencies” means (1) each of Fitch, Moody’s and S&P;
and (2) if Fitch, Moody’s or S&P ceases to rate the Securities or
fails to make a rating of the Securities publicly available for reasons outside
of the Company’s control, a “nationally recognized statistical rating
organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under
the Exchange Act, selected by the Company (as certified by a Board Resolution)
as a replacement agency for Fitch, Moody’s or S&P, or any of them, as the
case may be.

 

“S&P” means Standard & Poor’s Ratings Services, a division
of The McGraw-Hill Companies, Inc.

 

The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Security or (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.

 

If an Event of Default shall occur and be continuing, the principal of
all Securities of this series may be declared due and payable in the manner and
with the effect provided in the Indenture.

 

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of 50% in aggregate principal amount of the
Securities at the time Outstanding of each series to be affected.  The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all the Securities of such series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences.  Any
such consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
therefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Security.

 

As set forth in, and subject to, the provisions of the Indenture, no
Holder of any Security will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default, the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall not have received from the Holders of a majority in principal
amount of the Outstanding Securities a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations do not apply to a suit instituted by the
Holder hereof for the enforcement of payment of the principal of (and premium,
if any) or any interest on this Security on or after the respective due dates
expressed herein.

 

12

 

No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

 

As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of like tenor,
of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.

 

The Securities are issuable only in registered form without coupons in
denominations of $2,000 and integral multiples of $1,000.  As provided in the Indenture and subject to
certain limitations therein set forth, Securities are exchangeable for a like
aggregate principal amount of Securities of like tenor, of a different
authorized denomination, as requested by the Holder surrendering the same.

 

Except where otherwise specifically provided in the Indenture, no
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

 

Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for
all purposes, whether or not this Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.

 

All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

 

	
  Section 204.

  	
   Form of Guarantee.

  

 

The form of Guarantee shall be set forth on the Securities
substantially as follows:

 

GUARANTEE

 

For value received, each of the undersigned hereby absolutely, fully
and unconditionally and irrevocably guarantees, jointly and severally with each
other Guarantor, to the holder of the Security on which this Guarantee is
endorsed the payment of principal of, premium, if any, and 

 

13

 

interest on such Security in the amounts and at the time when due and
payable whether by declaration thereof, or otherwise, and interest on the
overdue principal and interest, if any, of such Security, if lawful, and the
payment or performance of all other obligations of the Company under the Indenture
or such Security, to the holder of such Security and the Trustee, all in
accordance with and subject to the terms and limitations of such Security and Article Five
of the Twenty-Second Supplemental Indenture to the Indenture.  This Guarantee will not become effective
until the Trustee duly executes the certificate of authentication on this
Guarantee.  This Guarantee shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of law principles thereof.

 

Dated: October 1, 2009

 

	
   

  	
  Each
  of the Guarantors Listed on Schedule I

  
	
   

  	
  hereto,
  as Guarantor of the Securities

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul
  W. Heldman

  
	
   

  	
   

  	
  Title:

  	
  President/Vice
  President

  
	
   

  	
   

  
	
   

  	
  QUEEN CITY ASSURANCE,
  INC.,

  
	
   

  	
  as Guarantor of the
  Securities

  
	
   

  	
  RJD ASSURANCE, INC.,

  
	
   

  	
  as Guarantor of the
  Securities

  
	
   

  	
  VINE COURT ASSURANCE
  INCORPORATED,

  
	
   

  	
  as Guarantor of the
  Securities

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce
  M. Gack

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  

 

14

 

This
is one of the Guarantees referred to in the within mentioned Indenture.

 

	
  Attest:

  	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
  as
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

15

 

SCHEDULE I

 

Guarantors

 

	
  Name
  of Guarantor

  	
   

  	
  State of Organization

  
	
   

  	
   

  	
   

  
	
  Alpha
  Beta Company

  	
   

  	
  California

  
	
  Bay
  Area Warehouse Stores, Inc.

  	
   

  	
  California

  
	
  Bell
  Markets, Inc.

  	
   

  	
  California

  
	
  Cala
  Co.

  	
   

  	
  Delaware

  
	
  Cala
  Foods, Inc.

  	
   

  	
  California

  
	
  CB&S
  Advertising Agency, Inc.

  	
   

  	
  Oregon

  
	
  Crawford
  Stores, Inc.

  	
   

  	
  California

  
	
  Dillon
  Companies, Inc.

  	
   

  	
  Kansas

  
	
  Dillon
  Real Estate Co., Inc.

  	
   

  	
  Kansas

  
	
  Distribution
  Trucking Company

  	
   

  	
  Oregon

  
	
  F4L
  L.P.

  	
   

  	
  Ohio

  
	
  FM, Inc.

  	
   

  	
  Utah

  
	
  FMJ, Inc.

  	
   

  	
  Delaware

  
	
  Food
  4 Less GM, Inc.

  	
   

  	
  California

  
	
  Food
  4 Less Holdings, Inc.

  	
   

  	
  Delaware

  
	
  Food
  4 Less Merchandising, Inc.

  	
   

  	
  California

  
	
  Food
  4 Less of California, Inc.

  	
   

  	
  California

  
	
  Food
  4 Less of Southern California, Inc.

  	
   

  	
  Delaware

  
	
  Fred
  Meyer, Inc.

  	
   

  	
  Delaware

  
	
  Fred
  Meyer Jewelers, Inc.

  	
   

  	
  California

  
	
  Fred
  Meyer Stores, Inc.

  	
   

  	
  Ohio

  
	
  Henpil, Inc.

  	
   

  	
  Texas

  
	
  Hughes
  Markets, Inc.

  	
   

  	
  California

  
	
  Hughes
  Realty, Inc.

  	
   

  	
  California

  
	
  Inter-American
  Foods, Inc.

  	
   

  	
  Ohio

  
	
  Junior
  Food Stores of West Florida, Inc.

  	
   

  	
  Florida

  
	
  J.V.
  Distributing, Inc.

  	
   

  	
  Michigan

  
	
  KRGP
  Inc.

  	
   

  	
  Ohio

  
	
  KRLP
  Inc.

  	
   

  	
  Ohio

  
	
  The
  Kroger Co. of Michigan

  	
   

  	
  Michigan

  
	
  Kroger
  Dedicated Logistics Co.

  	
   

  	
  Ohio

  
	
  Kroger
  Group Cooperative, Inc.

  	
   

  	
  Ohio

  
	
  Kroger
  Limited Partnership I

  	
   

  	
  Ohio

  
	
  Kroger
  Limited Partnership II

  	
   

  	
  Ohio

  
	
  Kroger
  Texas L.P.

  	
   

  	
  Ohio

  
	
  Kwik
  Shop, Inc.

  	
   

  	
  Kansas

  
	
  Mini
  Mart, Inc.

  	
   

  	
  Wyoming

  
	
  Peyton’s-Southeastern, Inc.

  	
   

  	
  Tennessee

  

 

16

 

	
  Name
  of Guarantor

  	
   

  	
  State of Organization

  
	
   

  	
   

  	
   

  
	
  Quik
  Stop Markets, Inc.

  	
   

  	
  California

  
	
  Ralphs
  Grocery Company

  	
   

  	
  Ohio

  
	
  Rocket
  Newco, Inc.

  	
   

  	
  Texas

  
	
  Second
  Story, Inc.

  	
   

  	
  Washington

  
	
  Smith’s
  Beverage of Wyoming, Inc.

  	
   

  	
  Wyoming

  
	
  Smith’s
  Food & Drug Centers, Inc.

  	
   

  	
  Ohio

  
	
  THGP
  Co., Inc.

  	
   

  	
  Pennsylvania

  
	
  THLP
  Co., Inc.

  	
   

  	
  Pennsylvania

  
	
  Topvalco, Inc.

  	
   

  	
  Ohio

  
	
  Turkey
  Hill, L.P.

  	
   

  	
  Pennsylvania

  

 

17

 

ARTICLE
THREE

 

THE
SERIES OF SECURITIES

 

Section 301.                              Title and Terms.

 

There shall be a series of Securities designated as the “3.90% Senior
Notes due 2015” of the Company.  Their
Stated Maturity shall be October 1, 2015, and they shall bear interest at the
rate of 3.90% per annum.

 

Interest on the Securities of this series will be payable semi-annually
on April 1 and October 1 of each year, commencing April 1, 2010,
until the principal thereof is made available for payment.  Interest on the Securities of this series
will be computed on the basis of a 360-day year of twelve 30-day months.  The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will be paid to the Person
in whose name the Securities of this series (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.

 

In the case where any Interest Payment Date or the maturity date of the
Securities of this series does not fall on a Business Day, payment of interest
or principal otherwise payable on such date need not be made on such day, but
may be made on the next succeeding Business Day with the same force and effect
as if made on such Interest Payment Date or the maturity date of the Securities
of this series.

 

The aggregate principal amount of Securities of this series which may
be authenticated and delivered under this Twenty-Second Supplemental Indenture
is initially limited to $500,000,000, except for Securities authenticated and
delivered upon registration or transfer of, or in exchange for, or in lieu of,
other Securities of this series pursuant to Section 304, 305 and 306 of
the Indenture and except for any Securities of this series which, pursuant to Section 303
of the Indenture, are deemed never to have been authenticated and delivered
under the Indenture. Notwithstanding the foregoing, the Company may from time
to time, without notice to or consent of the registered holders of the
Securities issue further Securities (“Additional Securities”). The Additional
Securities will rank equal with the Securities in all respects (or in all
respects other than the payment of interest accruing prior to the issue date of
the Additional Securities, or except for the first payment of interest
following the issue date of the Additional Securities). The Additional
Securities may be consolidated and form a single series with the Securities and
may have the same terms as to status, redemption, or otherwise, as the
Securities.

