Exhibit 10.20
LOAN FORGIVENESS AGREEMENT
LOAN FORGIVENESS AGREEMENT (this "Agreement") dated and
effective as of October 6, 1999 (the "Effective Date") between
KENTUCKY ELECTRIC STEEL, INC., a Delaware corporation (the
"Company"), and ___________________ ("Executive"), an individual.
W I T N E S S E T H:
WHEREAS, the Company has secured a "split-dollar" life
insurance policy on the life of Executive pursuant to a Split Dollar
Insurance Agreement dated September 1, 1998 between the Company and
Executive;
WHEREAS, the Company desires to transfer to Executive the
applicable life insurance policy and to terminate the Split Dollar
Insurance Agreement, and in connection therewith to loan to Executive,
pursuant to that certain Promissory Note in the original principal
amount of_______________________________________ executed and
delivered by Executive in favor of the Company on the date hereof (the
"Note"), which represents 90% of the aggregate federal and state
income taxes due from Executive on account of such life insurance policy
transfer; and
WHEREAS, subject to the terms and conditions set forth
herein, the Company further desires to provide for the forgiveness of
the principal and interest due under the Note.
NOW, THEREFORE, in consideration of the mutual covenants
set forth herein and for other good and valuable consideration the
parties hereby agree as follows:
1. Loan Forgiveness. On the first day of each of the
following nine calendar years, beginning with January 1, 2000 (each of
such dates being a "Forgiveness Date"), Executive shall be relieved of
the obligation to pay (i) _______________ of the principal and (ii)
all accrued interest due under the Note as of each such Forgiveness
Date. Such amounts shall be automatically and immediately forgiven
and canceled, provided that the following conditions have been met as
of the applicable Forgiveness Date:
1.1 Executive shall have continued employment with
the Company through the close of business of such Forgiveness Date; or
1.2 In the event Executive shall have been
terminated (whether due to death, disability or otherwise) or have
retired or resigned from his employment with the Company, that he
shall have at all times been in full and complete compliance with his
obligations not to compete with the Company and maintain
confidentiality as set forth in Section 2 of this Agreement.
Provided that the foregoing conditions have been
met, at the close of business on the 9th of such Forgiveness Dates,
the Company shall cancel the Note, record such cancellation on the
books and records of the Company and deliver the original Note, marked
canceled, to Executive, provided however, that the Company's failure
to perform any of the foregoing acts shall not in any way affect the
automatic cancellation of the debts and obligations of Executive under
the Note. However, if the requirement set forth in subsection 1.1
above is not satisfied on any Forgiveness Date, or if the requirement
set forth in Section 1.2 above has not at any time been satisfied,
Executive shall be obligated to repay in cash to the Company the
balance of the Note plus accrued interest, less only those amounts
previously forgiven in accordance with this Agreement.
1.3 As a result of the loan forgiveness provided
under this Section, Executive shall incur forgiveness of indebtedness
income for tax purposes ("Forgiveness Income"). As Executive incurs
Forgiveness Income, the Company shall pay to Executive a payment (a
"Gross-Up Payment") in an amount sufficient to enable Executive to pay
all income and employment taxes (including any interest or penalties
imposed with respect to such income and employment taxes) on the
Forgiveness Income as well as all such income and employment taxes
imposed upon the Gross-Up Payment.
2. Covenant Not to Compete and Confidentiality
2.1. For the period beginning upon the termination
of the Executive's employment with the Company for any reason or upon
Executive's resignation and retirement, and ending on the 9th
Forgiveness Date, the Executive shall not engage or attempt to engage
on his own behalf or on behalf of a third party, in any "Competitive
Activity". The term "Competitive Activity" shall mean participation
by the Executive, without the written consent of the Board of
Directors of the Company, in the management of any business operation
of any enterprise if such operation (a "Competitive Operation")
engages in substantial and direct competition with any business
operation activity conducted by the Company or its subsidiaries at the
time of the termination of the Executive's employment. A business
operation shall be considered a Competitive Operation if such business
operation's sales of any product or service competitive with any
product or service of the Company amounts to thirty percent (30%) of
that business operation's total sales and if the Company's sales of
said product or service of its comparable business operation amounts
to thirty percent (30%) of the Company's total sales. "Competitive
Activity" shall not include (i) the mere ownership of securities in
any enterprise, or (ii) participation in the management of any
enterprise or any business operation thereof other than in connection
with a Competitive Operation of such enterprise. Without limiting the
generality of the foregoing, Competitive Activity shall include
becoming employed by or associated with Stelco-McMaster Ltd. or Xxxxxx
Steels. The Executive agrees that if he shall breach any covenant of
this Section 2.1, and shall continue to breach such covenant for a
period of thirty (30) days after the Company shall have requested him
to desist from such breach, then, any provisions hereof to the
contrary notwithstanding, the full unpaid balance of the Note shall
become immediately due and payable.
