-----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, BmvWpdxjP5vidSu8JGV3JfpiV+EzLruuaZZYvTVmFO9jJPG/5RHaWj3543vT12NR ODwDi0o0pD02jcde2SDtXA== 0000910394-99-000004.txt : 19990811 0000910394-99-000004.hdr.sgml : 19990811 ACCESSION NUMBER: 0000910394-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19990626 FILED AS OF DATE: 19990810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENTUCKY ELECTRIC STEEL INC /DE/ CENTRAL INDEX KEY: 0000910394 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 611244541 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22416 FILM NUMBER: 99681923 BUSINESS ADDRESS: STREET 1: P O BOX 3500 CITY: ASHLAND STATE: KY ZIP: 41105-3500 BUSINESS PHONE: 6069291222 MAIL ADDRESS: STREET 1: P O BOX 3500 CITY: ASHLAND STATE: KY ZIP: 41105-3500 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 26, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to _____________________. Commission File No. 0-22416 KENTUCKY ELECTRIC STEEL, INC. (Exact name of Registrant as specified in its charter) Delaware 61-1244541 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) P. O. Box 3500, Ashland, Kentucky 41105-3500 (Address of principal executive office, Zip Code) (606) 929-1222 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO The number of shares outstanding of each of the issuer's classes of common stock, as of August 6, 1999, is as follows: 4,067,143 shares of voting common stock, par value $.01 per share. KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets ............ 3 Condensed Consolidated Statements of Operations .. 4 Condensed Consolidated Statements of Cash Flows .. 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ............ 9-13 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K ................. 14 SIGNATURES ...................................... 15 KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) June 26, Sept. 26, 1999 1998 ASSETS CURRENT ASSETS Cash and cash equivalents $ 141 $ 150 Accounts receivable, less allowance for doubtful accounts and claims of $442 at June 26, 1999 and $460 at September 26, 1998 13,578 12,037 Inventories 20,151 20,363 Operating supplies and other current assets 5,523 5,206 Deferred tax assets 796 648 Total current assets 40,189 38,404 PROPERTY, PLANT AND EQUIPMENT Land and buildings 4,607 4,532 Machinery and equipment 43,078 42,004 Construction in progress 4,252 3,031 Less - accumulated depreciation (17,384) (14,772) Net property, plant and equipment 34,553 34,795 DEFERRED TAX ASSETS 5,418 5,990 OTHER ASSETS 1,204 1,062 Total assets $ 81,364 $ 80,251 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Advances on line of credit $ 12,326 $ 11,397 Accounts payable 8,618 7,056 Capital expenditures payable 375 857 Accrued liabilities 3,722 3,834 Environmental liabilities - 982 Current portion of long-term debt 125 125 ---- -- Total current liabilities 25,166 24,251 LONG-TERM DEBT 20,000 20,000 OTHER LIABILITIES 1,093 808 Total liabilities 46,259 45,059 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued - - Common stock, $.01 par value, 15,000,000 shares authorized, 4,999,724 and 4,985,937 share issued, respectively 50 50 Additional paid-in capital 15,715 15,671 Less treasury stock - 932,581 and 526,996 shares at cost, respectively (4,272) (3,254) Deferred compensation (40) (73) Retained earnings 23,652 22,798 Total shareholders' equity 35,105 35,192 Total liabilities and shareholders' equity $ 81,364 $ 80,251 See notes to condensed consolidated financial statements
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Share and Per Share Data) (Unaudited) Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 1999 1998 1999 1998 NET SALES $ 27,421 $ 27,751 $ 78,997 $ 83,381 COST OF GOODS SOLD 23,710 24,294 71,250 74,161 Gross profit 3,711 3,457 7,747 9,220 SELLING AND ADMINISTRATIVE EXPENSES 2,229 1,832 5,862 5,421 Operating income 1,482 1,625 1,885 3,799 INTEREST INCOME AND OTHER 1,147 20 1,197 44 INTEREST EXPENSE (584) (594) (1,704) (1,816) Income before income taxes 2,045 1,051 1,378 2,027 PROVISION FOR INCOME TAXES 776 399 524 771 Net income $ 1,269 $ 652 $ 854 $ 1,256 NET INCOME PER COMMON SHARE - BASIC AND DILUTED $ .31 $ .14 $ .21 $ .27 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 4,064,920 4,626,375 4,090,817 4,626,264 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 4,064,920 4,630,192 4,092,949 4,632,513 See notes to condensed consolidated financial statements
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Nine Months Ended June 26, June 27, 1999 1998 Cash Flows From Operating Activities: Net income $ 854 $ 1,256 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 2,688 2,741 Change in deferred taxes 572 1,023 Change in other 100 (114) Change in current assets and current liabilities: Accounts receivable (1,541) (2,035) Insurance claim receivable - 900 Inventories 212 (5,067) Operating supplies and other current assets (317) (179) Refundable income taxes - 900 Deferred tax assets (148) (82) Accounts payable 1,562 1,623 Accrued liabilities (112) (323) Environmental liabilities (982) - Net cash flows from operating activities 2,888 643 Cash Flows From Investing Activities: Capital expenditures (2,370) (2,042) Change in capital expenditures payable (482) 282 Net cash flows from investing activities (2,852) (1,760) Cash Flows From Financing Activities: Net advances on line of credit 929 1,128 Purchases of treasury stock (1,018) (37) Issuance of common stock 44 35 Net cash flows from financing activities (45) 1,126 Net increase (decrease) in cash and cash equivalents (9) 9 Cash and Cash Equivalents at Beginning of Period 150 127 Cash and Cash Equivalents at End of Period $ 141 $ 136 Interest Paid, net of amount capitalized $ 2,082 $ 2,181 Income Taxes Paid $ 100 $ 50 See notes to condensed consolidated financial statements
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements represent Kentucky Electric Steel, Inc. and its wholly-owned subsidiary, KESI Finance Company, (collectively the Company). All significant intercompany accounts and transactions have been eliminated. These statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended June 26, 1999, are not necessarily indicative of the results that may be expected for the year ending September 25, 1999. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 26, 1998. (2) Accounting Policies Fiscal Year End The Company's fiscal year ends on the last Saturday of September. Property, Plant, Equipment and Depreciation Property, plant and equipment is recorded at cost, less accumulated depreciation. For financial reporting purposes, depreciation is provided on the straight-line method over the estimated useful lives of the assets, generally 3 to 12 years for machinery and equipment and 15 to 30 years for buildings and improvements. Depreciation for income tax purposes is computed using accelerated methods. Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for equipment renewals which extend the useful life of any asset are capitalized. Comprehensive Income In June 1997, the Financial accounting Standards Board issued Statement of Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting Comprehensive Income", which established standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. The Company adopted SFAS No. 130 in the quarter ended December 26, 1998. For the periods disclosed, comprehensive income is equal to net income reported. (3) Inventories Inventories at June 26, 1999 and September 26, 1998 consist of the following ($000's): June 26, Sept. 26, 1999 1998 Raw materials $ 2,133 $ 1,984 Semi-finished and finished goods 18,018 18,379 Total inventories $ 20,151 $ 20,363
(4) Earnings Per Share Statement of Financial Accounting Standards No. 128 (SFAS No. 128) related to earnings per share requires dual presentation of basic and diluted E.P.S. on the face of the income statement for all entities with complex capital structures. The Company adopted SFAS No. 128 during the first quarter of fiscal 1998. The following is the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations. For the Three For the Three Months Ended Months Ended June 26, 1999 June 27, 1998 Per Per Share Share Income Shares Amount Income Shares Amount Amounts for Basic Earnings Per Share $1,269 4,064,920 $.31 $ 652 4,626,375 $ .14 Effect of Dilutive Securities Options - - - - 3,817 - Amounts for Diluted Earnings Per Share $1,269 4,064,920 $.31 $ 652 4,630,192 $ .14 For the Nine For the Nine Months Ended Months Ended June 26, 1999 June 27, 1998 Per Per Share Share Income Shares Amount Income Shares Amount Amounts for Basic Earnings Per Share $ 854 4,090,817 $.21 $ 1,256 4,626,264 $ .27 Effect of Dilutive Securities Options - 2,132 - - 6,249 - Amounts for Diluted Earnings Per Share $ 854 4,092,949 $.21 $ 1,256 4,632,513 $ .27
The following options, outstanding at the end of the respective periods, were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the applicable period: For the Three For the Three For the Nine For the Nine Months Ended Months Ended Months Ended Months Ended Options June 26, 1999 June 27, 1998 June 26, 1999 June 27, 1998 Transition stock 57,524 137,016 57,524 137,016 Employee stock 469,860 301,976 378,668 301,976
(5) Environmental Liabilities The Company's melt shop operations were shut down for twelve days during the third quarter of fiscal 1997 in order to decontaminate its baghouse facilities after detection of a radioactive substance in the baghouse dust, a by-product of the melting process. The $1.0 million in environmental liabilities recorded as a current liability on the balance sheet at September 26, 1998, represents final payment due an environmental services company for treatment and disposal of the contaminated baghouse dust. Payment for the disposal occurred during the third quarter of fiscal 1999. (6) Commitments and Contingencies The Company has various commitments for the purchase of materials, supplies and energy arising in the ordinary course of business. The Company is subject to various claims, lawsuits and administrative proceedings arising in the ordinary course of business with respect to commercial, product liability and other matters, which seek remedies or damages. The Company believes that any liability that may ultimately be determined will not have a material effect on its financial position or results of operations. The Company generates both hazardous wastes and non- hazardous wastes which are subject to various governmental regulations. Estimated costs to be incurred in connection with environmental matters are accrued when the prospect of incurring costs for testing or remedial action is deemed probable. The Company is not aware of any material asserted or unasserted environmental claims against the Company and no accruals for such matters have been recorded in the accompanying balance sheets except as disclosed in Note 5. However, discovery of unknown conditions could result in the recording of accruals in the periods in which they become known. (7) Claim Settlement The fiscal 1999 third quarter and nine month periods include other income of $1.1 million for a claim settlement pertaining to the Company's purchase of electrodes during the years 1992 to 1997. KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General. The Company manufactures special bar quality alloy and carbon steel bar flats to precise customer specifications for sale in a variety of niche markets. Its primary markets are manufacturers of leaf-spring suspensions and flat bed truck trailers, cold drawn bar converters, and steel service centers. Net Sales. Net sales decreased $.4 million (1.2%) in the third quarter of fiscal 1999 to $27.4 million as compared to $27.8 million for the third quarter of fiscal 1998. The decrease in sales for the third quarter is due to a decrease in the average selling price offset by higher shipments. The average selling price per ton was down 7.5% for the third quarter of fiscal 1999 as compared to the third quarter of fiscal 1998. Tons shipped increased 6.8%, from 60,400 in the third quarter of fiscal 1998 to 64,500 in the third quarter of fiscal 1999. Net sales for the nine months ended June 26, 1999 decreased $4.4 million (5.3%) to $79.0 million, as compared to $83.4 million for the nine months ended June 27, 1998. The decrease in sales is attributed to a decrease in the average selling price and a decrease in shipments. The average selling price per ton decreased 4.3% for the first nine months of fiscal 1999 from the comparable period of fiscal 1998. Shipments for the first nine months of fiscal 1999 were 181,800 tons down 1.0% from the comparable period of fiscal 1998. The decrease in average selling price for the third quarter and the first nine months of fiscal 1999 is primarily attributable to market price reductions. Cost of Goods Sold. Cost of goods sold decreased $.6 million (2.4%) in the third quarter of fiscal 1999 to $23.7 million, as compared to $24.3 million for the third quarter of fiscal 1998. As a percentage of net sales, cost of goods sold decreased from 87.5% for the third quarter of fiscal 1998 to 86.5% for the third quarter of fiscal 1999. The decrease in cost of goods sold is primarily due to lower manufacturing costs offset by a 6.8% increase in tons shipped. The per ton cost of shipments in the third quarter of fiscal 1999 was significantly lower than in the third quarter of fiscal 1998 reflecting lower scrap prices. Cost of goods sold for the nine months ended June 26, 1999 decreased $2.9 million (3.9%) to $71.3 million as compared to $74.2 million for the nine months ended June 26, 1998. As a percentage of net sales, cost of goods sold increased from 88.9% for the nine months ended June 26, 1998 to 90.2% for the nine months ended June 26, 1999. The decrease in cost of goods sold reflects the decrease in shipments and a decrease in the per ton cost of tons shipped. The decrease in the per ton cost of tons shipped during the first nine months of fiscal 1999 as compared to the first nine months of fiscal 1998 resulted from lower scrap prices offset by higher conversion costs due to lower production in the first two quarters of fiscal 1999. Gross Profit. As a result of the above, gross profit for the third quarter of fiscal 1999 increased by $.2 million (7.3%) to $3.7 million from $3.5 million for the third fiscal quarter of 1998. As a percentage of net sales, gross profit increased from 12.5% for the third quarter of fiscal 1998 to 13.5% for the third quarter of fiscal 1999. As a result of the above, gross profit for the nine months ended June 26, 1999 decreased by $1.5 million (16.0%) to $7.7 million as compared to $9.2 million for the nine months ended June 27, 1998. As a percentage of net sales, gross profit decreased from 11.1% for the first nine months of fiscal 1998 to 9.8% for the first nine months of fiscal 1999. Selling and Administrative Expenses. Selling and administrative expenses include salaries and benefits, corporate overhead, insurance, sales commissions and other expenses incurred in the executive, sales and marketing, shipping, personnel, and other administrative departments. Selling and administrative expenses increased by approximately $397,000 and $441,000 for the three months and nine months ended June 26, 1999, as compared to the same periods in fiscal 1998. As a percentage of net sales, such expenses increased from 6.6% for the third quarter of fiscal 1998 to 8.1% for the third quarter of fiscal 1999, and from 6.5% for the nine months ended June 27, 1998 to 7.4% for the nine months ended June 26, 1999. The increase in selling and administrative expenses is due primarily to an increase in legal and professional fees and self-insured health care costs incurred during the third fiscal quarter of 1999. The increase in legal and professional fees is primarily due to legal and consulting fees related to the Company's electric service contract and a pending trade case with the Department of Commerce. Operating Income. For the reasons described above, operating income decreased $143,000 from $1.6 million in the third quarter of fiscal 1998 to $1.5 million in the third quarter of fiscal 1999. As a percentage of net sales, operating income decreased from 5.9% in the third quarter of 1998 to 5.4% in the third quarter of 1999. Similarly, operating income decreased $1.9 million from $3.8 million for the first nine months of fiscal 1998 to $1.9 million for the nine months ended June 26, 1999. As a percentage of net sales, operating income decreased from 4.6% for the nine months ended June 27, 1998 to 2.4% for the nine months ended June 26, 1999. Interest Income and Other. Interest and other income increased by $1.1 million for the three months ended June 26, 1999 from $20,000 for the third quarter of fiscal 1998 to $1,147,000 for the third quarter of fiscal 1999. Interest and other income increased by $1.2 million for the nine months ended June 26, 1999 from $44,000 for the nine months ended June 27, 1998 to $1.2 million for the nine months ended June 26, 1999. The fiscal 1999 third quarter and nine month periods include other income of $1.1 million for a claim settlement pertaining to the Company's purchase of electrodes during the years 1992 to 1997. Interest Expense. Interest expense decreased by $10,000 for the three months ended June 26, 1999 from $594,000 for the third quarter of fiscal 1998 to $584,000 for the