REPUBLIC ENGINEERED STEELS, INC.
CHANGE OF CONTROL AGREEMENT
AGREEMENT, made this _____ day of June, 1998 by and between ___________
("Executive") and Republic Engineered Steels, Inc. (the "Company").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
for the Company to agree to provide benefits under circumstances described below
to Executive; and
WHEREAS, the Board recognizes that the possibility of a change of
control of the Company, followed by a termination of the Executive's employment
or a reduction in his responsibility or compensation, is unsettling to the
Executive and wishes to make arrangements at this time to help assure his
continuing dedication to his duties to the Company and its shareholders,
notwithstanding any attempts by outside parties to gain control of the Company;
and
WHEREAS, the Board believes it important, should the Company receive
proposals from outside parties, to enable the Executive, without being
distracted by the uncertainties of his own employment situation, to perform his
regular duties;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. If, within 24 months following a Change of Control that occurs
at any time prior to the fifth anniversary of the date hereof, Executive's
employment with the Company or any successor thereto by merger or acquisition is
terminated (a) by the Company or successor other than for "Cause" (as defined in
paragraph 3 below) or as a result of the death or total disability, or (b) by
Executive for "Good Reason" (as defined in paragraph 3 below), then:
i. The Company will pay to Executive within 30 days of such
termination of employment a lump-sum cash payment equal
to the aggregate of (A) his then-current annual base
salary (or, if his base salary has been reduced at any
time after the Change of Control, his base salary in
effect prior to the reduction), which base salary shall
include for purposes of this Agreement any supplemental
amount payable under the Company's program known as
"Target 60," (B) the annual amount then paid by the
Company to lease an automobile for Executive or the
amount of any automobile allowance provided to
Executive, (C) the annual cost of life insurance then
furnished to him by the Company and (D) the annual cost
to the Company of any
other benefits then provided to Executive that are not
required to be provided under this Agreement (including
without limitation under any cafeteria plan or other
supplemental benefit program) and the amount contributed
by the Company on behalf of the Executive for the
calendar year ending immediately prior to the
termination to any pension plan of the Company.
ii. All of Executive's outstanding stock options, restricted
shares and other similar incentive interests and rights
that have not vested but that would have vested had his
employment continued until the first anniversary of such
termination will become immediately and fully vested.
iii. Executive, together with his dependents, will continue
following such termination of employment to participate
fully, with no contribution to the cost required of him
or them, in all accident and health plans maintained or
sponsored by the Company immediately prior to the Change
of Control, or receive substantially the equivalent
coverage (or the full value thereof in cash) from the
Company, until the first anniversary of such
termination.
iv. The Company will promptly reimburse Executive for any
and all legal fees and expenses incurred by him as a
result of such termination of employment, including
without limitation all fees and expenses incurred in
connection with efforts to enforce the provisions of
this Agreement.
2. A Change of Control will occur for purposes of this Agreement if
a. any individual, corporation, partnership, company, or
other entity (a "Person"), which term shall include a
"group" (within the meaning of section 13(d) of the
Securities Exchange Act of 1934 (the "Act")) who does
not currently own directly or indirectly 20% or more of
the combined voting power of the Company's outstanding
securities becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act) of securities of the Company
representing more than 20% of the combined voting power
of the company's then-outstanding securities.
b. the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation which would result
in the voting securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity) at
least 80% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation, or the stockholders approve a plan of
complete
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liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially
all of the Company's assets; PROVIDED, HOWEVER, that if
the merger, plan of liquidation or sale of substantially
all assets is not consummated following such stockholder
approval and the transaction is abandoned, then the
Change of Control shall be deemed not to have occurred.
c. the Board of Directors of the Company is no longer
selected in accordance with the qualification standards
(the "Qualification Standards") set forth in the
Certificate of Incorporation as in effect on the date
hereof and a change occurs in its composition that
results in fewer than a majority of the directors being
Continuing Directors, which term shall mean for purposes
of this Agreement, persons who either (i) were Group C
Directors selected in accordance with the Qualification
Standards or (ii) are elected, or nominated for
election, with the affirmative vote of at least a
majority of the directors of the Company who are
Continuing Directors described in clause (i) or this
clause (ii) of this sentence or at the time of such
election or nomination.
d. the Company shall after the date of this Agreement issue
common stock in an aggregate amount equal to or greater
than 35% of the number of shares of common stock
outstanding on the date of this Agreement (after making
such adjustments as are appropriate to account for stock
splits, reverse stock splits, stock dividends or other
similar events) or the Company shall after the date of
this Agreement otherwise issue voting securities or
securities convertible into voting securities that give
the holder thereof, assuming full conversion of the
convertible securities, combined voting power that in
the aggregate is equal to or greater than 35% of the
voting power of the Company's common stock on the date
of this Agreement (after making such adjustments as are
appropriate to account for stock splits, reverse stock
splits, stock dividends or other similar events).
