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EXHIBIT 10.1
September 1, 1996
Xx. Xxxx X. Xxxx
Executive Vice President
RMI Titanium Company
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Dear Xx. Xxxx:
This Letter Agreement sets forth the basis upon which I have been
authorized by the Board of Directors of RMI Titanium Company ("Company") to
continue your employment in the executive officer position described in
paragraph 1 below for the Employment Period (as hereinafter defined). The
"Employment Period" shall initially be the period September 1, 1996 through
August 31, 1999; provided, however, that on September 1, 1999 and each September
1 thereafter, the Employment Period shall automatically be extended for one
additional year unless, not later than the immediately preceding May 1, either
you or the Company shall have given written notice to the other that you or it
does not wish to extend the Employment Period; and provided further that the
Employment Period shall terminate automatically when you attain age 65. In the
event this Letter Agreement is terminated for any reason other than your death,
your obligations as set forth in paragraph 10 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated February
1, 1994.
1. During the Employment Period, you will serve as Executive Vice President
of the Company, in the Office of the Chairman (or on any other executive officer
position within the Company to which you may hereafter be elected by the
Company's Board of Directors), performing all duties and functions appropriate
to that office, as well as such additional duties as the Company's Chairman or
Board of Directors may, from time to time, assign to you. During the Employment
Period, you will devote your full time and best efforts to the performance of
all such duties.
2. During the Employment Period, the Company will pay you, in equal monthly
installments, as compensation for your services an annual salary of $200,000.
This annual salary may be increased from time to time in the sole discretion of
the Company, but may only be decreased by the Company with your written consent.
Such annual salary, whether increased or decreased, shall constitute your "Base
Salary." In addition, you may be awarded such bonuses as the Board of Directors
of the Company determines to be appropriate under the Company's Annual Incentive
Compensation Plan or any successor bonus plan. You will also be eligible to
participate in the Company's 1995 Stock Plan, or any successor stock plan.
3. You understand and acknowledge that: (1) under the provisions of the
United States Steel Corporation Plan for Employee Pension Benefits (Revision of
1950) your first period of employment with the former United States Steel
Corporation ("USS"), amounting to 3.58 years of service, cannot be credited as
pensionable service when you retire; and (2) under the provisions of the
Company's Pension Plan for Eligible Salaried Employees ("Pension Plan)"
applicable to you, your first period of employment with the Company (January 1,
1968 through July 27, 1973), amounting to 5.58 years of service, also cannot be
credited as pensionable service when you retire. Notwithstanding those facts, if
you continue in active employment with the Company until either age 65, i.e.,
until September 30, 2007, or such earlier date as the Company's Board of
Directors may approve, the Company, at your retirement, will, from the general
assets of the Company, pay you a one time lump sum payment of the then present
value of the 9.16 years of non-pensionable service attributable to your first
periods of employment with USS and the Company respectively, calculated pursuant
to the provisions for determining accrued pension benefits set forth in both the
Company's Pension Plan and its Supplemental Pension Program applicable to you at
date of retirement and based on your average monthly earnings(or then applicable
pensionable earnings) at such time. In addition, should you die prior to age 65
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while still actively employed by the Company, the Company will, from the general
assets of the Company, pay your surviving spouse, if any, a one time lump sum
payment of the then present value of the 9.16 years of non-pensionable service
attributable to your first periods of employment with USS and the Company
respectively, calculated pursuant to the provision for determining surviving
spouse eligibility and pension benefits set forth in both the Company's Pension
Plan and its Supplemental Pension Program applicable to you at date of death.
4. In the event of your death during the Employment Period, your right to
all compensation under this Letter Agreement allocable to days subsequent to
your death shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of your death.
5. In the event you become physically or mentally disabled, in the sole
judgment of physicians selected by the Company's Board of Directors, such that
you cannot perform the duties and functions contracted for pursuant to this
Letter Agreement, and should such disability continue for at least 180
consecutive days (or in the judgment of such physicians, be likely to continue
for at least 180 consecutive days), the Company may terminate your employment
upon written notice to you; provided, however, that such termination shall be
deemed to be a retirement authorized by the Company's Board of Directors for
purposes of paragraph 3 of this Letter Agreement. If your employment is
terminated because of physical or mental disability, your right to all
compensation under this Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of termination.
6. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment Period for Cause, (as
Cause is defined in paragraph 8(d) below). In such event, your right to receive
continued compensation under this Letter Agreement will terminate and no further
installments will be paid to you, except for that portion, if any, of your Base
Salary that is accrued and unpaid upon the date of termination.
7. In addition to your annual Base Salary as set forth in Paragraph 2
above, you will be entitled in each calendar year to a vacation with pay in
accordance with the vacation policies of the Company. You will also be entitled
to: (1) participate in all of the Company's existing and future employee benefit
programs applicable to officers of the Company in accordance with the terms of
such benefit program plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such examination to be
conducted by the Cleveland Clinic or comparable facility and provided in
accordance with terms and conditions comparable to those applicable to medical
examinations for USX executive officers; and (3) tax preparation and financial
planning advice under terms and conditions comparable to those applicable to USX
executive management.
8. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in Control" of
the Company shall mean a change in control of a nature that would be
required to be reported by it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Company is then subject to
such reporting requirement; provided, that, without limitation, such a
change in control shall be deemed to have occurred if:
(1) any person (within the meaning of that term as used in Sections
13(d) and 14(d) of the Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding voting securities; provided, however, that for purposes of
this Agreement the term "Person" shall not include (i) the Company or
any of its majority-owned subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, (v) USX Corporation; or
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(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the date hereof, are
serving as directors on the Board and any new director (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved, or
(3) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with any other corporation, other than a merger
or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger or
consolidation at least 50% of the combined voting power of the voting
securities of the entity surviving the merger or consolidation, (or the
parent of such surviving entity) or the shareholders of the Company
approve a plan of complete liquidation of the Company, or there is
consummated the sale or other disposition of all or substantially all of
the Corporation's assets.
(b) In the event of a Change in Control of the Company, you may, at
your sole option, terminate your employment with the Company within the
initial 90 calendar days from the occurrence of such Change in Control (a
"Sole Option" termination). If your employment is involuntarily terminated
by the Company other than for Cause within such initial 90 calendar day
period, if you elect a Sole Option termination, or if, after the first 90
calendar days following a Change in Control you terminate for Good Reason,
you shall not be required to remain in the Company's employ, and the
benefits set forth in paragraph 8(g) shall be applicable.
(c) If any of the events described above constituting a Change in
Control of the Company shall have occurred, you shall be entitled to the
benefits provided in paragraph 8(g) hereof upon the termination of your
employment during the term of this Letter Agreement unless such termination
is (i) because of your death or disability, (ii) by the Company for Cause,
(iii) by you other than for Good Reason after the first 90 calendar days
after a Change in Control has occurred, or (iv) on or after the date that
you attain age sixty-five (65). In the event your employment with the
Company is terminated for any reason prior to the occurrence of a Change in
Control, you shall not be entitled to any benefits under this paragraph 8;
provided, however, that if your employment is terminated prior to a Change
in Control without Cause at the direction of a person who has entered into
an agreement with the Company, the consummation of which will constitute a
Change in Control, your employment shall be deemed to have terminated
following a Change in Control. Your entitlement to benefits under any of
the Company's retirement plans will not adversely affect your rights to
receive payments hereunder.
(d) Termination by the Company of your employment for "Cause" shall
mean termination upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such
failure resulting from a Sole Option termination by you within the first 90
calendar days after a Change in Control has occurred or thereafter for Good
Reason), after a demand for substantial performance is delivered to you
that specifically identifies the manner in which the Company believes that
you have not substantially performed your duties, and you have failed to
resume substantial performance of your duties on a continuous basis within
fourteen (14) days of receiving such demand, (ii) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise or (iii) your conviction of any felony or
conviction of a misdemeanor which impairs your ability substantially to
perform your duties with the Company. For purposes of this paragraph, no
act, or failure to act, on your part shall be deemed "willful" unless done,
or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of the
Company.