third quarter of fiscal 1999. Interest expense decreased by $112,000 for the nine months ended June 26, 1999 from $1.8 million for the nine months ended June 27, 1998 to $1.7 million for the nine months ended June 26, 1999. The decrease in interest expense for the third quarter is primarily due to a decrease in the interest rate on the Company's line of credit. The decrease in interest expense for the first nine months of fiscal 1999 is due to a decrease in the average amount outstanding as well as a decrease in the interest rate on the Company's line of credit. Net Income. As a result of the above, net income increased $617,000 from $652,000 for the third quarter of fiscal 1998 to $1,269,000 for the third quarter of fiscal 1999. As a result of the above, net income decreased $402,000 from $1,256,000 for the first nine months of fiscal 1998 to $854,000 for the first nine months of fiscal 1999. Liquidity and Capital Resources The cash flows provided by operating activities were $2.9 million for the first nine months of fiscal 1999 as compared to $.6 million for the first nine months of fiscal 1998. The first nine months of fiscal 1999 reflect the profitable operations of $.9 million, $2.7 million in depreciation and amortization, an increase of $1.5 million in accounts receivable, an increase of $1.6 million in accounts payable and a decrease of $1.0 in environmental liabilities. The first nine months of fiscal 1998 reflect the profitable operations of $1.3 million, $2.7 million in depreciation and amortization, an increase in accounts receivable of $2.0 million, an increase in inventories of $5.1 million and an increase of $1.6 million in accounts payable. The cash flows used by investing activities were $2.9 million for the first nine months of fiscal 1999 as compared to $1.8 million for the first nine months of fiscal 1998. The cash flows used by investing activities for the first nine months of fiscal 1999 consist of $2.4 million in capital expenditures and a reduction in capital expenditures payable of $.5 million. The cash flows used by investing activities for the first nine months of fiscal 1998 consist of capital expenditures of $2.1 million offset somewhat by an increase in capital expenditures payable of $.3 million. The cash flows used in financing activities were $45,000 for the first nine months of fiscal 1999 as compared to cash flows provided of $1.1 million for the first nine months of fiscal 1998. The cash flows used in financing activities for the first nine months of fiscal 1999 reflect net advances of $.9 million on the Company's line of credit which were used primarily for capital expenditures as discussed above and $1.0 million used for the purchase of treasury stock. The cash flows provided from financing activities for the first nine months of fiscal 1998 reflect net advances of $1.1 million on the Company's line of credit, which were used primarily for capital expenditures. Working capital at June 26, 1999 was $15.0 million as compared to $14.2 million at June 27, 1998, and the current ratio was 1.6 to 1.0 at the end of both periods. The Company's primary ongoing cash requirements are for current capital expenditures. The two sources for the Company's liquidity are internally generated funds and its bank credit facility. The Company has $12.3 million in borrowings outstanding on its line of credit as of June 26, 1999. The Company believes that the unused portion of its $24.5 million bank credit facility and internally generated funds will be sufficient to fund its ongoing cash needs. Year 2000 Compliance The following Year 2000 discussion is provided in response to the Securities and Exchange Commission's recent interpretative statement expressing its view that public companies should include detailed discussion of Year 2000 issues in their MD&A. The Company is currently assessing the issues confronting it related to the "Year 2000 problem", which is the result of the inability of many computer systems and electronic equipment to distinguish the year 2000 from the year 1900. The Company is following an organized program to assure the Company's information technology systems and related infrastructure will be Year 2000 compliant. The Company has divided its Year 2000 issues into three areas including: computer hardware and software business systems, manufacturing process control devices and related systems, and facility support systems. The Company's Year 2000 program includes three phases: (1) an audit and assessment phase designed to identify Year 2000 issues; (2) a modification phase designed to correct Year 2000 issues (this phase includes testing of individual modifications as they are installed); and (3) a testing phase to test entire systems for Year 2000 compliance after individual modifications have been installed and tested. The Company has completed the audit and assessment phase for all areas of its Year 2000 program. The Company has completed the modification and testing phases for its computer hardware and software business systems, and has substantially completed these phases for the facility support systems and the manufacturing process control devices and related systems. After all modifications have been made, final testing of the system will continue throughout 1999. Management has estimated that the cost for correction of Year 2000 issues, including any software and hardware changes and the cost of personnel involved in working on the project, will be approximately $260,000. The Company estimates that 80% of the total cost has been spent to date. The Year 2000 updates are being funded out of funds generated from operations and account for less than 30% of the Company's information technology budget. The Company's Year 2000 program includes investigation of the Year 2000 readiness status of our major vendors and customers. The Company is using letters, questionnaires and protocols to determine its vendors' and customers' Year 2000 readiness. The Company has contacted all major vendors including energy and scrap suppliers and external service providers including banks, insurance companies, and phone service providers to determine their Year 2000 status. If any such vendor indicates that they will not be Year 2000 compliant, the Company will develop contingency plans to address the issue, which may include identifying and developing other vendors. The readiness of these third parties will continue to be evaluated throughout 1999. Although management does not believe that it will be necessary, the Company has begun efforts to develop a contingency plan in the event it experiences Year 2000 related problems. The plan will rely on manual processes and low technology to operate the Company's facilities until the affected systems are repaired. Outlook Management continues to believe that demand for our products is strong in our major markets as exhibited by our current bookings. Also, while the Company experienced price reductions in the first half of fiscal 1999, current prices are stable in most of our markets. Quantitative and Qualitative Disclosure About Market Risk Management does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item. Forward-Looking Statements The matters discussed or incorporated by reference in this Report on Form 10-Q that are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995) involve risks and uncertainities. These risks and uncertainities include, but are not limited to, reliance on the truck and utility vehicle industry; excess industry capacity; product demand and industry pricing; volatility of raw material costs, especially steel scrap; intense foreign and domestic competition; management's estimate of niche market data; the cyclical and capital intensive nature of the industry; and cost of compliance with environmental regulations. These risks and uncertainities could cause actual results of the Company to differ materially from those projected or implied by such forward-looking statements. PART II. - OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K A) Exhibits 3.1 Certificate of Incorporation of Kentucky Electric Steel, Inc., filed as Exhibit 3.1 to Registrant's Registration Statements on Form S-1 (No. 33-67140), and incorporated by reference herein. 3.2 By-Laws of Kentucky Electric Steel, Inc., filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-1 (No. 33- 67140), and incorporated by reference herein. 10.8 The Kentucky Electric Steel, Inc. Salary Continuation Plan, effective June 7, 1994, for the benefit of the Company's eligible salaried employees, as amended, filed herewith. 10.9 The Kentucky Electric Steel, Inc. Executive Severance Plan, effective June 7, 1994, for the benefit of the Company's eligible Executive Officers, as amended, filed herewith. 10.10 Employment agreements dated June 7, 1994, between Kentucky Electric Steel, Inc. and its four Executive Officers, as amended, filed herewith. 10.18 The Kentucky Electric Steel, Inc. 1999 Share Plan for Non-Employee Directors dated May 6, 1999, filed herewith. 27 Financial Data Schedule B) Reports on Form 8-K - None. 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. DATED: August 6, 1999 KENTUCKY ELECTRIC STEEL, INC. (Registrant) William J. Jessie William J. Jessie, Vice President, Secretary, Treasurer, and Principal Financial Officer EX-10.8 2 KENTUCKY ELECTRIC STEEL, INC. SALARY CONTINUATION PLAN The Kentucky Electric Steel, Inc. Salary Continuation Plan (the "Plan"), effective June 7, 1994, is an employee benefit plan which provides eligible salaried employees of Kentucky Electric Steel, Inc. and its majority-owned subsidiaries (collectively referred to herein as the "Company") with certain severance benefits if the individual's employment with the Company is terminated under defined circumstances after a "change in control of the Company." The details and purpose of the Plan are more fully explained below. SECTION 1. PURPOSE The purpose of the Plan is to reduce employee concerns about the possibility of a "change in control of the Company." It is important that each employee is able to focus his or her full attention and energy toward the goals and objectives of the Company. The Plan is also designed to permit the Company to retain its high quality work force by increasing stability and improving morale and productivity. In addition, the Plan will allow the Company to attract and retain new qualified employees. SECTION 2. ADMINISTRATION Kentucky Electric Steel, Inc. ("KESI") shall be the Plan administrator and shall administer the Plan. Any determinations by the Vice President, Administration in carrying out, administering, or interpreting this Plan shall be final and binding for all purposes and upon all interested persons and their heirs, successors, and personal representatives. All costs associated with the Plan shall be borne by the Company. SECTION 3. ELIGIBILITY An employee who is classified on the records of the Company as a regular, full-time salaried employee, whether exempt or nonexempt as specified in the Fair Labor Standards Act, as from time to time amended, (excluding hourly employees; employees covered by collective bargaining agreements; employees of subsidiaries, entities, or partnerships in which the Company has a 50% or less ownership interest; and international employees, except foreign nationals who are located in Canada or those who are U.S. expatriates) will be entitled to participate in the Plan, regardless of length of service. Employees who have entered into employment contracts with the Company will not be eligible to participate in the Plan. At any time prior to a "change in control of the Company" as defined in Section 4(b), KESI reserves, in its complete discretion, the right to amend the eligible classes of employees. SECTION 4. CONDITIONS FOR BENEFIT PAYMENTS (a) A participant shall not be entitled to receive benefits under this Plan prior to a "change in control of the Company," as hereinafter defined. Participation in the Plan does not create a contract of employment between the Company and its employees. The Company reserves the right to terminate employees at any time for any reason, just as employees have the right to terminate their employment at any time for any reason. (b) The term "change in control of the Company" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. (c) Benefits shall be payable to a participant under the Plan after a "change in control of the Company" has occurred if a participant's employment is terminated by the Company without "cause" within two (2) years from the date of the "change in control of the Company." For purposes of the Plan, "cause" shall mean (i) the wilful and continued failure of an employee to substantially perform his or her duties with the Company (other than such failure resulting from the employee's incapacity due to physical or mental illness), or (ii) wilful engaging by an employee in gross misconduct materially injurious to the Company. SECTION 5. AMOUNT OF BENEFITS Following a "change in control of the Company" and a participant's termination of employment within two (2) years thereafter without "cause," a participant shall be entitled to receive benefits under the Plan as described below: (a) A participant shall be entitled to be paid in an undiscounted lump sum, within ten (10) business days after such participant's termination of employment without "cause," an amount equal to a specified portion of his or her current base compensation (excluding any bonus compensation) based upon such participant's aggregate years and months of service (whether or not continuous) with the Company as follows: Length of Service Payment Up to 5 full years 3 months' base compensation More than 5 and up to 10 full years 6 months' base compensation More than 10 and up to 15 full years 1 year's base compensation More than 15 and up to 20 full years 1-1/2 year's base compensation More than 20 full years 2 years' base compensation For the purpose of this Plan a participant's years and months of service shall include all periods of employment at the Company's plant in Boyd County, Kentucky, regardless of whether the Company was the owner of the plant during the period of employment. (b) At the sole expense of the Company, a participant shall be entitled to the continuation of his or her medical, dental, and group life benefits in effect at the time of such participant's termination of employment without "cause" for a period of six (6) months following such participant's termination of employment. (c) A participant shall be reimbursed for any legal fees or expenses incurred by the participant to enforce the payment of Plan benefits within (10) business days of providing copies of applicable invoices to the Company. (d) A participant shall be entitled to interest on the amount of any payments due under the Plan (but not timely paid) in an amount equivalent to the prime rate of interest (quoted by Citibank, N.A. as its prime commercial lending rate) on the latest date practicable prior to the date such payments should have been made, to and including the date it is made. (e) Within ten (10) business days of the participant's termination of employment following a "change in control of the Company," the Company shall provide, at no cost to the participant, individual outside assistance in finding other employment. Such obligation may be fulfilled by the Company through the retention of an outplacement service for use by individual participants. (f) Participants shall be entitled to receive any pension, disability, workers' compensation, other Company benefit plan distribution, payment for vacation accrued but not taken, statutory employment termination benefit, or any other compensation plan payment otherwise independently due; however, in no event shall a participant who receives benefit under this Plan be entitled to additional severance payment pursuant to any other existing severance policy of the Company. SECTION 6. ACCEPTANCE OF BENEFITS If a participant receives and accepts all of the benefits provided under Section 5 of the Plan, he or she shall be deemed thereby to have waived any right or cause of action against the Company and its directors, officers, or employees arising from the termination of the participant's employment. SECTION 7. CLAIMS PROCEDURE (a) Following a "change in control of the Company" and a participant's termination of employment, the benefits described in Section 5 of the Plan shall be paid as described therein without any required action on the part of such participant. (b) If any participant believes that he or she is entitled to benefits provided under the Plan and has not received such benefits within the time prescribed by the Plan, such participant may submit a written claim for payment of such benefits to the Company. If such claim for benefits is wholly or partially denied, the Company, shall, within thirty (30) business days after receipt of the claim, notify the participant of the denial of the claim. Such notice of denial (i) shall be in writing, (ii) shall be written in a manner calculated to be understood by the participant, and (iii) shall contain (A) the specific reason or reasons for denial of the claim, (B) a specific reference to the pertinent Plan provisions upon which the denial is based, (C) a description of any additional material or information necessary to perfect the claim, along with an