 

The Securities of this series will be represented by one or more Global
Securities representing the entire $500,000,000 aggregate principal amount of
the Securities of this series

 

18

 

(as
such amount may be increased by the Additional Securities), and the Depositary
with respect to such Global Security or Global Securities will be The
Depository Trust Company.

 

The Place of Payment for the principal of (and premium, if any) and
interest on the Securities of this series shall be the office or agency of the
Company in the City of Cincinnati, State of Ohio, maintained for such purpose,
which shall be the Corporate Trust Office of the Trustee and at any other
office or agency maintained by the Company for such purpose; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.

 

The Securities of this series are redeemable prior to maturity at the
option of the Company as provided in this Twenty-Second Supplemental Indenture.

 

The Securities of this series are not subject to a sinking fund and the
provisions of Section 501(3) and Article Twelve of the Indenture
shall not be applicable to the Securities of this series.

 

The Securities of this series are subject to defeasance at the option
of the Company as provided in this Twenty-Second Supplemental Indenture.

 

ARTICLE
FOUR

 

MODIFICATIONS
AND ADDITIONS TO THE INDENTURE

 

Section 401.                              Modifications
to the Consolidation, Merger,

Conveyance, Transfer or Lease Provisions.

 

With respect to the Securities of this series, Section 801 of the
Indenture shall be deleted in its entirety and the following shall be
substituted therefor:

 

“Section 801. Covenant Not to Merge,
Consolidate, Sell or Convey Property Except Under Certain Conditions.

 

 The Company covenants that it will not merge with or into or
consolidate with any corporation, partnership, or other entity or sell, lease
or convey all or substantially all of its assets to any other Person, unless (i) either
the Company shall be the continuing corporation, or the successor entity or the
Person which acquires by sale, lease or conveyance all or substantially all the
assets of the Company (if other than the Company) shall be a corporation or
partnership organized under the laws of the United States of America or any
State thereof or the District of Columbia and shall expressly assume all
obligations of the Company under this Indenture and the Securities of the
series created by the 

 

19

 

Twenty-Second Supplemental Indenture, including the due and punctual
payment of the principal of and interest on all the Securities of the series
created by the Twenty-Second Supplemental Indenture according to their tenor,
and the due and punctual performance and observance of all of the covenants and
conditions of the Indenture to be performed or observed by the Company, by
supplemental indenture in form satisfactory to the Trustee, executed and
delivered to the Trustee  by such entity,
and (ii) the Company, such person or such successor entity, as the case
may be, shall not, immediately after such merger or consolidation, or such
sale, lease or conveyance, be in default in the performance of any such
covenant or condition and, immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing.

 

Section 802.           Successor
Substituted

 

 Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any sale, lease or conveyance of all or substantially
all of the assets of the Company in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company is
merged or to which such sale, lease or conveyance is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under
this Indenture and the Securities.”

 

Section 402.                              Other
Modifications.

 

With respect to the Securities of this series, the Indenture shall be
modified as follows:

 

(a)       The eighth paragraph of Section 305
of the Indenture shall be modified by inserting 
“, and a successor Depositary is not appointed by the Company within 90
days” at the end of clause (i) in such paragraph; and

 

(b)     Section 401 of the
Indenture shall be modified by adding to the end of such Section the
following paragraph:

 

“For the purpose of this Section 401,
trust funds may consist of (A) money in an amount, or (B) U.S.
Government Obligations (as defined in Section 1304) which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide,  not
later than one day before the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, the principal of, premium, if
any, and each installment of interest on the Securities of this series on the 

 

20

 

Stated Maturity of such principal or installment of interest on the day
on which such payments are due and payable in accordance with the terms of this
Indenture and of such Securities of this series.”

 

Section 403.                              Additional
Covenants; Defeasance and Covenant Defeasance.

 

(a)  With respect to the Securities of this series, the following
provisions shall be added as Sections 1009, 1010 and 1011 and as Article Thirteen
(Section references contained in these additional provisions are to the
Indenture as supplemented by this Twenty-Second Supplemental Indenture):

 

“Section 1009.  Limitations on Liens.

 

 After the date hereof and so
long as any Securities of the series created by the Twenty-Second Supplemental
Indenture are Outstanding, the Company will not issue, assume or guarantee, and
will not permit any Restricted Subsidiary to issue, assume or guarantee, any
Indebtedness which is secured by a mortgage, pledge, security interest, lien or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any of the foregoing) (each being hereinafter referred to as a “lien” or “liens”)
of or upon any Operating Property or Operating Asset, whether now owned or
hereafter acquired, of the Company or any Restricted Subsidiary without
effectively providing that the Securities of the series created by the
Twenty-Second Supplemental Indenture (together with, if the Company shall so
determine, any other Indebtedness of the Company ranking equally with the
Securities) shall be equally and ratably secured by a lien on such assets
ranking ratably with and equal to (or at the Company’s option prior to) such
secured Indebtedness; provided that the foregoing restriction shall not apply
to:

 

(a)    liens on any property or assets of any corporation
existing at the time such corporation becomes a Restricted Subsidiary provided
that such lien does not extend to any other property of the Company or any of
its Restricted Subsidiaries;

 

(b)    liens on any property or assets (including stock)
existing at the time of acquisition of such property or assets by the Company
or a Restricted Subsidiary, or liens to secure the payment of all or any part
of the purchase price of such property or assets (including stock) upon the
acquisition of such property or assets by the Company or a Restricted
Subsidiary or to secure any indebtedness incurred, assumed or guaranteed by the
Company or a Restricted Subsidiary for the purpose of financing all or any part
of the purchase price of such property or, in the case of real property,
construction or improvements thereon or attaching to property substituted by
the Company to obtain the release of a lien on other property of the Company on
which a lien then exists, which indebtedness is incurred, assumed or guaranteed
prior to, at the time of, or within 18 months after such acquisition (or in the
case of real property, the completion of construction (including any
improvements on an existing asset) or 

 

21

 

commencement of full operation at such property, whichever is later
(which in the case of a retail store is the opening of the store for business
to the public)); provided that in the case of any such acquisition,
construction or improvement, the lien shall not apply to any other property or
assets theretofore owned by the Company or a Restricted Subsidiary;

 

(c)    liens on any property or assets to secure
Indebtedness of a Restricted Subsidiary to the Company or to another Restricted
Subsidiary;

 

(d)    liens on any property or assets of a corporation
existing at the time such corporation is merged into or consolidated with the
Company or a Restricted Subsidiary or at the time of a purchase, lease or other
acquisition of the assets of a corporation or firm as an entirety or
substantially as an entirety by the Company or a Restricted Subsidiary provided
that such lien does not extend to any other property of the Company or any of
its Restricted Subsidiaries;

 

(e)    liens on any property or assets of the Company or
a Restricted Subsidiary in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political subdivision
of the United States of America or any State thereof, or in favor of any other
country, or any political subdivision thereof, to secure partial, progress,
advance or other payments pursuant to any contract or statute or to secure any
Indebtedness incurred or guaranteed for the purpose of financing all or any
part of the purchase price (or, in the case of real property, the cost of
construction) of the property or assets subject to such liens (including, but
not limited to, liens incurred in connection with pollution control, industrial
revenue or similar financings);

 

(f)   liens
existing on properties or assets of the Company or any Restricted Subsidiary
existing on the date hereof; provided that such liens secure only those
obligations which they secure on the date hereof or any extension, renewal or
replacement thereof;

 

(g)   any
extension, renewal or replacement (or successive extensions, renewals or
replacements) in whole or in part, of any lien referred to in the foregoing
clauses (a) through (f), inclusive; provided that such extension, renewal
or replacement shall be limited to all or a part of the property or assets
which secured the lien so extended, renewed or replaced (plus improvements and
construction on real property);

 

(h)    liens imposed by law, such as mechanics’, workmen’s,
repairmen’s, materialmen’s, carriers’, warehouseman’s, vendors’, or other
similar liens arising in the ordinary course of business of the Company or a
Restricted Subsidiary, or governmental (federal, state or municipal) liens
arising out of contracts for the sale of products or services by the Company or
any Restricted Subsidiary, or deposits or pledges to obtain the release of any
of the foregoing liens;

 

22

 

(i)   pledges,
liens or deposits under worker’s compensation laws or similar legislation and
liens or judgments thereunder which are not currently dischargeable, or in
connection with bids, tenders, contracts (other than for the payment of money)
or leases to which the Company or any Restricted Subsidiary is a party, or to
secure the public or statutory obligations of the Company or any Restricted
Subsidiary, or in connection with obtaining or maintaining self-insurance or to
obtain the benefits of any law, regulation or arrangement pertaining to
unemployment insurance, old age pensions, social security or similar matters,
or to secure surety, appeal or customs bonds to which the Company or any
Restricted Subsidiary is a party, or in litigation or other proceedings such
as, but not limited to, interpleader proceedings, and other similar pledges,
liens or deposits made or incurred in the ordinary course of business;