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(e) For purposes of this Letter Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in
Control of the Company of any one or more of the following:
(1) the assignment to you of duties inconsistent with your position
immediately prior to the Change in Control;
(2) a reduction or alteration in the nature of your position,
duties, status or responsibilities from those in effect immediately
prior to the Change in Control;
(3) the failure by the Company to continue in effect any of the
Company's employee benefit plans, programs, policies, practices or
arrangements in which you participate (or substantially equivalent
successor or replacement employee benefit plans, programs, policies,
practices or arrangements) or the failure by the Company to continue
your participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed immediately
prior to the Change in Control;
(4) the failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform this
Letter Agreement;
(5) any purported termination by the Company of your employment
that is not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (f) below, and for purposes of this Letter
Agreement, no such purported termination shall be effective; and
(6) the Company's requiring you to be based at a location in excess
of fifty (50) miles from the location where you are based immediately
prior to the Change in Control.
(f) Any termination by the Company for Cause or by you for Sole Option
or Good Reason shall be communicated by Notice of Termination to the other
party hereto. For purposes of this Letter Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Letter Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated.
(g) Following a Change in Control of the Company, as defined above,
upon termination of your employment you shall be entitled to the following
benefits:
(1) If your employment shall be terminated by the Company for Cause
or by you other than by Sole Option or Good Reason, the Company shall
pay you your full Base Salary through the date of termination at the
rate in effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of
the Company at the time such payments are due, and the Company shall
have no further obligations to you under this Agreement.
(2) If your employment terminates by reason of your death or
disability, your benefits shall be determined in accordance with
paragraphs 3, 4 and 5 of this Letter Agreement and the Company's
retirement, survivor's benefits, insurance and other applicable programs
and plans, then in effect.
(3) If your employment by the Corporation shall be terminated (i)
by the Company other than for Cause, your death or disability, or (ii)
by you by Sole Option or (iii) by you for Good Reason, you shall be
entitled to the benefits (the "Severance Payments") provided in
paragraphs 8(g)(3), (i), (ii), (iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and cancel any further rights you
have to receive any Base Salary that would be otherwise due under
paragraph 2 of this Letter Agreement:
(i) the Company shall pay you your full Base Salary through the
date of termination at the rate in effect at the time Notice of
Termination is given;
(ii) the Company will pay as severance benefits to you, not
later than the fifth day following the date of termination, a lump
sum severance payment (the "Severance Payment")
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equal to the product of (1) a fraction, the numerator of which is
equal to the lesser of (x) thirty-five and one-half (35 1/2) or (y)
the number of full and partial months existing between the date of
termination and your sixty-fifty (65th) birthday and the denominator
of which is equal to twelve (12), and (2) the sum of (x) your annual
Base Salary in effect immediately prior to the occurrence of the
circumstances giving rise to such termination, and (y) the amount, if
any, of the arithmetic average of the annual bonuses awarded to you
under any annual bonus plan of the Company calculated using the three
(3) years immediately preceding date of termination;
(iii) the options previously issued to you under any option or
incentive plan of the Company to purchase shares of Common Stock of
the Company (Option Shares), as well as any previously unvested
shares of Restricted Stock granted to you, shall irrevocably vest
upon any such termination and the stock options for such Option
Shares shall become thereafter uncancellable by the Company;
(iv) in the event that you become entitled to the Severance
Payments, if any of the Severance Payments or other portion of the
Total Payments (as defined below) will be subject to the tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay to you at the
time specified below, an additional amount (the "Gross-Up Payment")
such that the net amount retained by you, after deduction of (1) any
Excise Tax on the Severance Payments and such other Total Payments,
and (2) any federal, state and local income tax, FICA-Health
Insurance tax, and Excise Tax upon the payment provided for by this
paragraph, shall be equal to the Severance Payments and such other
Total Payments. For purposes of determining whether any of the
payments will be subject to the Excise Tax and the amount of such
Excise Tax, (1) any other payments or benefits received or to be
received by you in connection with a Change in Control of the Company
or your termination of employment whether pursuant to the terms of
this Letter Agreement or any other plan, arrangement or agreement
with the Company, any person whose actions result in a Change in
Control of the Company or any person affiliated with the Company or
such person (together with the Severance Payment, the "Total
Payments") shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) shall be treated
as subject to the Excise Tax, except to the extent that in the
opinion of tax counsel selected by the Company's independent auditors
and acceptable to you such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4)
of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (2) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Total Payments or (B) the amount of
excess parachute payments within the meaning of section 280G(b)(1)
(after applying clause (1), above), and (3) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
date of termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to
the Excise Tax and federal and state and local income tax imposed on
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the Gross-Up Payment being repaid by you if such repayment results in
a reduction in Excise Tax and/or a federal and state and local income
tax deduction) plus interest on the amount of such repayment at the
rate provided in section 1274(b)(2)(B) of the Code. In the event that
the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The payments provided for in the paragraph above shall be made
not later than the fifth day following the date of termination;
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to
you on such day an estimate as determined in good faith by the
Company of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth
day after the date of termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to
you payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code);
(v) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination of
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Letter Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
(vi) for a twenty-four (24) month period after date of
termination, the Company will arrange to provide you at the Company's
expense with life, disability, accident and health insurance benefits
substantially similar to those which you were receiving immediately
prior to the Notice of Termination; but benefits otherwise receivable
by you pursuant to this paragraph shall be reduced to the extent
comparable benefits are actually received by you during the
twenty-four (24) month period following your termination, and any
such benefits actually received by you shall be reported to the
Company.