explanation of why such material or information is necessary, and (D) an explanation of the claim review procedure, in accordance with the provisions of this Section 7. (c) Within sixty (60) business days after the receipt by the participant of a written notice of denial of the claim, or such later time as shall be deemed reasonable taking into account the nature of the benefit subject to the claim and any other attendant circumstances, the participant may file a written request with the Company that it conduct a full and fair review of the denial of the claim for benefits. As a part of such full and fair review, the participant (or such participant's duly authorized representative) may review and photocopy pertinent documents (including but not limited to the participant's personal history file) and subject issues and comments to the Company in writing. The Company shall make its determination in accordance with the documents governing the Plan insofar as such documents are consistent with the provisions of the Employee Retirement Income Security Act of 1974. The Company shall promptly deliver to the participant its written decision on the claim (in no event later than thirty (30) business days after the receipt of the aforesaid request for review, except that if there are special circumstances (such as a conference with the participant or his or her representative) which require an extension of time, the aforesaid thirty (30) business day period shall be extended to a reasonable period of time not to exceed sixty (60) business days). Such decision shall (i) be written in a manner calculated to be understood by the participant, (ii) include the specific reason or reasons for the decision, and (iii) contain a specific reference to the pertinent Plan provisions upon which the decision is based. If the decision on review is not furnished within the time prescribed by this Section 7(c), the claim shall be deemed granted on review. SECTION 8. AMENDMENTS AND TERMINATIONS KESI's Board of Directors shall have plenary authority to terminate, modify, or amend this Plan in such respects as it shall deem advisable at any time prior to a "change in control of the Company" as defined in Section 4(b). SECTION 9. SUCCESSORS BINDING AGREEMENT (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to eligible participants, expressly to assume and agree to provide benefits pursuant to this Plan in the same manner and to the same extent that the Company would be required to perform its obligations under the Plan if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a violation of this Plan and shall entitle eligible participants to compensation from the Company in the same amount and on the same terms as the participant would be entitled pursuant to Section 5, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date of the participant's termination of employment without "cause." As used in this Plan, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 9 or which otherwise becomes bound by all the terms and provision of this Plan by operation of law. (ii) This Plan shall inure to the benefit of and be enforceable by a participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a participant should die while any amounts would still be payable to him or her hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to such participant's devisee, legatee, or other designee or, if there be no such designee, to his or her estate. SECTION 10. WITHHOLDING TAXES The Company is authorized to withhold any tax required to be withheld from the amounts payable to a participant pursuant to this Plan which are considered taxable compensation to the participant. SECTION 11. GOVERNING LAW The Plan shall be governed by the laws of the Commonwealth of Kentucky. IN WITNESS WHEREOF, the Plan is adopted and effective immediately on the day and year first above written. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth 6/7/94 EX-10.8 3 AMENDMENT TO KENTUCKY ELECTRIC STEEL, INC. SALARY CONTINUATION PLAN WHEREAS, Kentucky Electric Steel, Inc. ("Company") adopted the Kentucky Electric Steel, Inc. Salary Continuation Plan ("Plan") for the benefit of eligible employees; and WHEREAS, the Company retained the right to amend the Plan pursuant to Section 8 thereof; and WHEREAS, the Company desires to amend the Plan to change the definition of the term "Change of Control": NOW, THEREFORE, effective as of May 6, 1999, the Plan is amended as follows: 1. Section 4(b) is deleted and replace with the following: (b) The term "change in control of the Company" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. IN WITNESS WHEREOF, this Amendment is adopted and effective immediately on the day and year first above written. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth 5/19/99 EX-10.9 4 KENTUCKY ELECTRIC STEEL, INC. EXECUTIVE SEVERANCE PLAN The Kentucky Electric Steel, Inc. Executive Severance Plan (the "Plan"), effective June 7, 1994, is a Plan which provides eligible Executives of Kentucky Electric Steel, Inc. (the "Company") with certain benefits if the individual's employment with the Company is terminated under defined circumstances. The details and purpose of the Plan are more fully explained below. Section 1. PURPOSE The purpose of the Plan is to reduce an Executive's concerns about the disruption of income and certain benefits due to the possibility of unexpected job loss in the event of a termination of employment, without cause (as defined as any termination of employment other than for death, disability, retirement or for "Cause"), by the Company. It is important that each Executive be able to focus his or her full attention and energy toward the goals and objectives of the Company at all times without such concern. Section 2. ADMINISTRATION Kentucky Electric Steel, Inc. shall be the Plan Administrator. Any determinations made by the President and CEO and/or the Board of Directors of the Company in carrying out, administering, or interpreting this Plan shall be final and binding for all purposes and upon all interested persons and their heirs, successors, and personal representatives. All costs associated with the Plan shall be borne by the Company. Section 3. ELIGIBILITY Executives in the following positions are eligible for coverage under the Plan: President and Chief Executive Officer Vice President, Administration Vice President, Secretary, Treasurer and Chief Financial Officer Vice President, Sales and Marketing Section 4. CONDITIONS FOR BENEFIT PAYMENTS An Executive shall be eligible for benefits under this Plan if his or her employment is terminated by the Company for any reason other than for death, disability, retirement, resignation or for "Cause," but only as long as the Executive complies with the covenants under Sections 6 and 7. For the purpose of this Plan, "Cause" shall mean (i) an act or acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of the Company or (ii) any material violation by the Elective and his duties or responsibilities which is demonstrably willful and deliberate on the Executive's part and which results in material injury to the Company. Section 5. AMOUNT OF BENEFITS A. In return for the Executive's covenants under Sections 6 and 7, he shall be entitled to be paid on a continuing basis, at the intervals already established by the Company, an amount equal to his or her regular base salary at the time of severance from the Company, for the Relevant Number of Years (as defined in Section 6) following his or her termination of employment. B. The Executive shall be eligible to receive a Prorata Share of any incentive bonus plan compensation earned but not yet paid. "Prorata Share" shall be equal to a fraction, the numerator of which is the number of days of the bonus period in question the Executive worked as an active employee of the Company and in denominator of which is the actual number of days in the bonus period in question. The payment of any Prorata Share will be made after the end of the bonus period when the incentive bonus payment would normally be made to Executive had his or her employment continued. C. At the sole expense of the Company, the Executive shall be entitled to the continuation of his or her medical, dental, group life insurance and Long Term Disability insurance benefits for the earlier of (i) twelve (12) months following participant's termination of employment of (ii) until receipt of equivalent benefits from a new employer. D. Pay an amount equal to the value of all vacation earned but not used by the Executive. E. The Executive shall be reimbursed for reasonable legal fees or expense incurred by the Executive to successfully enforce the payment of Plan benefits within ten (10) business days of providing copies of applicable invoices to the Company. F. Within ten (10) business days of the Executive's termination of employment, without "Cause," the Company shall provide, at no cost to the participant, individual outside assistance in finding other employment. Such obligation may be fulfilled by the Company through the retention of an executive outplacement service for use by the participant. Section 6. COVENANT NOT TO COMPETE AND CONSULTATION A. For the Relevant Number of Years (as defined below) after the termination of the Executive's employment hereunder for any reason, the Executive shall not engage or attempt to engage on his own behalf or on behalf of a third party, in any "Competitive Activity" and shall make himself available for reasonable consultation services with the Company. The term "Competitive Activity" shall mean participation by the Executive, without the written consent of the Board of Directors of the Company, in the management of any business operation of any enterprise if such operation (a "Competitive Operation") engages in substantial and direct competition with any business operation activity conducted by the Company or its subsidiaries at the time of the termination of the Executive's employment. A business operation shall be considered a Competitive Operation if such business operation's sales of any product or service competitive with any product or service of the Company amounts to thirty percent (30%) of that business operation's total sales and if the Company's sales of said product or service of its comparable business operation amounts to thirty percent (30%) of the Company's total sales. "Competitive Activity" shall not include (i) the mere ownership of securities in any enterprise, or (ii) participation in the management of any enterprise or any business operation thereof other than in connection with a Competitive Operation of such enterprise. Without limiting the generality of the foregoing, Competitive Activity shall include becoming employed by or associated with, Stelco-McMaster Ltd., Slater Steels or Atlantic Steel Industries, Inc. The term "Relevant Number of Years" shall be determined as follows: For the: Relevant Number of Years President and 3 Chief Executive Officer Vice President, Administration 2 Vice President, Secretary, Treasury and Chief Financial Officer 2 Vice President, Sales and Marketing 2 B. If the restrictions set forth in the preceding paragraph or any part thereof should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restriction shall not thereby be adversely affected. By accepting severance payment, the Executive agrees that the foregoing territorial and time limitations are reasonable and properly required for the adequate protection of the business of the Company and that in the event that any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, then the Executive also agrees and submits to the reduction of either said territorial or time limitation to such an area or period as said court shall deem reasonable. In the event that the Executive shall be in violation of the aforementioned restrictive covenants, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such breach or breaches should occur. Section 7. CONFIDENTIAL INFORMATION The Executive agrees, by acceptance of the benefits provided in Section 5 hereof, to protect all confidential information concerning the business activities of the Company which were acquired in connection with or as a result of the performance of service for the Company. Section 8. CLAIMS PROCEDURE A. If any participant believes that he or she is entitled to benefits provided under the Plan and has not received such benefits within the time prescribed by the Plan, such participant may submit a written claim for payment of such benefits to the Company. If such claim for benefits is wholly or partially denied, the Company shall within thirty (30) business days after receipt of the claim, notify the participant of the denial of the claim. Such notice of denial (i) shall be in writing, (ii) shall be written in a manner calculated to be understood by the participant, and (iii) shall contain (a) the specific reason or reasons for denial of the claim, (b) a specific reference to the pertinent Plan provisions upon which the denial is based, (c) a description of any additional material or information necessary to perfect the claim, along with an explanation of why such material or information is necessary, and (d) an explanation of the claim review procedure, in accordance with the provisions of this Section 8. B. Within sixty (60) business days after the receipt by the participant of a written notice of denial of the claim, or such later time as shall be deemed reasonable taking into account the nature of the benefit subject to the claim and any other attendant circumstances, the participant may file a written request with the Company that it conduct a full and fair review of the denial of the claim for benefits. As a part of such full and fair review, the participant (or such participant's duly authorized representative) may review and photocopy pertinent documents (including but not limited to the participant's personal history file) and submit issues and comments to the Company in writing. The Company shall make its determination in accordance with the documents governing the Plan insofar as such documents are consistent with the provisions of the Employee Retirement Income Security Act of 1974 (herein "ERISA"). The Company shall promptly deliver to the participant its written decision on the claim (in no event later than thirty (30) business days after the receipt of the aforementioned request for review, except that if there are special circumstances (such as a conference with the participant or his or her representative) which require an extension of time, the aforementioned thirty (30) business day period shall be extended to a reasonable period of time not to exceed sixty (60) business days). Such decision shall (i) be written in a manner calculated to be understood by the participant, (ii) include the specific reason or reasons for the decision, and (iii) contain a specific reference to the pertinent Plan provisions upon which the decision is based. If the decision on review is not furnished within the time prescribed by this Section 8, the claim shall be deemed granted on review. Section 9. AMENDMENTS AND TERMINATION The right is reserved by the Board of Directors of the Company to amend or terminate the Plan; however, no such amendment or termination shall be made after a Change of Control or in connection with negotiations with a third party resulting in a Change of Control. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. Unless there has been a Change of Control or unless there are negotiations relating to a possible Change of Control, the Plan shall terminate one (1) year after its adoption unless the Board of Directors of the Company extends it prior thereto. Section 10. RIGHTS UNDER OTHER PLANS AND POLICIES The benefits payable hereunder are in addition to any other benefits to which the participant may be entitled to under any other plan or contract with the Company. Section 11. NO MITIGATION REQUIRED Executive shall not be required to mitigate the amount provided for in Section 5 hereof by seeking other employment or otherwise, nor shall the amount of any payment provided for in Section 5 hereof be reduced by any compensation earned by Executive as the result of employment by another employer after the date of Termination, or otherwise. Section 12. SUCCESSORS BINDING AGREEMENT A. