-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dl3Bqwas9Y7tkKpE/vYsSF7ACvEUnRkQqg0shRUQm2k8S/hjEUbLDGg5y+2bWiJj pYTnCimjADLQtlRWx9ZH6Q== 0000950131-96-003812.txt : 19960813 0000950131-96-003812.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950131-96-003812 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL STEEL CORP CENTRAL INDEX KEY: 0000070578 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 250687210 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00983 FILM NUMBER: 96609095 BUSINESS ADDRESS: STREET 1: 4100 EDISON LAKES PARKWAY CITY: MISHAWAKA STATE: IN ZIP: 465453440 BUSINESS PHONE: 2192737000 MAIL ADDRESS: STREET 1: 4100 EDISON LAKE PARKWAY CITY: MISHAWAKA STATE: IN ZIP: 46545-3440 10-Q 1 FORM 10-Q 1996 SECOND QUARTER SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-983 NATIONAL STEEL CORPORATION (Exact name of registrant as specified in its charter) Delaware 25-0687210 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4100 Edison Lakes Parkway, Mishawaka, IN 46545-3440 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code): 219-273-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Registrant's Common Stock $.01 par value, as of July 31, 1996, was 43,288,240 shares. NATIONAL STEEL CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS PART I. FINANCIAL INFORMATION PAGE ---- Statements of Consolidated Income - Three Months Ended June 30, 1996 and 1995 3 Statements of Consolidated Income - Six Months Ended June 30, 1996 and 1995 4 Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 5 Statements of Consolidated Cash Flows - Six Months Ended June 30, 1996 and 1995 6 Statements of Changes in Consolidated Stockholders' Equity and Redeemable Preferred Stock-Series B - Six Months Ended June 30, 1996 and Year Ended December 31, 1995 7 Notes to Consolidated Financial Statements 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Legal Proceedings 14 Submission of Matters to a Vote of Security Holders 16 Exhibits and Reports on Form 8-K 16 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NATIONAL STEEL CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (In Thousands of Dollars, Except Per Share Amounts) (Unaudited)
THREE MONTHS ENDED JUNE 30, 1996 1995 ---------- --------- NET SALES $769,481 $736,611 Cost of products sold 687,754 620,804 Selling, general and administrative 32,429 37,261 Depreciation, depletion and amortization 36,322 35,348 Equity income of affiliates (1,376) (142) -------- -------- INCOME FROM OPERATIONS 14,352 43,340 Financing Costs: Interest and other financial income (1,797) (3,884) Interest and other financial expense 11,146 14,066 -------- -------- 9,349 10,182 -------- -------- INCOME BEFORE INCOME TAXES 5,003 33,158 Income tax provision (credit) (5,388) 2,841 -------- -------- NET INCOME 10,391 30,317 Less preferred stock dividends 2,740 2,739 -------- -------- Net income applicable to Common Stock $ 7,651 $ 27,578 ======== ======== PER SHARE DATA APPLICABLE TO COMMON STOCK: NET INCOME APPLICABLE TO COMMON STOCK $ .18 $ .64 ======== ======== Weighted average shares outstanding (in thousands) 43,288 43,276
See notes to consolidated financial statements. 3 NATIONAL STEEL CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (In Thousands of Dollars, Except Per Share Amounts) (Unaudited)
SIX MONTHS ENDED JUNE 30, 1996 1995 ----------- ----------- NET SALES $1,451,624 $1,489,287 Cost of products sold 1,316,674 1,239,520 Selling, general and administrative 63,842 71,576 Depreciation, depletion and amortization 72,610 72,181 Equity income of affiliates (3,663) (1,523) Unusual Charge -- 5,336 ---------- ---------- INCOME FROM OPERATIONS 2,161 102,197 Financing Costs: Interest and other financial income (3,693) (6,632) Interest and other financial expense 21,813 28,142 ---------- ---------- 18,120 21,510 ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES (15,959) 80,687 Income tax provision (credit) (10,775) 5,676 ---------- ---------- NET INCOME (LOSS) (5,184) 75,011 Less preferred stock dividends 5,482 5,479 ---------- ---------- Net income (loss) applicable to Common Stock $ (10,666) $ 69,532 ========== ==========
PER SHARE DATA APPLICABLE TO COMMON STOCK: NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (.25) $ 1.65 ========== ========== Weighted average shares outstanding (in thousands) 43,288 42,126 See notes to consolidated financial statements. 4 NATIONAL STEEL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars, Except Share Amounts) (Unaudited)
JUNE 30, DECEMBER 31, 1996 1995 ----------- ----------- ASSETS Current assets Cash and cash equivalents $ 158,647 $ 127,616 Receivables - net 290,153 316,662 Inventories: Finished and semi-finished products 298,254 276,162 Raw materials and supplies 130,291 135,852 ---------- ---------- 428,545 412,014 ---------- ---------- Total current assets 877,345 856,292 Investments in affiliated companies 59,745 59,885 Property, plant and equipment 3,587,769 3,540,214 Less allowances for depreciation, depletion and amortization 2,143,786 2,071,511 ---------- ---------- 1,443,983 1,468,703 Other assets 308,126 282,999 ---------- ---------- TOTAL ASSETS $2,689,199 $2,667,879 ========== ========== LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY: Current liabilities Accounts payable $ 290,633 $ 255,574 Accrued liabilities 342,962 341,242 Current portion of long-term obligations 36,731 35,750 ---------- ---------- Total current liabilities 670,326 632,566 Long-term obligations 328,534 339,613 Long-term indebtedness to related parties 154,328 161,912 Other long-term liabilities 925,840 912,201 Redeemable Preferred Stock - Series B 64,280 65,030 Stockholders' equity Common Stock - par value $.01: Class A - authorized 30,000,000 shares, issued and outstanding 22,100,000 221 221 Class B - authorized 65,000,000 shares; issued and outstanding 21,188,240 shares in 1996 and 21,176,156 shares in 1995 212 212 Preferred Stock - Series A 36,650 36,650 Additional paid-in-capital 465,359 465,359 Retained earnings 43,449 54,115 ---------- ---------- Total stockholders' equity 545,891 556,557 ---------- ---------- TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY $2,689,199 $2,667,879 ========== ==========
See notes to consolidated financial statements. 5 NATIONAL STEEL CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (In Thousands of Dollars) (Unaudited)
SIX MONTHS ENDED JUNE 30, CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 -------- --------- Net Income (loss) $ (5,184) $ 75,011 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 72,610 72,181 Carrying charges related to facility sales and plant closings 11,192 12,153 Equity income of affiliates (3,663) (1,523) Dividends from affiliates 4,375 900 Postretirement benefits 14,603 22,679 Deferred income taxes (10,800) (17,815) Changes in working capital items: Receivables 26,509 580 Inventories (16,531) (14,449) Accounts payable 35,059 (50,521) Accrued liabilities 1,510 12,497 Other (21,169) 7,162 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 108,511 118,855 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of plant and equipment (net) (46,934) (95,119) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (46,934) (95,119) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of Class B Common Stock -- 104,734 Debt repayment (17,682) (13,327) Payment of released Weirton benefit liabilities (6,842) (8,008) Dividend payments on Preferred Stock-Series A (2,007) (1,999) Dividend payments on Preferred Stock-Series B -- (860) Payment of unreleased Weirton liabilities and their release in lieu of cash dividends on Preferred Stock-Series B (4,015) (3,139) -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (30,546) 77,401 -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 31,031 101,137 Cash and cash equivalents at the beginning of the period 127,616 161,946 -------- -------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $158,647 $263,083 ======== ========
See notes to consolidated financial statements. 6 NATIONAL STEEL CORPORATION AND SUBSIDIARIES STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK - SERIES B (In Thousands of Dollars) (Unaudited)
COMMON COMMON PREFERRED ADDITIONAL RETAINED TOTAL REDEEMABLE STOCK - STOCK - STOCK - PAID-IN EARNINGS STOCKHOLDERS' PREFERRED CLASS A CLASS B SERIES A CAPITAL (DEFICIT) EQUITY STOCK - SERIES B ------- ------- --------- ---------- --------- ------------- ---------------- BALANCE AT JANUARY 1, 1995 $221 $143 $36,650 $360,525 $(43,958) $353,581 $66,530 Net income 110,796 110,796 Amortization of excess of book value over redemption value of Redeemable Preferred Stock - Series B 1,500 1,500 (1,500) Cumulative dividends on Preferred Stock - Series A and B (12,458) (12,458) Issuance of Common Stock - Class B 69 104,665 104,734 Exercise of stock options 169 169 Minimum pension liability (1,765) (1,765) ---- ---- ------- -------- ------- -------- ------- BALANCE AT DECEMBER 31, 1995 221 212 36,650 465,359 54,115 556,557 65,030 Net loss (5,184) (5,184) Amortization of excess of book value over redemption value of Redeemable Preferred Stock - Series B 750 750 (750) Cumulative dividends on Preferred Stock - Series A and B (6,232) (6,232) ---- ---- ------- -------- ------- -------- ------- BALANCE AT JUNE 30, 1996 $221 $212 $36,650 $465,359 $43,449 $545,891 $64,280 ==== ==== ======= ======== ======= ======== =======
See notes to consolidated financial statements. 7 NATIONAL STEEL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 (Unaudited) NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements of National Steel Corporation and its majority owned subsidiaries (the "Company") presented herein are unaudited. However, in the opinion of management, such statements include all adjustments necessary for a fair presentation of the results for the periods indicated. All such adjustments made were of a normal recurring nature, except for the items discussed in Notes 3 and 4. The financial results presented for the three and six month periods ended June 30, 1996 are not necessarily indicative of results of operations for the full year. The Annual Report of the Company on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K") contains additional information and should be read in conjunction with this report. NOTE 2 - ACCOUNTING CHANGES During the first quarter of 1996, the Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The adoption of SFAS 121 did not have an impact on the Company's financial statements. The Company also adopted Statement of Financial Accounting Standards No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation" during the first quarter of 1996. SFAS 123 requires the Company to either adopt a fair value based method of expense recognition for all stock compensation based awards, or provide proforma net income and earnings per share information as if the recognition and measurement provisions of SFAS 123 had been adopted. The Company will continue to account for its stock based compensation awards following the provisions of Accounting Principles Board Opinion No. 25 ("APB 25") and will provide the required fair value based proforma information in its annual financial statements. APB 25 requires compensation expense to be recognized only if the market price of the underlying stock exceeds the exercise price on the date of grant. The Company's stock based awards consist of stock options with an exercise price equal to market price on the date of grant. As such, the Company has not recorded compensation expense in connection with these awards. NOTE 3 - UNUSUAL ITEM During the fourth quarter of 1994, the Company finalized and implemented a plan that resulted in a workforce reduction of approximately 400 salaried nonrepresented employees. Accordingly, a restructuring charge of $34.2 million, or $25.6 million net of tax, was recorded during the fourth quarter of 1994. During the first quarter of 1995, the Company recorded an additional restructuring charge of $5.3 million, or $3.6 million net of tax, as a result of the various elections made by the terminated employees during the first quarter of 1995. This charge was comprised of retiree postemployment benefits ("OPEB") of $4.5 million, severance of $1.6 million, and a pension credit of $.8 million. 8 NOTE 4 - PRIMARY OFFERING OF CLASS B COMMON STOCK AND USE OF PROCEEDS TO PREPAY DEBT. On February 1, 1995, the Company completed a primary offering of 6,900,000 shares of Class B Common Stock, bringing the total number of shares of Class B Common Stock issued and outstanding to 21,176,156 at that time. Subsequent to the offering, NKK Corporation, through its ownership of all 22,100,000 issued and outstanding shares of Class A Common Stock, holds 67.6% of the combined voting power of the Company. The remaining 32.4% of the combined voting power is held by the public. The issuance of the additional shares of Class B Common Stock generated net proceeds of approximately $104.7 million, all of which was used for related party debt reduction during the third quarter of 1995. NOTE 5 - ENVIRONMENTAL AND LEGAL PROCEEDINGS The Company's operations are subject to numerous laws and regulations relating to the protection of human health and the environment. Because these environmental laws and regulations are quite stringent and are generally becoming more stringent, the Company has expended, and can be expected to expend in the future, substantial amounts for compliance with these laws and regulations. Due to the possibility of future changes in circumstances or regulatory requirements, the amount and timing of future environmental expenditures could vary from those currently anticipated. It is the Company's policy to expense or capitalize, as appropriate, environmental expenditures that relate to current operating sites. Environmental expenditures that relate to past operations and which do not contribute to future or current revenue generation are expensed. With respect to costs for environmental assessments or remediation activities, or penalties or fines that may be imposed for noncompliance with such laws and regulations, such costs are accrued when it is probable that liability for such costs will be incurred and the amount of such costs can be reasonably estimated. The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state superfund statutes generally impose joint and several liability on present and former owners and operators of contaminated sites and parties whose waste was disposed of at the sites, regardless of fault. The Company and certain of its subsidiaries, as well as unrelated third parties, are involved as potentially responsible parties (each a "PRP") at a number of off-site CERCLA or state superfund site proceedings. At some of these sites, any remediation costs incurred by the Company would constitute liabilities for which FoxMeyer Health Corporation ("FOX") is required to indemnify the Company ("FOX Environmental Liabilities"). In addition, at some of these sites, the Company does not have sufficient information regarding the nature and extent of the contamination, the wastes contributed by other PRPs, or the required remediation activity to estimate its potential liability. In connection with those sites involving FOX Environmental Liabilities, in January 1994 the Company received $10.0 million from FOX as an unrestricted prepayment for such liabilities for which the Company recorded $10.0 million as a liability in its consolidated balance sheet. The Company is required to repay FOX portions of the $10.0 million to the extent the Company's expenditures for such FOX Environmental Liabilities do not meet specified levels by certain dates over a twenty year period. At June 30, 1996 and December 31, 1995, the balance, including accrued interest, recorded as prepaid FOX Environmental Liabilities totaled $7.5 million and $7.2 million, respectively. The Company has also recorded the reclamation and other costs to restore its coal and iron ore mines at its shutdown locations to their original and natural state, as required by various federal and state mining statutes. Since the Company has been conducting steel manufacturing and related operations at numerous locations for over sixty years, the Company potentially may be required to remediate or reclaim any contamination that may be present at these sites. The Company does not have sufficient information to estimate its potential 9 liability in connection with any potential future remediation at such sites. Accordingly, the Company has not accrued for such potential liabilities. As any of these environmental matters discussed above progresses or the Company becomes aware of additional matters, the Company may be required to accrue charges in excess of those previously accrued. The outcome of any of the matters described, to the extent they exceed any applicable reserves, could have a material adverse effect on the Company's results of operations and liquidity for the applicable period; however, the Company has no reason to believe that such outcomes, whether considered individually or in the aggregate, will have a material adverse effect on the Company's financial condition. The Company has recorded an aggregate environmental liability of approximately $20.3 million and $18.6 million at June 30, 1996 and December 31, 1995, respectively. The Company is involved in various non-environmental legal proceedings, most of which occur in the normal course of its business. The Company does not believe that the proceedings will have a material adverse effect, either individually or in the aggregate, on the Company's financial condition. However, with respect to certain of the proceedings, if reserves prove to be inadequate and the Company incurs a charge to earnings, such charge could have a material adverse effect on the Company's results of operations for the applicable period. Certain other proceedings, if decided adversely to the Company, could have a material adverse effect on cash flows. