AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 1st day of September, 1998 by
and between Kentucky Electric Steel, Inc., with its principal office in
Ashland, Kentucky (the "Company"), and Xxxxxxx X. Xxxxxxxx, residing at
0000 Xxxxxxxx Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 (hereinafter called
the "Executive").
WITNESSETH
WHEREAS, the Company and the Executive executed an
Employment Agreement effective as of June 7, 1994 ("Agreement"); and
WHEREAS, the parties desire to amend and restate the
Agreement to define the term "Change of Control" as if included in the
original Agreement;
NOW, THEREFORE, the Agreement is amended and restated in
its entirety to read as follows:
I. Employment Duties and Term
A. Beginning on the Commencement Date (as
hereinafter defined) the Company agrees to employ the Executive at not
lower than the office held on the Commencement Date and the Executive
agrees to faithfully and to the best of his ability discharge the
responsibilities of said office and perform such duties and services of
an executive, administrative and managerial nature as shall be
specified and designated from time to time by the Board of Directors of
the Company in connection with the business and activities of the
Company. The Executive's duties and responsibilities shall be those
normally associated modified from time to time following the
Commencement Date by the Board of Directors, but there shall be no
significant change in his duties, position, title, job responsibility
and authority, office facilities, support staff, growth potential and
opportunity, or job location without his specific written agreement.
The Executive agrees that during the Employment Period (as
defined in Section I, B hereof), he shall devote substantially all his
professional time and effort to the performance of his duties hereunder
except for (i) time spent in managing his personal investments and
services on corporate, civic or charitable boards or committees, in
each case not significantly interfering with the performance of such
duties, and (ii) periods of vacation and sick leave to which he is
entitled. Furthermore, the Executive agrees that during the Employment
Period, he shall refrain from engaging on his own behalf or on behalf
of a third party, including without limitation, any customer or
supplier of the Company, in any line of activities or business in which
he knows or has reason to know that the Company is or is considering
becoming engaged during the Employment Period or in any related
activities or business without the express written consent of the Board
of Directors of the Company.
B. The term of the Executive's employment under this
Agreement (the "Employment Period") shall commence on the effective
date of a Change of Control (as hereinafter defined) ("Commencement
Date") and shall be for an initial period commencing on the
Commencement Date and ending on the third anniversary hereof (the
"Initial Term"), plus all Renewal Periods, if applicable. After the
Initial Term, this Agreement shall be automatically renewed for
subsequent three (3) year periods (each such three (3) year period
being referred to herein as a "Renewal Period") unless, no later than
(i) one (1) year prior to the expiration of the Initial Term, or, (ii)
if during a Renewal Period, one (1) year prior to the expiration of
such Renewal Period, either party gives written notice of cancellation
to the other party. After timely notice of cancellation has been given
as required above, the Employment Period shall continue until the
expiration of the Initial Term or the then current Renewal Period, as
applicable, and the term "Termination Date," as used herein, shall be
the last day of the Initial Term, or such Renewal Period, as
applicable.
The provisions of this Agreement shall not apply if, for
any reason (other than as set forth in the following sentence), the
Executive is not employed by the Company on the Commencement Date. The
provisions of this Agreement shall apply in the event the Executive's
employment is terminated prior to, but in connection with, a Change of
Control, by the Company's Board of Directors in the exercise of its
fiduciary duties as part of a negotiation with a third party that
requires such termination of employment as a condition of consummating
a transaction resulting in a Change of Control.
II. Compensation and Termination
A. During the Employment Period, the Company shall
pay to the Executive, and the Executive agrees to accept as
compensation for his services hereunder, a base annual salary in the
amount of not less than the level in effect on the Commencement Date,
payable in the manner and at the times the Company pays its senior
executives. Such base annual salary shall be increased on each
anniversary of the Commencement Date by an amount not less than that
which is substantially similar, on a percentage basis, to the average
percentage increase in base salary for all corporate officers of the
Company during the preceding twelve (12) months. "Base Salary" at any
time shall mean the Executive's base annual salary as adjusted by the
Board of Directors and as in effect at the time in question.
In addition to his Base Salary, the Executive shall be
entitled to participate in and receive compensation pursuant to the
Company's Incentive Bonus Plan, the Company's 1993 Incentive Stock
Option Plan and all other benefit, bonus and stock plans that now exist
or as may exist in the future (collectively, the "Benefit Plans").