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to eligible participants, expressly to assume and agree to provide benefits pursuant to this Plan in the same manner and to the same extent that the Company would be required to perform its obligations under the Plan if no such succession had taken place. Failure of the Company to obtain such an agreement prior to the effectiveness of any such succession shall be a violation of this Plan and shall entitle eligible participants to compensation from the company in the same amount and on the same terms as the participant would be entitled pursuant to Section 5, except that for the purpose of implementing the foregoing, the date on which any succession becomes effective shall be deemed the date of the participant's termination of employment without "Cause." B. This Plan shall inure to the benefits of and be enforceable by a participant's personal or legal representatives, executors, successors, administrators, heirs, distributees, devisees, and legatees. If a participant should die while any amounts would still be payable to him or her hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to such participant's devisee, legatee, or other designee or, if there be so such designee, to his or her estate. Section 13. WITHHOLDING TAXES The Company is authorized to withhold any tax required to be withheld from the amounts payable to a participant pursuant to this Plan which are considered taxable compensation to the participant. Section 14. LAWS This Plan shall be governed by the laws of the State of Kentucky. Section 15. NOTICE All notices under this Agreement shall be made in writing and shall be duly sent if sent by registered mail or certified mail to the respective parties' address shown hereinabove or such other address as the parties may hereafter designate in writing for such purpose. Section 16. CAPTIONS AND TITLES Captions and titles have been used in this Agreement only for convenience, and in no way define, limit or describe the meaning of this Agreement or any part thereof. IN WITNESS WHEREOF, the Plan is adopted and effective immediately on the day and year first above written. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth 6/7/94 EX-10.9 5 AMENDMENT TO KENTUCKY ELECTRIC STEEL, INC. EXECUTIVE SEVERANCE PLAN WHEREAS, Kentucky Electric Steel, Inc. ("Company") adopted the Kentucky Electric Steel, Inc. Executive Severance Plan ("Plan) for the benefit of eligible employees; and WHEREAS, the Company retained the right to amend the Plan pursuant to Section 9 thereof; and WHEREAS, the Company desires to amend the Plan to change the definition of the term "Change of Control": NOW, THEREFORE, effective as of May 6, 1999, the Plan is amended as follows: 1. Section 9 is deleted and replace with the following: The right is reserved by the Board of Directors of the Company to amend or terminate the Plan; however, no such amendment or termination shall be made after a Change of Control or in connection with negotiations with a third party resulting in a Change of Control. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. Unless there has been a Change of Control or unless there are negotiations relating to a possible Change of Control, the Plan shall terminate one (1) year after its adoption unless the Board of Directors of the Company extends it prior thereto. IN WITNESS WHEREOF, this Amendment is adopted and effective immediately on the day and year first above written. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth 5/19/97 EX-10.10 6 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 1st day of September, 1998 by and between Kentucky Electric Steel, Inc., with its principal office in Ashland, Kentucky (the "Company"), and Charles C. Hanebuth, residing at 4720 Southern Hills Drive, Ashland, Kentucky 41102 (hereinafter called the "Executive"). WITNESSETH WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 ("Agreement"); and WHEREAS, the parties desire to amend and restate the Agreement to define the term "Change of Control" as if included in the original Agreement; NOW, THEREFORE, the Agreement is amended and restated in its entirety to read as follows: I. Employment Duties and Term A. Beginning on the Commencement Date (as hereinafter defined) the Company agrees to employ the Executive at not lower than the office held on the Commencement Date and the Executive agrees to faithfully and to the best of his ability discharge the responsibilities of said office and perform such duties and services of an executive, administrative and managerial nature as shall be specified and designated from time to time by the Board of Directors of the Company in connection with the business and activities of the Company. The Executive's duties and responsibilities shall be those normally associated modified from time to time following the Commencement Date by the Board of Directors, but there shall be no significant change in his duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, or job location without his specific written agreement. The Executive agrees that during the Employment Period (as defined in Section I, B hereof), he shall devote substantially all his professional time and effort to the performance of his duties hereunder except for (i) time spent in managing his personal investments and services on corporate, civic or charitable boards or committees, in each case not significantly interfering with the performance of such duties, and (ii) periods of vacation and sick leave to which he is entitled. Furthermore, the Executive agrees that during the Employment Period, he shall refrain from engaging on his own behalf or on behalf of a third party, including without limitation, any customer or supplier of the Company, in any line of activities or business in which he knows or has reason to know that the Company is or is considering becoming engaged during the Employment Period or in any related activities or business without the express written consent of the Board of Directors of the Company. B. The term of the Executive's employment under this Agreement (the "Employment Period") shall commence on the effective date of a Change of Control (as hereinafter defined) ("Commencement Date") and shall be for an initial period commencing on the Commencement Date and ending on the third anniversary hereof (the "Initial Term"), plus all Renewal Periods, if applicable. After the Initial Term, this Agreement shall be automatically renewed for subsequent three (3) year periods (each such three (3) year period being referred to herein as a "Renewal Period") unless, no later than (i) one (1) year prior to the expiration of the Initial Term, or, (ii) if during a Renewal Period, one (1) year prior to the expiration of such Renewal Period, either party gives written notice of cancellation to the other party. After timely notice of cancellation has been given as required above, the Employment Period shall continue until the expiration of the Initial Term or the then current Renewal Period, as applicable, and the term "Termination Date," as used herein, shall be the last day of the Initial Term, or such Renewal Period, as applicable. The provisions of this Agreement shall not apply if, for any reason (other than as set forth in the following sentence), the Executive is not employed by the Company on the Commencement Date. The provisions of this Agreement shall apply in the event the Executive's employment is terminated prior to, but in connection with, a Change of Control, by the Company's Board of Directors in the exercise of its fiduciary duties as part of a negotiation with a third party that requires such termination of employment as a condition of consummating a transaction resulting in a Change of Control. II. Compensation and Termination A. During the Employment Period, the Company shall pay to the Executive, and the Executive agrees to accept as compensation for his services hereunder, a base annual salary in the amount of not less than the level in effect on the Commencement Date, payable in the manner and at the times the Company pays its senior executives. Such base annual salary shall be increased on each anniversary of the Commencement Date by an amount not less than that which is substantially similar, on a percentage basis, to the average percentage increase in base salary for all corporate officers of the Company during the preceding twelve (12) months. "Base Salary" at any time shall mean the Executive's base annual salary as adjusted by the Board of Directors and as in effect at the time in question. In addition to his Base Salary, the Executive shall be entitled to participate in and receive compensation pursuant to the Company's Incentive Bonus Plan, the Company's 1993 Incentive Stock Option Plan and all other benefit, bonus and stock plans that now exist or as may exist in the future (collectively, the "Benefit Plans"). B. In the event the Company terminates Executive's employment Without Cause (as defined in this Section II B below), the Company's obligation to pay Executive the compensation set forth herein shall nevertheless continue until the Termination Date. For the purposes of this Agreement, a termination "Without Cause" shall mean a termination by the Company for any reason other than for Cause (as defined in Section II C hereof) or Disability, and the Executive's employment with the Company shall be deemed terminated Without Cause by the Company in the event of a termination resulting from a change in duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, compensation, job location, or senior management of the Company which, in the reasonable judgement of the Executive, would have a material adverse impact on the Executive or the nature of work performed by the Executive, or which would require him to change the location of his residence to avoid a commuting distance greater than the greater of (i) his commuting distance prior to the change and (ii) thirty (30) miles. C. In the event that the Company terminates the Executive's employment under this Agreement for "Cause" (as hereinafter defined), except as provided in Section III, the Executive shall cease to receive compensation as of the date of termination of his employment. For the purpose of this Agreement, "Cause" shall mean (i) an act or acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of the Company or (ii) any gross misconduct by the Executive in the performance of his duties or responsibilities set forth in Section I hereof which is demonstrably willful and deliberate on the Executive's part and which results in material injury to the Company after written demand to cease such misconduct by the Board of Directors of the Company is delivered to the Executive. "Cause" shall not include any mistake of fact or opinion made in good faith with respect to the Company's business. III. Change of Control A. 1. In the event of a Change of Control (as hereinafter defined) which causes this Agreement to commence, Executive may terminate his employment hereunder at any time during the period commencing six (6) months following the Change of Control and ending thirty-six (36) months following the Change of Control. If (a) the Executive shall terminate his employment during such period for any reason other than death or Disability, (b) the Company shall terminate the Executive's employment during the Change of Control Period (as hereinafter defined) for any reason, or (c) the Executive terminates his employment during the first six (6) months of the Change of Control Period for Good Reason as hereinafter defined, the Company shall pay to the Executive upon such termination of employment, in a single lump cash sum, an amount equal to One Dollar ($1.00) less than 300% of Employee's Base Amount as hereinafter defined. Such payment shall be in lieu of further Base Salary payments under Section II except as otherwise provided in Section II-B. Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall relieve the Company of its obligation of providing the Executive with all benefits in accordance with the terms of the Benefit Plans in which the Executive participates. 2. In addition to the foregoing, if requested by the Executive, the Company will purchase the Executive's principal residence at any time requested by the Executive within a period of two (2) years following termination of employment; provided, however, that the purchase price of the residence shall be the fair market value of such residence as established by the average of appraisals submitted by three (3) independent appraisers mutually selected by the Executive and the Company. B. 1. The term "Good Reason" shall mean the failure of the Company to comply with the following requirement: During the Change of Control Period, (i) the Executive's Base Salary, position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by or assigned to the Executive at any time during the 90-day period immediately preceding the date of the Change of Control and (ii) Executive's services shall be performed at the location where Executive was employed immediately preceding the date of the Change of Control. 2. The term "Base Amount" shall mean Executive's average annual compensation from the Company (as reported on Form W-2) for the five consecutive calendar years (or such lesser period as constitutes Executive's total years of employment with the Company) ending with the calendar year immediately preceding the Change of Control. 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. 4. The term "Change of Control Period" shall mean the period beginning on the date of the Change of Control and ending thirty-six (36) months thereafter. C. Notwithstanding anything else contained herein, if the aggregate of the payments to be made under this Agreement as a result of a Change of Control, either alone or together with other payments to which the Executive is entitled from the Company, would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such total payments shall be reduced to the largest amount as will result in no portion of the payments made hereunder being subject to the excise tax imposed by Section 4999 of the Code or being disallowed as a deduction by the Company under Section 280G of the Code. The determination of any reduction in payments hereunder pursuant to the foregoing provisions shall be made by the Executive in good faith after consultation with the Company, and such determination shall be conclusive and binding on the Company. The Company shall cooperate in good faith with the Executive in making such determination and providing the necessary information for this purpose. IV. Executive's Rights Under Certain Plans and Policies The Company agrees that the benefits provided to the Executive herein are not in lieu of any rights and privileges to which the Executive may be entitled as an employee of the Company under retirement, pension, special salary continuation plan, disability, life insurance, hospitalization, vacation, business expense reimbursement or other plan or policy which may now or hereafter be in effect, it being understood that the Executive shall have no less than the same rights and privileges to participate in such plans, policies or benefits as any other employee of the Company. V. Covenant Not to Compete and Consultation A. For the period of two (2) years after the termination of the Executive's employment hereunder for any reason, the Executive shall not engage or attempt to engage on his own behalf or on behalf of a third party, in any "Competitive Activity". The term "Competitive Activity" shall mean participation by the Executive, without the written consent of the Board of Directors of the Company, in the management of any business operation of any enterprise if such operation (a "Competitive Operation") engages in substantial and direct competition with any business operation activity conducted by the Company or its subsidiaries at the time of the termination of the Executive's employment. A business operation shall be considered a Competitive Operation if such business operation's sales of any product or service competitive with any product or service of the Company amounts to thirty percent (30%) of that business operation's total sales and if the Company's sales of said product or service of its comparable business operation amounts to thirty percent (30%) of the Company's total sales. "Competitive Activity" shall not include (i) the mere ownership of securities in any enterprise, or (ii) participation in the management of any enterprise or any business operation thereof other than in connection with a Competitive Operation of such enterprise. Without limiting the generality of the foregoing, Competitive Activity shall include becoming employed by or associated with, Stelco-McMaster Ltd., Slater Steels or Atlantic Steel Industries, Inc. In addition, the Executive shall make himself available for reasonable consultation services with the Company for three (3) years after termination of employment. B. If the restrictions set forth in the preceding paragraph or any part thereof should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restriction shall not thereby be adversely affected. The Executive agrees that the foregoing territorial and time limitations are reasonable and properly required for the adequate protection of the business of the Company and that in the event that any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, then the Executive agrees and submits to the reduction of either said territorial or time limitation to such an area or period as said court shall deem reasonable. In the event that the Executive shall be in violation of the aforementioned restrictive covenants, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such breach or breaches should occur. VI. Confidential Information The Executive agrees to receive Confidential Information (as defined in this Section VI below) of the Company in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means, except in the ordinary course of the Company's business, without the express written consent of the Board of Directors of the Company. The Executive further agrees that, upon termination of his employment with the Company, all documents, records, notebooks and similar repositories containing Confidential Information, including copies thereof, then in the Executive's possession, whether prepared by him or others, shall be left with the Company. For the purpose of this Agreement, "Confidential Information" means information disclosed to the Executive or known by the Company, not generally known in the industry in which the Company is or may become engaged, about the Company's products, processes or services. VII. Remedy for Violation of Noncompetition and Confidential Information Agreements The Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed were the Executive to breach or threaten to breach the provisions of Section V or VI hereof, and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section V or VI hereof, and to specific performance of the terms of each such sections in addition to any other legal or equitable remedy it may have. The Executive further agrees that he shall not, in any equity proceeding involving him relating to the enforcement of Section V or VI hereof, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. VIII. Indemnification for Expense If litigation or other judicial or arbitrative proceedings shall be brought to enforce or interpret any provision contained herein, the Company, to the extent permitted by applicable law and the Company's Certificate of Incorporation and By-laws as in effect on the date hereof, hereby indemnifies the Executive for his reasonable expenses (including without limitation, attorneys' fees and disbursements) incurred in connection with such proceeding. If so requested by the Executive, the Company shall pay to the Executive an amount equal to any and all such expenses within five (5) business days after the Executive's written request, which request shall be supported by reasonably adequate documentation. IX. Successors A. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the Company, its successors and assigns, including without limitation, any person, partnership or corporation which may acquire all or substantially all of the Company's assets and business, or with or into which the Company may be consolidated or merged. Any and all references to the Company in this Agreement shall be deemed to mean and include any successor or assignee. B. This Agreement shall also inure to the benefit of and be binding on the Executive and his legal representatives, but being a contract for personal services, cannot be assigned by Executive. X. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. XI. Applicable Law The construction and interpretation of this Agreement shall be governed by the laws of the State of Kentucky applicable to agreements made and to be performed within Kentucky, without regard to Kentucky's conflict of laws rules. XII. No Mitigation Required The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement. XIII. Notice All notices under this Agreement shall be made in writing and shall be duly sent if sent by registered mail or certified mail to the respective parties' address shown hereinabove or such other address as the parties may hereafter designate in writing for such purpose. XIV. Captions and Titles Captions and titles have been used in this Agreement only for convenience, and in no way define, limit or describe the meaning of this Agreement or any part thereof. IN WITNESS WHEREOF, the parties have signed this Agreement on this 1st day of September, 1998 effective as if adopted on June 7, 1994. KENTUCKY ELECTRIC STEEL, INC. By: /s/ William J. Jessie /s/ Charles C. Hanebuth /s/ William H. Gerak WITNESS EX-10.10 7 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 1st day of September, 1998 by and between Kentucky Electric Steel, Inc., with its principal office in Ashland, Kentucky (the "Company"), and William J. Jessie, residing at 2150 Hilton Ave., Ashland, Kentucky 41101 (hereinafter called the "Executive"). WITNESSETH WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 ("Agreement"); and WHEREAS, the parties desire to amend and restate the Agreement to define the term "Change of Control" as if included in the original Agreement; NOW, THEREFORE, the Agreement is amended and restated in its entirety to read as follows: I. Employment Duties and Term A. Beginning on the Commencement Date (as hereinafter defined) the Company agrees to employ the Executive at not lower than the office held on the Commencement Date and the Executive agrees to faithfully and to the best of his ability discharge the responsibilities of said office and perform such duties and services of an executive, administrative and managerial nature as shall be specified and designated from time to time by the Board of Directors of the Company in connection with the business and activities of the Company. The Executive's duties and responsibilities shall be those normally associated modified from time to time following the Commencement Date by the Board of Directors, but there shall be no significant change in his duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, or job location without his specific written agreement. The Executive agrees that during the Employment Period (as defined in Section I, B hereof), he shall devote substantially all his professional time and effort to the performance of his duties hereunder except for (i) time spent in managing his personal investments and services on corporate, civic or charitable boards or committees, in each case not significantly interfering with the performance of such duties, and (ii) periods of vacation and sick leave to which he is entitled. Furthermore, the Executive agrees that during the Employment Period, he shall refrain from engaging on his own behalf or on behalf of a third party, including without limitation, any customer or supplier of the Company, in any line of activities or business in which he knows or has reason to know that the Company is or is considering becoming engaged during the Employment Period or in any related activities or business without the express written consent of the Board of Directors of the Company. B. The term of the Executive's employment under this Agreement (the "Employment Period") shall commence on the effective date of a Change of Control (as hereinafter defined) ("Commencement Date") and shall be for an initial period commencing on the Commencement Date and ending on the third anniversary hereof (the "Initial Term"), plus all Renewal Periods, if applicable. After the Initial Term, this Agreement shall be automatically renewed for subsequent three (3) year periods (each such three (3) year period being referred to herein as a "Renewal Period") unless, no later than (i) one (1) year prior to the expiration of the Initial Term, or, (ii) if during a Renewal Period, one (1) year prior to the expiration of such Renewal Period, either party gives written notice of cancellation to the other party. After timely notice of cancellation has been given as required above, the Employment Period shall continue until the expiration of the Initial Term or the then current Renewal Period, as applicable, and the term "Termination Date," as used herein, shall be the last day of the Initial Term, or such Renewal Period, as applicable. The provisions of this Agreement shall not apply if, for any reason (other than as set forth in the following sentence), the Executive is not employed by the Company on the Commencement Date. The provisions of this Agreement shall apply in the event the Executive's employment is terminated prior to, but in connection with, a Change of Control, by the Company's Board of Directors in the exercise of its fiduciary duties as part of a negotiation with a third party that requires such termination of employment as a condition of consummating a transaction resulting in a Change of Control. II. Compensation and Termination A. During the Employment Period, the Company shall pay to the Executive, and the Executive agrees to accept as compensation for his services hereunder, a base annual salary in the amount of not less than the level in effect on the Commencement Date, payable in the manner and at the times the Company pays its senior executives. Such base annual salary shall be increased on each anniversary of the Commencement Date by an amount not less than that which is substantially similar, on a percentage basis, to the average percentage increase in base salary for all corporate officers of the Company during the preceding twelve (12) months. "Base Salary" at any time shall mean the Executive's base annual salary as adjusted by the Board of Directors and as in effect at the time in question. In addition to his Base Salary, the Executive shall be entitled to participate in and receive compensation pursuant to the Company's Incentive Bonus Plan, the Company's 1993 Incentive Stock Option Plan and all other benefit, bonus and stock plans that now exist or as may exist in the future (collectively, the "Benefit Plans"). B. In the event the Company terminates Executive's employment Without Cause (as defined in this Section II B below), the Company's obligation to pay Executive the compensation set forth herein shall nevertheless continue until the Termination Date. For the purposes of this Agreement, a termination "Without Cause" shall mean a termination by the Company for any reason other than for Cause (as defined in Section II C hereof) or Disability, and the Executive's employment with the Company shall be deemed terminated Without Cause by the Company in the event of a termination resulting from a change in duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, compensation, job location, or senior management of the Company which, in the reasonable judgement of the Executive, would have a material adverse impact on the Executive or the nature of work performed by the Executive, or which would require him to change the location of his residence to avoid a commuting distance greater than the greater of (i) his commuting distance prior to the change and (ii) thirty (30) miles. C. In the event that the Company terminates the Executive's employment under this Agreement for "Cause" (as hereinafter defined), except as provided in Section III, the Executive shall cease to receive compensation as of the date of termination of his employment. For the purpose of this Agreement, "Cause" shall mean (i) an act or acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of the Company or (ii) any gross misconduct by the Executive in the performance of his duties or responsibilities set forth in Section I hereof which is demonstrably willful and deliberate on the Executive's part and which results in material injury to the Company after written demand to cease such misconduct by the Board of Directors of the Company is delivered to the Executive. "Cause" shall not include any mistake of fact or opinion made in good faith with respect to the Company's business. III. Change of Control A. 1. In the event of a Change of Control (as hereinafter defined) which causes this Agreement to commence, Executive may terminate his employment hereunder at any time during the period commencing six (6) months following the Change of Control and ending thirty-six (36) months following the Change of Control. If (a) the Executive shall terminate his employment during such period for any reason other than death or Disability, (b) the Company shall terminate the Executive's employment during the Change of Control Period (as hereinafter defined) for any reason, or (c) the Executive terminates his employment during the first six (6) months of the Change of Control Period for Good Reason as hereinafter defined, the Company shall pay to the Executive upon such termination of employment, in a single lump cash sum, an amount equal to One Dollar ($1.00) less than 300% of Employee's Base Amount as hereinafter defined. Such payment shall be in lieu of further Base Salary payments under Section II except as otherwise provided in Section II-B. Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall relieve the Company of its obligation of providing the Executive with all benefits in accordance with the terms of the Benefit Plans in which the Executive participates. 2. In addition to the foregoing, if requested by the Executive, the Company will purchase the Executive's principal residence at any time requested by the Executive within a period of two (2) years following termination of employment; provided, however, that the purchase price of the residence shall be the fair market value of such residence as established by the average of appraisals submitted by three (3) independent appraisers mutually selected by the Executive and the Company. B. 1. The term "Good Reason" shall mean the failure of the Company to comply with the following requirement: During the Change of Control Period, (i) the Executive's Base Salary, position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by or assigned to the Executive at any time during the 90-day period immediately preceding the date of the Change of Control and (ii) Executive's services shall be performed at the location where Executive was employed immediately preceding the date of the Change of Control. 2. The term "Base Amount" shall mean Executive's average annual compensation from the Company (as reported on Form W-2) for the five consecutive calendar years (or such lesser period as constitutes Executive's total years of employment with the Company) ending with the calendar year immediately preceding the Change of Control. 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. 4. The term "Change of Control Period" shall mean the period beginning on the date of the Change of Control and ending thirty-six (36) months thereafter. C. Notwithstanding anything else contained herein, if the aggregate of the payments to be made under this Agreement as a result of a Change of Control, either alone or together with other payments to which the Executive is entitled from the Company, would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such total payments shall be reduced to the largest amount as will result in no portion of the payments made hereunder being subject to the excise tax imposed by Section 4999 of the Code or being disallowed as a deduction by the Company under Section 280G of the Code. The determination of any reduction in payments hereunder pursuant to the foregoing provisions shall be made by the Executive in good faith after consultation with the Company, and such determination shall be conclusive and binding on the Company. The Company shall cooperate in good faith with the Executive in making such determination and providing the necessary information for this purpose. IV. Executive's Rights Under Certain Plans and Policies The Company agrees that the benefits provided to the Executive herein are not in lieu of any rights and privileges to which the Executive may be entitled as an employee of the Company under retirement, pension, special salary continuation plan, disability, life insurance, hospitalization, vacation, business expense reimbursement or other plan or policy which may now or hereafter be in effect, it being understood that the Executive shall have no less than the same rights and privileges to participate in such plans, policies or benefits as any other employee of the Company. V. Covenant Not to Compete and Consultation A. For the period of two (2) years after the termination of the Executive's employment hereunder for any reason, the Executive shall not engage or attempt to engage on his own behalf or on behalf of a third party, in any "Competitive Activity". The term "Competitive Activity" shall mean participation by the Executive, without the written consent of the Board of Directors of the Company, in the management of any business operation of any enterprise if such operation (a "Competitive Operation") engages in substantial and direct competition with any business operation activity conducted by the Company or its subsidiaries at the time of the termination of the Executive's employment. A business operation shall be considered a Competitive Operation if such business operation's sales of any product or service competitive with any product or service of the Company amounts to thirty percent (30%) of that business operation's total sales and if the Company's sales of said product or service of its comparable business operation amounts to thirty percent (30%) of the Company's total sales. "Competitive Activity" shall not include (i) the mere ownership of securities in any enterprise, or (ii) participation in the management of any enterprise or any business operation thereof other than in connection with a Competitive Operation of such enterprise. Without limiting the generality of the foregoing, Competitive Activity shall include becoming employed by or associated with, Stelco-McMaster Ltd., Slater Steels or Atlantic Steel Industries, Inc. In addition, the Executive shall make himself available for reasonable consultation services with the Company for two (2) years after termination of employment. B. If the restrictions set forth in the preceding paragraph or any part thereof should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restriction shall not thereby be adversely affected. The Executive agrees that the foregoing territorial and time limitations are reasonable and properly required for the adequate protection of the business of the Company and that in the event that any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, then the Executive agrees and submits to the reduction of either said territorial or time limitation to such an area or period as said court shall deem reasonable. In the event that the Executive shall be in violation of the aforementioned restrictive covenants, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such breach or breaches should occur. VI. Confidential Information The Executive agrees to receive Confidential Information (as defined in this Section VI below) of the Company in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means, except in the ordinary course of the Company's business, without the express written consent of the Board of Directors of the Company. The Executive further agrees that, upon termination of his employment with the Company, all documents, records, notebooks and similar repositories containing Confidential Information, including copies thereof, then in the Executive's possession, whether prepared by him or others, shall be left with the Company. For the purpose of this Agreement, "Confidential Information" means information disclosed to the Executive or known by the Company, not generally known in the industry in which the Company is or may become engaged, about the Company's products, processes or services. VII. Remedy for Violation of Noncompetition and Confidential Information Agreements The Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed were the Executive to breach or threaten to breach the provisions of Section V or VI hereof, and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section V or VI hereof, and to specific performance of the terms of each such sections in addition to any other legal or equitable remedy it may have. The Executive further agrees that he shall not, in any equity proceeding involving him relating to the enforcement of Section V or VI hereof, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. VIII. Indemnification for Expense If litigation or other judicial or arbitrative proceedings shall be brought to enforce or interpret any provision contained herein, the Company, to the extent permitted by applicable law and the Company's Certificate of Incorporation and By-laws as in effect on the date hereof, hereby indemnifies the Executive for his reasonable expenses (including without limitation, attorneys' fees and disbursements) incurred in connection with such proceeding. If so requested by the Executive, the Company shall pay to the Executive an amount equal to any and all such expenses within five (5) business days after the Executive's written request, which request shall be supported by reasonably adequate documentation. IX. Successors A. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the Company, its successors and assigns, including without limitation, any person, partnership or corporation which may acquire all or substantially all of the Company's assets and business, or with or into which the Company may be consolidated or merged. Any and all references to the Company in this Agreement shall be deemed to mean and include any successor or assignee. B. This Agreement shall also inure to the benefit of and be binding on the Executive and his legal representatives, but being a contract for personal services, cannot be assigned by Executive. X. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. XI. Applicable Law The construction and interpretation of this Agreement shall be governed by the laws of the State of Kentucky applicable to agreements made and to be performed within Kentucky, without regard to Kentucky's conflict of laws rules. XII. No Mitigation Required The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement. XIII. Notice All notices under this Agreement shall be made in writing and shall be duly sent if sent by registered mail or certified mail to the respective parties' address shown hereinabove or such other address as the parties may hereafter designate in writing for such purpose. XIV. Captions and Titles Captions and titles have been used in this Agreement only for convenience, and in no way define, limit or describe the meaning of this Agreement or any part thereof. IN WITNESS WHEREOF, the parties have signed this Agreement on this 1st day of September, 1998 effective as if adopted on June 7, 1994. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth /s/ William J. Jessie /s/ William H. Gerak WITNESS EX-10.10 8 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 1st day of September, 1998 by and between Kentucky Electric Steel, Inc., with its principal office in Ashland, Kentucky (the "Company"), and Joseph E. Harrison, residing at70 Cheshire Lane, Ashland, Kentucky 41102 (hereinafter called the "Executive"). WITNESSETH WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 ("Agreement"); and WHEREAS, the parties desire to amend and restate the Agreement to define the term "Change of Control" as if included in the original Agreement; NOW, THEREFORE, the Agreement is amended and restated in its entirety to read as follows: I. Employment Duties and Term A. Beginning on the Commencement Date (as hereinafter defined) the Company agrees to employ the Executive at not lower than the office held on the Commencement Date and the Executive agrees to faithfully and to the best of his ability discharge the responsibilities of said office and perform such duties and services of an executive, administrative and managerial nature as shall be specified and designated from time to time by the Board of Directors of the Company in connection with the business and activities of the Company. The Executive's duties and responsibilities shall be those normally associated modified from time to time following the Commencement Date by the Board of Directors, but there shall be no significant change in his duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, or job location without his specific written agreement. The Executive agrees that during the Employment Period (as defined in Section I, B hereof), he shall devote substantially all his professional time and effort to the performance of his duties hereunder except for (i) time spent in managing his personal investments and services on corporate, civic or charitable boards or committees, in each case not significantly interfering with the performance of such duties, and (ii) periods of vacation and sick leave to which he is entitled. Furthermore, the Executive agrees that during the Employment Period, he shall refrain from engaging on his own behalf or on behalf of a third party, including without limitation, any customer or supplier of the Company, in any line of activities or business in which he knows or has reason to know that the Company is or is considering becoming engaged during the Employment Period or in any related activities or business without the express written consent of the Board of Directors of the Company. B. The term of the Executive's employment under this Agreement (the "Employment Period") shall commence on the effective date of a Change of Control (as hereinafter defined) ("Commencement Date") and shall be for an initial period commencing on the Commencement Date and ending on the third anniversary hereof (the "Initial Term"), plus all Renewal Periods, if applicable. After the Initial Term, this Agreement shall be automatically renewed for subsequent three (3) year periods (each such three (3) year period being referred to herein as a "Renewal Period") unless, no later than (i) one (1) year prior to the expiration of the Initial Term, or, (ii) if during a Renewal Period, one (1) year prior to the expiration of such Renewal Period, either party gives written notice of cancellation to the other party. After timely notice of cancellation has been given as required above, the Employment Period shall continue until the expiration of the Initial Term or the then current Renewal Period, as applicable, and the term "Termination Date," as used herein, shall be the last day of the Initial Term, or such Renewal Period, as applicable. The provisions of this Agreement shall not apply if, for any reason (other than as set forth in the following sentence), the Executive is not employed by the Company on the Commencement Date. The provisions of this Agreement shall apply in the event the Executive's employment is terminated prior to, but in connection with, a Change of Control, by the Company's Board of Directors in the exercise of its fiduciary duties as part of a negotiation with a third party that requires such termination of employment as a condition of consummating a transaction resulting in a Change of Control. II. Compensation and Termination A. During the Employment Period, the Company shall pay to the Executive, and the Executive agrees to accept as compensation for his services hereunder, a base annual salary in the amount of not less than the level in effect on the Commencement Date, payable in the manner and at the times the Company pays its senior executives. Such base annual salary shall be increased on each anniversary of the Commencement Date by an amount not less than that which is substantially similar, on a percentage basis, to the average percentage increase in base salary for all corporate officers of the Company during the preceding twelve (12) months. "Base Salary" at any time shall mean the Executive's base annual salary as adjusted by the Board of Directors and as in effect at the time in question. In addition to his Base Salary, the Executive shall be entitled to participate in and receive compensation pursuant to the Company's Incentive Bonus Plan, the Company's 1993 Incentive Stock Option Plan and all other benefit, bonus and stock plans that now exist or as may exist in the future (collectively, the "Benefit Plans"). B. In the event the Company terminates Executive's employment Without Cause (as defined in this Section II B below), the Company's obligation to pay Executive the compensation set forth herein shall nevertheless continue until the Termination Date. For the purposes of this Agreement, a termination "Without Cause" shall mean a termination by the Company for any reason other than for Cause (as defined in Section II C hereof) or Disability, and the Executive's employment with the Company shall be deemed terminated Without Cause by the Company in the event of a termination resulting from a change in duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, compensation, job location, or senior management of the Company which, in the reasonable judgement of the Executive, would have a material adverse impact on the Executive or the nature of work performed by the Executive, or which would require him to change the location of his residence to avoid a commuting distance greater than the greater of (i) his commuting distance prior to the change and (ii) thirty (30) miles. C. In the event that the Company terminates the Executive's employment under this Agreement for "Cause" (as hereinafter defined), except as provided in Section III, the Executive shall cease to receive compensation as of the date of termination of his employment. For the purpose of this Agreement, "Cause" shall mean (i) an act or acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of the Company or (ii) any gross misconduct by the Executive in the performance of his duties or responsibilities set forth in Section I hereof which is demonstrably willful and deliberate on the Executive's part and which results in material injury to the Company after written demand to cease such misconduct by the Board of Directors of the Company is delivered to the Executive. "Cause" shall not include any mistake of fact or opinion made in good faith with respect to the Company's business. III. Change of Control A. 1. In the event of a Change of Control (as hereinafter defined) which causes this Agreement to commence, Executive may terminate his employment hereunder at any time during the period commencing six (6) months following the Change of Control and ending thirty-six (36) months following the Change of Control. If (a) the Executive shall terminate his employment during such period for any reason other than death or Disability, (b) the Company shall terminate the Executive's employment during the Change of Control Period (as hereinafter defined) for any reason, or (c) the Executive terminates his employment during the first six (6) months of the Change of Control Period for Good Reason as hereinafter defined, the Company shall pay to the Executive upon such termination of employment, in a single lump cash sum, an amount equal to One Dollar ($1.00) less than 300% of Employee's Base Amount as hereinafter defined. Such payment shall be in lieu of further Base Salary payments under Section II except as otherwise provided in Section II-B. Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall relieve the Company of its obligation of providing the Executive with all benefits in accordance with the terms of the Benefit Plans in which the Executive participates. 2. In addition to the foregoing, if requested by the Executive, the Company will purchase the Executive's principal residence at any time requested by the Executive within a period of two (2) years following termination of employment; provided, however, that the purchase price of the residence shall be the fair market value of such residence as established by the average of appraisals submitted by three (3) independent appraisers mutually selected by the Executive and the Company. B. 1. The term "Good Reason" shall mean the failure of the Company to comply with the following requirement: During the Change of Control Period, (i) the Executive's Base Salary, position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by or assigned to the Executive at any time during the 90-day period immediately preceding the date of the Change of Control and (ii) Executive's services shall be performed at the location where Executive was employed immediately preceding the date of the Change of Control. 2. The term "Base Amount" shall mean Executive's average annual compensation from the Company (as reported on Form W-2) for the five consecutive calendar years (or such lesser period as constitutes Executive's total years of employment with the Company) ending with the calendar year immediately preceding the Change of Control. 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. 4. The term "Change of Control Period" shall mean the period beginning on the date of the Change of Control and ending thirty-six (36) months thereafter. C. Notwithstanding anything else contained herein, if the aggregate of the payments to be made under this Agreement as a result of a Change of Control, either alone or together with other payments to which the Executive is entitled from the Company, would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such total payments shall be reduced to the largest amount as will result in no portion of the payments made hereunder being subject to the excise tax imposed by Section 4999 of the Code or being disallowed as a deduction by the Company under Section 280G of the Code. The determination of any reduction in payments hereunder pursuant to the foregoing provisions shall be made by the Executive in good faith after consultation with the Company, and such determination shall be conclusive and binding on the Company. The Company shall cooperate in good faith with the Executive in making such determination and providing the necessary information for this purpose. IV. Executive's Rights Under Certain Plans and Policies The Company agrees that the benefits provided to the Executive herein are not in lieu of any rights and privileges to which the Executive may be entitled as an employee of the Company under retirement, pension, special salary continuation plan, disability, life insurance, hospitalization, vacation, business expense reimbursement or other plan or policy which may now or hereafter be in effect, it being understood that the Executive shall have no less than the same rights and privileges to participate in such plans, policies or benefits as any other employee of the Company. V. Covenant Not to Compete and Consultation A. For the period of two (2) years after the termination of the Executive's employment hereunder for any reason, the Executive shall not engage or attempt to engage on his own behalf or on behalf of a third party, in any "Competitive Activity". The term "Competitive Activity" shall mean participation by the Executive, without the written consent of the Board of Directors of the Company, in the management of any business operation of any enterprise if such operation (a "Competitive Operation") engages in substantial and direct competition with any business operation activity conducted by the Company or its subsidiaries at the time of the termination of the Executive's employment. A business operation shall be considered a Competitive Operation if such business operation's sales of any product or service competitive with any product or service of the Company amounts to thirty percent (30%) of that business operation's total sales and if the Company's sales of said product or service of its comparable business operation amounts to thirty percent (30%) of the Company's total sales. "Competitive Activity" shall not include (i) the mere ownership of securities in any enterprise, or (ii) participation in the management of any enterprise or any business operation thereof other than in connection with a Competitive