 

(j)   liens
created by or resulting from any litigation or other proceeding which is being
contested in good faith by appropriate proceedings, including liens arising out
of judgments or awards against the Company or any Restricted Subsidiary with
respect to which the Company or such Restricted Subsidiary is in good faith
prosecuting an appeal or proceedings for review or for which the time to make
an appeal has not yet expired; or final unappealable judgment liens which are
satisfied within 30 days of the date of judgment; or liens incurred by the
Company or any Restricted Subsidiary for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding to which the
Company or such Restricted Subsidiary is a party;

 

(k)   liens
for taxes or assessments or governmental charges or levies not yet due or
delinquent, or which can thereafter be paid without penalty, or which are being
contested in good faith by appropriate proceedings; landlord’s liens on
property held under lease; and any other liens or charges incidental to the
conduct of the business of the Company or any Restricted Subsidiary or the
ownership of the property or assets of any of them which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit
and which do not, in the opinion of the Company, materially impair the use of
such property or assets in the operation of the business of the Company or such
Restricted Subsidiary or the value of such property or assets for the purposes
of such business; or

 

(l)    liens not permitted by clauses (a) through (k) above
if at the time of, and after giving effect to, the creation or assumption of
any such lien, the aggregate amount of all Indebtedness of the Company and its
Restricted Subsidiaries secured by all such liens not so permitted by clauses (a) through
(k) above together with the Attributable Debt in respect of Sale and
Lease-Back Transactions permitted  by
paragraph (a) of Section 1010 does not exceed 10% of Consolidated Net
Tangible Assets.

 

Section 1010.  Limitations
on Sale and Lease-Back Transactions.

 

After the date hereof and so
long as any Securities of the series created by the Twenty-Second Supplemental
Indenture are Outstanding, the Company agrees that it 

 

23

 

will not, and will not permit any Restricted Subsidiary to, enter into
any arrangement with any Person providing for the leasing by the Company or a
Restricted Subsidiary of any Operating Property or Operating Asset (other than
any such arrangement involving a lease for a term, including renewal rights,
for not more than 3 years and leases between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries), whereby such Operating Property
or Operating Asset has  been or is to be
sold or transferred by the Company or any Restricted Subsidiary to such Person
(herein referred to as a “Sale and Lease-Back Transaction”), unless:

 

(a)          the Company or such Restricted Subsidiary would, at the
time of entering into a Sale and Lease-Back transaction, be entitled to incur
Indebtedness secured  by a lien on the
Operating Property or Operating Asset to be leased in an amount at least equal
to the Attributable Debt in respect of such Sale and Lease-Back Transaction
without equally and ratably securing the Securities of the series created by
the Twenty-Second Supplemental Indenture pursuant to Section 1009; or

 

(b)          the proceeds of the sale of the Operating Property or
Operating Asset to be leased are at least equal to the fair market value of
such Operating Property or Operating Asset (as determined by the chief
financial officer or chief accounting officer of the Company) and an amount in
cash equal to the net proceeds from the sale of the Operating Property or
Operating Asset so leased is applied, within 180 days of the effective date of
any such Sale and Lease-Back Transaction, to the purchase or acquisition (or,
in the case of Operating Property, the construction) of Operating Property or
Operating Assets or to the retirement, repurchase, redemption or repayment
(other than at maturity or pursuant to a mandatory sinking fund or redemption
provision and other than Indebtedness owned by the Company or any Restricted
Subsidiary) of Securities of the series created by the Twenty-Second
Supplemental Indenture or of Funded Indebtedness of the Company ranking on a
parity with or senior to the Securities of the series created by the
Twenty-Second Supplemental Indenture, or in the case of a Sale and Lease-Back
Transaction by a Restricted Subsidiary, of Funded Indebtedness of such
Restricted Subsidiary; provided that in connection with any such retirement, any
related loan commitment or the like shall be reduced in an amount equal to the
principal amount so retired.

 

 The foregoing restriction shall not apply to, in the case of any
Operating Property or Operating Asset acquired or constructed subsequent to the
date eighteen months prior to the date of this Indenture, any Sale and
Lease-Back Transaction with respect to such Operating Asset or Operating
Property (including presently owned real property upon which such Operating
Property is to be constructed) if a binding commitment is entered into with
respect to such Sale and Lease-Back Transaction within 18 months after the
later of the acquisition of the Operating Property or Operating Asset or the
completion of improvements or construction thereon or commencement of full
operations at such Operating Property (which in the case of a retail store is
the opening of the store for business to the public).

 

24

 

Section 1011.  Change of Control.

 

If a Change of Control Triggering Event
occurs, unless the Company has exercised its right to redeem the Securities,
Holders of Securities will have the right to require the Company to repurchase
all or any part (equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of their Securities pursuant to the offer described below (the “Change
of Control Offer”).  In the Change of
Control Offer, the Company shall offer payment in cash equal to 101% of the
aggregate principal amount of Securities repurchased plus accrued and unpaid
interest, if any, on the Securities repurchased, to the date of purchase (the “Change
of Control Payment”).  Within 30 days
following any Change of Control Triggering Event, or, at the Company’s option,
prior to any Change of Control, but after the public announcement of the Change
of Control, the Company shall mail a notice to Holders of Securities describing
the transaction or transactions that constitute or may constitute the Change of
Control Triggering Event and offering to repurchase the Securities on the date
specified in the notice, which date will be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the “Change of Control
Payment Date”), pursuant to the procedures described herein and in such
notice.  The notice shall, if mailed
prior to the date of consummation of the Change of Control, state that the
offer to purchase is conditioned on the Change of Control Triggering Event
occurring on or prior to the payment date specified in the notice.  The Company shall comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and any other securities laws and regulations
thereunder to the extent those laws and regulations are applicable in
connection with the repurchase of the Securities as a result of a Change of
Control Triggering Event.  To the extent
that the provisions of any securities laws or regulations conflict with the
Change of Control provisions herein, the Company shall be required to comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the Change of Control provisions herein by
virtue of such conflicts.

 

On the Change of Control
Payment Date, the Company shall, to the extent lawful, (i) accept for
payment all Securities or portions of Securities properly tendered pursuant to
the Change of Control Offer; (ii) deposit with the paying agent an amount
equal to the Change of Control Payment in respect of all Securities or portions
of Securities properly tendered; and (iii) deliver or cause to be
delivered to the Trustee the Securities properly accepted, together with an
officers’ certificate stating the aggregate principal amount of Securities or
portions of Securities being purchased.

 

“Below Investment Grade
Rating Event” means the Securities are rated below an Investment Grade Rating
by any two of the three Rating Agencies (as defined below) on any date from the
date of the public notice of an arrangement that could result in a Change of
Control until the end of the 60-day period following public notice of the
occurrence of the Change of Control (which 60-day period shall be extended so
long as the rating of the Securities is under publicly announced consideration
for possible 

 

25

 

downgrade below investment grade by any of the Rating Agencies);
provided that a Below Investment Grade Rating Event otherwise arising by virtue
of a particular reduction in rating shall not be deemed to have occurred in
respect of a particular Change of Control (and thus shall not be deemed a Below
Investment Grade Rating Event for purposes of the definition of Change of
Control Triggering Event) if the Rating Agencies making the reduction in rating
to which this definition would otherwise apply do not announce or publicly
confirm or inform the Trustee in writing at the Company’s request that the
reduction was the result, in whole or in part, of any event or circumstance
comprised of or arising as a result of, or in respect of, the applicable Change
of Control (whether or not the applicable Change of Control shall have occurred
at the time of the Below Investment Grade Rating Event).

 

“Change of Control” means the occurrence of any of the following:  (1) the direct or indirect sale,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of the Company and its
subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3) of
the Exchange Act) other than the Company or one of its subsidiaries; (2) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” (as that term is used
in Section 13(d)(3) of the Exchange Act) becomes the beneficial
owner, directly or indirectly, of more than 50% of the then outstanding number
of shares of the Company’s voting stock; or (3) the first day on which a
majority of the members of the Company’s Board of Directors are not Continuing
Directors.  Notwithstanding the
foregoing, a transaction will not be deemed to involve a Change of Control if (1) the
Company becomes a wholly owned subsidiary of a holding company that has agreed
to be bound by the terms of the Securities and (2) the Holders of the
voting stock of such holding company immediately following that transaction are
substantially the same as the Holders of the Company’s voting stock immediately
prior to that transaction.

 

“Change of Control Triggering Event” means
the occurrence of both a Change of Control and a Below Investment Grade Rating
Event.

 

“Continuing Directors” means, as of any date of determination, members
of the Board of Directors of the Company who (1) were members of such
Board of Directors on the date of original issuance of the Securities; or (2) were
nominated for election or elected to such Board of Directors with the approval
of a majority of the continuing directors under clause (1) or (2) of
this definition who were members of such Board of Directors at the time of such
nomination or election (either by a specific vote or by approval of the Company’s
proxy statement in which such member was named as a nominee for election as a
director, without objection to such nomination).

 

“Fitch” means Fitch, Inc.

 

“Investment Grade Rating” means a rating
equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the
equivalent) by S&P and Fitch, and the 

 

26

 

equivalent investment grade credit rating from any replacement rating
agency or rating agencies selected by the Company.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Person” means any individual, partnership,
corporation, limited liability company, joint stock company, business trust,
trust, unincorporated association, joint venture or other entity, or a
government or political subdivision or agency thereof.