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- RESULTS OF OPERATIONS - COMPARISON OF THE THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 Net Sales - --------- Net sales for the second quarter of 1996 totaled $769.5 million, an improvement of $32.9 million, or 4.5%, compared to the corresponding period in 1995. This increase was primarily attributable to a 223,000 ton increase in shipments, which was significantly offset by a decrease in average selling prices and a decline in outside pellet sales. The increase in shipments, however, contributed favorably to income from operations. Steel shipments for the second quarter of 1996 were 1,571,000 tons, a 16.5% increase compared to the 1,348,000 tons shipped during the corresponding 1995 period. Cost of Products Sold - --------------------- The Company's cost of products sold of $687.8 million during the second quarter of 1996 represents an increase of $67.0 million compared to the same period in 1995. This increase is mainly attributable to the increased level of steel shipments and a shift in product mix, offset somewhat by a reduction in costs associated with the decline in outside pellet sales, along with the Company's cost reduction programs. During the second quarter of 1996, the Company produced 1,687,000 net tons of steel, a 26.2% increase compared to the 1,337,000 net tons produced during the corresponding 1995 period. Selling, General and Administrative Expense - ------------------------------------------- Selling, general and administrative expense of $32.4 million during the second quarter of 1996 represents a decrease of $4.8 million compared to the corresponding 1995 period. This decrease is primarily a result of a reduction in the level of spending for professional services. Financing Costs - --------------- Net financing costs of $9.3 million represents a $.8 million decrease compared to the corresponding 1995 period. The August 1995 prepayment of $133.3 million of debt resulted in a $4.0 million reduction in interest expense during the quarter, which was partially offset by a reduction in interest income. Blast Furnace Outage - -------------------- On August 3, 1996, the "B" blast furnace at the Company's Granite City Division experienced a failure in the cooling circuit and is expected to resume operations in approximately three to four weeks for repair. Shipments will be affected in third quarter of 1996 as a result of this unscheduled outage, however, management is unable to currently estimate the impact on third quarter earnings. 11 COMPARISON OF THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 Net Sales - --------- Net sales for the first half of 1996 totaled $1.45 billion compared to $1.49 billion during the first half of 1995. A 237,000 net ton increase in steel shipments was offset by a reduction in average selling prices as well as a decline in outside pellet sales. The increased tonnage, however, favorably impacted the Company's income from operations. Steel shipments for the first half of 1996 were 3,007,000 tons, an 8.6% increase compared to the 2,770,000 tons shipped during the corresponding 1995 period. Cost of Products Sold - --------------------- The Company's cost of products sold for the first half of 1996 totaled $1.32 billion, a $77.2 million increase compared to the same 1995 period. This increase is primarily attributable to the 237,000 net ton increase in steel shipments as well as a shift in product mix. Higher natural gas prices due to extreme cold weather earlier in the year also increased costs. These increases were partially offset by the Company's cost reduction programs. Raw steel production increased to 3,353,000 tons, a 14.7% increase from the 2,923,000 tons produced during the six month period ended June 30, 1995. Selling, General and Administrative Expense - ------------------------------------------- Selling, general and administrative expense of $63.8 million during the first half of 1996 represents a $7.7 decrease compared to the corresponding 1995 period. This decrease is a result of the favorable settlement of a lawsuit along with a reduction in the level of spending for professional services. Unusual Item - ------------ During the fourth quarter of 1994, the Company recorded an unusual charge of $34.2 million related to a reduction of the salaried nonrepresented workforce. During the first quarter of 1995, an additional charge of $5.3 million was recorded as an unusual item as a result of various elections made by the terminated employees during that quarter. Financing Costs - --------------- Net financing costs of $18.1 million for the six months ended June 30, 1996 represents a $3.4 million decrease compared to the same 1995 period. The August 1995 prepayment of $133.3 million of debt resulted in a $7.5 million reduction in interest expense during the first half of 1996, which was partially offset by a reduction in interest income. Primary Offering of Class B Common Stock - ---------------------------------------- On February 1, 1995, the Company completed a primary offering of 6,900,000 shares of Class B Common Stock, bringing the total number of shares of Class B Common Stock issued and outstanding to 21,176,156 at that time. Subsequent to the offering, NKK Corporation, through its ownership of all 22,100,000 issued and outstanding shares of Class A Common Stock, holds 67.6% of the combined voting power of the Company. The remaining 32.4% of the combined voting power is held by the public. The issuance of the additional shares of Class B Common Stock generated net proceeds of approximately $104.7 million, which was used along with cash from operations during the third quarter of 1995 to prepay related party debt. 12 LIQUIDITY AND SOURCES OF CAPITAL - -------------------------------- The Company's liquidity needs arise primarily from capital investments, working capital requirements and principal and interest payments on its indebtedness. The Company has satisfied these liquidity needs with funds provided by long term borrowings and cash provided by operations, in addition to the Company's 1995 public offering of Class B Common Stock. Available sources of liquidity consist of a Receivables Purchase Agreement (the "Receivables Purchase Agreement") with commitments of up to $200 million and $15 million in an uncommitted, unsecured line of credit (the "Uncommitted Line of Credit"). During July 1996, the Company amended the Receivables Purchase Agreement extending the expiration date to May 2001. In addition, the Company entered into a new $100 million credit facility and a new $50 million credit facility which will expire in May 2000 and July 1997, respectively. Both facilities are secured by the Company's inventories. The Company is currently in compliance with all material covenants of, and obligations under, the Receivables Purchase Agreement, the Uncommitted Line of Credit and other debt instruments. On June 30, 1996, there were no cash borrowings outstanding under the Receivables Purchase Agreement or the Uncommitted Line of Credit, and outstanding letters of credit under the Receivables Purchase Agreement totaled $89.6 million. During the first six months of 1996, the maximum availability under the Receivables Purchase Agreement, after reduction of letters of credit outstanding, varied from $65.1 million to $108.9 million and was $89.1 million as of June 30, 1996. At June 30, 1996, total debt and redeemable preferred stock as a percentage of total capitalization decreased slightly to 51.7% as compared to 52.0% at December 31, 1995. Cash and cash equivalents totaled $158.6 million at June 30, 1996 as compared to $127.6 million at December 31, 1995. Cash Flows from Operating Activities - ------------------------------------ For the six months ended June 30, 1996, cash provided from operating activities amounted to $108.5 million, which is primarily attributable to the impact of working capital items and noncash charges for depreciation and postretirement benefits. An increase in accounts payable and a decrease in accounts receivable had the most significant positive effects, due mainly to the timing of cash disbursement clearings and cash receipts. The above mentioned favorable effects were offset by an increase in inventories, primarily in finished steel products, as well as the net loss of $5.2 million. Cash Flows from Investing Activities - ------------------------------------ Capital investments for the six months ended June 30, 1996 and 1995 amounted to $46.9 million and $95.2 million, respectively. The 1996 spending is primarily due to the completion of the galvanizing line at the Granite City Division, the construction of the new galvanizing line at the Midwest Division and a major upgrade at the Midwest Division tin line. The Company plans to invest approximately $70.0 million during the remainder of 1996 for capital expenditures which include the ongoing construction of the Midwest Division galvanizing line and improvements at its other facilities. Cash Flows from Financing Activities - ------------------------------------ During the first six months of 1996, the Company utilized $30.5 million for financing activities which included scheduled payments of debt, as well as dividend payments on the Company's preferred stock. During the first quarter of 1995, the Company completed a primary offering of 6,900,000 million shares of Class B Common Stock. The issuance of this stock generated net proceeds of $104.7 million, which was used along with cash from operations during the third quarter of 1995 to prepay related party debt. 13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state superfund statutes generally impose joint and several liability on present and former owners and operators, transporters and generators for remediation of contaminated properties, regardless of fault. The Company and certain of its subsidiaries, as well as unrelated third parties, are involved as potentially responsible parties (each a "PRP") in a number of off-site CERCLA or state superfund site proceedings. National Mines Corporation - Isabella Mine. National Mines Corporation ("NMC"), a wholly-owned subsidiary of the Company, previously owned and operated a coal mine and coal refuse disposal area in Pennsylvania commonly known as the Isabella Mine. The area covered under NMC's mining permit was approximately 140 acres. A reclamation bond in the amount of $1,200,000 was held by the Pennsylvania Department of Environmental Resources ("DEP") for that area. NMC subsequently ceased coal refuse disposal and mining operations at the site and reclaimed the disposal areas. In June 1993, NMC sold the Isabella property to Global Coal Recovery, Inc. ("Global"), a coal refuse reprocessor. Global applied for and received a new mining permit from DEP for a total area of about 375 acres, including acreage previously covered under NMC's permit. As part of the terms of sale, NMC agreed to allow Global to use NMC's $1,200,000 reclamation bond as security to obtain the new permit from the DEP. Global was obligated to repay NMC the $1,200,000. Global assumed all environmental liability associated with the Isabella Mine as part of the transaction. Subsequent to the sale of the Isabella Mine to Global, Global extracted coal from a refuse pile at the mine, and in doing so, disturbed reclamation work NMC had previously performed. Global was ultimately unable to operate the Isabella Mine at a profit and subsequently defaulted on its agreements to NMC. Global and its contractors abandoned the site in October 1995. The DEP subsequently took enforcement actions against Global and its contractors for unabated discharges of mine drainage as well as other violations associated with reclamation obligations at the Isabella site. The enforcement actions were unsuccessful in eliminating the environmental violations at the site. In July 1996, the DEP notified Global of its intention to revoke its permit and also notified NMC of its intention to forfeit the reclamation bond. NMC has been negotiating with the DEP concerning a proposal to allow NMC to reclaim the Isabella Mine in lieu of the Agency's collection of the $1,200,000 reclamation bond. Iron River (Dober Mine) Site. With reference to the matter involving the Iron River (Dober Mine) Site located in Iron County, Michigan, previously reported in the Company's 1995 Form 10-K, the Company has had discussions with the State of Michigan to explore whether there might be supplemental projects that the Company could perform in exchange for a full release from the State's natural resource damages claim. Additionally, the Company has had preliminary settlement discussions with some of the third party defendants regarding contribution toward any natural resources damages settlement. In light of the ongoing settlement negotiations, the court has extended the pre-trial schedule, and a trial of this proceeding is not expected to occur before December, 1996. Springfield Site. With reference to the matter involving the Springfield Township Site located in Davisburg, Michigan, previously reported in the Company's 1995 Form 10-K, the various PRPs have agreed upon a settlement which allocates the cost of implementation of the remedy, as well as certain cost overruns and penalties, among themselves. Documentation for the settlement, the overall terms of which are confidential, 14 is currently being prepared. The Company's share of the settlement costs would be less than the $175,000 settlement offer the Company had previously tendered. Great Lakes Division Outfalls Proceedings. With reference to the matter involving certain outfalls located at the Company's Great Lakes Division facility, previously reported in the Company's 1995 Form 10-K, by letter of May 28, 1996, the Michigan Department of Environmental Quality ("MDEQ") sent the Company a draft consent order to address compliance issues at the 80 inch hot strip mill. The draft order did not contain any specific demands regarding the assessment of any civil penalties or the need for any additional control equipment. However, in a subsequent meeting with Company representatives, the MDEQ made an initial penalty demand of $350,000. Further discussions are anticipated to occur. FOX SITES. - --------- See "Part I - Financial Information, Note 5 - Environmental and Legal Proceedings" regarding Fox Environmental Liabilities. Buckeye Site. With reference to the matter involving the Buckeye Site located at Bridgeport, Ohio, previously reported in the Company's 1995 Form 10-K, on June 27, 1996, the Company entered into a Settlement Agreement with Consolidated Coal Company, Allegheny Ludlum Corporation, USX Corporation, Beazer East, Inc., SKF USA, Inc., Ashland, Inc., Aristech Chemical Corporation and the Pullman Company which resolves the litigation brought by Consolidated Coal Company with respect to the Buckeye Site. Under the terms of the settlement, the Company has agreed to pay 2.8 percent of the response costs associated with the Buckeye Site. Due to negotiations between the EPA and the PRP steering committee to reduce the scope of the remedy at the site, the cost for the Phase 1 remedial action is anticipated by the PRP steering committee to be between $15 million to $20 million. The Settlement Agreement is contingent upon the Court's approval. Weirton Steel Site. With reference to the matter involving the Weirton Steel Site located in Weirton, West Virginia, previously reported in the Company's 1995 Form 10-K, Weirton Steel Corporation has rejected the Company's offer of settlement to cap the Company's liability for the lagoon at $480,000. In addition, the Company has been informed that the EPA is currently conducting an all-inclusive investigation of the Weirton Steel facilities. This investigation may result in an order from the EPA to perform corrective action at the Weirton Steel facilities and a claim by Weirton Steel Corporation against the Company. Swissvale Site. With reference to the matter involving the Swissvale Site located at Swissvale, Pennsylvania, previously reported in the Company's 1995 Form 10-K, on June 28, 1996, the Court approved a Consent Decree among the plaintiff, third-party plaintiffs and third-party defendants, including the Company, which resolves the third-party litigation. Under the terms of the Consent Decree, the Company has agreed to pay the third-party plaintiffs the sum of $5,000. 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on April 30, 1996. In connection with the meeting, proxies were solicited pursuant to the Securities Exchange Act of 1934. The following are the voting results on proposals considered and voted upon at the meeting, all of which were described in the Company's Proxy Statement dated April 8, 1996.
