Exhibit 10.20
CHANGE OF CONTROL AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 28th day of April 1998.
BETWEEN:
PRUDENTIAL STEEL LTD., a corporation incorporated under the
laws of Canada (hereinafter referred to as the "Corporation")
OF THE FIRST PART
- and -
X. X. XXXXXX, an individual resident in the City of Calgary,
in the Province of Alberta (hereinafter referred to as the
"Executive")
OF THE SECOND PART
WHEREAS the Corporation recognizes the valuable service that the Executive has
provided and is continuing to provide to the Corporation and believes that it is
reasonable and fair that the Executive receive appropriate treatment in the
event of a Change of Control (as hereinafter defined);
AND WHEREAS the Corporation further recognizes that the Executive has acquired
special skills relating to his extensive familiarity with the business of the
Corporation;
AND WHEREAS in the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without cause or adversely
modified and the Executive has expressed concern in that regard to the
Corporation;
AND WHEREAS the Executive has provided additional service to the Corporation and
the directors of the Corporation have undertaken consultation and received
advice on current industry practice with respect to contracts of this nature;
AND WHEREAS the directors of the Corporation have determined that it would be in
the best interests of the Corporation to induce the Executive to remain in the
employ of the Corporation by indicating that in the event of a Change of
Control, the Executive would have certain automatic and guaranteed rights;
AND WHEREAS the Corporation and the Executive wish formally to agree to the
terms and conditions which will govern the termination or modification of the
employment of the Executive in the event of a Change of Control;
NOW THEREFORE in consideration of the premises hereof and of the mutual
covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereby agree as follows:
ARTICLE 1
RECITALS
1.1 The parties agree, and represent and warrant to each other, that the above
recitals are true and accurate.
ARTICLE 2
INTERPRETATION
2.1 The headings of the Articles and Sections herein are inserted for
convenience of reference only and shall not affect the meaning or construction
hereof.
2.2 This Agreement shall be construed and interpreted in accordance with the
laws of the Province of Alberta and the federal laws of Canada applicable
therein. Each of the parties hereby irrevocably attorns to the jurisdiction of
the courts of the Province of Alberta with respect to any matters arising out of
this Agreement.
2.3 If any provision contained herein is determined to be void or unenforceable
in whole or in part, it shall not be deemed to affect or impair the validity of
any other provision herein and it shall be deemed to be severed from this
Agreement without affecting the enforceability or validity of the remaining
provisions of this Agreement. Each provision is deemed to be separate and
distinct and all provisions, Articles, Sections and paragraphs of this Agreement
are intended to be so severable.
2.4 For the purposes of this Agreement, the following terms shall have the
following meanings, respectively: (a) "Annual Salary" means the base annual
salary received by the Executive during the year in which the Change of Control
occurs plus the bonus that would be earned for such year based upon such annual
salary, provided that the bonus for such year shall be calculated assuming that
100% of the year's target for earnings per share for bonus purposes is achieved;
(b) "Change of Control" means: (i) the acceptance by the holders of shares of
the Corporation, representing in the aggregate more than thirty-five per cent
(35%) of all issued voting shares of the Corporation, of any offer, whether by
way of a take-over bid or otherwise, for all or any of the shares of the
Corporation; or (ii) the acquisition hereafter, by whatever means, of ownership
or control of more than thirty-five per cent (35%) in the aggregate of all
issued voting shares of the Corporation by any companies and/or individuals
acting in concert (any or all of the aforesaid hereinafter referred to as the
control group); or (iii) the acquisition of ownership or control of less than
thirty-five per cent (35%) in the aggregate of all issued voting shares of the
Corporation whereby the voting of such shares allows and results in the election
of a majority of the directors of the Corporation or the assumption of the
effective management of the Corporation; (iv) the making of any agreement by the
Corporation to merge, consolidate or amalgamate, which causes the Corporation to
be absorbed into another company; or (v) the sale by the Corporation of all or
substantially all of the assets of the Corporation (other than to a wholly-owned
subsidiary of the Corporation). (c) "Date of Termination" shall mean the date of
termination of the Executive's employment; (d) "Disability" means any physical
or mental incapacity, disease or affliction as determined by a legally qualified
medical practitioner selected by the Corporation, which prevents the Executive
to a substantial degree from performing his obligations; (e) "Good Reason" shall
include, without limitation, the occurrence within two years after the
occurrence of a Change of Control of any of the following without the
Executive's written consent (except in connection with the termination of the
employment of the Executive for Just Cause or Disability): (i) a change which
reduces the Executive's responsibilities in effect immediately prior to the
Change of Control; or (ii) a reduction by the Corporation of the Executive's
base annual salary, benefits or any other form of remuneration or any change in
the basis upon which the Executive's salary, benefits or any other form of
remuneration payable by the Corporation is determined and calculated; provided
that base annual salary, benefits or such other remuneration may be reduced or
the basis upon which they are calculated changed if the aggregate compensation
to be received by the Executive provides the same overall economic benefit to
the Executive; (iii) the Corporation relocating the Executive to any place other
than the location at which he performed his duties for the Corporation
immediately prior to the Change of Control, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's obligations immediately prior to the Change of Control; or (iv) any
failure by the Corporation to provide the Executive with the number of paid
vacation days to which he was entitled immediately prior the Change of Control
or the Corporation failing to increase such paid vacation on a basis consistent
with practices in effect immediately prior to the Change of Control or with
practices implemented subsequent to the Change of Control with respect to the
senior executives of the Corporation, whichever is more favourable to the
Executive; or (v) the failure by the Corporation to obtain, in a form
satisfactory to the Executive, an effective assumption of its obligations under
this Change of Control Agreement; (f) "Just Cause" shall mean: (i) the continued
failure by the Executive to substantially perform his duties after the
Corporation has given the Executive reasonable notice of such failure and a
reasonable opportunity to correct it; or (ii) the engaging by the Executive in
any act which is materially injurious to the Corporation, monetarily or
otherwise; or (iii) the engaging by the Executive in any criminal act of
dishonesty resulting or intended to result directly or indirectly in personal
gain of the Executive at the Corporation's expense.