 

“Rating Agencies” means (1) each of
Fitch, Moody’s and S&P; and (2) if Fitch, Moody’s or S&P ceases to
rate the Securities or fails to make a rating of the Securities publicly
available for reasons outside of the Company’s control, a “nationally
recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under
the Exchange Act, selected by the Company (as certified by a Board Resolution)
as a replacement agency for Fitch, Moody’s or S&P, or any of them, as the
case may be.

 

“S&P” means Standard & Poor’s
Ratings Services, a division of The McGraw-Hill Companies, Inc.

 

ARTICLE THIRTEEN

 

DEFEASANCE AND COVENANT DEFEASANCE

 

Section 1301.  Company’s
Option to Effect Defeasance or Covenant Defeasance.

 

The Company may at its option by Board Resolution, at any time, elect
to have either Section 1302 or Section 1303 applied to the
Outstanding Securities of this series upon compliance with the conditions set
forth below in this Article Thirteen.

 

Section 1302.  Defeasance
and Discharge.

 

Upon the Company’s exercise of the option provided in Section 1301
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities of the series
created by the Twenty-Second Supplemental Indenture on the date the conditions
set forth below are satisfied (hereinafter, “Defeasance”).  For this purpose, such Defeasance means that
the Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of this series and to have satisfied
all its other obligations under such Securities of this series and this
Indenture insofar as such Securities of this series are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Securities of this series to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section,
payments in respect of the principal of (and premium, if any) and interest on
such securities when such payments are due, (B) the Company’s obligations
with respect to such Securities of

 

27

 

this
series under Sections 304, 305, 306, 1002 and 1003, (C) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (D) this
Article Thirteen.  Subject to
compliance with this Article Thirteen, the Company may exercise its option
under this Section 1302 notwithstanding the prior exercise of its option
under Section 1303.

 

Section 1303.  Covenant Defeasance.

 

Upon the Company’s exercise of the option provided in Section 1301
applicable to this Section, the Company shall be released from its obligations
under Section 501(4) (in respect of the covenants in Sections 1008
through 1010), Section 801 and Sections 1008 through 1010, the Securities
of this series and the Holders of Securities of this series, on and after the
date the conditions set forth below are satisfied (hereinafter, “covenant
Defeasance”).  For this purpose, such
covenant Defeasance means that the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or by reason of any reference in any
such Section to any other provision herein or in any other document, but
the remainder of this Indenture and such Securities of this series shall be
unaffected thereby.

 

Section 1304.  Conditions
to Defeasance or Covenant Defeasance.

 

The following shall be the conditions to application of either Section 1302
or Section 1303 to the Outstanding Securities of this series:

 

(1)          The Company shall
irrevocably have deposited or caused to be deposited with the Trustee (or
another trustee satisfying the requirements of Section 609 who shall agree
to comply with the provisions of this Article Thirteen applicable to it) as trust
funds in trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders of
such Securities of this series, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the principal
of, premium, if any, and each installment of interest on the Securities of this
series on the Stated Maturity of such principal or installment of interest on
the day on which such payments are due and payable 

 

28

 

in accordance with the terms of this Indenture and of such Securities
of this series.  For this purpose, “U.S.
Government Obligations” means securities that are (x) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (y) obligations of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the Company thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depositary receipt.

 

(2)          No Event of Default or event
which with notice or lapse of time or both would become an Event of Default
shall have occurred and be continuing on the date of such deposit or, insofar
as subsections 501(6) and (7) are concerned, at any time during the
period ending on the 121st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).

 

(3)          Such Defeasance or covenant
Defeasance shall not cause the Trustee to have a conflicting interest as
defined in Section 608 and for purposes of the Trust Indenture Act with
respect to any securities of the Company.

 

(4)          Such Defeasance or covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under, this Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound.

 

(5)          The Company shall have delivered
to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for relating to either the 

 

29

 

Defeasance under Section 1302 or the covenant Defeasance under Section 1303
(as the case may be) have been complied with.

 

(6)          In the case of an election
under Section 1302, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (x) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or (y) since
the date of this Twenty-Second Supplemental Indenture there has been a change
in the applicable Federal income tax law, in either case to the effect that and
based thereon such opinion shall confirm that, and in the case of an election
under Section 1303 the Company shall have delivered to the Trustee an
Opinion of Counsel stating that, the Holders of the Outstanding Securities of
this series will not recognize income, gain or loss for Federal income tax
purposes as a result of such Defeasance or covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Defeasance or covenant
Defeasance had not occurred.

 

Section 1305.  Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other Miscellaneous Provisions.

 

Subject to the provisions of the last
paragraph of Section 1003, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee—collectively, for purposes of this Section 1305, the “Trustee”)
pursuant to Section 1304 in respect of the Securities of this series shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Securities of this series and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such Securities
of this series, of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.

 

The Company shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 1304 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
Outstanding Securities of this series.

 

Anything in this Article Thirteen to the
contrary notwithstanding, the Trustee shall deliver or pay to the Company from
time to time upon Company Request any money or U.S. Government Obligations held
by it as provided in Section 1304 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount 

 

30

 

thereof which would then be required to be deposited to effect an
equivalent Defeasance or covenant Defeasance.

 

Section 1306.  Reinstatement.

 

If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1302 or 1303 by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company’s obligations under this
Indenture and the Securities of this series shall be revived and reinstated as
though no deposit had occurred pursuant to this Article Thirteen until
such time as the Trustee or Paying Agent is permitted to apply all such money
in accordance with Section 1302 or 1303; provided, however,
that if the Company makes any payment of principal of (and premium, if any) or
interest on any Security of this series following the reinstatement of its
obligations, the Company shall be subjugated to the rights of the Holders of
such Securities of this series to receive such payment from the money held by
the Trustee or the Paying Agent.”

 

Section 404.                              Redemption of
Securities.

 

With respect to Securities of this series, Section 1101 of the
Indenture shall be deleted in its entirety and the following shall be
substituted therefor:

 

“Section 1101.  Optional
Redemption.

 

The Securities will be redeemable, in whole or in part, at the option
of the Company at any time at a redemption price equal to the greater of (i) 100%
of the principal amount of such Securities or (ii) as determined by a
Quotation Agent, the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate plus 25 basis points
plus, in each case, accrued interest thereon to the date of redemption.”

 

ARTICLE
FIVE

 

GUARANTEE

 

Section 501.                              Guarantee.

 

Each Guarantor hereby jointly and severally fully and unconditionally
guarantees (each a “Guarantee”) to each Holder of a Security authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Indenture or the
Securities or the obligations of the Company or any other Guarantor to the
Holders or the Trustee hereunder or thereunder, that (a) the principal of,
premium, if any, and interest on the Securities will be duly and punctually
paid in full when due, whether at 

 

31

 

maturity, upon redemption, by acceleration or otherwise, and interest
on the overdue principal and (to the extent permitted by law) interest, if any,
on the Securities and all other obligations of the Company or the Guarantor to
the Holders of or the Trustee under the Indenture or the Securities hereunder
(including fees, expenses or others) (collectively, the “Obligations”) will be
promptly paid in full or performed, all in accordance with the terms of the
Indenture and the Securities; and (b) in case of any extension of time of
payment or renewal of any Obligations, the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at Stated Maturity, by acceleration or otherwise.  If the Company shall fail to pay when due, or
to perform, any Obligations, for whatever reason, each Guarantor shall be
obligated to pay, or to perform or cause the performance of, the same
immediately.  An Event of Default under
the Indenture or the Securities shall constitute an event of default under this
Guarantee, and shall entitle the Holders of Securities to accelerate the
Obligations of the Guarantor hereunder in the same manner and to the same
extent as the Obligations of the Company.

 

Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Securities or the Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Securities with respect to any
provisions of the Indenture or the Securities, any release of any other
Guarantor, the recovery of any judgment against the Company, any action to
enforce the same, whether or not a Guarantee is affixed to any particular
Security, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Guarantor.

 

Each Guarantor further agrees that, as between it, on the one hand, and
the Holders of Securities and the Trustee, on the other hand, (a) the
maturity of the Obligations may be accelerated as provided in Article Five
of the Indenture for the purposes of the Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations, and (b) in the event of any acceleration of such Obligations
as provided in Article Five of the Indenture, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantor
for the purposes of its Guarantee.

 

Section 502.                              Waiver of
Demand.

 

To the fullest extent permitted by applicable law, each of the
Guarantors waives presentment to, demand of payment from and protest of any of
the Obligations, and also waives notice of acceptance of its Guarantee and
notice of protest for nonpayment.

 

Section 503.                              Guarantee of
Payment.

 

Each of the Guarantors further agrees that its Guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be 

 

32

 

had by the Trustee or any Holder of the Securities to the security, if
any, held for payment of the Obligations.

 

Section 504.                              No Discharge or
Diminishment of Guarantee.