Operation of such enterprise. Without limiting the generality of the foregoing, Competitive Activity shall include becoming employed by or associated with, Stelco-McMaster Ltd., Slater Steels or Atlantic Steel Industries, Inc. In addition, the Executive shall make himself available for reasonable consultation services with the Company for two (2) years after termination of employment. B. If the restrictions set forth in the preceding paragraph or any part thereof should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restriction shall not thereby be adversely affected. The Executive agrees that the foregoing territorial and time limitations are reasonable and properly required for the adequate protection of the business of the Company and that in the event that any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, then the Executive agrees and submits to the reduction of either said territorial or time limitation to such an area or period as said court shall deem reasonable. In the event that the Executive shall be in violation of the aforementioned restrictive covenants, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such breach or breaches should occur. VI. Confidential Information The Executive agrees to receive Confidential Information (as defined in this Section VI below) of the Company in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means, except in the ordinary course of the Company's business, without the express written consent of the Board of Directors of the Company. The Executive further agrees that, upon termination of his employment with the Company, all documents, records, notebooks and similar repositories containing Confidential Information, including copies thereof, then in the Executive's possession, whether prepared by him or others, shall be left with the Company. For the purpose of this Agreement, "Confidential Information" means information disclosed to the Executive or known by the Company, not generally known in the industry in which the Company is or may become engaged, about the Company's products, processes or services. VII. Remedy for Violation of Noncompetition and Confidential Information Agreements The Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed were the Executive to breach or threaten to breach the provisions of Section V or VI hereof, and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section V or VI hereof, and to specific performance of the terms of each such sections in addition to any other legal or equitable remedy it may have. The Executive further agrees that he shall not, in any equity proceeding involving him relating to the enforcement of Section V or VI hereof, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. VIII. Indemnification for Expense If litigation or other judicial or arbitrative proceedings shall be brought to enforce or interpret any provision contained herein, the Company, to the extent permitted by applicable law and the Company's Certificate of Incorporation and By-laws as in effect on the date hereof, hereby indemnifies the Executive for his reasonable expenses (including without limitation, attorneys' fees and disbursements) incurred in connection with such proceeding. If so requested by the Executive, the Company shall pay to the Executive an amount equal to any and all such expenses within five (5) business days after the Executive's written request, which request shall be supported by reasonably adequate documentation. IX. Successors A. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the Company, its successors and assigns, including without limitation, any person, partnership or corporation which may acquire all or substantially all of the Company's assets and business, or with or into which the Company may be consolidated or merged. Any and all references to the Company in this Agreement shall be deemed to mean and include any successor or assignee. B. This Agreement shall also inure to the benefit of and be binding on the Executive and his legal representatives, but being a contract for personal services, cannot be assigned by Executive. X. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. XI. Applicable Law The construction and interpretation of this Agreement shall be governed by the laws of the State of Kentucky applicable to agreements made and to be performed within Kentucky, without regard to Kentucky's conflict of laws rules. XII. No Mitigation Required The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement. XIII. Notice All notices under this Agreement shall be made in writing and shall be duly sent if sent by registered mail or certified mail to the respective parties' address shown hereinabove or such other address as the parties may hereafter designate in writing for such purpose. XIV. Captions and Titles Captions and titles have been used in this Agreement only for convenience, and in no way define, limit or describe the meaning of this Agreement or any part thereof. IN WITNESS WHEREOF, the parties have signed this Agreement on this 1st day of September, 1998 effective as if adopted on June 7, 1994. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth /s/ Joseph E. Harrison /s/ William H. Gerak WITNESS EX-10.10 9 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 1st day of September, 1998 by and between Kentucky Electric Steel, Inc., with its principal office in Ashland, Kentucky (the "Company"), and William H. Gerak, residing at 3424 Oakwood Circle, Ashland, Kentucky 41102 (hereinafter called the "Executive"). WITNESSETH WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 ("Agreement"); and WHEREAS, the parties desire to amend and restate the Agreement to define the term "Change of Control" as if included in the original Agreement; NOW, THEREFORE, the Agreement is amended and restated in its entirety to read as follows: I. Employment Duties and Term A. Beginning on the Commencement Date (as hereinafter defined) the Company agrees to employ the Executive at not lower than the office held on the Commencement Date and the Executive agrees to faithfully and to the best of his ability discharge the responsibilities of said office and perform such duties and services of an executive, administrative and managerial nature as shall be specified and designated from time to time by the Board of Directors of the Company in connection with the business and activities of the Company. The Executive's duties and responsibilities shall be those normally associated modified from time to time following the Commencement Date by the Board of Directors, but there shall be no significant change in his duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, or job location without his specific written agreement. The Executive agrees that during the Employment Period (as defined in Section I, B hereof), he shall devote substantially all his professional time and effort to the performance of his duties hereunder except for (i) time spent in managing his personal investments and services on corporate, civic or charitable boards or committees, in each case not significantly interfering with the performance of such duties, and (ii) periods of vacation and sick leave to which he is entitled. Furthermore, the Executive agrees that during the Employment Period, he shall refrain from engaging on his own behalf or on behalf of a third party, including without limitation, any customer or supplier of the Company, in any line of activities or business in which he knows or has reason to know that the Company is or is considering becoming engaged during the Employment Period or in any related activities or business without the express written consent of the Board of Directors of the Company. B. The term of the Executive's employment under this Agreement (the "Employment Period") shall commence on the effective date of a Change of Control (as hereinafter defined) ("Commencement Date") and shall be for an initial period commencing on the Commencement Date and ending on the third anniversary hereof (the "Initial Term"), plus all Renewal Periods, if applicable. After the Initial Term, this Agreement shall be automatically renewed for subsequent three (3) year periods (each such three (3) year period being referred to herein as a "Renewal Period") unless, no later than (i) one (1) year prior to the expiration of the Initial Term, or, (ii) if during a Renewal Period, one (1) year prior to the expiration of such Renewal Period, either party gives written notice of cancellation to the other party. After timely notice of cancellation has been given as required above, the Employment Period shall continue until the expiration of the Initial Term or the then current Renewal Period, as applicable, and the term "Termination Date," as used herein, shall be the last day of the Initial Term, or such Renewal Period, as applicable. The provisions of this Agreement shall not apply if, for any reason (other than as set forth in the following sentence), the Executive is not employed by the Company on the Commencement Date. The provisions of this Agreement shall apply in the event the Executive's employment is terminated prior to, but in connection with, a Change of Control, by the Company's Board of Directors in the exercise of its fiduciary duties as part of a negotiation with a third party that requires such termination of employment as a condition of consummating a transaction resulting in a Change of Control. II. Compensation and Termination A. During the Employment Period, the Company shall pay to the Executive, and the Executive agrees to accept as compensation for his services hereunder, a base annual salary in the amount of not less than the level in effect on the Commencement Date, payable in the manner and at the times the Company pays its senior executives. Such base annual salary shall be increased on each anniversary of the Commencement Date by an amount not less than that which is substantially similar, on a percentage basis, to the average percentage increase in base salary for all corporate officers of the Company during the preceding twelve (12) months. "Base Salary" at any time shall mean the Executive's base annual salary as adjusted by the Board of Directors and as in effect at the time in question. In addition to his Base Salary, the Executive shall be entitled to participate in and receive compensation pursuant to the Company's Incentive Bonus Plan, the Company's 1993 Incentive Stock Option Plan and all other benefit, bonus and stock plans that now exist or as may exist in the future (collectively, the "Benefit Plans"). B. In the event the Company terminates Executive's employment Without Cause (as defined in this Section II B below), the Company's obligation to pay Executive the compensation set forth herein shall nevertheless continue until the Termination Date. For the purposes of this Agreement, a termination "Without Cause" shall mean a termination by the Company for any reason other than for Cause (as defined in Section II C hereof) or Disability, and the Executive's employment with the Company shall be deemed terminated Without Cause by the Company in the event of a termination resulting from a change in duties, position, title, job responsibility and authority, office facilities, support staff, growth potential and opportunity, compensation, job location, or senior management of the Company which, in the reasonable judgement of the Executive, would have a material adverse impact on the Executive or the nature of work performed by the Executive, or which would require him to change the location of his residence to avoid a commuting distance greater than the greater of (i) his commuting distance prior to the change and (ii) thirty (30) miles. C. In the event that the Company terminates the Executive's employment under this Agreement for "Cause" (as hereinafter defined), except as provided in Section III, the Executive shall cease to receive compensation as of the date of termination of his employment. For the purpose of this Agreement, "Cause" shall mean (i) an act or acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of the Company or (ii) any gross misconduct by the Executive in the performance of his duties or responsibilities set forth in Section I hereof which is demonstrably willful and deliberate on the Executive's part and which results in material injury to the Company after written demand to cease such misconduct by the Board of Directors of the Company is delivered to the Executive. "Cause" shall not include any mistake of fact or opinion made in good faith with respect to the Company's business. III. Change of Control A. 1. In the event of a Change of Control (as hereinafter defined) which causes this Agreement to commence, Executive may terminate his employment hereunder at any time during the period commencing six (6) months following the Change of Control and ending thirty-six (36) months following the Change of Control. If (a) the Executive shall terminate his employment during such period for any reason other than death or Disability, (b) the Company shall terminate the Executive's employment during the Change of Control Period (as hereinafter defined) for any reason, or (c) the Executive terminates his employment during the first six (6) months of the Change of Control Period for Good Reason as hereinafter defined, the Company shall pay to the Executive upon such termination of employment, in a single lump cash sum, an amount equal to One Dollar ($1.00) less than 300% of Employee's Base Amount as hereinafter defined. Such payment shall be in lieu of further Base Salary payments under Section II except as otherwise provided in Section II-B. Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall relieve the Company of its obligation of providing the Executive with all benefits in accordance with the terms of the Benefit Plans in which the Executive participates. 2. In addition to the foregoing, if requested by the Executive, the Company will purchase the Executive's principal residence at any time requested by the Executive within a period of two (2) years following termination of employment; provided, however, that the purchase price of the residence shall be the fair market value of such residence as established by the average of appraisals submitted by three (3) independent appraisers mutually selected by the Executive and the Company. B. 1. The term "Good Reason" shall mean the failure of the Company to comply with the following requirement: During the Change of Control Period, (i) the Executive's Base Salary, position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by or assigned to the Executive at any time during the 90-day period immediately preceding the date of the Change of Control and (ii) Executive's services shall be performed at the location where Executive was employed immediately preceding the date of the Change of Control. 2. The term "Base Amount" shall mean Executive's average annual compensation from the Company (as reported on Form W-2) for the five consecutive calendar years (or such lesser period as constitutes Executive's total years of employment with the Company) ending with the calendar year immediately preceding the Change of Control. 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. 