3. a. "Cause" means only:
(i) the Executive's willful and substantial
misconduct with respect to the business and
affairs of the Company, or any subsidiary or
affiliate thereof;
(ii) the Executive's gross neglect of duties,
dishonesty, deliberate disregard of any material
rule or policy of the Company or the commission
by the Employee of any other action with the
intent to injure the Company, or any subsidiary
or affiliate thereof;
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(iii) the Executive's commission of an act involving
embezzlement or fraud or commission of a similar
felony.
b. "Good Reason" means any one or more of the following
occurring without Executive's express written consent:
(i) Failure by the Company to maintain Executive in
substantially equivalent positions, with
substantially equivalent titles, that he held
immediately prior to the Change of Control or
downgrading of his responsibilities or
authority. If, following the Change of Control,
the Company is part of a controlled group of
entities, Executive's responsibilities and
authority will be deemed for this purpose to
have been reduced unless he is given and retains
the same responsibilities and authority with the
entity that controls the group as he held with
the Company immediately prior to the Change of
Control.
(ii) Reduction of Executive's base salary.
(iii) Material reduction in the health, disability or
life insurance benefits that the Company was
providing Executive immediately prior to the
Change of Control.
(iv) Failure by the Company to provide Executive with
the opportunity to participate in any executive
compensation or benefit plan or program that is
then generally available to other senior
executives of the Company.
(v) Relocation of Executive's principal place of
business more than 30 miles from the its
location immediately prior to the Change of
Control.
4. In the event that it is determined that any payment or benefit
provided by the Company to or for the benefit of Executive, either under this
Agreement or otherwise, will be subject to the excise tax imposed by section
4999 of the Internal Revenue Code or any successor provision ("section 4999"),
the Company will, prior to the date on which any amount of the excise tax must
be paid or withheld, make an additional lump-sum payment (the "gross-up
payment") to Executive. The gross-up payment will be sufficient, after giving
effect to all federal, state and other taxes and charges (including interest and
penalties, if any) with respect to the gross-up payment, to make Executive whole
for all taxes (including withholding taxes) and any associated interest and
penalties, imposed under or as a result of section 4999.
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All determinations to be made under this paragraph 4 shall be made at
the Company's cost and expense by the firm that serves as the Company's
independent public accountant immediately prior to the Change of Control, or if
such firm is unwilling or unable to make such determination by such other
certified public accounting firm reasonably acceptable to the Company as may be
designated by the Executive in writing (in either case, the "Firm"), which shall
provide reasonable supporting calculations to the Company and the Executive. If
the Internal Revenue Service asserts a claim that, if successful, would require
the Company to make a gross-up payment or an additional gross-up payment, the
Company and Executive will cooperate fully in resolving the controversy with the
Internal Revenue Service. The Company will make or advance such gross-up
payments as are necessary to prevent Executive from having to bear the cost of
payments made to the Internal Revenue Service in the course of, or as a result
of, the controversy. The Firm will determine the amount of such gross-up
payments or advances and will determine after final resolution of the
controversy whether any advances must be returned by Executive to the Company.
The Company will bear all expenses of the controversy and will gross Executive
up for any additional taxes that may be imposed upon Executive as a result of
its payment of such expenses.
5. If the Company fails to timely make any payment to the Executive
that is required to be made hereunder, the amount not timely paid shall bear
interest after the date it is due hereunder at the rate of 18% per annum until
it is paid.
6. Within ten (10) days after a Change of Control Date, the
Company shall deposit in a trust designed in accordance with Revenue Procedure
92-64 or any successor thereto having a trustee independent of the Company and
any successor thereto an amount equal to the total amount necessary to make the
payments contemplated by paragraph 1. The Executive shall be entitled to
receive funds held in such trust from the trustee upon the Executive's delivery
to the trustee of a written certification by the Executive that a termination of
his employment has occurred and that as a result, the Executive is entitled to
payment under paragraph 1 of this Agreement. Any funds which the Executive so
receives shall be credited against the amount owed by the Company to the
Executive pursuant to this agreement. The Company shall pay any and all
expenses of establishing and maintaining the trust.