 

Subject to Section 510 of this Twenty-Second Supplemental
Indenture, the obligations of each of the Guarantors hereunder shall not be
subject to any reduction, limitation, impairment or for any reason (other than
the indefeasible payment in full in cash of the Obligations), including any
claim of waiver, release, surrender, alteration or compromise of any of the
Obligations, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.  Without limiting the generality of the
foregoing, the obligations of each of the Guarantors hereunder shall not be
discharged or impaired or otherwise affected by the failure of the Trustee or
any Holder of the Securities to assert any claim or demand or to enforce any
remedy under the Indenture or the Securities, any other guarantee or any other
agreement, by any waiver or modification of any provision of any thereof, by
any default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise operate as
a discharge of any Guarantor as a matter of law or equity (other than the
indefeasible payment in full in cash of all the Obligations).

 

Section 505.                              Defenses of
Company Waived.

 

To the extent permitted by applicable law, each of the Guarantors
waives any defense based on or arising out of any defense of the Company or any
other Guarantor or the unenforceability of the Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the
Company, other than final and indefeasible payment in full in cash of the
Obligations.  Each of the Guarantors
waives any defense arising out of any such election even though such election
operates to impair or to extinguish any right of reimbursement or subrogation
or other right or remedy of each of the Guarantors against the Company or any
security.

 

Section 506.                              Continued
Effectiveness.

 

Subject to Section 510 of this Twenty-Second Supplemental
Indenture, each of the Guarantors further agrees that its Guarantee hereunder
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by the Trustee or any
Holder of the Securities upon the bankruptcy or reorganization of the Company.

 

Section 507.                              Subrogation.

 

In furtherance of the foregoing and not in limitation of any other
right of each of the Guarantors by virtue hereof, upon the failure of the
Company to pay any Obligation when 

 

33

 

and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each of the Guarantors hereby promises
to and will, upon receipt of written demand by the Trustee or any Holder of the
Securities, forthwith pay, or cause to be paid, to the Holders in cash the
amount of such unpaid Obligations, and thereupon the Holders shall, assign
(except to the extent that such assignment would render a Guarantor a “creditor”
of the Company within the meaning of Section 547 of Title 11 of the United
States Code as now in effect or hereafter amended or any comparable provision
of any successor statute) the amount of the Obligations owed to it and paid by
such Guarantor pursuant to this Guarantee to such Guarantor, such assignment to
be pro rata to the extent the Obligations in question were discharged by
such Guarantor, or make such other disposition thereof as such Guarantor shall
direct (all without recourse to the Holders, and without any representation or
warranty by the Holders).  If (a) a
Guarantor shall make payment to the Holders of all or any part of the
Obligations and (b) all the Obligations and all other amounts payable
under this Twenty-Second Supplemental Indenture shall be indefeasibly paid in
full, the Trustee will, at such Guarantor’s request, execute and deliver to
such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Obligations resulting from such payment by
such Guarantor.

 

Section 508.                              Information.

 

Each of the Guarantors assumes all responsibility for being and keeping
itself informed of the Company’s financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Obligations and
the nature, scope and extent of the risks that each of the Guarantors assumes
and incurs hereunder, and agrees that the Trustee and the Holders of the Securities
will have no duty to advise the Guarantors of information known to it or any of
them regarding such circumstances or risks.

 

Section 509.                              Subordination.

 

Upon payment by any Guarantor of any sums to the Holders, as provided
above, all rights of such Guarantor against the Company, arising as a result
thereof by way of right of subrogation or otherwise, shall in all respects be
subordinated and junior in right of payment to the prior indefeasible payment
in full in cash of all the Obligations to the Trustee; provided, however,
that any right of subrogation that such Guarantor may have pursuant to this
Twenty-Second Supplemental Indenture is subject to Section 507 hereof.

 

Section 510.                              Termination.

 

A Guarantor shall, upon the occurrence of either of the following
events, be  automatically and
unconditionally released and discharged from all obligations under this
Twenty-Second Supplemental Indenture and its Guarantee without any action
required on the part of the Trustee or any Holder if such release and discharge
will not result in any downgrade 

 

34

 

in
the rating given to the Securities by Moody’s Investors Service and Standard
and Poor’s Rating Services:

 

(a)          upon any sale,
exchange, transfer or other disposition (by merger or otherwise) of all of the
Capital Stock of a Guarantor or all, or substantially all, of the assets of
such Guarantor, which sale or other disposition is otherwise in compliance with
the terms of the Indenture; provided, however, that such Guarantor shall not be
released and discharged from its obligations under this Twenty-Second
Supplemental Indenture and its Guarantee if, upon consummation of such sale,
exchange, transfer or other disposition (by merger or otherwise), such
Guarantor remains or becomes a Guarantor under any Credit Facility; or

 

(b)         at the request
of the Company, at any time that none of the Credit Facilities are guaranteed
by any Subsidiary of the Company.

 

The
Trustee shall deliver an appropriate instrument evidencing such release upon
receipt of a request of the Company accompanied by an Officers’ Certificate
certifying as to the compliance with this Section.  Any Guarantor not so released will remain
liable for the full amount of the principal of, premium, if any, and interest
on the Notes provided in this Twenty-Second Supplemental Indenture and its
Guarantee.

 

Section 511.                              Guarantees of
other Indebtedness.

 

As long as the Securities are guaranteed by the Guarantors, the Company
will cause each of its Subsidiaries that becomes a Guarantor in respect of (i) any
Indebtedness of the Company which is outstanding on the date hereof and (ii) any
Indebtedness incurred by the Company after the date hereof (other than in
respect of asset-backed securities), to include in any guarantee given by any
such Guarantor, provisions similar to those set forth in Section 510
hereof.

 

Section 512.                              Additional
Guarantors.

 

The Company will cause each of its Subsidiaries that becomes a
Guarantor in respect of any Indebtedness of the Company following the date
hereof to execute and deliver a supplemental indenture pursuant to which it
will become a Guarantor under this Twenty-Second Supplemental Indenture, if it
has not already done so or unless the Guarantor is prohibited from doing so by
applicable law or a provision of a contract to which it is a party or by which
it is bound.

 

Section 513.                              Limitation of
Guarantor’s Liability.

 

Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the Guarantee by
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Title 11 of the United States Code, the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any similar 

 

35

 

Federal
of state law.  To effectuate the
foregoing intention, the Holders and such Guarantor hereby irrevocably agree
that the obligations of such Guarantor under this Twenty-Second Supplemental
Indenture and its Guarantee shall be limited to the maximum amount which, after
giving effect to all other contingent and fixed liabilities of such Guarantor,
and after giving effect to any collections from or payments made by or on
behalf of, any other Guarantor in respect of the obligations of such Guarantor
under its Guarantee or pursuant to its contribution obligations under this
Twenty-Second Supplemental Indenture, will result in the obligations of such
Guarantor under its Guarantee not constituting such fraudulent transfer or conveyance.

 

Section 514.                              Contribution
from Other Guarantors.

 

Each Guarantor that makes a payment or distribution under its Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the net assets of
each Guarantor, determined in accordance with generally accepted accounting
principles in effect in the United States of America as of the date hereof.

 

Section 515.                              No Obligation
to Take Action Against the Company.

 

Neither the Trustee, any Holder nor any other Person shall have any
obligation to enforce or exhaust any rights or remedies or take any other steps
under any security for the Obligations or against the Company or any other
Person or any property of the Company or any other Person before the Trustee,
such Holder or such other Person is entitled to demand payment and performance
by any or all Guarantors of their liabilities and obligations under their
Guarantee.

 

Section 516.                              Dealing with
the Company and Others.

 

The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may:

 

(a)          grant time,
renewals, extensions, compromises, concessions, waivers, releases, discharges
and other indulgences to the Company or any other Person;

 

(b)         take or abstain
from taking security or collateral from the Company or from perfecting security
or collateral from the Company;

 

(c)          release,
discharge, compromise, realize, enforce or otherwise deal with or do any act or
thing in respect of (with or without consideration) any and all collateral,
mortgages or other security given by the Company or any third party with
respect to the Obligations;

 

(d)         accept
compromises or arrangements from the Company;

 

36

 

(e)          apply all
monies at any time received from the Company or from any security to such part
of the Obligations as the Holders may see fit or change any such application in
whole or in part from time to time as the Holders may see fit; and

 

(f)            otherwise deal
with, or waive or modify their right to deal with, the Company and all other
Persons and any security as the Holders or the Trustee may see fit.

 

Section 517.                              Execution and
Delivery of the Guarantee.

 

(a)          To further
evidence the Guarantee set forth in this Article Five, each Guarantor
hereby agrees that a notation of such Guarantee shall be endorsed on each
Security authenticated and delivered by the Trustee and executed by either
manual or facsimile signature of an officer of each Guarantor.  The corporate seal of a Guarantor may be
reproduced on the executed Guarantee and the execution thereof may be attested
to by any appropriate officer of the Guarantor, but neither such reproduction nor
such attestation is or shall be required.

 

(b)         Each of the
Guarantors hereby agrees that its Guarantee set forth in this Article Five
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee.

 

(c)          If an officer
of a Guarantor whose signature is on this Twenty-Second Supplemental Indenture
or a Guarantee no longer holds that office at the time the Trustee
authenticates such Guarantee or at any time thereafter, such Guarantor’s
Guarantee of such Security shall be valid nevertheless.

 

(d)     The delivery of any Security
by the Trustee, after the authentication thereof hereunder, shall constitute
due delivery of any Guarantee set forth in this Twenty-Second Supplemental
Indenture on behalf of each Guarantor.