2.2. If the restrictions set forth in the preceding
paragraph or any part thereof should, for any reason whatsoever, be
declared invalid by a court of competent jurisdiction, the validity or
enforceability of the remainder of such restriction shall not thereby
be adversely affected. The Executive agrees that the foregoing
territorial and time limitations are reasonable and properly required
for the adequate protection of the business of the Company and that in
the event that any such territorial or time limitation is deemed to be
unreasonable by a court of competent jurisdiction, then the Executive
agrees and submits to the reduction of either said territorial or time
limitation to such an area or period as said court shall deem
reasonable.
2.3. The Executive agrees to receive Confidential
Information (as defined in this Section 2.3) of the Company in
confidence, and not to disclose to others, assist others in the
application of, or use for his own gain, such information, or any part
thereof, unless and until it has become public knowledge or has come
into the possession of such other or others by legal and equitable
means, except in the ordinary course of the Company's business,
without the express written consent of the Board of Directors of the
Company. The Executive further agrees that, upon termination of his
employment with the Company, all documents, records, notebooks and
similar repositories containing Confidential Information, including
copies thereof, then in the Executive's possession, whether prepared
by him or others, shall be left with the Company. For the purpose of
this Agreement, "Confidential Information" means information
disclosed to the Executive or known by the Company, not generally
known in the industry in which the Company is or may become engaged,
about the Company's products, processes or services.
3. Jurisdiction, Venue and Governing Law. This
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Kentucky (regardless of that
jurisdiction or any other jurisdiction's choice of law principles).
To the extent permitted by law, the parties hereto agree that all
actions or proceedings arising in connection herewith, shall be
litigated in the state and federal courts located in the State of
Kentucky, and each party hereby waives any right it may have to object
to venue. The parties each hereby stipulate that the state and
federal courts located in the County of Xxxx, State of Kentucky, shall
have personal jurisdiction and venue over each party for the purpose
of litigating any such dispute, controversy or proceeding arising out
of or related to this Agreement.
4. Validity. If any one or more of the provisions (or
any part thereof) of this Agreement shall be held to be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions (or any part thereof) shall
not in any way be affected or impaired thereby.
5. Attorneys' Fees. The prevailing party shall be
entitled to recover from the losing party its attorneys fees and costs
incurred in any action or proceeding, including arbitration, brought
to interpret this Agreement or to enforce any right arising out of
this Agreement.
6. No Waiver of Rights. The delay or failure of either
party to enforce at any time any provision of this Agreement shall in
no way be considered a waiver of any such provision, or any other
provision, of this Agreement. No waiver of, or delay or failure to
enforce any provision of this Agreement shall in any way be considered
a continuing waiver or be construed as a subsequent waiver of any such
provision, or any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
Executive KENTUCKY ELECTRIC STEEL, INC.
_______________________________ By:________________________________
Kentucky Electric Steel, Inc.
Supplemental Schedule for Exhibit 10.20
Loan Forgiveness Agreement
Name Title Amount
Xxxxxxx X. Xxxxxxxx President and Chief Executive Officer $213,862
Xxxxxxx X. Xxxxxx Vice President & Chief Financial Officer $ 69,315
Xxxxxx X. Xxxxxxxx Vice President, Sales & Marketing $101,470
Xxxxxxx X. Xxxxx Vice President, Administration $ 84,740