B. In the event the Company terminates Executive's
employment Without Cause (as defined in this Section II B below), the
Company's obligation to pay Executive the compensation set forth herein
shall nevertheless continue until the Termination Date. For the
purposes of this Agreement, a termination "Without Cause" shall mean a
termination by the Company for any reason other than for Cause (as
defined in Section II C hereof) or Disability, and the Executive's
employment with the Company shall be deemed terminated Without Cause by
the Company in the event of a termination resulting from a change in
duties, position, title, job responsibility and authority, office
facilities, support staff, growth potential and opportunity,
compensation, job location, or senior management of the Company which,
in the reasonable judgement of the Executive, would have a material
adverse impact on the Executive or the nature of work performed by the
Executive, or which would require him to change the location of his
residence to avoid a commuting distance greater than the greater of (i)
his commuting distance prior to the change and (ii) thirty (30) miles.
C. In the event that the Company terminates the
Executive's employment under this Agreement for "Cause" (as hereinafter
defined), except as provided in Section III, the Executive shall cease
to receive compensation as of the date of termination of his
employment. For the purpose of this Agreement, "Cause" shall mean (i)
an act or acts of dishonesty on the Executive's part which are intended
to result in the Executive's substantial personal enrichment at the
expense of the Company or (ii) any gross misconduct by the Executive in
the performance of his duties or responsibilities set forth in
Section I hereof which is demonstrably willful and deliberate on the
Executive's part and which results in material injury to the Company
after written demand to cease such misconduct by the Board of Directors
of the Company is delivered to the Executive. "Cause" shall not
include any mistake of fact or opinion made in good faith with respect
to the Company's business.
III. Change of Control
A. 1. In the event of a Change of Control (as
hereinafter defined) which causes this Agreement to commence, Executive
may terminate his employment hereunder at any time during the period
commencing six (6) months following the Change of Control and ending
thirty-six (36) months following the Change of Control. If (a) the
Executive shall terminate his employment during such period for any
reason other than death or Disability, (b) the Company shall terminate
the Executive's employment during the Change of Control Period (as
hereinafter defined) for any reason, or (c) the Executive terminates
his employment during the first six (6) months of the Change of Control
Period for Good Reason as hereinafter defined, the Company shall pay to
the Executive upon such termination of employment, in a single lump
cash sum, an amount equal to One Dollar ($1.00) less than 300% of
Employee's Base Amount as hereinafter defined. Such payment shall be
in lieu of further Base Salary payments under Section II except as
otherwise provided in Section II-B. Notwithstanding anything to the
contrary contained herein, nothing in this Agreement shall relieve the
Company of its obligation of providing the Executive with all benefits
in accordance with the terms of the Benefit Plans in which the
Executive participates.
2. In addition to the foregoing, if requested by
the Executive, the Company will purchase the Executive's principal
residence at any time requested by the Executive within a period of two
(2) years following termination of employment; provided, however, that
the purchase price of the residence shall be the fair market value of
such residence as established by the average of appraisals submitted by
three (3) independent appraisers mutually selected by the Executive and
the Company.
B. 1. The term "Good Reason" shall mean the failure
of the Company to comply with the following requirement: During the
Change of Control Period, (i) the Executive's Base Salary, position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held or
exercised by or assigned to the Executive at any time during the 90-day
period immediately preceding the date of the Change of Control and (ii)
Executive's services shall be performed at the location where Executive
was employed immediately preceding the date of the Change of Control.
2. The term "Base Amount" shall mean Executive's average
annual compensation from the Company (as reported on Form W-2) for the
five consecutive calendar years (or such lesser period as constitutes
Executive's total years of employment with the Company) ending with the
calendar year immediately preceding the Change of Control.
3. The term "Change of Control" shall mean (i) the
consummation of (A) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company's Common Stock would be converted into
cash, securities or other property, other than a merger of the Company
in which the holders of the Company's Common Stock immediately prior to
the merger have substantially the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
or (B) any sale, lease, exchange or transfer (in one transaction or a
series of related transactions) of all or substantially all the assets
of the Company, or (ii) the approval by the shareholders of the Company
of any plan or proposal for the liquidation or dissolution of the
Company, other than in connection with a bankruptcy or reorganization
proceeding of the Company under applicable federal or state bankruptcy
laws, or (iii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Company or a subsidiary thereof or any
employee benefit plan sponsored by the Company or a subsidiary thereof,
becoming the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of directors,
as a result of a tender or exchange offer, open market purchases,
privately-negotiated purchases or otherwise, or (iv) at any time during
a period of two (2) consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of the Company
ceasing for any reason to constitute at least a majority thereof,
unless the election or the nomination for election by the Company's
shareholders of each new director during such two-year period was
approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such two-year period.
4. The term "Change of Control Period" shall mean the
period beginning on the date of the Change of Control and ending
thirty-six (36) months thereafter.