(h) You shall not be required to mitigate the amount of any
Severance Payments provided for in this paragraph 8 by seeking other
employment or otherwise, nor, except as provided in paragraph (vi)
above, shall the amount of any payment or benefit provided for in this
paragraph 8 be reduced by any compensation or benefit earned by you as
the result of employment by another employer after the date of
termination, or otherwise.
(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 or of any
division or subsidiary thereof employing you to expressly assume and
agree to perform this Letter Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle
you to compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you terminate your
employment for Good Reason.
9. This Letter Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts,
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unless otherwise provided herein, shall be paid in accordance with the terms of
this Letter Agreement, to your devisee, legatee or other designee or, if there
is not such designee, to your estate.
10. As additional consideration for the compensation and benefits provided
to you pursuant to this Letter Agreement, you agree that you will not, for a
period of 24 months after the end of the Employment Period, or the termination
of your employment with the Company (whichever first occurs), directly or
indirectly, compete with, engage in the same business as, be employed by, act a
consultant to, or be a director, officer, employee, owner or partner, or
otherwise participate in or assist (including, without limitation, by soliciting
customers for, or individuals to provide services to), any business or
organization which competes with the Company; provided, that this restriction
shall not apply if you terminate your employment with the Company by Sole Option
or for Good Reason after a Change in Control of the Company. For purposes of
this Paragraph 10, you will not be deemed to have breached your commitment
merely because you own, directly or indirectly, not more than one percent (1%)
of the outstanding common stock of such a corporation if, at the time you
acquire such stock, such stock is listed on a national securities exchange or is
regularly traded in the over-the-counter market by a member of either a national
securities exchange or the National Association of Securities Dealers, Inc. In
order to protect the interest of the Company, you will also maintain in strict
confidence and not disclose to any other person or entity any information
received from any source in the Company or developed by you in the course of
performing your duties for the Company. This obligation shall not extend to: (a)
anything you can establish as known to you from a source outside the Company,
(b) anything which has been published or becomes published hereafter other than
by you, or (c) anything which you receive from a non-Company source without
restriction on its disclosure. Should you breach or threaten to breach the
commitments in this Paragraph 10, and in recognition of the fact that the
Company would not under such circumstances be adequately compensated by money
damages, the Company shall be entitled, in addition to any other rights and
remedies available to it, to an injunction restraining you from such breach.
Further, you acknowledge and agree that the provisions of this Paragraph 10 are
necessary, reasonable, and proportionate to protect the Company during such
noncompetition period.
11. The validity, interpretation, construction and performance of this
Letter Agreement shall be governed by the laws of the State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please
sign one original copy of this Letter Agreement and return it to me. You may
retain the second signed original for your files.
Very truly yours,
RMI TITANIUM COMPANY
By /s/ X. X. XXXXXXXXX
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X. X. Xxxxxxxxx
Chairman of the Board of
Directors
Confirmed:
/s/ XXXX X. XXXX
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Xxxx X. Xxxx
September 23, 1996
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Date
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