7. If the Company is at any time before or after a Change of
Control merged or consolidated into or with any other corporation or other
entity (whether or not the Company is the surviving entity), or if substantially
all of the assets thereof are transferred to another corporation or other
entity, the provisions of this Agreement will be binding upon and inure to the
benefit of the corporation or other entity resulting from such merger or
consolidation or the acquirer of such assets, and this paragraph 7 will apply in
the event of any subsequent merger or consolidation or transfer of assets.
In the event of any merger, consolidation, or sale of assets
described above, nothing contained in this Agreement will detract from or
otherwise limit Executive's right to participate or privilege of participation
in any stock option or purchase plan or any bonus, profit sharing,
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pension, group insurance, hospitalization, or other incentive or benefit plan or
arrangement which may be or become applicable to executives of the corporation
resulting from such merger or consolidation or the corporation acquiring such
assets of the Company.
In the event of any merger, consolidation or sale of assets
described above, references to the Company in this Agreement shall unless the
context suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
8. All payments required to be made by the Company hereunder to
Executive or his dependents, beneficiaries, or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll deductions as
may be required by law.
9. There shall be no requirement on the part of the Executive to
seek other employment or otherwise mitigate damages in order to be entitled to
the full amount of any payments and benefits to which Executive is entitled
under this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment.
10. Nothing contained in this Agreement shall be construed as a
contract of employment between the Company and the Executive, or as a right of
the Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause; the
Executive may, subject to the terms and conditions of this Agreement, have the
right to receive upon termination of his employment the payments and benefits
provided in this Agreement and shall not be deemed to have waived any rights he
may have either at law or in equity in respect of such discharge.
11. In consideration, among other things, for the provisions of
paragraph 9 hereof, the Executive agrees that during a period commencing on the
date (the "Date of Termination") Executive's employment with the Company is
terminated in a manner that entitles Executive to the payments and benefits
described in paragraph 1 hereof and ending one year thereafter (the "Covenant
Period"), the Executive will not, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of, or
be connected as an officer, employee, partner, director or otherwise with, or
(other than through the ownership of not more than five percent (5%) of the
voting stock of any publicly held corporation) have any financial interest in,
or aid or assist anyone else in the conduct of, a business which at the time of
such termination competes in the United States with a business conducted by the
Company or by any group, division or subsidiary of the Company (collectively
with the Company, the "Company Group") on the Date of Termination.
Notwithstanding the foregoing, employment of Executive by a business that
competes with the business of the Company Group, or retention of Executive as a
consultant by any such business shall not violate this paragraph if Executive's
duties and actions for the business are solely for groups, divisions or
subsidiaries that are not engaged in a business that competes with a business
conducted by the Company Group. No
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business shall be deemed to be a business conducted by the Company Group unless
the Company Group was engaged in the business at the Date of Termination and
continues to be engaged in the business and at least twenty-five percent (25%)
of the Company's consolidated gross sales and operating revenues, or net income,
is derived from, or at least twenty-five percent (25%) of the Company's
consolidated assets are devoted to, such business and no business shall be
deemed to compete with a business conducted by the Company Group unless at least
twenty-five percent (25%) of the consolidated gross sales and operating
revenues, or net income, of any consolidated group that includes the business,
is derived from, or at least twenty-five percent (25%) of the consolidated
assets of any such consolidated group are devoted to, such business.
12. During the Covenant Period, Executive shall not solicit on
behalf of himself or any other person the services, as employee, consultant or
otherwise, of any person who on the Date of Termination is employed by the
Company Group, whether or not such person would commit any breach of his
contract of service in leaving such employment, except for any employee (a)
whose employment is terminated by the Company Group or any successor thereof
prior to such solicitation of such employee, (b) who initiates discussions
regarding such employment without any solicitation by Executive, (c) who
responds to any public advertisement unless such advertisement is designed to
target, or has the effect of targeting, employees of the Company Group, or (d)
who is initially solicited for a position other than by Executive and without
any suggestion or advice from Executive. Nothing herein shall restrict
businesses which employ Executive or retain him as an executive from soliciting
from time to time employees of the Company Group, if (x) such solicitation
occurs in the ordinary course of filling the business's employment needs, and
(y) the solicitation is made by persons at the business other than Executive who
have not become aware of the availability of any specific employees as a result
of the advice of Executive.
13. Paragraphs 11 and 12 shall be of no force or effect if
Executive's employment is terminated and he is not as a result thereof entitled
to any payments or benefits under paragraph 1 hereof or if, within twenty (20)
days after the date of the termination of his employment, he waives his right to
such payments and benefits in writing.