1. All nominees for director listed in the Proxy Statement were elected. NAME VOTES FOR VOTES WITHHELD - ----------------- ------------- -------------- Osamu Sawaragi 59,647,497 37,921 V. John Goodwin 59,647,497 37,921 Masayuki Hanmyo 59,647,297 38,121 Frank Lucchino 59,647,397 38,021 Hiroshi Matsumoto 59,647,297 38,121 Bruce K. MacLaury 59,647,497 37,921 Kenichiro Sekino 59,647,497 37,921 Robert J. Slater 59,647,497 37,921 Susumu Terao 59,647,497 37,921
2. The proposal to ratify the selection of Ernst & Young LLP as the Company's outside auditors for 1996 passed. (For 59,678,189, abstained 1,136, against 6,093) ITEM 5. OTHER INFORMATION Effective July 22, 1996, Masayuki Hanmyo resigned from the Board of Directors. On the same date, the Board appointed Yoshiharu Onuma to fill the vacant director position. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See attached Exhibit Index (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the second quarter of 1996. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL STEEL CORPORATION BY /s/ Bernard D. Henely ---------------------------------------------------- Bernard D. Henely, Senior Vice President and General Counsel BY /s/ William E. McDonough ---------------------------------------------------- William E. McDonough, Acting Chief Financial Officer and Treasurer Date: August 8, 1996 17 NATIONAL STEEL CORPORATION QUARTERLY REPORT ON FORM 10-Q EXHIBIT INDEX FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 10-A Employment Contract dated April 30, 1996 between National Steel Corporation and V. John Goodwin 10-B Employment Contract dated April 30, 1996 between National Steel Corporation and Bernard D. Henely 10-C Employment Contract dated April 30, 1996 between National Steel Corporation and George D. Lukes 10-D Employment Contract dated April 30, 1996 between National Steel Corporation and David L. Peterson 10-E Employment Contract dated April 30, 1996 between National Steel Corporation and Robert G. Pheanis 10-F Employment Contract dated April 30, 1996 between National Steel Corporation and David A. Pryzbylski 10-G Employment Contract dated May 1, 1996 between National Steel Corporation and John A. Maczuzak 27-A Financial Data Schedule EX-10.A 2 CONTRACT WITH J. GOODWIN EXHIBIT 10-A EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is dated and effective as of the 30th day of April, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and V. John Goodwin ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the President, Chief Executive Officer and Chief Operating Officer of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Board of Directors, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1999 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1999, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation. Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 55% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans. (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term and for one year after the Date of Termination, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by Company-paid (i) long-term disability insurance and benefits in accordance with the terms and conditions set forth in Section 11(d)(vi); and (ii) group or individual life insurance or a combination thereof providing a death benefit of not less than three times Executive's annual base salary and target incentive compensation percentage in effect immediately prior to such Executive's death. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). Executive shall also be entitled to the Retirement Equalization Benefit as defined in Section 11(d)(iii). 4. Non-Compete Agreement Executive hereby agrees that if Executive terminates his employment with the Company without Good Reason, then for a period of two (2) years after the Date of Termination, but in any event only as long as the Company satisfies its obligations under this Agreement, (the "Restricted Period"), Executive will not engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor or director) in any "Competitive Business" in the continental United States (the "Territory"). The term "Competitive Business" means the making, producing, manufacturing or finishing of steel products which products are in direct competition with steel products that are made, produced, manufactured or finished by the Company on the Date of Termination. It is -2- agreed that the ownership of not more than one percent of the equity securities of any company having securities listed on an exchange or regularly traded in the over-the-counter market shall not be deemed inconsistent with this Section 4. If any court of competent jurisdiction shall deem any obligation of this Section 4 too lengthy or the Territory too extensive, the other provisions of this Section shall nevertheless stand, the Restricted Period shall be deemed to be the longest period such court deems not to be too lengthy and the Territory shall be deemed to comprise the portion of the United States east of the Mississippi River (or such other portion of the United States that such court deems not to be too extensive). 5. Non-Inducement Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company -3- Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. 9. Release of Employment Claims Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies Executive acknowledges and agrees that the covenants set forth in Sections 4 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment. (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). -4- (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)) and the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 63 or older on the Date of Termination, the "three times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below:
Age Multiplier --- ---------- 63 Two times 64 One times 65 or older Zero
(d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of -5- Termination is due to death, Executive's estate or other beneficiaries shall receive the death benefits described in Section 3(b)(ii); (iii) Executive shall be entitled to receive a "Retirement Equalization Benefit" equal to (A) the benefit that is or would have been payable to Executive under the National Steel Corporation Retirement Program (including any successor thereto) (the "Retirement Plan"), without regard to satisfaction of applicable vesting requirements under the Retirement Plan, determined (x) without regard to the limitations on earnings taken into account for purpose of calculation of accrued benefits under section 401(a) (17) of the Internal Revenue Code of 1986, as amended (the "Code"), (y) without regard to any applicable limitations on maximum benefits under section 415 of the Code, and (z) for purposes of vesting, eligibility for immediate commencement of benefits, and calculation of the amount of the benefits, based upon the sum of the number of years of service of Executive with the Company, plus the number of years of service of Executive with the Prior Employer, less (B) the actuarially equivalent value of the benefit actually payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under the Retirement Plan and the Company's ERISA Parity Plan, and further, less (C) the actuarially equivalent value of the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contributions (and earnings thereon), and further less (D) the actuarially equivalent value of the benefit hereafter payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under any defined benefit tax qualified retirement plan maintained by the Prior Employer. The Retirement Equalization Benefit or its actuarially equivalent value shall be payable, beginning as of the earliest date Executive would be entitled to receive a pension under the Retirement Plan based on service described in clause (A)(z) of this Section 11(d)(iii), in the form of the normal form of benefit under the Retirement Plan or such optional form of benefit as Executive elects from among the forms of payment then available under the Retirement Plan. (iv) If Executive's employment with the Company terminates after the earliest date as of which Executive would have been eligible upon termination of employment, if his employment with the Prior Employer had been employment with the Company, for retiree health care benefits under any plan then maintained by the Company and providing such benefits for salaried non-represented employees hired before 1993 who retire after satisfying such eligibility requirements as may then be in effect under such plan ("Company Plan"), then the Company shall provide to Executive and his eligible dependents such benefits as may be in effect from time to time under the Company Plan. (v) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (vi) If Executive is entitled to Termination Benefits due to a Disability, the Company shall (A) pay Executive each month, beginning with the month in which occurs -6- Executive's Disability Effective Date and continuing until the earliest of (x) Executive's death, (y) the date Executive attains age 65 or (z) the date Executive is no longer considered to have a Disability ("Disability Benefit Period"), an amount equal to 65% of the monthly base salary in effect on the date immediately before the Disability Effective Date, reduced by any disability benefits provided under the Company's sponsored program of long term disability insurance, including, without limitation, the Long Term Disability Program of National Steel Corporation (including any successor thereto); and (B) provide to Executive such other benefits as would have been provided to Executive pursuant to the Benefit Plans (other than the Company's sponsored program of long term disability insurance) and Compensation Plans if Executive's Disability had constituted disability thereunder. (vii) If Executive dies before the Retirement Equalization Benefit begins, the surviving spouse of Executive, if any, will be entitled to receive a survivor annuity equal to the pre-retirement survivor benefits she would have received under the Retirement Plan if Executive's service for pension purposes with the Prior Employer were service with the Company, determined without regard to the limits under sections 401(a)(17) and 415 of the Code and reduced by (A) the sum of the benefits payable to her under the Retirement Plan and, if applicable, the ERISA Parity Plan, (B) the actuarially equivalent value of any death benefit based on the Supplemental Pension that may be payable to her under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contribution (including any earnings thereon), and (C) the actuarially equivalent value of any benefit payable to her, if any under any defined benefit retirement plans maintained by the Prior Employer. (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) three times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to three times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum aggregate amount payable under this Section 11(e)(i) shall not exceed five times the Executive's annual base salary (immediately preceding the Date of Termination). (ii) For three years after Executive's Date of Termination, if Executive is less than age 63 on his Date of Termination, or such longer period as may be provided by the -7- terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 63 or older on his Date of Termination, the period of "three years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below:
Age Period --- ------ 63 Two years 64 One year 65 or older Zero
For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have commenced employment prior to January 1, 1993 (and employment with the Prior Employer shall be deemed to be employment with the Company), to have remained employed until the lesser of (a) three years after the Date of Termination or (b) age 65, and to have retired on the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. -8- (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) three years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted . (v) A cash amount payable within thirty (30) days after the Date of Termination equal to the benefits which Executive would have been entitled to receive pursuant to the Retirement Plan, the Company's ERISA Parity Plan and the Retirement Equalization Benefit had his employment continued at the annual base salary as defined in Section 2 until the date Executive attained the age of 55 or the Date of Termination, whichever occurs later. 12. Special Provisions on Change of Control. In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company (including without limitation the Retirement Equalization Benefit under this Agreement) shall be paid to Executive in a single sum within thirty (30) days after Executive is no longer employed by the Company. (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if -9- earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax -10- (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration. (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the -11- rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, 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 this Section 14(a). (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting -12- Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or -13- (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance of Executive's duties; provided, however, that for purposes of Sections 11(d)(iii) and 11(d)(vi) the Date of Termination shall, as long as Executive continues to have a Disability, be deemed to be the date on which Executive reaches age 65. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: -14- (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; (vii) [Intentionally left blank.] (viii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or (xi) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the -15- Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Prior Employer". "Prior Employer" means USX Corporation. (h) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. 