UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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 number 0-3855
Laclede Steel Company
(Exact name of Registrant as specified in its charter)
Delaware 43-0368310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Metropolitan Square
211 North Broadway
St. Louis, Missouri 63102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 425-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
$13.33 par value, Common Stock
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days. Yes X
No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
At the date of filing of this report there were 4,056,140 shares
of $13.33 par value common stock outstanding. At February 15, 1995 the
aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $24,518,000.
Documents Incorporated by Reference
Definitive Proxy Statement for the 1995 Annual Meeting of
Stockholders is incorporated herein by reference in Part III.<PAGE>
PART I
Item 1. Business.
(a) General Development of Business
Laclede Steel Company is a low cost manufacturer
of a wide range of carbon and alloy steel products, including
pipe and tubular products, hot rolled products (primarily special
quality bars), rod and wire products, and welded chain. The
Company enjoys a competitive advantage due to its business
strategy of vertically integrating its modernized steelmaking
operations with low cost finishing facilities. The Company has
lower steelmaking costs afforded by "mini-mill" technology and
converts its semi-finished steel into a variety of products
through its finishing plants. Each of the Company's downstream
facilities is strategically located near its end markets, is
specialized by product to optimize efficiency, and benefits from
lower employment costs per ton.
The Company is one of only three full-line
domestic producers of continuous weld pipe in the United States.
In addition, the Company believes it is a dominant North American
producer of oil tempered wire, which is used for applications
such as mechanical springs and overhead garage door springs. Oil
tempered wire has metallurgical properties that typically command
a price premium over commodity grades of wire, and therefore
produces higher profit margins. The Company's manufactured and
imported chain products give it a significant position in the
truck and automobile tire chain and the hardware and industrial
chain markets. The Company's special quality bars are primarily
sold to forgers for finishing into a variety of products.
Due to favorable energy costs and modernized
facilities, the Company is a low cost producer of semi-finished
steel at the Alton, Illinois Plant, which has a rated annual
steelmaking capacity of over 850,000 tons. The Alton Plant
supplies nearly all of the semi-finished steel used to finish
products at the Company's downstream facilities. In accordance
with the Company's business strategy, over the last ten years the
Company has acquired or leased five additional finishing
facilities, constructed a new finishing facility and relocated
much of its labor-intensive work to lower cost labor areas. The
Company has modified its continuous caster to minimize its
reliance on the ingot process for production of tubular products
and therefore experiences significantly lower pipe production
costs.
At December 31, 1994 Ivaco Inc. of Montreal,
Canada owned 2,018,650 shares of the Company's common stock or
49.8% of the total number of shares outstanding. An agreement
between the Company and Ivaco Inc. reached in 1991, provides that
the Company would take the necessary action to cause four
designees of Ivaco to be seated on the Company's nine member
Board of Directors. On January 22, 1993 the Company was advised
that Ivaco is exploring the possibility of disposing of its
interest in Laclede Steel Company.
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(b) Financial Information
The following table sets forth certain financial
information relating to Registrant's operations:
Year Ended December 31,
(Thousands of Dollars) 1994 1993 1992
Net Sales $341,289 $328,766 $274,468
Earnings (Loss) Before
Cumulative Effect of Change
in Accounting Principle $ 4,462 $ 3,107 $ (7,547)
Cumulative Effect of Change
in Accounting Principle
for Postretirement Medical
Benefits, Net of Tax -- (46,543) --
Net Earnings (Loss) $ 4,462 $(43,436) $ (7,547)
Identifiable Assets $343,251 $349,814 $312,142
(c) Description of Business
The following table lists the Company's wide range
of steel products:
Pipe and Tubular Products: Continuous Weld Pipe
- A53 Standard and Extra Heavy
- API 5L Line Pipe
- CW 55 Tubing
- Fence Pipe
Electric Resistance Weld Tubing
- A500 Structural
Hot Rolled Products: - Carbon and Alloy SBQ Bars
- Forging Billets
- Special Shapes
Rod and Wire Products: Cold Drawn Wire
- High Carbon
- Oil Tempered
- Low Carbon
- Annealed Wire and Rod
Chain: - Welded Chain
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The following table presents, for the years
indicated, the percentage of the Company's total sales by product
class:
Product 1994 1993 1992
Pipe and tube 40.1% 35.7% 34.9%
Hot Rolled 29.2 30.3 31.8
Rod and wire 18.5 22.9 23.4
Chain 8.9 9.2 8.9
Other 3.3 1.9 1.0
Total 100% 100% 100%
Pipe and Tubular Products. The Company's pipe and
tubular products are comprised of continuous butt weld ("CBW")
pipe and electric resistance weld ("ERW") tubing, which are sold
in the U.S. and Canada to distributors and manufacturers. Pipe
and tubular products are produced and finished at the Company's
Alton Plant; Benwood, West Virginia; Fairless Hills,
Pennsylvania; and Vandalia, Illinois Facilities. Prior to 1993,
the majority of the Company's CBW pipe was finished at the Alton
Plant or at the Fairless Facility, as discussed below. While
semi-finished pipe continues to be produced at the Alton Plant,
in 1993 the Company moved the majority of the Alton Plant's
finishing operations to the Company's new, lower cost Vandalia
Facility. By the end of 1993, the majority of CBW pipe was no
longer finished at the Alton Plant.