14. It shall be a condition to Executive's right to receive any
payments under paragraph 1 hereof that Executive shall have executed and
delivered to the Company after the termination of his employment a release in
substantially the form attached hereto as Exhibit A, as such form may be changed
by the Company to reasonably account for changes in any applicable law, and that
any applicable waiting periods for the effectiveness of the release shall have
elapsed and expired.
15. No amendment, change, or modification of this Agreement may be
made except in writing, signed by both parties.
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16. Payments made by the Company pursuant to this Agreement shall be
in lieu of payments and other benefits, if any, to which Executive may be
entitled under any other severance agreement or severance plan of the Company.
17. The provisions of this Agreement shall be binding upon and shall
inure to the benefit of Executive, his executors, administrators, legal
representatives and assigns, and the Company and its successors.
18. The validity, interpretation, and effect of this Agreement shall
be governed by the laws of the State of Delaware.
19. The Company shall have no right of set-off or counterclaims, in
respect of any claim, debt, or obligation, against any payments to Executive,
his dependents, beneficiaries or estate provided for in this Agreement.
20. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
21. No right or interest to or in any payments or benefits hereunder
shall be assignable by the Executive; provided, however, that this provision
shall not preclude him from designating one or more beneficiaries to receive any
amount that may be payable after his death and shall not preclude the legal
representative of his estate from assigning any right hereunder to the person or
persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries" as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such amount, or if no
beneficiary has been so designated, the legal representative of the Executive's
estate.
22. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or to
execution, attachment, levy, or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void, and of no effect.
IN WITNESS WHEREOF, Republic Engineered Steels, Inc. and Executive have
each caused this Agreement to be duly executed and delivered as of the date set
forth above.
REPUBLIC ENGINEERED STEELS, INC.
By:
Title:
Agreed:
-------------------------
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EXHIBIT A
RELEASE
In consideration of the payments the undersigned Executive is to receive
under the Change of control Agreement dated as of June __, 1998 between
Executive and Republic Engineered Steels, Inc. (the "Company"), Executive does
for himself, his heirs, executors and assigns, forever release and discharge
Company, its stockholders, directors, officers, employees, agents and
representatives, successors and assigns (hereafter collectively the "Persons")
from any claims Executive may now have, or will have, against them in connection
with his employment or termination from employment with the Company. Executive
confirms and agrees that it is his intention by this general release to release
the Persons from any and all claims, demands, damages, actions, grievances or
suits of any and every nature, known or unknown, from the commencement of his
employment with the Company to the date of this release, including, but not
limited to, claims arising under federal or state statutes, including claims
brought under the Age Discrimination in Employment Act, as amended, 29 U.S.C.
Sections 621-634, the Americans with Disabilities Act, as amended, 42 U.S.C.
Sections 12101 ET SEQ., Title VII of the Civil Rights Act of 1964, as amended,
42 U.S.C. Sections 2000e ET SEQ., the Civil Rights Act of 1991, 42 U.S.C.
Sections 1981 ET SEQ., the Labor Management Relations Act of 1947, as amended,
29 U.S.C. Sections 141 ET SEQ., or at common law, for wrongful discharge, breach
of contract, or any other claims growing out of any legal restriction on the
Company's right to terminate its employees and further including, without
limitation, any claim for disability compensation, bonuses, vacation or
severance pay. Notwithstanding the foregoing, this general release shall not
release the Company from its obligations under the Change of Control Agreement.
THIS RELEASE AFFECTS CERTAIN RIGHTS EXECUTIVE MAY HAVE UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED, AND THEREFORE, EXECUTIVE SHOULD
CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS RELEASE. By executing this
Release, Executive certifies that in accordance with 29 U.S.C. Section
626(f), Executive has carefully read the foregoing Release, knows and
understands the contents and effects thereof, and is executing this Release
knowingly, voluntarily, freely and after the opportunity for consultation
with counsel. Executive further certifies that the Company has given
Executive the opportunity to consider this Release for a period of twenty-one
days prior to its execution, and that neither the Company, nor any of its
officers, directors, stockholders, employees, agents, representatives,
affiliates, subsidiaries, parent or holding companies, successor or assigns,
nor any of its officers, employees, agents or representatives have made any
representations concerning the terms, conditions or effects of this Release
other than those contained herein. Furthermore, the parties acknowledge that
this Release may be revoked by Executive within seven (7) days following the
execution hereof, by sending written notice of revocation via certified mail
to the Company, in which case the Company shall have no obligation hereunder.
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