15. Miscellaneous. (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and -16- the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President - Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any -17- provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. (k) Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. -18- IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By:_____________________________________________ Name: David A. Pryzbylski Title: Senior Vice President, Administration and Secretary ----------------------------------------------- V. John Goodwin -19- EX-10.B 3 CONTRACT WITH B. HENELY EXHIBIT 10-B EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is dated and effective as of the 30th day of April, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and Bernard D. Henely ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the Senior Vice President and General Counsel of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Chief Executive Officer, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1998 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1998, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation. Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the -1- Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 40% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans. (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by long-term disability insurance and benefits; and group or individual life insurance or a combination thereof, all in accordance with the plans, policies, programs and arrangements as presently in effect or as they may be modified or added to by the Company from time to time. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). 4. Non-Compete Agreement Executive hereby agrees that if Executive terminates his employment with the Company without Good Reason, then for a period of two (2) years after the Date of Termination, but in any event only as long as the Company satisfies its obligations under this Agreement, (the "Restricted Period"), Executive will not engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor or director) in any "Competitive Business" in the continental United States (the "Territory"). The term "Competitive Business" means the making, producing, manufacturing or finishing of steel products which products are in direct competition with steel products that are made, produced, manufactured or finished by the Company on the Date of Termination. It is agreed that the ownership of not more than one percent of the equity securities of any company having securities listed on an exchange or regularly traded in the -2- over-the-counter market shall not be deemed inconsistent with this Section 4. If any court of competent jurisdiction shall deem any obligation of this Section 4 too lengthy or the Territory too extensive, the other provisions of this Section shall nevertheless stand, the Restricted Period shall be deemed to be the longest period such court deems not to be too lengthy and the Territory shall be deemed to comprise the portion of the United States east of the Mississippi River (or such other portion of the United States that such court deems not to be too extensive). 5. Non-Inducement Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the -3- Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. 9. Release of Employment Claims Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies Executive acknowledges and agrees that the covenants set forth in Sections 4 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment. (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). -4- (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), and if Executive has been employed by the Company for more than two years prior to the Date of Termination, or if a Change of Control has occurred prior to the Date of Termination, the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 64 or older on the Date of Termination, the "two times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below:
Age Multiplier --- ---------- 64 One times 65 or older Zero
(d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in -5- this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of Termination is due to Disability or death, Executive or his estate or other beneficiaries shall receive the Disability or death benefits described in Section 3(b); (iii) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) two times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to two times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum aggregate amount payable under this Section 11(e)(i) shall not exceed three times the Executive's annual base salary (immediately preceding the Date of Termination). (ii) For two years after Executive's Date of Termination, if Executive is less than age 64 on his Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 64 or older on his Date of Termination, the period of "two years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below: -6-
Age Period --- ------ 64 One year 65 or older Zero
For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have remained employed until the lesser of (a) two years after the Date of Termination or (b) age 65, and to have retired on the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) two years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted. 12. Special Provisions on Change of Control. In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to -7- Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company shall be paid to Executive in a single sum within thirty (30) days after Executive is no longer employed by the Company. (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; -8- For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration. (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that -9- have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution -10- duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, 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 this Section 14(a). (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding -11- shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance of Executive's duties. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. -12- (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; -13- (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; (vii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or (viii) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. 15. Miscellaneous. (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. -14- (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. -15- (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President - Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, -16- the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. (k) Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. -17- IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By: ------------------------------------------- Name: V. John Goodwin Title: President, Chief Executive Officer and Chief Operating Officer ----------------------------------------------- Bernard D. Henely -18- EX-10.C 4 CONTRACT WITH G. LUKES EXHIBIT 10-C EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is dated and effective as of the 30th day of April, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and George D. Lukes ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the Senior Vice President Quality Assurance and Customer Satisfaction of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Chief Executive Officer, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1998 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1998, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation. Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 40% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans. (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by long-term disability insurance and benefits; and group or individual life insurance or a combination thereof, all in accordance with the plans, policies, programs and arrangements as presently in effect or as they may be modified or added to by the Company from time to time. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). Executive shall also be entitled to the Retirement Equalization Benefit as defined in Section 11(d)(iii). 4. Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. -2- 5. Non-Inducement Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. -3- 9. Release of Employment Claims Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies Executive acknowledges and agrees that the covenants set forth in Sections 5 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment. (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). -4- (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)) and the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 64 or older on the Date of Termination, the "two times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below:
Age Multiplier --- ---------- 64 One times 65 or older Zero
(d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of Termination is due to Disability or death, Executive or his estate or other beneficiaries shall receive the Disability or death benefits described in Section 3(b); (iii) Executive shall be entitled to receive a "Retirement Equalization Benefit" equal to (A) the benefit that is or would have been payable to Executive under the National Steel Corporation Retirement Program (including any successor thereto) (the "Retirement Plan"), without regard to satisfaction of applicable vesting requirements under the Retirement Plan, determined (x) without regard to the limitations on earnings taken into account for purpose of calculation of accrued benefits under section 401(a) (17) of the Internal Revenue Code of 1986, as amended (the "Code"), (y) without regard -5- to any applicable limitations on maximum benefits under section 415 of the Code, and (z) for purposes of vesting, eligibility for immediate commencement of benefits, and calculation of the amount of the benefits, based upon the sum of the number of years of service of Executive with the Company, plus the number of years of service of Executive with the Prior Employer, less (B) the actuarially equivalent value of the benefit actually payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under the Retirement Plan and the Company's ERISA Parity Plan, and further, less (C) the actuarially equivalent value of the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contributions (and earnings thereon), and further less (D) the actuarially equivalent value of the benefit hereafter payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under any defined benefit tax qualified retirement plan maintained by the Prior Employer. The Retirement Equalization Benefit or its actuarially equivalent value shall be payable, beginning as of the earliest date Executive would be entitled to receive a pension under the Retirement Plan based on service described in clause (A)(z) of this Section 11(d)(iii), in the form of the normal form of benefit under the Retirement Plan or such optional form of benefit as Executive elects from among the forms of payment then available under the Retirement Plan. (iv) If Executive's employment with the Company terminates after the earliest date as of which Executive would have been eligible upon termination of employment, if his employment with the Prior Employer had been employment with the Company, for retiree health care benefits under any plan then maintained by the Company and providing such benefits for salaried non-represented employees hired before 1993 who retire after satisfying such eligibility requirements as may then be in effect under such plan ("Company Plan"), then the Company shall provide to Executive and his eligible dependents such benefits as may be in effect from time to time under the Company Plan. (v) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (vi) If Executive dies before the Retirement Equalization Benefit begins, the surviving spouse of Executive, if any, will be entitled to receive a survivor annuity equal to the pre-retirement survivor benefits she would have received under the Retirement Plan if Executive's service for pension purposes with the Prior Employer were service with the Company, determined without regard to the limits under sections 401(a)(17) and 415 of the Code and reduced by (A) the sum of the benefits payable to her under the Retirement Plan and, if applicable, the ERISA Parity Plan, (B) the actuarially equivalent value of any death benefit based on the Supplemental Pension that may be payable to her under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contribution (including any earnings thereon), and (C) the actuarially equivalent value of any benefit payable to her, if any under any defined benefit retirement plans maintained by the Prior Employer. -6- (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) two times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to two times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum aggregate amount payable under this Section 11(e)(i) shall not exceed three times the Executive's annual base salary (immediately preceding the Date of Termination). (ii) For two years after Executive's Date of Termination, if Executive is less than age 64 on his Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 64 or older on his Date of Termination, the period of "two years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below: Age Period --- ------ 64 One year 65 or older Zero For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have commenced employment prior to January 1, 1993 (and employment with the Prior Employer shall be deemed to be employment with the Company), to have remained employed until the lesser of (a) two years after the Date of Termination or (b) age 65, and to have retired on -7- the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) two years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted. 12. Special Provisions on Change of Control. In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company (including without limitation the Retirement Equalization Benefit under this Agreement) shall be paid to Executive in a single sum within thirty (30) days after Executive is no longer employed by the Company. -8- (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year -9- (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration. ------------------------------------ (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in -10- accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions ----------- Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, 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 this Section 14(a). -11- (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person -12- (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance of Executive's duties; provided, however, that for purposes of Section 11(d)(iii) the Date of Termination shall be the earliest date following the Disability Effective Date as of which Executive is not entitled to benefits under the Company's sponsored program of long term disability insurance, including without limitation, the Long Term Disability Program of National Steel Corporation (including any successor thereto), or if earlier, the date of which Executive reaches age 65. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more -13- during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; -14- (vii) [Intentionally left blank.] (viii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or (ix) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Prior Employer". "Prior Employer" means USX Corporation. (h) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. 