 

ARTICLE
SIX

 

MISCELLANEOUS

 

Section 601.                              Miscellaneous.

 

(a)               The Trustee
accepts the trusts created by the Indenture, as supplemented by this
Twenty-Second Supplemental Indenture, and agrees to perform the same upon the
terms and conditions of the Indenture, as supplemented by this Twenty-Second
Supplemental Indenture.

 

(b)              The recitals
contained herein shall be taken as statements of the Company, and the Trustee
assumes no responsibility for their correctness.  The Trustee makes no representations as to
the validity or sufficiency of this Twenty-Second Supplemental Indenture.

 

37

 

(c)     All capitalized terms used
and not defined herein shall have the respective meanings assigned to them in
the Indenture.

 

(d)     Each of the Company and
the Trustee makes and reaffirms as of the date of execution of this
Twenty-Second Supplemental Indenture all of its respective representations,
covenants and agreements set forth in the Indenture.

 

(e)     All covenants and
agreements in this Twenty-Second Supplemental Indenture by the Company or the
Trustee and each Guarantor shall bind its respective successors and assigns,
whether so expressed or not.

 

(f)      In case any provisions in
this Twenty-Second Supplemental Indenture shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

(g)     Nothing in this
Twenty-Second Supplemental Indenture, express or implied, shall give to any
Person, other than the parties hereto and their successors under the Indenture
and the Holders of the series of Securities created hereby, any benefit or any
legal or equitable right, remedy or claim under the Indenture.

 

(h)     If any provision hereof
limits, qualifies or conflicts with a provision of the Trust Indenture Act of
1939, as may be amended from time to time, that is required under such Act to
be a part of and govern this Twenty-Second Supplemental Indenture, the latter
provision shall control.  If any
provision hereof modifies or excludes any provision of such Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Twenty-Second Supplemental Indenture as so modified or excluded, as the case
may be.

 

(i)      This Twenty-Second
Supplemental Indenture shall be governed by and construed in accordance with
the laws of the State of New York.

 

(j)      All amendments to the
Indenture made hereby shall have effect only with respect to the series of
Securities created hereby.

 

(k)     All provisions of this
Twenty-Second Supplemental Indenture shall be deemed to be incorporated in, and
made a part of, the Indenture; and the Indenture, as supplemented by this
Twenty-Second Supplemental Indenture, shall be read, taken and construed as one
and the same instrument.

 

This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

 

38

 

IN WITNESS WHEREOF, the
parties hereto have caused this Indenture to be duly executed as of the day and
year first above written.

 

	
   

  	
   

  	
  THE KROGER CO.

  
	
   

  	
   

  	
  Each of the Guarantors Listed on Schedule I

  
	
   

  	
   

  	
  hereto, as Guarantor of the Securities

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul W. Heldman

  
	
   

  	
   

  	
   

  	
  Name: Paul W. Heldman

  
	
   

  	
   

  	
   

  	
  Title:   President/Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  QUEEN CITY ASSURANCE,
  INC.,

  
	
   

  	
   

  	
  as Guarantor of the
  Securities

  
	
   

  	
   

  	
  RJD ASSURANCE, INC.,

  
	
   

  	
   

  	
  as Guarantor of the Securities

  
	
   

  	
   

  	
  VINE COURT ASSURANCE INCORPORATED,

  
	
   

  	
   

  	
  as Guarantor of the Securities

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Bruce M. Gack

  
	
   

  	
   

  	
   

  	
  Name: Bruce M. Gack

  
	
   

  	
   

  	
   

  	
  Title:   Senior
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  U.S. BANK NATIONAL
  ASSOCIATION,

  
	
   

  	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ William E. Sicking

  
	
   

  	
   

  	
   

  	
  Name: William E. Sicking

  
	
   

  	
   

  	
   

  	
  Title:   Vice
  President and Senior Trust Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Jack Hannah

  	
   

  	
   

  
	
  Jack
  Hannah

  	
   

  	
   

  
	
  Assistant
  Vice President

  	
   

  	
   

  
					

 

39

 

SCHEDULE I

 

Guarantors

 

	
  Name
  of Guarantor

  	
   

  	
  State of Organization

  
	
   

  	
   

  	
   

  
	
  Alpha
  Beta Company

  	
   

  	
  California

  
	
  Bay
  Area Warehouse Stores, Inc.

  	
   

  	
  California

  
	
  Bell
  Markets, Inc.

  	
   

  	
  California

  
	
  Cala
  Co.

  	
   

  	
  Delaware

  
	
  Cala
  Foods, Inc.

  	
   

  	
  California

  
	
  CB&S
  Advertising Agency, Inc.

  	
   

  	
  Oregon

  
	
  Crawford
  Stores, Inc.

  	
   

  	
  California

  
	
  Dillon
  Companies, Inc.

  	
   

  	
  Kansas

  
	
  Dillon
  Real Estate Co., Inc.

  	
   

  	
  Kansas

  
	
  Distribution
  Trucking Company

  	
   

  	
  Oregon

  
	
  F4L
  L.P.

  	
   

  	
  Ohio

  
	
  FM, Inc.

  	
   

  	
  Utah

  
	
  FMJ, Inc.

  	
   

  	
  Delaware

  
	
  Food
  4 Less GM, Inc.

  	
   

  	
  California

  
	
  Food
  4 Less Holdings, Inc.

  	
   

  	
  Delaware

  
	
  Food
  4 Less Merchandising, Inc.

  	
   

  	
  California

  
	
  Food
  4 Less of California, Inc.

  	
   

  	
  California

  
	
  Food
  4 Less of Southern California, Inc.

  	
   

  	
  Delaware

  
	
  Fred
  Meyer, Inc.

  	
   

  	
  Delaware

  
	
  Fred
  Meyer Jewelers, Inc.

  	
   

  	
  California

  
	
  Fred
  Meyer Stores, Inc.

  	
   

  	
  Ohio

  
	
  Henpil, Inc.

  	
   

  	
  Texas

  
	
  Hughes
  Markets, Inc.

  	
   

  	
  California

  
	
  Hughes
  Realty, Inc.

  	
   

  	
  California

  
	
  Inter-American
  Foods, Inc.

  	
   

  	
  Ohio

  
	
  Junior
  Food Stores of West Florida, Inc.

  	
   

  	
  Florida

  
	
  J.V.
  Distributing, Inc.

  	
   

  	
  Michigan

  
	
  KRGP
  Inc.

  	
   

  	
  Ohio

  
	
  KRLP
  Inc.

  	
   

  	
  Ohio

  
	
  The
  Kroger Co. of Michigan

  	
   

  	
  Michigan

  
	
  Kroger
  Dedicated Logistics Co.

  	
   

  	
  Ohio

  
	
  Kroger
  Group Cooperative, Inc.

  	
   

  	
  Ohio

  
	
  Kroger
  Limited Partnership I

  	
   

  	
  Ohio

  
	
  Kroger
  Limited Partnership II

  	
   

  	
  Ohio

  
	
  Kroger
  Texas L.P.

  	
   

  	
  Ohio

  
	
  Kwik
  Shop, Inc.

  	
   

  	
  Kansas

  
	
  Mini
  Mart, Inc.

  	
   

  	
  Wyoming

  

 

40

 

	
  Name
  of Guarantor

  	
   

  	
  State of Organization

  
	
   

  	
   

  	
   

  
	
  Peyton’s-Southeastern, Inc.

  	
   

  	
  Tennessee

  
	
  Quik
  Stop Markets, Inc.

  	
   

  	
  California

  
	
  Ralphs
  Grocery Company

  	
   

  	
  Ohio

  
	
  Rocket
  Newco, Inc.

  	
   

  	
  Texas

  
	
  Second
  Story, Inc.

  	
   

  	
  Washington

  
	
  Smith’s
  Beverage of Wyoming, Inc.

  	
   

  	
  Wyoming

  
	
  Smith’s
  Food & Drug Centers, Inc.

  	
   

  	
  Ohio

  
	
  THGP
  Co., Inc.

  	
   

  	
  Pennsylvania

  
	
  THLP
  Co., Inc.

  	
   

  	
  Pennsylvania

  
	
  Topvalco, Inc.

  	
   

  	
  Ohio

  
	
  Turkey
  Hill, L.P.

  	
   

  	
  Pennsylvania

  

 

41

 

	
  STATE
  OF OHIO

  	
  )

  
	
   

  	
  )
  ss.:

  
	
  COUNTY
  OF HAMILTON

  	
  )

  

 

On the 1st day of October, 2009, before me personally
came Paul W. Heldman, to me known, who, being by me duly sworn, did depose and
say that he is Executive Vice President of The Kroger Co., and President/Vice
President of each of the Guarantors Listed on Schedule I hereto,
corporations described in and which executed the foregoing instrument; that he
knows the seals of said corporations; that the seals affixed to said instrument
are such corporate seals; that they were so affixed by authority of the Board
of Directors of such corporations, and that he signed his name thereto by like
authority.

 

 

	
   

  	
  /s/
  Dorothy D. Roberts

  

 

 

	
  STATE
  OF OHIO

  	
  )

  
	
   

  	
  )
  ss.:

  
	
  COUNTY
  OF HAMILTON

  	
  )

  

 

On the 1st day of October, 2009, before me personally
came Bruce M. Gack to me known, who, being by me duly sworn, did depose and say
that he is Senior Vice President of Queen City Assurance, Inc., RJD Assurance, Inc.
and Vine Court Assurance Incorporated, corporations described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Boards of Directors of said corporation, and that
he signed his name thereto by like authority.

