EMPLOYMENT AGREEMENT
This Employment Agreement ("AGREEMENT") is between Rhys J. Best
("EXECUTIVE") and Lone Star Technologies, Inc. (known herein as "LONE STAR"
or "COMPANY"):
1. DEFINITIONS. As used in this Agreement, the following capitalized
terms have the following meanings:
1.1 "ACCRUED OBLIGATION" means the Executive's Base Salary,
previously deferred compensation the right to which is vested as of the Date
of Termination, pay for accrued but unused vacation time, and any other
monies owed Executive by the Company on the Date of Termination.
1.2 "ANNUAL BONUS" means any bonus to which the Executive may
become entitled under the bonus program attached to this Agreement as EXHIBIT
A and incorporated into this Agreement by reference, and as may be approved
and amended on an annual basis by the Board or its Compensation Committee.
1.3 "BASE SALARY" is the Executive's annual compensation paid in
accord with the Company's normal payroll practices.
1.4 "BOARD" means the Company's Board of Directors.
1.5 "CAUSE" means one or more of the following: (a) Executive is
convicted of any act of fraud, embezzlement or theft, or any felony involving
moral turpitude; or (b) Executive materially breaches any term of this
Agreement and fails to correct the breach within 30 days of receiving written
Notice of it. The Board may determine that there is "Cause" for the
termination of this Agreement only after 2/3 of its members vote in good
faith that "Cause" exists, after having provided the Executive and his
counsel reasonable notice and an opportunity to be heard before the Board
regarding the allegations which provide the basis of the "Cause" allegation.
1.6 "CHANGE IN CONTROL" has the same meaning in this Agreement as
it has in the Incentive Plan.
1.7 "COMPETITION" means the Executive engaging in, acting as a
director or consultant to, being employed in any capacity by, or permitting
his name to be used by any entity which directly competes with the Company
for sales of the Company's products which exist at the Termination Date. For
purposes of Section 5.3 and the definition of "Competition," the term Company
includes Lone Star Technologies, Inc. and any other entity in which it has a
majority ownership interest at the Date of Termination.
1.8 "CONFIDENTIAL INFORMATION" means information which is not
known to the general public or the Company's competitors, which is not
available from any public source, and which gives the Company a competitive
advantage over those who do not know it, including by way of example, the
identity, terms of business relationships, pricing and credit information
regarding the Company's customers and prospective customers, suppliers and
business partners;
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trade secrets; proprietary processes, methods and technologies; software
programs; and the Company's business strategies.
1.9 "CONFLICTS OF INTEREST" means: (a) ownership of a material
interest in, acting on behalf of, or accepting anything of value from any
competitor, customer, supplier or business partner of the Company, unless
permitted by the Company's Business Conduct Policy or approved by the Board;
(b) prohibited disclosure or use of Confidential Information; or (c) the
usurpation of any of the Company's business opportunities for Executive's
direct or indirect benefit. This definition is not meant to prevent Executive
from investing in publicly traded companies, although he must disclose any
investments in competitors of the Company to the Board.
1.10 "DATE OF TERMINATION" means the date of the Executive's
death; or thirty (30) days after the Executive receives or sends Notice of
Termination for any reason other than Cause; or on the date specified by the
Notice of Termination if the termination is for Cause; or at the end of the
Term if Notice of the intent not to extend the Term automatically is given;
or on the date specified by the parties' written agreement, as the
circumstances dictate.
1.11 "DISABILITY" means the Executive's inability to perform his
essential job functions, even with reasonable accommodation, for more than
sixty (60) consecutive calendar days, or more than ninety (90) calendar days
in any six (6) month period. If the parties are not able to agree about
whether Executive suffers a "Disability," whether a Disability exists will be
determined by a mutually agreeable physician.
1.12 "EFFECTIVE DATE" means May 7, 2001.
1.13 "EMPLOYMENT PERIOD" means May 7, 2001 through the
Executive's Date of Termination.