15. Miscellaneous. (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. -15- (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. -16- (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President-Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, -17- the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By:________________________ Name: V. John Goodwin Title: President, Chief Executive Officer and Chief Operating Officer --------------------------- George D. Lukes -18- EX-10.D 5 CONTRACT WITH D. PETERSON EXHIBIT 10-D EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is dated and effective as of the 30th day of April, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and David L. Peterson ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term ------------------- Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the Vice President and General Manager-Great Lakes Division of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Chief Executive Officer, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1998 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1998, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation ---------------------------------------- Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 40% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans ------------------------------ (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by long-term disability insurance and benefits; and group or individual life insurance or a combination thereof, all in accordance with the plans, policies, programs and arrangements as presently in effect or as they may be modified or added to by the Company from time to time. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). Executive shall also be entitled to the Retirement Equalization Benefit as defined in Section 11(d)(iii). 4. Non-Compete Agreement --------------------- Executive hereby agrees that if Executive terminates his employment with the Company without Good Reason, then for a period of two (2) years after the Date of Termination, but in any event only as long as the Company satisfies its obligations under this Agreement, (the "Restricted Period"), Executive will not engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor or director) in any "Competitive Business" in the continental United States (the "Territory"). The term "Competitive Business" means the making, producing, manufacturing or finishing of steel products which products are in direct competition with steel products that are made, produced, manufactured or finished by the Company on the Date of Termination. It is agreed that the ownership of not more than one percent of the equity securities of any -2- company having securities listed on an exchange or regularly traded in the over- the-counter market shall not be deemed inconsistent with this Section 4. If any court of competent jurisdiction shall deem any obligation of this Section 4 too lengthy or the Territory too extensive, the other provisions of this Section shall nevertheless stand, the Restricted Period shall be deemed to be the longest period such court deems not to be too lengthy and the Territory shall be deemed to comprise the portion of the United States east of the Mississippi River (or such other portion of the United States that such court deems not to be too extensive). 5. Non-Inducement -------------- Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure -------------- For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity ------------------------ Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company ---------------------------- -3- Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. 9. Release of Employment Claims ---------------------------- Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies -------- Executive acknowledges and agrees that the covenants set forth in Sections 4 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment ------------------------- (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). -4- (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)) and the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 64 or older on the Date of Termination, the "two times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below: Age Multiplier --- ---------- 64 One times 65 or older Zero (d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of -5- Termination is due to Disability or death, Executive or his estate or other beneficiaries shall receive the Disability or death benefits described in Section 3(b); (iii) Executive shall be entitled to receive a "Retirement Equalization Benefit" equal to (A) the benefit that is or would have been payable to Executive under the National Steel Corporation Retirement Program (including any successor thereto) (the "Retirement Plan"), without regard to satisfaction of applicable vesting requirements under the Retirement Plan, determined (x) without regard to the limitations on earnings taken into account for purpose of calculation of accrued benefits under section 401(a) (17) of the Internal Revenue Code of 1986, as amended (the "Code"), (y) without regard to any applicable limitations on maximum benefits under section 415 of the Code, and (z) for purposes of vesting, eligibility for immediate commencement of benefits, and calculation of the amount of the benefits, based upon the sum of the number of years of service of Executive with the Company, plus the number of years of service of Executive with the Prior Employer, less (B) the actuarially equivalent value of the benefit actually payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under the Retirement Plan and the Company's ERISA Parity Plan, and further, less (C) the actuarially equivalent value of the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contributions (and earnings thereon), and further less (D) the actuarially equivalent value of the benefit hereafter payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under any defined benefit tax qualified retirement plan maintained by the Prior Employer. The Retirement Equalization Benefit or its actuarially equivalent value shall be payable, beginning as of the earliest date Executive would be entitled to receive a pension under the Retirement Plan based on service described in clause (A)(z) of this Section 11(d)(iii), in the form of the normal form of benefit under the Retirement Plan or such optional form of benefit as Executive elects from among the forms of payment then available under the Retirement Plan. (iv) If Executive's employment with the Company terminates after the earliest date as of which Executive would have been eligible upon termination of employment, if his employment with the Prior Employer had been employment with the Company, for retiree health care benefits under any plan then maintained by the Company and providing such benefits for salaried non-represented employees hired before 1993 who retire after satisfying such eligibility requirements as may then be in effect under such plan ("Company Plan"), then the Company shall provide to Executive and his eligible dependents such benefits as may be in effect from time to time under the Company Plan. (v) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (vi) If Executive dies before the Retirement Equalization Benefit begins, the surviving spouse of Executive, if any, will be entitled to receive a survivor annuity equal to -6- the pre-retirement survivor benefits she would have received under the Retirement Plan if Executive's service for pension purposes with the Prior Employer were service with the Company, determined without regard to the limits under sections 401(a)(17) and 415 of the Code and reduced by (A) the sum of the benefits payable to her under the Retirement Plan and, if applicable, the ERISA Parity Plan, (B) the actuarially equivalent value of any death benefit based on the Supplemental Pension that may be payable to her under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contribution (including any earnings thereon), and (C) the actuarially equivalent value of any benefit payable to her, if any under any defined benefit retirement plans maintained by the Prior Employer. (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) two times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to two times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum aggregate amount payable under this Section 11(e)(i) shall not exceed three times the Executive's annual base salary (immediately preceding the Date of Termination). (ii) For two years after Executive's Date of Termination, if Executive is less than age 64 on his Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 64 or older on his Date of Termination, the period of "two years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below: -7- Age Period --- ------ 64 One year 65 or older Zero For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have commenced employment prior to January 1, 1993 (and employment with the Prior Employer shall be deemed to be employment with the Company), to have remained employed until the lesser of (a) two years after the Date of Termination or (b) age 65, and to have retired on the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) two years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted. 12. Special Provisions on Change of Control --------------------------------------- In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company -8- for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company (including without limitation the Retirement Equalization Benefit under this Agreement) shall be paid to Executive in a single sum within thirty (30) days after Executive is not longer employed by the Company. (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable -9- compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration ------------------------------------ (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall -10- be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and -11- until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, 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 this Section 14(a). (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of -12- the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance -13- of Executive's duties; provided, however, that for purposes of Section 11(d)(iii) the Date of Termination shall be the earliest date following the Disability Effective Date as of which Executive is not entitled to benefits under the Company's sponsored program of long term disability insurance, including without limitation, the Long Term Disability Program of National Steel Corporation (including any successor thereto), or if earlier, the date on which Executive reaches age 65. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless -14- the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; (vii) [Intentionally left blank.] (viii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or (ix) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Prior Employer". "Prior Employer" means USX Corporation. (h) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. -15- 15. Miscellaneous. (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in -16- accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President - Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of -17- Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. (k) Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By:_________________________________________ Name: V. John Goodwin Title: President, Chief Executive Officer and Chief Operating Officer -------------------------------------------- David L. Peterson -18- EX-10.E 6 CONTRACT WITH R. PHEANIS EXHIBIT 10-E EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is dated and effective as of the 30th day of April, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and Robert G. Pheanis ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the Vice President and General Manager-Midwest Division of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Chief Executive Officer, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1998 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1998, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation. Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 35% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans. (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by long-term disability insurance and benefits; and group or individual life insurance or a combination thereof, all in accordance with the plans, policies, programs and arrangements as presently in effect or as they may be modified or added to by the Company from time to time. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). 4. Non-Compete Agreement Executive hereby agrees that if Executive terminates his employment with the Company without Good Reason, then for a period of two (2) years after the Date of Termination, but in any event only as long as the Company satisfies its obligations under this Agreement, (the "Restricted Period"), Executive will not engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor or director) in any "Competitive Business" in the continental United States (the "Territory"). The term "Competitive Business" means the making, producing, manufacturing or finishing of steel products which products are in direct competition with steel products that are made, produced, manufactured or finished by the Company on the Date of Termination. It is agreed that the ownership of not more than one percent of the equity securities of any company having securities listed on an exchange or regularly traded in the -2- over-the-counter market shall not be deemed inconsistent with this Section 4. If any court of competent jurisdiction shall deem any obligation of this Section 4 too lengthy or the Territory too extensive, the other provisions of this Section shall nevertheless stand, the Restricted Period shall be deemed to be the longest period such court deems not to be too lengthy and the Territory shall be deemed to comprise the portion of the United States east of the Mississippi River (or such other portion of the United States that such court deems not to be too extensive). 5. Non-Inducement Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the -3- Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. 9. Release of Employment Claims Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies Executive acknowledges and agrees that the covenants set forth in Sections 4 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment. (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). -4- (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)) and the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 64 or older on the Date of Termination, the "two times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below:
Age Multiplier --- ---------- 64 One times 65 or older Zero
(d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of -5- Termination is due to Disability or death, Executive or his estate or other beneficiaries shall receive the Disability or death benefits described in Section 3(b); (iii) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) two times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to two times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum aggregate amount payable under this Section 11(e)(i) shall not exceed three times the Executive's annual base salary (immediately preceding the Date of Termination). (ii) For two years after Executive's Date of Termination, if Executive is less than age 64 on his Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 64 or older on his Date of Termination, the period of "two years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below:
Age Period --- ------ 64 One year 65 or older Zero