ARTICLE 3
TERMINATION ON CHANGE OF CONTROL
3.1 If the Executive's employment is terminated by the Corporation, other than
for Just Cause, Disability or death, within one hundred and eighty (180) days of
the occurrence of one of the events set forth in Clause 2.4(b) of this
Agreement, or if the Executive's employment is terminated by the Executive for
any reason at his sole discretion within sixty (60) days of the occurrence of
one of the events set forth in Clause 2.4(b) of this Agreement or if the
Executive's employment is terminated by the Executive for Good Reason, then: (a)
The Corporation shall pay the Executive within ten (10) days after the Date of
Termination (or within such other reasonable period to effect tax planning at
the request of the Executive) and to the extent permitted by law, a sum equal
to: 3 times the Annual Salary; (b) The Executive shall be reimbursed all
expenses incurred by him prior to the Date of Termination; (c) The Corporation
shall continue to pay the appropriate premiums in respect of all rights and
benefits under any life insurance, disability, medical and dental plans being
provided by the Corporation to the Executive at the Date of Termination, to the
extent permitted by the terms of the applicable policy, for a period of 36
months from the Date of Termination or until the Executive secures alternative
employment, whichever is shorter. If the Executive's participation in any such
benefit plan is not permitted by the terms of the applicable policy, the
Corporation shall arrange to provide the Executive with benefits substantially
similar to those which the Executive is entitled to receive under such benefit
plan or to pay to the Executive such amount which, after the deduction of any
income tax payable by the Executive in respect of such payment, would enable the
Executive to purchase substantially similar coverage on an individual basis
during such period; and (d) All club memberships held in the Corporation's name
for the Executive's benefit at the Date of Termination shall be transferred to
the Executive at no cost to the Executive and all club memberships annual and
other mandatory user fees which have been fully paid or pre-paid by the
Corporation may be retained without reimbursement by the Executive.
3.2 Except as otherwise provided in Section 3.1, the benefits payable pursuant
to this Article shall not be reduced in any respect in the event the Executive
shall secure or shall not reasonably pursue alternative employment following the
termination of the Executive's employment.
ARTICLE 4
NO CHANGE TO EXISTING EMPLOYMENT RELATIONSHIP
4.1 Nothing in this Agreement shall alter the terms and conditions of the
Executive's employment with the Corporation except in the event of a Change of
Control. Likewise, nothing in this Agreement shall have any impact upon the
Executive's entitlement to receive severance at common law absent a Change of
Control.
ARTICLE 5
RELEASES AND PRE-PAYMENT OF DEBT
5.1 In order to receive any payments pursuant to this Agreement, then the
Executive shall first be required to repay any amounts then due and owing by the
Executive to the Corporation, and the Executive shall be required to execute a
Release in a form satisfactory to the Corporation which releases the Corporation
of any claims which the Executive may have as against the Corporation with
respect to the termination of the Executive's employment.
ARTICLE 6
ACCELERATION OF OPTIONS
6.1 Notwithstanding the provision of any Agreement to the contrary, in the event
of a Change of Control, all of the Executive's existing unvested stock options
shall be accelerated and vested immediately upon the Change of Control.
ARTICLE 7
GENERAL
7.1 The Executive shall not be prohibited from obtaining re-employment of any
type after his termination.
7.2 The Executive agrees that after termination of his employment by him, he
will tender his resignation from any position he may hold as an officer or
director of the Corporation or any of its affiliated or associated companies.
7.3 If a Change of Control occurs, the Corporation agrees to pay, to the full
extent permitted by law, all legal fees and expenses to a maximum of $50,000
which the Executive, the Executive's legal representatives or the Executive's
family may reasonably incur arising out of or in connection with any litigation
concerning the validity or enforceability of any provision of this Agreement, or
any action by the Executive, the Executive's legal representatives or the
Executive's family to enforce his or their rights under this Agreement
regardless of the outcome of such litigation, and the Corporation agrees to pay
interest, compounded quarterly, on the total unpaid amount payable under this
Agreement until such amount is fully paid, such interest to be calculated at a
rate equal to 2% in excess of the prime commercial lending rate for Canadian
dollar demand loans announced from time to time by the Canadian Imperial Bank of
Commerce during the period of such nonpayment.
7.4 This Agreement shall enure to the benefit of and be binding upon the
Executive and his heirs, executors and administrators and upon the Corporation
and its successors and assigns.
7.5 Nothing herein derogates from any rights the Executive may have under
applicable law, except as set out in this paragraph. The parties agree that the
rights, entitlements and benefits set out here are to be paid to the Executive
in full satisfaction of all rights of the Executive under the Employment
Standards Code R.S.A. 1980 as am. or any successor legislation from time to time
and/or the applicable common law associated with wrongful termination claims.
7.6 Neither party can waive or shall be deemed to have waived any right set out
in this Agreement except to the extent that such waiver is in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
PRUDENTIAL STEEL LTD.
Per: ____________________________________
c/s
Per: ____________________________________
SIGNED, SEALED AND )
DELIVERED in the )
presence of: )
)
) ____________________________________
) X. X. XXXXXX