1.14 "GOOD REASON" means that any of the following occur, without
the Executive's prior written consent: (a) Executive is assigned duties which
are substantially inconsistent with the duties of the Chairman, Chief
Executive Officer and President of an operation that is at least similar in
size and complexity to that of the Company on the Effective Date of this
Agreement; (b) the Principal Place of Employment is changed to a location
more than twenty-five (25) miles from its current location in Dallas, Texas;
(c) the aggregate value of Executive's compensation and benefits as set forth
in the entirety of Section 3 hereinbelow is decreased by three percent (3%)
or more (except Executive's Base Salary which, as provided herein, cannot be
decreased); or (d) the Company breaches any material provision of this
Agreement, and fails to correct the breach within thirty (30) days of being
given written Notice of it.
1.15 "INCENTIVE PLAN" means the Company's 1985 Long Term
Incentive Plan, as from time to time amended.
1.16 "NOTICE" means written notice, mailed certified mail, return
receipt requested, or hand delivered, and if given to the Executive to: Rhys
J. Best, 0000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxx, 00000; and if given to the
Company, to Lone Star Technologies, Inc., X.X.
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Xxx 000000, Xxxxxx, Xxxxx, 00000-0000, Attention: General Counsel; or to any
changed address that the parties notify each other of according to this
Notice provision.
1.17 "NOTICE OF TERMINATION" must be given according to the
Notice provision of this Agreement, must specify the reason for termination
and provide the facts which the party claims support the termination decision.
1.18 "PRINCIPAL PLACE OF EMPLOYMENT" shall be the Company's
executive offices in Dallas, Texas.
1.19 "RESTRICTED PERIOD" means two (2) years following the Date
of Termination.
1.20 The "TERM" of this Agreement begins on the Effective Date
and ends on May 7, 2004, unless either: (a) the Agreement is terminated by
either party pursuant to Section 4; or (b) the Agreement's Term is
automatically extended. The Term shall be automatically extended for one (1)
additional year on May 7, 2002 and on each May 7th thereafter unless the
Company or the Executive gives Notice by the immediately preceding April 15
of the party's intent not to extend the Term by an additional year.
See SCHEDULE I TO EXHIBIT A for additional definitions which are
applicable to the calculation of the Annual Bonus.
2. EMPLOYMENT.
2.1 TITLE, DUTIES, TERM AND PLACE OF EMPLOYMENT. Executive is
employed as the Chairman, President and Chief Executive Officer of the
Company, having the usual duties of such offices, for the Term of this
Agreement. Executive will also serve as a Director or Officer of any of the
Company's subsidiaries, provided that Section 3.8 shall also apply to that
service. Executive agrees to devote substantially his full time and attention
to the performance of his duties under this Agreement, and shall not engage
in any other business activities which require his active participation in
managing their affairs. Executive's duties shall be rendered at the Principal
Place of Employment, with such business travel from there as is customary for
his offices.
2.2 AVOIDANCE OF CONFLICTS OF INTEREST. Executive will not either
directly or indirectly become involved in any Conflict of Interest. Should
Executive become aware of any situation which might involve a Conflict of
Interest, he shall take prompt steps to discontinue his involvement and
disclose the relevant facts to the Board. Neither Section 2.1 immediately
above nor this Section 2.2 is meant to prevent Executive from serving as a
director of other business entities, provided he has the consent of the Board
to do so.
3. COMPENSATION/BENEFITS.
3.1 BASE SALARY. Executive's Base Salary is $425,000.00 on an
annualized basis. The Base Salary is subject to annual review during the
Term, and may be increased but not decreased.
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3.2 ANNUAL BONUS. Executive shall be entitled to an Annual Bonus
to be paid at a time and in a manner consistent with EXHIBIT A and the
Company's customary practice.