-6- For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have remained employed until the lesser of (a) two years after the Date of Termination or (b) age 65, and to have retired on the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) two years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted. 12. Special Provisions on Change of Control. In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company -7- shall be paid to Executive in a single sum within thirty (30) days after Executive is no longer employed by the Company. (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest -8- marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration. (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. -9- (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording -10- Executive the opportunity, 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 this Section 14(a). (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more -11- subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance of Executive's duties. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and -12- reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; (vii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or -13- (viii) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. 15. Miscellaneous. (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. -14- (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. -15- (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President - Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, -16- the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. (k) Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. -17- IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By: ------------------------------------------ Name: V. John Goodwin Title: President, Chief Executive Officer and Chief Operating Officer --------------------------------------------- Robert G. Pheanis -18- EX-10.F 7 CONTRACT WITH D. PRYZBYLSKI EXHIBIT 10-F EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is dated and effective as of the 30th day of April, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and David A. Pryzbylski ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term ------------------- Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the Senior Vice President Administration and Secretary of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Chief Executive Officer, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1998 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1998, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation. ---------------------------------------- Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 40% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans. ------------------------------ (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by long-term disability insurance and benefits; and group or individual life insurance or a combination thereof, all in accordance with the plans, policies, programs and arrangements as presently in effect or as they may be modified or added to by the Company from time to time. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). Executive shall also be entitled to the Retirement Equalization Benefit as defined in Section 11(d)(iii). 4. Non-Compete Agreement --------------------- Executive hereby agrees that if Executive terminates his employment with the Company without Good Reason, then for a period of two (2) years after the Date of Termination, but in any event only as long as the Company satisfies its obligations under this Agreement, (the "Restricted Period"), Executive will not engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor or director) in any "Competitive Business" in the continental United States (the "Territory"). The term "Competitive Business" means the making, producing, manufacturing or finishing of steel products which products are in direct competition with steel products that are made, produced, manufactured or finished by the Company on the Date of Termination. It is agreed that the ownership of not more than one percent of the equity securities of any -2- company having securities listed on an exchange or regularly traded in the over- the-counter market shall not be deemed inconsistent with this Section 4. If any court of competent jurisdiction shall deem any obligation of this Section 4 too lengthy or the Territory too extensive, the other provisions of this Section shall nevertheless stand, the Restricted Period shall be deemed to be the longest period such court deems not to be too lengthy and the Territory shall be deemed to comprise the portion of the United States east of the Mississippi River (or such other portion of the United States that such court deems not to be too extensive). 5. Non-Inducement -------------- Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure -------------- For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity ------------------------ Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company ---------------------------- -3- Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. 9. Release of Employment Claims ---------------------------- Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies -------- Executive acknowledges and agrees that the covenants set forth in Sections 4 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment ------------------------- (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). -4- (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)) and the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 64 or older on the Date of Termination, the "two times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below: Age Multiplier --- ---------- 64 One times 65 or older Zero (d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of -5- Termination is due to Disability or death, Executive or his estate or other beneficiaries shall receive the Disability or death benefits described in Section 3(b); (iii) Executive shall be entitled to receive a "Retirement Equalization Benefit" equal to (A) the benefit that is or would have been payable to Executive under the National Steel Corporation Retirement Program (including any successor thereto) (the "Retirement Plan"), without regard to satisfaction of applicable vesting requirements under the Retirement Plan, determined (x) without regard to the limitations on earnings taken into account for purpose of calculation of accrued benefits under section 401(a) (17) of the Internal Revenue Code of 1986, as amended (the "Code"), (y) without regard to any applicable limitations on maximum benefits under section 415 of the Code, and (z) for purposes of vesting, eligibility for immediate commencement of benefits, and calculation of the amount of the benefits, based upon the sum of the number of years of service of Executive with the Company, plus the number of years of service of Executive with the Prior Employer, less (B) the actuarially equivalent value of the benefit actually payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under the Retirement Plan and the Company's ERISA Parity Plan, and further, less (C) the actuarially equivalent value of the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contributions (and earnings thereon), and further less (D) the actuarially equivalent value of the benefit hereafter payable to Executive (whether or not he has applied for or is currently eligible and has begun to receive such benefit) under any defined benefit tax qualified retirement plan maintained by the Prior Employer. The Retirement Equalization Benefit or its actuarially equivalent value shall be payable, beginning as of the earliest date Executive would be entitled to receive a pension under the Retirement Plan based on service described in clause (A)(z) of this Section 11(d)(iii), in the form of the normal form of benefit under the Retirement Plan or such optional form of benefit as Executive elects from among the forms of payment then available under the Retirement Plan. (iv) If Executive's employment with the Company terminates after the earliest date as of which Executive would have been eligible upon termination of employment, if his employment with the Prior Employer had been employment with the Company, for retiree health care benefits under any plan then maintained by the Company and providing such benefits for salaried non-represented employees hired before 1993 who retire after satisfying such eligibility requirements as may then be in effect under such plan ("Company Plan"), then the Company shall provide to Executive and his eligible dependents such benefits as may be in effect from time to time under the Company Plan. (v) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (vi) If Executive dies before the Retirement Equalization Benefit begins, the surviving spouse of Executive, if any, will be entitled to receive a survivor annuity equal to -6- the pre-retirement survivor benefits she would have received under the Retirement Plan if Executive's service for pension purposes with the Prior Employer were service with the Company, determined without regard to the limits under sections 401(a)(17) and 415 of the Code and reduced by (A) the sum of the benefits payable to her under the Retirement Plan and, if applicable, the ERISA Parity Plan, (B) the actuarially equivalent value of any death benefit based on the Supplemental Pension that may be payable to her under the Company's Executive Deferred Compensation Plan, excluding any accrual which is a salary or incentive compensation deferral or contribution (including any earnings thereon), and (C) the actuarially equivalent value of any benefit payable to her, if any under any defined benefit retirement plans maintained by the Prior Employer. (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) two times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to two times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum aggregate amount payable under this Section 11(e)(i) shall not exceed three times the Executive's annual base salary (immediately preceding the Date of Termination). (ii) For two years after Executive's Date of Termination, if Executive is less than age 64 on his Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 64 or older on his Date of Termination, the period of "two years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below: -7- Age Period --- ------ 64 One year 65 or older Zero For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have commenced employment prior to January 1, 1993 (and employment with the Prior Employer shall be deemed to be employment with the Company), to have remained employed until the lesser of (a) two years after the Date of Termination or (b) age 65, and to have retired on the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) two years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted. 12. Special Provisions on Change of Control --------------------------------------- In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company -8- for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company (including without limitation the Retirement Equalization Benefit under this Agreement) shall be paid to Executive in a single sum within thirty (30) days after Executive is no longer employed by the Company. (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable -9- compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration ------------------------------------ (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall -10- be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions ----------- Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and -11- until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, 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 this Section 14(a). (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of -12- the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance -13- of Executive's duties; provided, however, that for purposes of Section 11(d)(iii) Date of Termination shall be the earliest date following the Disability Effective Date as of which Executive is not entitled to benefits under the Company's sponsored program of long term disability insurance, including without limitation, the Long Term Disability Program of National Steel Corporation (including any successor thereto), or if earlier, the date on which Executive reaches age 65. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless -14- the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; (vii) [Intentionally left blank.] (viii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or (ix) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Prior Employer". "Prior Employer" means USX Corporation. (h) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. -15- 15. Miscellaneous ------------- (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in -16- accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President-Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of -17- Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. (k) Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By:_________________________________ Name: V. John Goodwin Title: President, Chief Executive Officer and Chief Operating Officer ------------------------------------ David A. Pryzbylski -18- EX-10.G 8 CONTRACT WITH J. MACZUZAK EXHIBIT 10-G EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is dated and effective as of the 1st day of May, 1996 ("Effective Date"), and is by and between National Steel Corporation, a Delaware corporation (the "Company"), and John A. Maczuzak ("Executive"). In consideration of the mutual covenants contained herein, and other good and valuable consideration (including the Termination Benefits and the Special Termination Benefits) the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows: 1. Employment and Term Executive is or may be employed by the Company pursuant to one or more contracts or letter agreements (the "Prior Agreement"). The Company hereby agrees to employ Executive as the Vice President and General Manager-Granite City Division of the Company and Executive hereby agrees to accept such employment and serve in such capacity on a full-time basis during the Term and upon the terms and conditions set forth in this Employment Agreement (this "Agreement"). Executive shall report solely to the Company's Chief Executive Officer, and will have such responsibilities, duties and authorities as are customary for such positions in a publicly held company of the size, type and nature of the Company as they may exist from time to time. The term of employment of Executive under this Agreement shall be the period commencing on the Effective Date and terminating on July 1, 1998 or on the date of the end of any period or periods of extension thereof (the "Term"). On July 1, 1998, the Term shall be automatically extended on a month to month basis without further action by either party unless either party hereto notifies the other party that such extension shall not occur. In the event either party notifies the other party that such extension shall not occur, Executive's employment shall terminate automatically at the end of the initial Term or any extension thereof, as the case may be. Prior to the date on which Executive reaches age 65 ("Normal Retirement"), an election by the Company not to further extend the initial Term or any extension thereof shall automatically result in a termination of Executive's employment by the Company without Cause, which termination of employment shall be effective at the end of the initial Term or any extension thereof. Termination of Executive's employment at or after age 65, for any reason, whether by Executive or the Company, shall be deemed to be a termination of Executive's employment due to Normal Retirement. The respective rights and obligations of the parties hereunder shall survive any termination of employment to the extent necessary to achieve the intended preservation of rights and obligations. 2. Salary and Annual Incentive Compensation. Executive's annual base salary as in effect on the Effective Date shall be the Executive's annual base salary hereunder as of the Effective Date, payable in consecutive equal monthly installments. The term "base salary" as utilized in this Agreement shall refer to the then current base salary as adjusted from time to time. Executive shall also be eligible to receive annual incentive compensation pursuant to the Company's Management Incentive Compensation Program or any successor plan (the "MICP") during the Term and as determined in accordance with the terms and conditions of the MICP. Executive's MICP target annual incentive compensation for 1996 shall be 40% of base salary. The Company will maintain in effect, for each year during the Term, the MICP or an equivalent plan under which Executive will be eligible for an award not less than the prior year opportunity level available to Executive. Any such annual incentive compensation payable to Executive shall be paid in accordance with the Company's usual practices with respect to payment of incentive compensation of senior executives. 