 

 

	
   

  	
  /s/
  Dorothy D. Roberts

  

 

1

 

	
  STATE
  OF OHIO

  	
  )

  
	
   

  	
  )
  ss.:

  
	
  COUNTY
  OF HAMILTON

  	
  )

  

 

On the 1st day of October, 2009, before me personally
came William E. Sicking, to me known, who, being by me duly sworn, did depose
and say that he is a Vice President and Senior Trust Officer of U.S. Bank
National Association, one of the corporations described in and which executed
the foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.

 

 

	
   

  	
  /s/
  Dorothy D. Roberts

  

 

2EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

THIS
AGREEMENT is made and entered into as of the 28th  day of September, 2009, by and between BLOUNT
INTERNATIONAL, INC., a Delaware corporation (the “Company”), and JOSHUA L.
COLLINS (“Executive”).

 

W I T N E S S E T H:

 

WHEREAS,
the Company desires to hire Executive and Executive desires to accept such
employment; and

 

WHEREAS,
the Company and Executive desire to enter into an agreement providing for
Executive’s employment by the Company and specifying the terms and conditions
of such employment.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein, the parties hereby agree as follows:

 

1.                                       Employment and Term.

 

(a)                                  Subject to the
terms and conditions of this Agreement, the Company hereby employs Executive
and Executive hereby accepts employment as the President, Chief Operating
Officer and Chief Executive Officer-Designate of the Company and shall have
such responsibilities, duties and authority that are consistent with such
positions as may be from time to time assigned to Executive by the Board of
Directors, provided that effective January 4, 2010, upon the retirement of the
Company’s current Chief Executive Officer (“CEO”), Executive shall also serve
as the Company’s CEO.  Consistent with
his positions, Executive shall, in consultation with the Board and other senior
Company executives, have meaningful authority over the hiring, firing and
promotion of his direct reports and other senior executives.  The Company agrees to nominate Executive for
election as a Director of the Company commencing

 

 

with
the annual stockholders meeting in calendar year 2010 and to continue to
nominate Executive for election as a Director during the Term.  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; provided that for a period of up to ten (10) years after the Effective
Date (although Executive reasonably expects this period will not exceed five (5)
years), Executive may spend one (1) day per calendar quarter and up to five (5)
hours a month performing services in connection with an investment fund for
which he currently performs services. 
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 Agreement
shall be for a rolling, two-year term (the “Term) commencing on October 15,
2009 (the “Effective Date”) and shall be deemed to extend automatically,
without further action by either the Company or Executive, each day for an
additional day, such that the remaining term of the Agreement shall continue to
be two years; provided, however, that 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 two-year period following the
date of such notice and this Agreement shall terminate upon the expiration of
such Term; provided, further, that the Term of this Agreement shall cease on
the date Executive attains age 65.

 

2.                                       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:

 

2

 

(a)                                  An annual base
salary (“Base Salary”) at a rate of Five Hundred Fifty Thousand Dollars
($550,000.00) per year, prorated for any partial year of employment.  Executive’s Base Salary shall be subject to
annual review starting in 2011 for increase at such time as the Company
conducts salary reviews 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 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 in
consultation with the Executive establish performance goals for the Executive
each year under the Incentive Program. 
For the period from the Effective Date through December 31, 2009, the
Compensation Committee of the Board (“Compensation Committee”) in its sole
discretion may grant Executive a bonus based on his and/or the Company’s
performance or such other factors deemed appropriate by the Compensation
Committee in its sole discretion.  For
fiscal year 2010, Executive shall be entitled to a Target Bonus of $500,000,
provided that the Compensation Committee certifies that the applicable
performance objectives established for such period have been met.  For fiscal year 2011 and thereafter,
Executive’s annual Target Bonus shall be established in accordance with the
determination of the Compensation Committee, which determination shall be made
in a manner consistent with that for other executive officers of the
Company.  The annual incentive bonus
payable under this subsection (b) shall be

 

3

 

payable
as a lump sum at the same time bonuses are paid to other senior executives
after certification by the Compensation Committee, 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)                                  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 401(k) benefits, matching and Savings Plus benefits, deferred
compensation, health care (including Exec-U-Care), dental and vision care, life
insurance, disability, accidental death and similar benefits.

 

(d)                                 On the
Effective Date, the Company will grant Executive 750,000 options (the “Options”)
to purchase shares of the Company’s Common Stock under the Company’s 2006
Equity Incentive Plan.  The exercise
price for the Options will be the closing sales price of the Company’s Common
Stock on the New York Stock Exchange on the business day immediately preceding
the Effective Date.  The Options will
vest in equal installments of 250,000 shares each on the first, second and
third anniversaries of the Effective Date. 
To the extent unvested, the Options will automatically fully vest upon
the occurrence of a Change in Control (as defined in Section 5.3 below).  The terms and conditions of the Stock Option
Agreement granting the Options will be consistent with the agreements for other
executive officers of the Company.

 

(e)                                  The Company
will reimburse Executive for membership dues, initiation fees, and any
assessments at a country club of Executive’s choice in the Portland area and
will assist Executive in reducing any waiting period in regard to

 

4

 

membership
in such club to the extent it is able to do so. 
Executive will be provided an automobile in accordance with the Company’s
automobile policy for Executives, and the Company will pay all insurance,
maintenance, fuel, oil and related operational expenses for such
automobile.  Executive will be entitled
to four (4) weeks vacation during calendar year 2010, which amount will be
subject to increase during the Term in accordance with Company policy.  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.  If any of the perquisite amounts provided to
Executive pursuant to this subsection (e) are subject to federal, state or
local income taxes, Executive will be provided an appropriate tax gross-up on
such amounts.

 

(f)                                    With respect to
Executive’s relocation to the Portland, Oregon area, the Company will provide
Executive (i) a furnished townhouse or apartment for three months or until
Executive is permanently relocated, whichever first occurs, including
reasonable and customary living expenses for such period, (ii) one month’s Base
Salary to take care of incidental and miscellaneous moving expenses payable
upon his relocation to Portland; (iii) reimbursement for the reasonable
expenses for house hunting trips for Executive and his family, (iv) transportation
expenses to move Executive and his family to Portland; (v) reimbursement for
the costs of packing, shipping and unpacking Executive’s furniture and personal
effects, including storage as appropriate; (vi) with respect to the purchase of
a home in the Portland area, house finding assistance and upon the purchase of
a home, reimbursement of Executive’s

 

5

 

closing
costs; (vii) with respect to the sale of Executive’s current home in
Bronxville, New York, the Company will provide marketing assistance and, if
necessary, a guaranteed buyout in accordance with the customary terms through
the Company’s third-party relocation service provider; and (viii) an
appropriate tax gross-up on any non-tax deductible relocation expenses.

 

3.                                       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 will 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.  Executive acknowledges
that at least two weeks prior to the Effective Date, he was notified in writing
that his offer of employment was conditioned upon his agreement to the
noncompetition restriction in subsection (d)(i) below.

 

(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 or otherwise for the
Company, any Confidential Information at any time, including following the
termination of his employment with the Company for any reason; provided,
however, that Executive

 

6

 

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 3(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 3(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 under Section 4.1(a) below,
whichever is longer, he shall not (i) be employed by or provide services to any
company or business engaged in the design, manufacture, marketing or sale of
any products similar to those produced or offered by the Company or its
affiliates in the geographic areas of the world in which the Company conducts
its principal manufacturing and sales operations, including China, Brazil,

 

7

 

Germany
and North America, provided that this noncompetition restriction shall in no
event extend longer than two years from Executive’s Date of Termination, (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 3, his
actions may cause irreparable harm and damage to the Company that could not be
compensated in damages.  Accordingly, if
Executive breaches or threatens to breach this Section 3, the Company shall be
entitled to seek injunctive relief, in addition to any other rights or remedies
available to 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 3(e).

 

4.                                       Termination.

 

4.1                                 By Executive.  Executive shall have the right to terminate
his employment hereunder at any time by Notice of Termination (as described in Section
6).  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 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 5.7),
Executive shall be entitled to receive the compensation and benefits set

 

8

 

forth in subsections (a) through (g) below.  If Executive terminates his employment other
than pursuant to clauses (i) or (ii) of this Section 4.1, the Company’s
obligations under this Agreement shall cease as of the date of such
termination.  Unless specified otherwise,
the time period (such time period is hereinafter referred to as the “Severance
Period”) in (a) through (g) below shall be the lesser of (i) (A) if Executive
terminates his employment within 24 months of the Effective Date, the 24-month
period commencing on Executive’s Date of Termination or (B) if Executive
terminates his employment more than 24 months after the Effective Date, the
36-month period commencing on Executive’s Date of Termination, or (ii) the time
period remaining from the Executive’s Date of Termination until the date he
attains age 65.  The Company agrees that
if Executive terminates employment and is entitled to compensation and benefits
under this Section 4.1, 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 5.9) on the date
Executive’s employment under this Agreement is terminated.