4. The term "Change of Control Period" shall mean the period beginning on the date of the Change of Control and ending thirty-six (36) months thereafter. C. Notwithstanding anything else contained herein, if the aggregate of the payments to be made under this Agreement as a result of a Change of Control, either alone or together with other payments to which the Executive is entitled from the Company, would constitute an "excess parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such total payments shall be reduced to the largest amount as will result in no portion of the payments made hereunder being subject to the excise tax imposed by Section 4999 of the Code or being disallowed as a deduction by the Company under Section 280G of the Code. The determination of any reduction in payments hereunder pursuant to the foregoing provisions shall be made by the Executive in good faith after consultation with the Company, and such determination shall be conclusive and binding on the Company. The Company shall cooperate in good faith with the Executive in making such determination and providing the necessary information for this purpose. IV. Executive's Rights Under Certain Plans and Policies The Company agrees that the benefits provided to the Executive herein are not in lieu of any rights and privileges to which the Executive may be entitled as an employee of the Company under retirement, pension, special salary continuation plan, disability, life insurance, hospitalization, vacation, business expense reimbursement or other plan or policy which may now or hereafter be in effect, it being understood that the Executive shall have no less than the same rights and privileges to participate in such plans, policies or benefits as any other employee of the Company. V. Covenant Not to Compete and Consultation A. For the period of two (2) years after the termination of the Executive's employment hereunder for any reason, the Executive shall not engage or attempt to engage on his own behalf or on behalf of a third party, in any "Competitive Activity". The term "Competitive Activity" shall mean participation by the Executive, without the written consent of the Board of Directors of the Company, in the management of any business operation of any enterprise if such operation (a "Competitive Operation") engages in substantial and direct competition with any business operation activity conducted by the Company or its subsidiaries at the time of the termination of the Executive's employment. A business operation shall be considered a Competitive Operation if such business operation's sales of any product or service competitive with any product or service of the Company amounts to thirty percent (30%) of that business operation's total sales and if the Company's sales of said product or service of its comparable business operation amounts to thirty percent (30%) of the Company's total sales. "Competitive Activity" shall not include (i) the mere ownership of securities in any enterprise, or (ii) participation in the management of any enterprise or any business operation thereof other than in connection with a Competitive Operation of such enterprise. Without limiting the generality of the foregoing, Competitive Activity shall include becoming employed by or associated with, Stelco-McMaster Ltd., Slater Steels or Atlantic Steel Industries, Inc. In addition, the Executive shall make himself available for reasonable consultation services with the Company for two (2) years after termination of employment. B. If the restrictions set forth in the preceding paragraph or any part thereof should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restriction shall not thereby be adversely affected. The Executive agrees that the foregoing territorial and time limitations are reasonable and properly required for the adequate protection of the business of the Company and that in the event that any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, then the Executive agrees and submits to the reduction of either said territorial or time limitation to such an area or period as said court shall deem reasonable. In the event that the Executive shall be in violation of the aforementioned restrictive covenants, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such breach or breaches should occur. VI. Confidential Information The Executive agrees to receive Confidential Information (as defined in this Section VI below) of the Company in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means, except in the ordinary course of the Company's business, without the express written consent of the Board of Directors of the Company. The Executive further agrees that, upon termination of his employment with the Company, all documents, records, notebooks and similar repositories containing Confidential Information, including copies thereof, then in the Executive's possession, whether prepared by him or others, shall be left with the Company. For the purpose of this Agreement, "Confidential Information" means information disclosed to the Executive or known by the Company, not generally known in the industry in which the Company is or may become engaged, about the Company's products, processes or services. VII. Remedy for Violation of Noncompetition and Confidential Information Agreements The Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed were the Executive to breach or threaten to breach the provisions of Section V or VI hereof, and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section V or VI hereof, and to specific performance of the terms of each such sections in addition to any other legal or equitable remedy it may have. The Executive further agrees that he shall not, in any equity proceeding involving him relating to the enforcement of Section V or VI hereof, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. VIII. Indemnification for Expense If litigation or other judicial or arbitrative proceedings shall be brought to enforce or interpret any provision contained herein, the Company, to the extent permitted by applicable law and the Company's Certificate of Incorporation and By-laws as in effect on the date hereof, hereby indemnifies the Executive for his reasonable expenses (including without limitation, attorneys' fees and disbursements) incurred in connection with such proceeding. If so requested by the Executive, the Company shall pay to the Executive an amount equal to any and all such expenses within five (5) business days after the Executive's written request, which request shall be supported by reasonably adequate documentation. IX. Successors A. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the Company, its successors and assigns, including without limitation, any person, partnership or corporation which may acquire all or substantially all of the Company's assets and business, or with or into which the Company may be consolidated or merged. Any and all references to the Company in this Agreement shall be deemed to mean and include any successor or assignee. B. This Agreement shall also inure to the benefit of and be binding on the Executive and his legal representatives, but being a contract for personal services, cannot be assigned by Executive. X. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. XI. Applicable Law The construction and interpretation of this Agreement shall be governed by the laws of the State of Kentucky applicable to agreements made and to be performed within Kentucky, without regard to Kentucky's conflict of laws rules. XII. No Mitigation Required The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement. XIII. Notice All notices under this Agreement shall be made in writing and shall be duly sent if sent by registered mail or certified mail to the respective parties' address shown hereinabove or such other address as the parties may hereafter designate in writing for such purpose. XIV. Captions and Titles Captions and titles have been used in this Agreement only for convenience, and in no way define, limit or describe the meaning of this Agreement or any part thereof. IN WITNESS WHEREOF, the parties have signed this Agreement on this 1st day of September, 1998 effective as if adopted on June 7, 1994. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth /s/ William H. Gerak /s/ William J. Jessie WITNESS EX-10.10 10 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made on the 12th day of February, 1999, by and between Kentucky Electric Steel, Inc. (the "Company"), and Charles C. Hanebuth (the "Executive"). WITNESSETH : WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement to change the definition of the term "Change of Control": NOW, THEREFORE, the Agreement is amended as follows: 1. Paragraph III.B.3 is revised to read as follows: 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. IN WITNESS WHEREOF, the parties have signed this Amendment on this 12th day of February, 1999. KENTUCKY ELECTRIC STEEL, INC. By: /s/ William J. Jessie /s/ Charles C. Hanebuth /s/ William H. Gerak WITNESS EX-10.10 11 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made on the 12th day of February, 1999, by and between Kentucky Electric Steel, Inc. (the "Company"), and William J. Jessie (the "Executive"). WITNESSETH : WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement to change the definition of the term "Change of Control": NOW, THEREFORE, the Agreement is amended as follows: 1. Paragraph III.B.3 is revised to read as follows: 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. IN WITNESS WHEREOF, the parties have signed this Amendment on this 12th day of February, 1999. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth /s/ William J. Jessie /s/ Joseph E. Harrison WITNESS EX-10.10 12 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made on the 12th day of February, 1999, by and between Kentucky Electric Steel, Inc. (the "Company"), and Joseph E. Harrison (the "Executive"). WITNESSETH : WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement to change the definition of the term "Change of Control": NOW, THEREFORE, the Agreement is amended as follows: 1. Paragraph III.B.3 is revised to read as follows: 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. IN WITNESS WHEREOF, the parties have signed this Amendment on this 12th day of February, 1999. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth /s/ Joseph E. Harrison /s/ William J. Jessie WITNESS EX-10.10 13 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT THIS AGREEMENT made on the 12th day of February, 1999, by and between Kentucky Electric Steel, Inc. (the "Company"), and William H. Gerak (the "Executive"). WITNESSETH : WHEREAS, the Company and the Executive executed an Employment Agreement effective as of June 7, 1994 (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement to change the definition of the term "Change of Control": NOW, THEREFORE, the Agreement is amended as follows: 1. Paragraph III.B.3 is revised to read as follows: 3. The term "Change of Control" shall mean (i) the consummation of (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, other than in connection with a bankruptcy or reorganization proceeding of the Company under applicable federal or state bankruptcy laws, or (iii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, becoming the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, or (iv) at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company ceasing for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. IN WITNESS WHEREOF, the parties have signed this Amendment on this 12th day of February, 1999. KENTUCKY ELECTRIC STEEL, INC. By: /s/ Charles C. Hanebuth /s/ William H. Gerak /s/ William J. Jessie WITNESS EX-10.18 14 EXHIBIT A KENTUCKY ELECTRIC STEEL, INC. 1999 SHARE PLAN FOR NON-EMPLOYEE DIRECTORS I. Name and Purpose of Plan 1.1 Establishment. This plan created in accordance with the terms hereof shall be known as the "Kentucky Electric Steel, Inc. 1999 Share Plan for Non-Employee Directors" (the "Plan"). 1.2 Purposes. The purposes of this Plan are to encourage the Non-Employee Directors of Kentucky Electric Steel, Inc. (the "Company") to own shares of the Company's stock and thereby to align their interests more closely with the interests of the other shareholders of the Company, to encourage the highest level of director performance by providing the Non-Employee Directors with a direct interest in the Company's attainment of its financial goals, and to provide a financial incentive that will help attract and retain the most qualified directors. II. Definitions 2.1 Definitions. The following terms shall have the meanings set forth below: (a) "Board" shall mean the Board of Directors of the Company. (b) "Non-Employee Director" shall mean an individual duly elected or chosen as a member of the Board who is not an employee of the Company. (c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (d) "Fair Market Value" means the average of the highest sale price and the lowest sale price of a Share on the date the value of a Share is to be determined, as reported on the NASDAQ System, and published in the Wall Street Journal, or if no sale is reported for such date, then on the next preceding date for which a sale is reported or, if the Shares are no longer traded on the NASDAQ System, the determination of such value shall be made by the Board. (e) "Fees" shall mean the amount of the fees to be paid to each Non-Employee Director for services as a director (including all meetings of the full Board and all committee meetings) for each fiscal quarter, as determined by the Board from time to time. (f) "Shares" shall mean the common stock, par value $.01 per share, of the Company. 2.2 Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural. III. Stock Subject to the Plan A total of 25,000 Shares are authorized for issuance under this Plan in accordance with the provisions of this Plan. This authorization may be increased from time to time by approval of the Board and by the shareholders of the Company if, in the opinion of counsel for the Company, such shareholder approval is required. IV. Participation Each Non-Employee Director of the Company may receive Shares pursuant to this Plan on the terms and conditions set forth herein. Each Non-Employee Director shall, if required by the Board, enter in an agreement with the Company, in such form as the Board shall determine and which is consistent with the provisions of this Plan. In the event of any inconsistency between the provisions of this Plan and any such agreement entered into hereunder, the provisions of this Plan shall govern. V. Stock Issuances Promptly following each Board meeting or meeting of a committee of the Board during a fiscal quarter commencing on or after March 28, 1999, the Company shall issue to each Non-Employee Director the number of Shares (rounded to the nearest whole number) obtained by dividing the "Applicable Portion" of such Non-Employee Director's Fees by the Fair Market Value of a Share on the date of the applicable Board or committee meeting. No fractional Share shall be issued by the Company under this Plan. The "Applicable Portion" shall be 60% of the Fees payable with respect to the applicable meeting for each Non-Employee Director, or such higher percentage that any individual Non-Employee Director elects for himself, such election to be filed in writing with the Chief Financial Officer of the Company prior to the first day of the fiscal quarter during which the applicable meeting occurs. VI. General Provisions 6.1 Non-transferability. No rights to the issuance of Shares pursuant to this Plan shall be assigned, pledged, hypothecated or otherwise transferred by a Non-Employee Director or any other person, voluntarily or involuntarily, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order. 6.2 Investment Representations; Restricted Stock. The Company may require any Non-Employee Director to whom Shares are to be issued pursuant to this Plan, as a condition of receiving such Shares, to given written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the Shares for his own account for investment and not with any present intention of selling or otherwise distributing the same, that the Shares issued pursuant to this Plan have not been registered pursuant to any applicable securities law and can only be transferred upon compliance with such laws, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. The Shares issued pursuant to this Plan will bear an appropriate legend. 6.3 Compliance with Laws. (a) Each issuance of Shares pursuant to this Plan shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance of Shares thereunder, such Shares may not be issued unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board. (b) This Plan and the issuance of Shares pursuant to this Plan are intended to comply with Rule 16b-3 promulgated under the Exchange Act; and the Board shall interpret and administer the provisions of this Plan in a manner consistent therewith. (c) The issuance of Shares and the payment of cash pursuant to this Plan shall be subject to all applicable laws, rules and regulations. VII. Plan Amendment and Termination The Board may at any time terminate, and from time to time amend or modify this Plan; provided, however, that no amendment or modification may become effective without approval of the amendment or modification by the shareholders if shareholder approval is required to enable this Plan to satisfy any applicable statutory or regulatory requirements, or if the Company, on the advice of counsel, determines that shareholder approval is otherwise necessary or desirable. VIII. Miscellaneous 8.1 Retention as Director. Nothing contained in this Plan shall interfere with or limit in any way the right of the shareholders or the Directors of the Company to remove any Director from the Board pursuant to the bylaws of the Company, nor confer upon any Director any right to continue in the service of the Company. 8.2 Relationship to Other Plans. The adoption of this Plan shall not affect any other compensation plan in effect for the Company. Furthermore, this Plan shall not preclude the Company from establishing any other form of incentive or other compensation arrangement for Directors of the Company. 8.3 Plan Binding on Successors. This Plan shall be binding upon the successors and assigns of the Company. 8.4 Governing Law. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of Delaware. 8.5 Headings. Headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such headings, numberings and paragraphing shall not in any case be deemed in any way material or relevant to the construction of this Plan or any provisions thereof. IX. Effective Date The effective date of this Plan shall be the date of its adoption by the Board. EX-27 15 ART.5 FDS FOR 3RD QUARTER 10-Q
5 This schedule contains summary financial information extracted from Kentucky Electric Steel, Inc.'s condensed consolidated financial statements as of and for the nine month period ended June 26, 1999 included in this Company's quarterly report on Form 10-Q and is qualified in its entirety by reference to such condensed consolidated financial statements. 0000910394 KENTUCKY ELECTRIC STEEL, INC. 1,000 U.S. DOLLARS 9-MOS SEP-25-1999 SEP-27-1998 JUN-26-1999 1 141 0 14,020 442 20,151 40,189 51,937 17,384 81,364 25,166 20,000 50 0 0 35,055 81,364 78,997 78,997 71,250 71,250 0 0 1,704 1,378 524 854 0 0 0 854 .21 .21
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