3. Benefit and Compensation Plans. (a) Executive shall be entitled during the Term to participate in all executive compensation plans, and other employee and executive benefits, practices, policies and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time ("Benefit Plans"); and during the Term, the Company will pay the cost of financial and tax planning services, up to a maximum amount in effect on the Effective Date of this Agreement. Such services shall be furnished by a provider selected by Executive. (b) During the Term, the Company will provide Executive with coverage by long-term disability insurance and benefits; and group or individual life insurance or a combination thereof, all in accordance with the plans, policies, programs and arrangements as presently in effect or as they may be modified or added to by the Company from time to time. (c) During the Term, Executive will participate in the Company's Executive Deferred Compensation Plan, ERISA Parity Plan, and any other supplemental retirement plans, benefits, practices, programs, or policies of the Company, as in effect on the Effective Date or as they may be modified or added to by the Company from time to time ("Compensation Plans"). 4. Non-Compete Agreement Executive hereby agrees that if Executive terminates his employment with the Company without Good Reason, then for a period of two (2) years after the Date of Termination, but in any event only as long as the Company satisfies its obligations under this Agreement, (the "Restricted Period"), Executive will not engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor or director) in any "Competitive Business" in the continental United States (the "Territory"). The term "Competitive Business" means the making, producing, manufacturing or finishing of steel products which products are in direct competition with steel products that are made, produced, manufactured or finished by the Company on the Date of Termination. It is agreed that the ownership of not more than one percent of the equity securities of any company having securities listed on an exchange or regularly traded in the -2- over-the-counter market shall not be deemed inconsistent with this Section 4. If any court of competent jurisdiction shall deem any obligation of this Section 4 too lengthy or the Territory too extensive, the other provisions of this Section shall nevertheless stand, the Restricted Period shall be deemed to be the longest period such court deems not to be too lengthy and the Territory shall be deemed to comprise the portion of the United States east of the Mississippi River (or such other portion of the United States that such court deems not to be too extensive). 5. Non-Inducement Executive hereby agrees that for a period commencing with the Date of Termination and ending on the second anniversary of the Date of Termination, Executive shall not induce, or attempt to influence, any employee of the Company who reports either directly to the Company's Chief Executive Officer or to another employee who reports directly to the Company's Chief Executive Officer, to terminate his employment with the Company. 6. Non-Disclosure For a period commencing on the Date of Termination and ending on the fifth anniversary of the Date of Termination, Executive shall keep secret and retain in strictest confidence, and shall not furnish, make available or disclose to any third party or use for the benefit of himself or any third party, any Confidential Information. As used in this Section, "Confidential Information" shall mean any information relating to the business or affairs of the Company, including but not limited to information relating to financial statements, customer identities, customer needs, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with its business; provided, however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company. 7. No Unfavorable Publicity Subsequent to Executive's Date of Termination, Executive agrees not to make statements or communications and not to issue any written communications or release any other written materials which would likely be materially damaging to the Company's reputation or standing, whether in the investor or financial community, the steel industry or otherwise. 8. Cooperation With the Company Executive agrees to cooperate with the Company for a reasonable period of time after the Term of this Agreement by making himself available to testify on behalf of the -3- Company, in any action, suit, or proceeding. In addition, for a reasonable period of time, Executive agrees to be available at reasonable times to meet and consult with the Company on matters reasonably within the scope of his prior duties with the Company so as to facilitate a transition to his successor. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or consulting assistance. 9. Release of Employment Claims Executive and the Company agree that in the event Executive receives Special Termination Benefits (as defined in Section 11(e)), he and the Company will execute a mutual release agreement releasing any and all claims which either of them have or may have against the other arising out of Executive's employment (other than enforcement of this Agreement). The Executive agrees that in the event the Executive's employment with the Company terminates or is terminated, the Executive's sole and exclusive remedy shall be, and the Company's liability shall be limited to, damages equal to the payments and benefits to be provided by the Company hereunder and to payment or reimbursement of Executive's costs and expenses in accordance with Section 13(b). 10. Remedies Executive acknowledges and agrees that the covenants set forth in Sections 4 through 8 are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of such covenants, and that in the event of Executive's actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of such covenants, the Company shall be entitled to immediate temporary injunctive and other equitable relief, without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove. 11. Termination of Employment. (a) Termination Due to Death, Disability or Normal Retirement. Upon an Executive's Date of Termination due to death, Disability or Normal Retirement, the Company will pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) will be entitled to receive, the Termination Benefits (as defined in Section 11(d)). -4- (b) Termination by the Company for Cause and Termination by Executive without Good Reason. Upon Executive's Date of Termination by the Company for Cause or by Executive without Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)), except that, in the event of termination of Executive's employment by the Company for Cause or by Executive without Good Reason, no amount shall be paid and no right accrued in respect of Executive under Section 11(d)(i)(B). (c) Termination by the Company Without Cause and Termination by Executive for Good Reason. Upon Executive's Date of Termination by the Company without Cause or by Executive for Good Reason the Company shall pay Executive (or his beneficiaries, dependents or estate), and Executive (or his beneficiaries, dependents or estate) shall be entitled to receive, the Termination Benefits (as defined in Section 11(d)) and the Special Termination Benefits (as defined in Section 11(e)), except that in the event Executive is age 64 or older on the Date of Termination, the "two times" multipliers set forth in Section 11(e)(i) shall be reduced in accordance with the schedule set forth below: Age Multiplier --- ---------- 64 One times 65 or older Zero (d) "Termination Benefits". "Termination Benefits" means the aggregate of all of the following: (i) a single sum cash payment by the Company to Executive within thirty (30) days after the Date of Termination of (A) Executive's then current annual base salary pro rata through the Date of Termination to the extent not theretofore paid; (B) the product of (y) the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) Executive's target incentive compensation percentage payable under the MICP multiplied by Executive's then current base salary and (z) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365; and (C) any accrued vacation pay to the extent not theretofore paid. (ii) All vested amounts owing or accrued at the Date of Termination under any compensation and benefit plans, programs, and arrangements set forth or referred to in this Agreement, including, but not limited to, Sections 2 and 3 hereof; and if the Date of -5- Termination is due to Disability or death, Executive or his estate or other beneficiaries shall receive the Disability or death benefits described in Section 3(b); (iii) Reasonable business expenses and disbursements incurred by Executive prior to such Date of Termination will be fully reimbursed within ten (10) days after the Date of Termination. (e) "Special Termination Benefits". "Special Termination Benefits" means the aggregate of all of the following: (i) The Company shall pay to Executive, in a single sum in cash within thirty (30) days after the Date of Termination, an amount equal to (y) two times the Executive's annual base salary (immediately preceding the Date of Termination), plus (z) in the event a Change of Control has previously occurred, an additional amount equal to two times the greater of (aa) the average annual incentive compensation paid to Executive in the three fiscal years immediately preceding the fiscal year of the Date of Termination (or all fiscal years Executive was employed if less than three, and annualized in the event Executive was not employed by the Company for the whole of any such fiscal year), and (bb) and Executive's most recent target incentive compensation percentage payable under the MICP multiplied by his then current base salary; provided, however, that notwithstanding the foregoing, in the event a Change of Control has previously occurred, the maximum amount payable under clauses (y) and (z) of this Section 11(e)(i) shall not exceed three times the Executives annual base salary (immediately preceding the Date of Termination). If Executive's employment is terminated without Cause or if Executive terminates his employment for Good Reason, in either case prior to his first anniversary of employment with the Company, the Company shall also pay to Executive in a single sum in cash within thirty (30) days after the Date of Termination, an additional amount equal to his base salary for the period commencing with his Date of Termination and ending on what would have been his first anniversary of employment had he continued to be employed with the Company. (ii) For two years after Executive's Date of Termination, if Executive is less than age 64 on his Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, arrangement, practice or policy, the Company shall continue benefits to Executive and/or Executive's dependents at least equal to those which would have been provided to them in accordance with the Benefit Plans or this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and their dependents; provided, however, that if Executive is eligible to receive health benefits under another employer-provided plan, the health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and provided, further, that if Executive shall later become ineligible for health benefits under another employer-provided plan, the health benefits provided by the Company shall be primary. If Executive is age 64 or older -6- on his Date of Termination, the period of "two years" in the first line of this Section 11(e)(ii) shall be reduced to the period set forth below: Age Period --- ------ 64 One year 65 or older Zero For purposes of determining vesting, eligibility and benefit accrual (for both age and service but not the time of commencement of benefits) of Executive for retiree benefits pursuant to such Benefit Plans, Executive shall be considered to have remained employed until the lesser of (a) two years after the Date of Termination or (b) age 65, and to have retired on the last day of such period. If such Benefit Plans do not allow Executive's continued participation, Executive shall be paid within thirty (30) days after the Date of Termination a cash payment actuarially equivalent on an after-tax basis to the value of the additional benefits which Executive would have received under such employee benefit plans, programs, and arrangements in which Executive was participating immediately prior to the Date of Termination, as if Executive had received credit under such plans, programs, and arrangements for service, age and compensation with the Company during the periods previously described following Executive's Date of Termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans, programs and arrangements. The value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating. (iii) Outplacement services, the scope and provider of which shall be selected by Executive in his sole discretion, provided by the Company at its sole expense as incurred. (iv) Stock options held by Executive as of the date of this Agreement will continue to vest as if Executive had remained an employee of the Company and shall remain fully exercisable for the lesser of (a) the entire period that would have been available for exercise had Executive continued in the employ of the Company through the original option term or (b) two years; such stock options shall otherwise be governed by the plans and programs (and the agreements and other documents thereunder) pursuant to which such stock options were granted. 12. Special Provisions on Change of Control. In the event of a Change of Control, the provisions of this Section shall apply, and the Agreement shall be interpreted and applied consistently with the provisions of this Section. (a) Benefit and Compensation Plans. In no event shall Benefit Plans or Compensation Plans provide Executive with benefits or compensation, in each case, less -7- favorable, in the aggregate, than the most favorable of those provided by the Company for Executive under Benefit Plans or Compensation Plans as in effect at any time during the 120-day period immediately preceding the Change of Control or if more favorable to Executive, those provided generally at any time after the Change of Control to other peer executives of the Company. If after a Change of Control (i) Executive terminates his employment with the Company with Good Reason, or (ii) Executive's employment with the Company is terminated without Cause, the actuarially equivalent value of nonqualified unfunded retirement benefits under any plan, program or arrangement of the Company shall be paid to Executive in a single sum within thirty (30) days after Executive is no longer employed by the Company. (b) Tax Matters. If Executive becomes entitled to one or more payments (with a "payment" including, without limitation, any Termination Benefits, Special Termination Benefits, the vesting of an option or other cash or non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, program, policy, practice, arrangement, or agreement with the Company (the "Benefit Payments"), which are or may become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall indemnity and hold the Executive harmless on an after-tax basis from the Excise Tax and any additional federal, state, and local income tax, employment tax and penalties and interest thereon, and the Company shall pay to Executive at the time of the Benefit Payments (or at the time the Excise Tax is imposed, if earlier) an additional amount which shall equal and include the Excise Tax, reimbursement for any penalties and interest that may accrue in respect of any Excise Tax (including any penalties or interest thereon) and any federal, state and local income or employment tax and Excise Tax on such additional amount, including any penalties or interest thereon (collectively, the "Additional Amounts"), but before reduction for any federal, state, or local income or employment tax on the Benefit Payments, so that after payment of the previously mentioned taxes (including penalties and interest thereon) Executive retains an amount equal to the sum of (a) the Benefit Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state, or local income tax purposes because of the inclusion of the Additional Amounts in Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local income taxation, respectively, for the calendar year in which payment of the Additional Amounts is to be made. The Benefit Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent independent legal counsel or independent compensation consultants or independent certified public accountants of nationally recognized standing mutually selected by the Company and Executive ("Independent Advisors") provide a written opinion acceptable to Executive that the Benefit Payments (in whole or in part) are not subject to Excise Tax because they do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable -8- compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax; For purposes of determining the amount of the Additional Amounts, Executive shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the payment of the Additional Amounts is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the payment of the Additional Amounts is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least equal to those disallowed because of the inclusion of the Additional Amounts in Executive's adjusted gross income. The Company shall have the right to contest any claim by the Internal Revenue Service relating to the Excise Tax; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, federal, state and local income or employment tax (including interest and penalties with respect thereto) imposed and payment of costs and expenses. The Company shall bear all of its own expenses and the expense of the Independent Advisors, and the legal, consulting and accounting expenses of Executive incurred by Executive for any reason under or with respect to this Section. 