 

9

 

(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 month
equal to one-twelfth of the average of the bonuses (“Average Bonus”) earned by him
for the two fiscal years in which bonuses were paid to him (including, if
applicable, any completed fiscal year for which the bonus has been earned but
has not yet been 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 pro rated bonus for any uncompleted fiscal year at the Date of
Termination, calculated based upon the Average Bonus and the number of days
compared to 365 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 60 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 care coverage (including Exec-U-Care)
and group term life insurance 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

 

10

 

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 Date of Termination shall
be paid by Executive by separate check payable to the Company each month in
advance.  If the terms of the life
insurance coverage referred to in this subsection (c), or the laws applicable
to such life insurance coverage, do not permit continued participation by
Executive, then the Company will arrange for other life insurance coverage at
its expense providing substantially similar benefits (even if the costs of such
coverage are higher than if Executive had remained in the Company plan).

 

If
the terms of the healthcare benefits program referred to in this subsection (c)
do not permit continued participation by Executive as required by this
subsection or if the healthcare benefits to be provided to Executive and his
dependents pursuant to this subsection (c) cannot be provided in a manner such
that the benefit payments will continue to be tax-free to Executive and his
dependents, then the Company  shall (i) pay
to Executive within five (5) days after Executive’s Date of Termination a lump
sum amount equal to the monthly rate for COBRA coverage at Executive’s
termination date that is then being paid by former active employees for the
level of coverage that applies to Executive and his dependents, minus the
amount active employees are then paying for such coverage, multiplied by the
number of months in the Severance Period (plus a gross-up on the lump sum
amount determined under this subsection (c)), and (ii) permit Executive and his
dependents to elect to

 

11

 

participate
in the healthcare plan for the length of the Severance Period upon payment of
the applicable rate for COBRA coverage during the Severance Period.

 

(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 401(k) Plan and the Blount Excess 401(k) Plan.  Executive’s participation in such retirement
plans shall continue for the Severance Period, 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, and he
will receive credit for years of service for the length of the Severance
Period.  For purposes of the Blount 401(k)
Plan and the Blount Excess 401(k) Plan, he will receive an amount equal to the
Company’s contributions to the plans as though Executive had participated in
such plans at the maximum permissible contributions level and the Company had
continued to make Matching Contributions and Savings Plus Contributions to such
plans for the Severance Period.  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 under this Agreement of the excess 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

 

12

 

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.  The lump sum payments
under subsections (a), (b) (c) and (d) above are intended to satisfy the “short-term
deferral exception” of Section 409A of the Code.

 

(f)                                    Stock Options.  As of Executive’s Date of Termination, any
outstanding stock options granted to Executive by the Company, shall become
vested and exercisable as provided in the Stock Option Agreements for such
stock options.

 

(g)                                 Office Space;
Secretarial.  Executive
will be provided appropriate office space, secretarial assistance and
reasonable expenses related thereto for a period of twelve (12) months from
Executive’s Date of Termination.  The
benefits under this subsection (g) shall be provided in a manner consistent
with the requirements of Section 409A of the Code.

 

4.2                                 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 6).  If the Company terminates Executive’s
employment under this Agreement (i) for Cause, as defined in Section 5.2, (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

 

13

 

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 4.2, Executive shall be entitled to receive the compensation and
benefits provided in subsections (a) through (g) of Section 4.1 above for the
Severance Period (as defined in Section 4.1), and subject to the provisions
(including the non-mitigation provision) and limitations therein.

 

4.3                                 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.

 

(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 4.3, Executive shall direct which Severance Payments are to
be modified or reduced; provided, however, that no

 

14

 

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 4.3
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 4.3 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 4.3, 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 4.3, 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)

 

15

 

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.

 

4.4                                 Section 409A Compliance.
To the extent applicable, this Agreement shall at all times be operated in
accordance with the requirements of Section 409A of the Code, including any
applicable transition rules.  The Company
shall have authority to take action, or refrain from taking any action, with
respect to
the payments and benefits under this Agreement that is reasonably necessary to
comply with Section 409A.  The Company shall have the authority to delay the
commencement of all or a part of the payments to Executive under this Section 4
if Executive is a “key employee” of the Company (as determined by the Company
in accordance with procedures established by the Company that are consistent
with Section 409A) to a date which is six months after the date of Executive’s
termination of employment (and on such date the payments that would otherwise
have been made during such six-month period shall be made) to the extent (but
only to the extent) such delay is required under the provisions of Section 409A
to avoid imposition of additional income and other taxes, provided that the
Company and Executive agree to take into account any transitional rules and
exemption rules available under Section 409A.

 

4.5                                 Release of Claims.  To be entitled to any of the compensation and
benefits described above in this Section 4, Executive shall sign a release of
claims in the form required by the Company. 
No payments shall be made under this Section 4 until such release has
been properly executed and delivered to the Company and until

 

16

 

the expiration of the revocation
period, if any, provided under the release. 
If the release is not properly executed by Executive and delivered to
the Company within the reasonable time periods specified in the release, the
Company’s obligations under this Section 4 will terminate.

 

5.                                       Definitions. 
For purposes of this Agreement the following terms shall have the
meanings specified below:

 

5.1                                 “Board”
or “Board of Directors”.  The
Board of Directors of the Company.

 

5.2                                 “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 a willful act or acts by Executive
which are in the good faith judgment of the Board to be in material 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

 

(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

 

17

 

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.

 

5.3                                 “Change in Control”. 
Either

 

(a)                                  the
acquisition, directly or indirectly, by any “person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
of securities of the Company representing an aggregate of more than fifty  percent (50%) of the combined voting power of
the Company’s then outstanding securities (excluding the acquisition by persons
who own such amount of securities on the date hereof, or acquisitions by persons
who acquire such amount through inheritance), or

 

18

 

(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 sale of more
than 50% of the assets of the Company.

 

5.4                                 “Code”.  The
Internal Revenue Code of 1986, as it may be amended from time to time.

 

5.5                                 “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, 

 

19

 

product plans, and lists of actual or
potential customers or suppliers that (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.

 

5.6                                 “Disability”
or “Disabled”.  Executive’s
inability as a result of physical or mental incapacity substantially to perform
his duties for the Company on a full-time basis for a continuous period of six (6)
months.

 

5.7                                 “Good Reason”. 
A “Good Reason” for termination by Executive of Executive’s employment
shall mean the occurrence during the Term 
(without the Executive’s express written consent) of any one of the acts
or failures to act by the Company set forth in (a) through (e) below, and
satisfaction of the following conditions: 
(i) the Executive provides notice to the Company of such Good Reason
condition within 90 days of its initial existence, (ii) the Company is given 30
days to remedy the Good Reason condition and fails to do so, and (iii) the
Executive terminates employment within one year of the initial existence of the
Good Reason condition.  For purposes of
this Agreement, the Good Reason conditions are as follows:

 

20

 

(a)                                  a material
adverse change in the nature or status of Executive’s job responsibilities from
those set forth in Section 1(a) above;

 

(b)                                 the relocation
of the Company’s principal executive offices to a location more than fifty (50)
miles from Portland, Oregon or the Company’s requiring Executive to be based
anywhere other than the Company’s principal executive offices, except for
reasonably required travel on the Company’s business;

 

(c)                                  a material
reduction by the Company in Executive’s Base Salary as in effect on the date
hereof or as the same my be increased from time to time;

 

(d)                                 a material
reduction by the Company in the compensation and benefits provided in the
aggregate to Executive on the date hereof under the Company’s 401(k), deferred
compensation, incentive compensation, life insurance, health care, AD&D, or
disability plans; and

 

(e)                                  the failure by
the Company to obtain a successor’s consent to be bound by the Agreement as
provided in Section 8.1.

 

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.

 

5.8                                 “Person” .  Any
individual, corporation, bank, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or other entity.

 

21

 

5.9           “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.

 

6.             Termination Procedures.

 

6.1           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 10.  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.

 

6.2           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); 

 

22

 

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.

 

7.             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.

 

8.             Successors; Binding Agreement.

 

8.1           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 or stock 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.

 

8.2           This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, 

 

23

 

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.

 

9.             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.

 

10.           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:

  	
  Joshua L. Collins

  [redacted]

  [redacted]

  

 

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.

 

11.           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 

 

24

 

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.

 

12.           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.

 

13.           Indemnification.  During the
term of this Agreement and after Executive’s termination, 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 Governing
Documents as in effect on the date of this Agreement except from changes
mandated by law.  During the Term and
after Executive’s termination, 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.

 

25

 

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 Delaware.

 

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 Portland,
Oregon, in accordance with the employment arbitration rules of the
American Arbitration Association then in effect.  To the extent administratively practicable,
the Company and the Executive agree to select an arbitrator who is an attorney
with experience in employment law disputes. 
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 material rights or benefits through
settlement, arbitration or 

 

26

 

otherwise, the Company
shall pay Executive’s reasonable legal fees and expenses incurred in enforcing
this Agreement and the fees of the arbitrator. 
If applicable, the Executive’s reasonable legal fees and expenses shall
be paid within thirty (30) days of Executive’s submission of the invoices for
such amounts.  Except to the extent
provided in the preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.

 

[SIGNATURE PAGE
FOLLOWS]

 

27

 

IN
WITNESS WHEREOF, the parties have executed this Employment Agreement as of the
day and year first above written.

 

 

	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
  /s/
  Joshua L. Collins

  
	
   

  	
  JOSHUA
  L. COLLINS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  BLOUNT
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Eliot M. Fried

  

 

28

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