C. Notwithstanding anything else contained herein, if
the aggregate of the payments to be made under this Agreement as a
result of a Change of Control, either alone or together with other
payments to which the Executive is entitled from the Company, would
constitute an "excess parachute payment" (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")), such total
payments shall be reduced to the largest amount as will result in no
portion of the payments made hereunder being subject to the excise tax
imposed by Section 4999 of the Code or being disallowed as a deduction
by the Company under Section 280G of the Code. The determination of
any reduction in payments hereunder pursuant to the foregoing
provisions shall be made by the Executive in good faith after
consultation with the Company, and such determination shall be
conclusive and binding on the Company. The Company shall cooperate in
good faith with the Executive in making such determination and
providing the necessary information for this purpose.
IV. Executive's Rights Under Certain Plans and Policies
The Company agrees that the benefits provided to the
Executive herein are not in lieu of any rights and privileges to which
the Executive may be entitled as an employee of the Company under
retirement, pension, special salary continuation plan, disability, life
insurance, hospitalization, vacation, business expense reimbursement or
other plan or policy which may now or hereafter be in effect, it being
understood that the Executive shall have no less than the same rights
and privileges to participate in such plans, policies or benefits as
any other employee of the Company.
V. Covenant Not to Compete and Consultation
A. For the period of two (2) years after the termination
of the Executive's employment hereunder for any reason, 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., Xxxxxx Steels or Atlantic Steel Industries,
Inc. In addition, the Executive shall make himself available for
reasonable consultation services with the Company for three (3) years
after termination of employment.
B. 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. In the event that the Executive shall be in violation of
the aforementioned restrictive covenants, then the time limitation
thereof shall be extended for a period of time equal to the period of
time during which such breach or breaches should occur.
VI. Confidential Information
The Executive agrees to receive Confidential Information
(as defined in this Section VI below) 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.
VII. Remedy for Violation of Noncompetition and
Confidential Information Agreements
The Executive acknowledges that the Company has no adequate
remedy at law and would be irreparably harmed were the Executive to
breach or threaten to breach the provisions of Section V or VI hereof,
and, therefore, agrees that the Company shall be entitled to injunctive
relief to prevent any breach or threatened breach of Section V or VI
hereof, and to specific performance of the terms of each such sections
in addition to any other legal or equitable remedy it may have. The
Executive further agrees that he shall not, in any equity proceeding
involving him relating to the enforcement of Section V or VI hereof,
raise the defense that the Company has an adequate remedy at law.
Nothing in this Agreement shall be construed as prohibiting the Company
from pursuing any other remedies at law or in equity that it may have
or any other rights that it may have under any other agreement.
VIII. Indemnification for Expense
If litigation or other judicial or arbitrative proceedings
shall be brought to enforce or interpret any provision contained
herein, the Company, to the extent permitted by applicable law and the
Company's Certificate of Incorporation and By-laws as in effect on the
date hereof, hereby indemnifies the Executive for his reasonable
expenses (including without limitation, attorneys' fees and
disbursements) incurred in connection with such proceeding. If so
requested by the Executive, the Company shall pay to the Executive an
amount equal to any and all such expenses within five (5) business days
after the Executive's written request, which request shall be supported
by reasonably adequate documentation.
IX. Successors
A. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and shall be binding upon
the Company, its successors and assigns, including without limitation,
any person, partnership or corporation which may acquire all or
substantially all of the Company's assets and business, or with or into
which the Company may be consolidated or merged. Any and all
references to the Company in this Agreement shall be deemed to mean and
include any successor or assignee.
B. This Agreement shall also inure to the benefit
of and be binding on the Executive and his legal representatives, but
being a contract for personal services, cannot be assigned by
Executive.
X. Severability
In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law.
XI. Applicable Law
The construction and interpretation of this Agreement
shall be governed by the laws of the State of Kentucky applicable to
agreements made and to be performed within Kentucky, without regard to
Kentucky's conflict of laws rules.
XII. No Mitigation Required
The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made
under any provision of this Agreement, and the obtaining of any such
other employment shall in no event effect any reduction of the
Company's obligations to make the payments and arrangements required to
be made under this Agreement.
XIII. Notice
All notices under this Agreement shall be made in
writing and shall be duly sent if sent by registered mail or certified
mail to the respective parties' address shown hereinabove or such other
address as the parties may hereafter designate in writing for such
purpose.
XIV. Captions and Titles
Captions and titles have been used in this Agreement
only for convenience, and in no way define, limit or describe the
meaning of this Agreement or any part thereof.
IN WITNESS WHEREOF, the parties have signed this Agreement
on this 1st day of September, 1998 effective as if adopted on
June 7, 1994.
KENTUCKY ELECTRIC STEEL, INC.
By: /s/ Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxx
WITNESS