13. Governing Law; Disputes; Arbitration. (a) Governing Law. This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Indiana, without regard to Indiana conflicts of law principles, except insofar as the Delaware General Corporation Law and federal laws and regulations may be applicable. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. (b) Reimbursement of Expenses in Enforcing Rights. All costs and expenses (including, without limitation, fees and disbursements of actuaries, accountants and counsel) incurred by Executive in seeking in good faith to enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights. If there shall -9- be any dispute between the Company and Executive, the Company shall pay or provide, as applicable, all undisputed amounts or benefits as are then payable to Executive or Executive's beneficiaries or dependents pursuant to this Agreement. Any amounts that have become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law, but which are not timely paid shall bear interest, payable by the Company, at the lower of (A) the highest lawful rate or (B) the prime rate in effect at the time such payment first becomes payable, as quoted by The Wall Street Journal. (c) Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration, by three (3) arbitrators, one of which shall be chosen by the Company, one of which shall be chosen by Executive, and one of which shall be chosen by the arbitrators chosen by Company and Executive. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Indiana; (ii) any of the courts of the State of Indiana, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding. Notwithstanding any provision in this Section 13(c), Executive shall be entitled to seek specific performance of Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14. Definitions Certain terms in this Agreement are defined the first time they appear; other terms which are capitalized are not defined the first time they appear, but unless the context indicates otherwise, have the meanings set forth below: (a) "Cause". For purposes of this Agreement, "Cause" shall mean Executive's gross misconduct (as defined herein) or willful and material breach of this Agreement. For purposes of this definition, "gross misconduct" shall mean (A) a felony conviction or a plea of nolo contendere to a felony charge in a court of law under applicable federal or state laws which results in material damage to the Company, or (B) willfully engaging in one or more acts which is demonstrably and materially damaging to the Company. Notwithstanding the foregoing, Executive may not be terminated for Cause unless and -10- until there shall have been delivered to him, within six months after the Board (A) had knowledge of conduct or an event allegedly constituting Cause and (B) had reason to believe that such conduct or event could be grounds for Cause, a copy of a resolution duly adopted by a majority affirmative vote of the entire membership of the Company's Board of Directors (excluding Executive if a member of Company's Board of Directors), at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such termination and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, 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 this Section 14(a). (b) "Change of Control". For the purpose of this Agreement, a "Change of Control" shall mean: (i) (A) If any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") acquires (by purchase, tender offer or otherwise) or becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") and (B) NKK Corporation ceases to be the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the total voting power of all the then Outstanding Company Voting Securities; provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (2) any acquisition by any entity pursuant to a transaction which complies with each of clauses (A), (B) and (C) of subsection (iii) of this paragraph (b). (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) Consummation of a reorganization, recapitalization, merger, acquisition of securities or assets by the Company or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of -11- the Company (the "Outstanding Company Common Stock") and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, the Company or a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least two-thirds of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Date of Termination". "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, by Executive for Good Reason, or by the Company or the Executive due to Normal Retirement, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if Executive's employment is terminated by the Company without Cause, the Date of Termination shall be (a) the date on which the Company notifies Executive of such Date of Termination, or (b) the date of expiration of the initial Term (or any extension thereof, as the case may be) if such termination without Cause occurs as a result of an election by the Company, during either the initial Term or any extension thereof, not to further extend the initial Term or any extension thereof; and (iii) if Executive's employment is terminated by reason of death or Disability, or is terminated by Executive without Good Reason, the Date of Termination shall be the date of death of Executive, the Disability Effective Date, or the date Executive notifies the Company that Executive's employment will terminate, as the case may be. If the Company determines in good faith that the Disability of Executive has occurred during the Term of the Agreement (pursuant to the definition of Disability set forth in Section 14(d)), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's Date of Termination is effective on the date that is six months after receipt of such notice by Executive (the "Disability Effective Date"), provided that, within such six month period, Executive shall not have returned to full-time performance -12- of Executive's duties. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. (d) "Disability". "Disability" means the failure of Executive to render and perform the services required of him under this Agreement, for a total of 180 days or more during any consecutive 12 month period, because of any physical or mental incapacity or disability as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within six (6) months after Executive has received written notice from the Company of a proposed Date of Termination due to such absence, Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive's good health prepared by a physician selected by Executive and reasonably acceptable to the Company. (e) "Good Reason". For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without Executive's prior written consent: (i) the diminution of Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, or removal from Executive of any status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, which is inconsistent in any respect with Executive's status, titles, positions, duties, offices, authorities, responsibilities, assignments or reporting relationships, as contemplated by Section 1 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) if Executive is a member of the Board on the Effective Date, the removal of Executive from, any failure to elect or re-elect, or nominate Executive to the Board; (iii) any reduction in Executive's then current base salary or in Executive's then current target incentive compensation opportunity under the MICP; (iv) any reduction in benefits under the Retirement Plan, the Retirement Equalization Benefit, the ERISA Parity Plan or the Supplemental Pension payable to Executive under the Company's Executive Deferred Compensation Plan unless such reduction under any tax-qualified employee benefit plan is required by law; provided, further, that if any such reduction is required by law, "Good Reason" shall still exist unless the Company promptly makes Executive whole for any such reduction through equal accruals under a non-tax qualified plan; (v) any failure other than provided in Section 14(e)(iv) by the Company to comply with any of the provisions of this Agreement, including but not limited to Sections 2 and 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not -13- occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (vi) any failure by the Company to perform any obligation under, or breach by the Company of any provision of, this Agreement; (vii) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by this Agreement; or (viii) any failure by the Company to comply with and satisfy Section 15(c) of this Agreement. (f) "Notice of Termination". "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (g) "Board" or "Board of Directors". "Board" or "Board of Directors" means the full board of directors of the Company as it may be constituted in accordance with applicable law from time to time, and any committee of the board shall not be deemed to be the Board or Board of Directors for purposes of this Agreement. 15. Miscellaneous. (a) Integration. This Agreement modifies and supersedes any and all prior employment agreements (including but not limited to the Prior Agreement, if any). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Notwithstanding the foregoing, all stock options granted to Executive pursuant to such Prior Agreement shall remain outstanding, and to the extent applicable, Section 11(e)(iv) shall apply to such stock options and shall also apply to such other stock options granted to Executive prior to the Effective Date of this Agreement. -14- (b) Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. In the event of any conflict between the terms and provisions of this Agreement and any of the Company's plans, policies, practices, programs, contracts or agreements, the terms and provisions of whichever is more favorable to the Executive shall prevail. (c) Non-Transferability. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 15(d). The Company may, but only with the consent of Executive, assign this Agreement and the Company's rights and obligations hereunder, and the Company shall, as a condition of the succession, require such Successor to assume (jointly and severally with the Company) the Company's obligations and be bound by this Agreement. Any such assignment shall not release the Company of any of its obligations under this Agreement. For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or all or substantially all of its assets, or otherwise. (d) Beneficiaries. Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits payable hereunder following Executive's death. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate. -15- (e) Notices. Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by overnight courier service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice: If to the Company: With copies to: Senior Vice President - Administration Senior Vice President & General National Steel Corporation Counsel 4100 Edison Lakes Parkway National Steel Corporation Mishawaka, Indiana 46545-3440 4100 Edison Lakes Parkway Mishawaka, Indiana 46545-3440 If to Executive at his then current address reflected in the Company's records. If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement when sent. In the case of overnight courier service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective 2 days after deposit into the mails by delivery to the U.S. Post Office. If the person to receive the notice (or a copy thereof) for the Company is Executive, then notice to the Company shall be sent to the President of the Company at the above address rather than to the officer previously named. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (g) No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. (h) No Obligation To Mitigate. Executive shall not be required to seek other employment or otherwise to mitigate Executive's damages on or after Executive's Date of Termination, and the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by Executive as the result of employment by another employer or by retirement benefits; provided, however, that, -16- the health benefits that Executive is entitled to receive after the Date of Termination may be reduced in accordance with the terms of Section 11(e)(ii). (i) Offsets; Withholding. The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 11 and 12, or otherwise by the Company, will be subject to required withholding taxes and other required deductions. (j) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns as provided in Section 15(c). This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. (k) Actuarially Equivalent Value Calculation. For the purpose of determining an actuarially equivalent value under the terms of this Agreement, the interest rate specified in Section 417(e)(3) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such determination, and the 1994 Group Annuitants Mortality Table, shall be used and for purposes of determining present value under the terms of this Agreement, the interest rate specified immediately above shall be used. All calculations shall be made at the expense of the Company, by the independent auditors of the Company. As soon as practicable after the need for such calculation arises, the Company shall provide to its auditors all information needed to perform such calculations. (l) Representation. The Executive represents and warrants that: (i) he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement; (ii) that he has not breached any duty of confidentiality owed to any previous employer; and (iii) that he has not brought with him to the Company any documents, written information, records, data, computer information and material, tapes, film, and other material of any kind incorporating any confidential information of a previous employer. IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the day and year first above written. NATIONAL STEEL CORPORATION By: ------------------------------------------- Name: V. John Goodwin Title: President, Chief Executive Officer and -17- Chief Operating Officer --------------------------------------- John A. Maczuzak -18- EX-27 9 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 158,647 0 312,190 22,027 428,545 877,345 3,587,769 2,143,786 2,689,199 670,326 482,862 433 64,280 36,650 508,808 2,689,199 769,481 769,481 687,754 687,754 67,344 29 9,349 5,003 (5,388) 10,391 0 0 0 10,391 .18 .18
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