The Company is one of only three producers of CBW
pipe in the United States, due in part to the Company's long-term
lease from former competitor USX Corporation of its pipe
manufacturing facilities at the Fairless Facility. The Company
believes that the addition of the Fairless Facility provides
lower cost pipe making capacity as well as a stronger geographic
balance than most of its competitors.
The Company has made considerable progress towards
its goal of becoming the low cost producer of tubular products in
North America and is planning the final modifications in the Melt
Shop at the Alton Plant that will allow the Company to shift its
entire production of steel used in pipe making from the ingot
process to continuous cast.
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Hot Rolled Products. The Company's hot rolled
products are produced at the Alton Plant and consist primarily of
special quality ("SBQ") bars sold to manufacturers to be cold
drawn or forged. Demand is currently strong for the
Company's SBQ products. The Company's goal in this area is to
increase shipments of higher quality products with higher profit
margins. In late 1992, the Company successfully completed the
installation of an electromagnetic stirring device intended to
improve the surface quality of its SBQ products.
Rod and Wire Products. The Company is a major
manufacturer of rod and wire products. These products include
high and low carbon wire, oil tempered wire, and annealed wire
and rod. The Company believes it is a dominant participant in
the oil tempered wire market. Wire products are currently
manufactured and finished at the Company's Alton, Memphis,
Tennessee and Fremont, Indiana Facilities. The Fremont Facility,
which is the Company's state-of-the-art, stand-alone oil tempered
wire facility, has completed the final stage of expansion. The
Company has moved the majority of wire production from the Alton
Plant to the Fremont Facility, which has lower operating costs.
Chain Products. Laclede Chain, one of the
Company's wholly owned subsidiaries, produces chain products from
rods produced at the Alton Plant and also imports a significant
amount of chain from the Far East. Laclede Chain generated in
excess of $30 million in sales in 1994, approximately half of
which was attributable to sales of anti-skid devices for trucks
and automobiles. The balance of the Company's chain products
sales is in the hardware and industrial chain business.
At December 31, 1994 the Company had a sales
backlog of over $25 million. This backlog does not have
significant seasonal variation. Long-term sales commitments do
not represent a significant portion of the business. Because of
its size in relation to the industry and its diversified product
mix, in periods of normal demand, the Company expects to operate
near full steelmaking capacity. For further information and also
for discussion of future capital expenditure plans, please refer
to Management's Discussion and Analysis of Financial Condition
and Results of Operations (MD&A).
Research and development activities of the Company
have not been material.
The Company manufactures steel from steel scrap
generated in the course of its steel production and purchased in
the open market from numerous scrap suppliers. Since it does not
produce its own raw materials, the Company is subject to the
fluctuation in prices and availability of scrap.
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The Company's business strategy has been to
modernize its basic steelmaking facilities at the Alton Plant
while growing and modernizing its lower cost, downstream
finishing facilities. The Company believes that the major
elements of this strategy are currently in place.
In 1984, after the installation of a new
management team the year before, the Company commenced a business
strategy that included the expansion and modernization of its
existing facilities, the acquisition of new facilities, the
relocation of finishing operations, and the relocation of labor-
intensive work to lower operating cost areas. This
repositioning, which was substantially completed by the end of
1993, was designed to reduce the Company's production costs while
expanding its production capacity and market share.
The center of the Company's business is the Alton
Plant, which has the advantages of a central location, low
utility costs, and good sources for raw materials. In addition,
the Alton Plant provides the necessary strategic flexibility to
manufacture the grades of steel needed to produce the Company's
various products. Utilizing that flexibility, the Company has
acquired, expanded or constructed decentralized finishing
facilities that can utilize the output of the Alton Plant while
reducing the costs of finishing processes. Each of the Company's
downstream facilities is strategically located near its end
markets, is specialized by product to optimize efficiency, and
benefits from lower employment costs per ton.
The Company began its business strategy with the
acquisition of a chain manufacturer in northwestern Missouri in
1984. In furtherance of its business strategy, since 1984 the
Company has acquired four additional facilities and constructed
one new facility. Most notable among these new and/or expanded
facilities are the Company's lease of the pipe manufacturing
facilities at the Fairless Facility, the Company's expanded oil
tempered wire operations at the Fremont Facility, and the
construction of the Vandalia Facility, a tubular finishing plant.
At the Fairless Facility, the Company enjoys a
favorable long-term lease, lower costs of operation and lower
employment costs. Operations at the Fairless Facility began in
May 1992, and have achieved an annual production rate in excess
of 50,000 tons. The Fremont Facility was expanded in order to
handle the majority of oil tempered wire volume previously
produced at the Alton Plant's wire mill. Relatively minor
amounts of oil tempered wire are produced at the Alton and
Memphis Plants. The Vandalia Facility, constructed in 1992,
processes semi-finished pipe produced at the Alton Plant.