3.3 EQUITY-BASED COMPENSATION. In addition to his existing stock
and stock options awarded prior to execution of this Agreement, the Company
will, no later than the Effective Date, issue to Executive 100,000 restricted
shares of Company's common stock under the Incentive Plan that will vest in
accordance with the terms and conditions of EXHIBIT B attached hereto and
incorporated herein by reference. Executive's stock options will vest in
accordance with the terms and conditions of the applicable agreement granting
such stock options. Executive will receive additional Equity-Based
Compensation under the Incentive Plan, on similar terms and conditions as
other executive officers of the Company. Executive may also receive other
Equity-Based Compensation under some other program or agreement as determined
by the Board.
3.4 EXPENSES. The Company will reimburse Executive for his
reasonable business expenses, submitted in accord with the Company's expense
reimbursement policies and procedures.
3.5 OTHER BENEFIT. During the Term of this Agreement, Executive
will be eligible to participate in all benefit plans available to employees
and executives of the Company.
3.6 PAID VACATION TIME. Executive is entitled to at least twenty
(20) working days of paid vacation time each year, which for calendar year
2001 accrued in its entirety on January 1, 2001 and which shall accrue in its
entirety on each January 1 of each year thereafter and shall be taken in
accordance with the Company's vacation policy or as agreed by the Board. The
Executive will be allowed to "roll over" up to seven (7) days of his accrued,
unused vacation time to the next year, at his election.
3.7 OFFICE AND ASSISTANCE. Executive will continue to occupy his
existing office and maintain the same level of support staff as he enjoyed
prior to the execution of this Agreement.
3.8 INSURANCE/INDEMNITY. The Company agrees to indemnify, pay for
the defense of (with Executive's choice of counsel) and hold Executive
harmless from any claims which arise against Executive as a result of his
employment with the Company, regardless of whether the Company contends that
the Executive's acts or omissions are within the course and scope of his
employment, to the maximum extent permitted by law. The Company also agrees
that it will acquire and maintain Directors and Officers Liability insurance
coverage in the amount of at least $50 million under which Executive is a
covered insured, with a carrier rated A or A+ by AM Best.
4. TERMINATION.
4.1 EMPLOYMENT ENDS. The Employment Period ends on the Date of
Termination.
4.2 NOTICE OF TERMINATION REQUIRED. Either party wishing to
terminate this Agreement must give Notice of Termination.
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4.3 COMPENSATION AFTER TERMINATION.
(a) If Executive's employment is terminated for Cause or
Executive resigns without Good Reason, he will be paid within thirty (30)
days of the Date of Termination any Accrued Obligation and nothing more; or
(b) If Executive's employment is terminated for any reason
other than death or Disability, he will be paid: (i) the Accrued Obligation;
and (ii) his Base Salary for the remainder of the Term (pro-rated for any
partial year); and (iii) 100% of the Annual Bonus Target (as defined on
SCHEDULE I TO EXHIBIT A) for the remainder of the Term (pro-rated for any
partial year), less any amounts received by the Executive from another
employer during any year of the Term which amounts shall be applied against
the Company's payments received by the Executive during that year of the
Term. However, the Executive shall not be obligated to seek other employment;
or
(c) If the Executive's employment is terminated due to his
death or Disability, he (or his Estate if legally required) will be paid: (i)
the Accrued Obligation; and (ii) fifty percent (50%) of his Base Salary for
the remainder of the Term (pro-rated for any partial year); and fifty percent
(50%) of the Annual Bonus Target for the remainder of the Term (pro-rated for
any partial year).
The Accrued Obligation will be paid within thirty (30) days of the Date of
Termination, with the remaining payments to be made over the term of the
Agreement and in accord with the Company's normal payroll practices for Base
Salary and Annual Bonus, unless there is a Change in Control, in which case
the remaining Base Salary and Annual Bonus shall be paid in a lump sum within
thirty (30) days of the Change in Control.
4.4 STOCK OPTIONS AND RESTRICTED STOCK AFTER TERMINATION. (a) If
the Executive's employment is terminated by the Company for any reason other
than for Cause or death, or if Executive resigns for Good Reason, 50% of all
unvested stock options granted to Executive under the Incentive Plan will
vest and become fully exercisable without restriction on the Date of
Termination, and the remaining 50% will vest and become fully exercisable
without restriction two (2) years later, or at such earlier date as the Board
or its Compensation Committee decides, and the restrictions applicable to 50%
of the unvested restricted stock awarded to Executive under the Incentive
Plan will lapse and such restricted stock will vest on the Date of
Termination, and the restrictions applicable to the other 50% of the unvested
restricted stock will lapse and the other 50% will vest two (2) years later
or at such earlier date as the Board or its Compensation Committee decides.
This Section 4.4 (a) will become effective only if the shareholders of the
Company approve the proposed amendments to the Incentive Plan at the
Company's Annual Shareholder's Meeting scheduled for May 8, 2001.
(b) However, notwithstanding the immediately foregoing, if
the Executive's employment is terminated by death, one hundred percent (100%)
of Executive's unvested stock options granted to the Executive under the
Incentive Plan will vest and become fully exercisable without restriction on
the Date of Termination, and if the Executive's employment is terminated by
Retirement (as defined in the Incentive Plan), one hundred percent (100%) of
Executive's unvested stock options granted to the Executive under the
Incentive Plan will vest and become fully exercisable without restriction on
the Date of Termination and the restrictions applicable to one hundred
percent (100%) of the unvested restricted stock awarded to the Executive
under the Incentive Plan
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will lapse and such restricted stock will vest on the Date of Termination.
This Section 4.4(b) is not subject to any amendment or modification at any
time (including, without limitation, the above-referenced proposed amendments
to the Incentive Plan at the Company's Annual Shareholder's Meeting scheduled
for May 8, 2001) except as permitted in accordance with Section 6.2
hereinbelow, and shall be effective as provided herein regardless if the
Incentive Plan is amended at such Annual Shareholder's Meeting or at any time
thereafter. If the Executive's employment is terminated due to his death or
Disability, the restricted shares awarded to the Executive will vest in
accordance with item B.2. of EXHIBIT B hereto.
4.5 OTHER BENEFITS AFTER TERMINATION. If Executive is terminated
for Cause or resigns without Good Reason, he shall be entitled to COBRA
continuation coverage of his and his dependents' health insurance. If the
Executive's employment is terminated for any other reason, the Company shall
allow him and his dependents to continue to participate in all its benefit
plans during the Term, and then provide such continuation or conversion
coverage as required by law. If the law will not permit Executive's or his
dependents' continuing participation, then the Company will reimburse him for
the cost of obtaining substantially similar benefits. Executive shall not be
entitled to receive any benefits under this Section 4.5 if he is receiving
substantially similar benefits from another employer.
4.6 NO OBLIGATION TO OBTAIN OTHER EMPLOYMENT/NO OFFSET.
Executive's right to receive the benefits provided by Section 4 will not be
reduced because he does not seek or obtain other employment nor by any
offset, except as specified in Section 4.3(b) above.
4.7 ELECTION OF AGREEMENT OR EMPLOYMENT RETENTION POLICY
COMPENSATION / BENEFITS. However, notwithstanding anything else in this
Agreement, if the termination of the Executive's employment would result in
the payment of compensation and benefits under both Section 4 of this
Agreement and the Employment Retention Policy, the Executive shall be
entitled to receive only the compensation and benefits under Section 4 of
this Agreement, unless the Executive has given the Company notice under this
Agreement within thirty (30) days after the Date of Termination that he has
elected to receive only the compensation and benefits under the Employment
Retention Policy.
5. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
5.1 PROTECTION OF CONFIDENTIAL INFORMATION. Executive agrees not
to disclose or use, directly or indirectly, any of the Company's Confidential
Information, except as needed to perform his duties under this Agreement or
as approved by the Board or as required by law or to obtain tax or legal
advice. Executive agrees to return all Confidential Information in whatever
form maintained at the Board's request. To the extent that Executive is
permitted to disclose Confidential Information, he shall inform those to whom
it is disclosed of the applicability of this provision.
5.2 NON-COMPETITION. During the Restricted Period, Executive will
not engage in Competition with the Company.
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5.3 NO EMPLOYEE RAIDING. Executive agrees that during the
Restricted Period, he will not directly or indirectly solicit the services of
nor hire any employee or consultant of the Company for the purpose of
engaging in Competition.
5.4 ACKNOWLEDGMENTS. Executive acknowledges that the Company has
a legitimate interest in protecting its business goodwill and Confidential
Information, and that the restrictions contained in Section 5 are reasonably
necessary for it to do so.
6. GENERAL PROVISIONS.
6.1 BINDING ON SUCCESSORS. This Agreement is binding on the
successors, heirs, legal representatives and assigns of the Company and the
Executive. The Company agrees that it will require any successor (whether by
purchase, merger or otherwise of all or substantially all the Company's
assets/business) to agree to assume and perform this Contract. The Company's
failure to secure this agreement from any successor shall be an additional
Good Reason for Executive's resignation.
6.2 ENTIRE AGREEMENT/AMENDMENT. This Agreement and the Exhibits
incorporated into it by reference are the entire agreement between the
parties; there are no verbal agreements or "side deals." This Agreement may
be changed only by a written document signed by both parties. Subject to
Section 4.7 of this Agreement regarding Executive's right to an election,
this Agreement does not replace the Company's Employment Retention Policy.
6.3 WAIVER. No waiver by either party of any provision of this
Agreement shall constitute a continuing waiver of the party's right to
enforce either that provision or this Agreement.
6.4 GOVERNING LAW. This Agreement will be interpreted under Texas
law, without regard to its conflicts of law principles.
6.5 SURVIVAL OF CERTAIN TERMS. The obligations of the parties
under Sections 4.3, 4.4, 4.5 and 5.1, 5.2 and 5.3 survive the termination of
this Agreement.
6.6 ENFORCEABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect throughout the Tenn. Should any one or more of the
provisions of this Agreement be held to be excessive or unreasonable as to
duration, geographical scope or activity, then that provision shall be
construed by limiting and reducing it so as to be reasonable and enforceable
to the extent compatible with the applicable law.
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Dated May 7, 2001. "COMPANY"
LONE STAR TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxxxxx
Chairman of the Compensation
Committee of the Board of Directors
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxx X. Xxxxxx, Vice President,
General Counsel and Secretary
"EXECUTIVE"
RHYS J. BEST
/s/ Rhys J. Best
--------------------------------------------------
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EXHIBIT A TO
RHYS J. BEST EMPLOYMENT AGREEMENT*
CALCULATION OF:
ANNUAL BONUS TARGET
EXAMPLE FOR THE FISCAL YEAR ENDING 12-31-2001
-------
CHART A
-------
------------------------------------------------------ -------------------------- -----------------------------------------
Individual Annual Annual Annual Bonus Target
Salary Bonus
Target
------------------------------------------------------ -------------------------- -----------------------------------------
Name Title Responsibility 12/31/01 60% of Subjective Performance Total
Annual Salary Component Component Annual Bonus
------------------------------------------------------ -------------------------- -----------------------------------------
TARGET TARGET TARGET
-----------------------------------------
25% OF 75% OF 100%
ANNUAL ANNUAL
SALARY SALARY
-----------------------------------------
Rhys J. Best Chairman/President CEO $63,750 $191,250 $255,000
$425,000 $255,000
------------------------------------------------------ -------------------------- -----------------------------------------
*See Schedule 1 to Exhibit A for definitions of capitalized terms on this
Chart A which are not otherwise defined in the foregoing employment Agreement
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EXHIBIT A TO RHYS J. BEST EMPLOYMENT AGREEMENT
CALCULATIONS OF ANNUAL BONUS**
(EXAMPLE FOR THE FISCAL YEAR ENDING 12-31-2001)
-------
CHART B
-------
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RETURN ON AVERAGE NET ASSETS ANNUAL BONUS
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TOTAL
SUBJECTIVE PERFORMANCE ANNUAL
COMPONENT COMPONENT BONUS
------------------------------------------
From Subjective Component Target $63,750
on Chart A
From Performance Component Target $191,250
on Chart A
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PERFORMANCE COMPONENT
-------------------------------------------------------------------- -------------------------
PERCENTAGE OF ROANA PERFORMANCE
ACHIEVED MULTIPLIER
--------------------------------------------------------------------
Return on Average Net Assets
Below < 13% 0% $ 63,750(1) -- $ 63,750
Between 12.01%-13.00% 40% 63,750 76,500 140,250
Between 13.01%-14.00% 60% 63,750 114,750 178,500
Between 14.01%-15.00% 80% 63,750 153,000 216,750
Between 15.01%-16.00% 100% 63,750 191,250 255,000
Between *BOP 2001 16.01%-17.00% 120% 63,750 229,500 293,250
Between 17.01%-18.00% 140% 63,750 267,750 331,500
Between 18.01%-19.00% 160% 63,750 306,000 369,750
Between 19.01%-20.00% 180% 63,750 344,250 408,000
Above 20.00% 200% 63,750 382,500 446,250
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*Lone Star's Base Operating Plan for 2001.
**See Schedule I to Exhibit A for definitions of capitalized terms on
this Chart B, which are not otherwise defined in the foregoing Employment
Agreement
-------------------
(1) To be determined by Compensation Committee.
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Schedule I to Exhibit A to the
RHYS J. BEST
EMPLOYMENT AGREEMENT
DEFINITIONS FOR CHARTS A AND B
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ANNUAL BONUS: The total sum of the Subjective Component plus the Performance Component.
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ANNUAL BONUS TARGET: A sum equal to the Executive's Annual Base Salary effective at the end of
the immediately previous fiscal year of Lone Star multiplied by 60%.
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AVERAGE NET ASSETS: For any fiscal year, the average of the Net Assets of Lone Star for the
immediately previous four (4) consecutive quarters with such fiscal quarter
being the last of such four (4) consecutive quarters. Example calculation:
if the most recent fiscal quarter ended on March 31, 2001 then Average Net
Assets shall equal the sum of Net Assets reported in 10Q for fiscal quarter
ending on June 30, 2000 plus Net Assets reported in 10Q for fiscal quarter
ending on September 30, 2000 plus Net Assets reported in 10Q for fiscal
quarter ending on December 31, 2000 plus Net Assets reported in 10Q for
fiscal quarter ending on March 31, 2001, divided by 4.
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EARNINGS BEFORE TAXES: For any fiscal year, income or (loss) from continuing operations before
income tax as reported for the year in the consolidated statement of
income of Lone Star Technologies ("Lone Star") included in the Form 10K
annually filed by Lone Star with the SEC and audited by the external
auditors of Lone Star. (For an example of such consolidated statement
of income, see page 22 of 2000 Annual Report).
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GAAP Generally accepted accounting principals consistently applied.
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NET ASSETS: For any fiscal quarter, the Total Assets of such fiscal quarter minus a
sum equal to the total non-interest bearing current assets (as defined
by GAAP) of such fiscal quarter, as reported in the 10Q filed by Lone
Star with the SEC for such fiscal quarter.
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PERCENTAGE OF RETURN ON The Percentage of Return On Average Net Assets of Lone Star during any
AVERAGE NET ASSETS: fiscal year of Lone Star shall be determined by the following calculation:
Earnings Before Taxes for such fiscal year of Lone Star divided by
Average Net Assets for such fiscal year.
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PERFORMANCE MULTIPLIER: It is that percentage number in the column designated "Performance
Multiplier" on Chart B set forth opposite the percentage number in the
column designated "Percentage of Return On Average Net Assets" (PRANA)
on Chart B which corresponds to the PRANA determined for the immediately
previous fiscal year of Lone Star.
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PERFORMANCE COMPONENT TARGET: The Performance Component Target will be determined by the following
calculation: the Executive's Base Salary IN
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EFFECT ON THE IMMEDIATE PAST JUNE 30 multiplied by 60% and the product
thereof is then multiplied by 75%. Example calculation: Amount of
Executive's Base Salary EFFECTIVE ON THE IMMEDIATE PAST JUNE 30 X 60%
= product X 75%.
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PERFORMANCE COMPONENT: The Performance Component will be determined by multiplying the Percentage
of Return On Average Net Assets by the applicable Performance Multiplier set
forth in the grid on Chart B and the product thereof shall be equal to the
Performance Component of the Annual Bonus.
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SUBJECTIVE COMPONENT TARGET: The subjective component target will be determined by the following
calculation: A sum equal the Executive's Base Salary in effect ON THE
IMMEDIATE PAST JUNE 30 multiplied by 60% and the product thereof is then
multiplied by 25%. Example calculation: Amount of Executive's Base Salary
EFFECTIVE ON THE IMMEDIATE PAST JUNE 30 X 60% = product X 25%.
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SUBJECTIVE COMPONENT: In determining the Subjective Component, the Compensation Committee of the
Board of Directors of Lone Star will consider qualitative leadership and
management performance of the Executive plus his non-financial contribution
to the long-term objectives of Lone Star. The Subjective Component as
determined by the Compensation Committee may be higher or lower than the
Subjective Component Target. The Subjective Component of the Executive's
Annual Bonus may be determined without regard to financial performance of
Lone Star.
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TOTAL ASSETS: For any fiscal year, an aggregate sum equal to the total assets of Lone Star
reported as of the end of each quarter in the 10Q filed quarterly with the SEC
by Lone Star. Example calculation: 1Q Total Assets + 2Q Total Assets + 3Q Total
Assets + 4Q Total Assets = Total Assets.
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EXHIBIT B
TO RHYS J. BEST EMPLOYMENT AGREEMENT
A. Stock grant award of 100,000 restricted shares of the Company's common stock.
B. 1. Except as set forth in B.2., C, and D immediately below, such stock grant
award will vest on the following basis:
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END OF YEAR INCREMENTAL % OF VESTED CUMULATIVE % VESTED
-----------------------------------------------------------------------
3 12.5% 12.5
-----------------------------------------------------------------------
4 12.5% 25.0
-----------------------------------------------------------------------
5 12.5% 37.5
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6 12.5% 50.0
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7 12.5% 62.5
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8 12.5% 75.0
-----------------------------------------------------------------------
9 12.5% 87.5
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10 12.5% 100.0
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2. However, if the Executive is terminated by the Company due to death
or Disability, the vested portion of such 100,000 restricted shares of
the Company's common stock will equal the higher of: (a) ten percent
(10%) times the number of years the Executive has been employed by the
Company since the Effective Date; or (b) the number of such restricted
shares then vested under B.1. above.
C. "Change in Control"2 (as defined in the Incentive Plan): the unvested
stock grants and stock options will vest as follows:
1. 50% of such unvested shares and options will vest upon a "Change
in Control" of the Company; and
2. 50% of such unvested shares and options will vest on the second
anniversary of the "Change in Control" or such earlier date that
the Company's Board of Directors or its Compensation Committee
may determine in its discretion.
D. Termination of Employment(1): the unvested stock grants and stock options
will vest in accordance with Section 4.4.
----------------
(1) Items C & D above will be effective only if authorizing amendments to the
Incentive Plan are approved by the Company's shareholders on May 8, 2001.
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