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Capital Improvements. While the Company has
expanded and improved its downstream finishing facilities, it
also completed two important capital improvements to the
steelmaking operations at the Alton Plant: the addition of
electromagnetic stirring to improve the surface quality of SBQ
products and a modification to the Company's continuous caster
discussed below. The primary objective of both of these
improvements was to substantially reduce production costs, but
each also provides access to new markets.
The caster modification added the capability to
cast a slab suitable for the production of the majority of pipe
sizes. Previously, all pipe skelp, which is the intermediate
rolled strip used as input material for pipe production, was
produced from ingots, passing through a blooming mill before
entering the 22" rolling mill at the Alton Plant. The modified
caster adds the capability to feed continuous cast slabs directly
into the 22" rolling mill and the Fairless Facility's 18" rolling
mill. In 1994 the Company produced 67% of its total steel output
by the continuous cast process, compared to 45% in 1993. The
Company has begun a major new capital program to become a 100%
cast steel producer in 1996.
Competition
Price sensitivity in markets for the Company's
products is driven by competitive factors and the cost of steel
production.
Domestic. The Company faces competition from
regional mini-mill companies and fully integrated steel mills,
and such competition can be expected to continue. However, the
Company believes its emphasis on producing higher grade steel
products, its competitive production costs, substantially
completed repositioning, established market positions, diverse
product lines, and strategic geographic locations will all enable
the Company to continue to compete effectively in its markets.
Foreign. The Company also faces competition from
foreign steel producers. However, in recent years a declining
U.S. dollar, increased efficiency in the U.S. steel industry and
voluntary restraint agreements with foreign steel producers have
improved the competitive position of U.S. steel companies,
including the Company.
Environmental Matters
In general, the Company is subject to a broad
range of federal, state and local environmental regulations,
including those governing discharges into the air and water, the
handling and disposal of solid and/or hazardous wastes and the
remediation of contamination associated with the release of
hazardous substances. The domestic steel industry, including the
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Company, has spent substantial amounts to comply with these
requirements. Although the Company believes it is in substantial
compliance with the various environmental regulations applicable
to its business, there can be no assurance that future changes in
environmental regulations will not require the Company to incur
significant costs in order to comply with such future
regulations.
Specifically, like all electric arc furnace (EAF)
steel producers, the Company generates EAF dust as part of the
steelmaking process. For some time, the EPA has classified EAF
dust as a designated hazardous waste. Over the past decade, the
Company has accumulated approximately 145,000 tons of this
material on site at the Alton Plant, pending development of
technology for economical treatment. Currently, approximately
45,000 tons of EAF dust are located in a building at the Alton
Plant (the "Indoor Pile") and the remaining 100,000 tons are
piled outdoors at the Alton Plant (the "Outdoor Pile"). The
Company believes that it has remained in compliance with EPA
regulations during this period of accumulation and believes that
it continues to be in compliance with current EPA regulations.
In 1989, the Company reached an agreement with
Elkem Technology ("Elkem") to construct the High Temperature
Metals Recovery (HTMR) System at the Alton Plant, intended to
treat newly generated EAF dust as well as the existing storage
piles. In 1990 the Company completed the permanent financing for
this facility through the issuance of $25 million in Solid Waste
Disposal Revenue Bonds.
In the second quarter of 1993 the Company was
advised by Elkem that the HTMR System would not be able to meet
its original goals, including the recovery of prime western grade
zinc, which was an essential criterion under the Company's
agreement with Elkem and, accordingly, commissioning of the
facility would cease. On May 17, 1993, the Company and Elkem
negotiated a settlement of the original contract, under which
Elkem refunded $13.6 million to the Company and relinquished
control of and legal title to the HTMR System. Under provisions
of the related Bond Agreement financing the project, funds
recovered from Elkem were deposited in trust in the Bond Project
Fund and used to modify the HTMR System. The remaining $8.1
million of unused funds were used to prepay a portion of the
Bonds under the terms of the Bond indenture. The Company's
investment in the HTMR System at December 31, 1994 is
approximately $15.7 million.
If the HTMR System is not economical relative to
alternative EAF dust disposal methods, then ultimately it may
have limited use. In this event, which management considers
unlikely, the Company's investment in the HTMR System may be
impaired, requiring an accounting charge.
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The Company has filed a modified closure plan for
disposition of existing EAF dust piles which provides for the
closure of all piles in place at the location of the Outdoor
Pile. It appears that the cost of this plan will approximate the
$3.8 million liability existing at December 31, 1994 for the
disposal of the existing EAF dust.
While management believes the modified closure
plan represents the best available alternative, approval by the
IEPA is not assured and considerable time may be required to
resolve the issues involved. However, based on other closure
plans accepted by the environmental regulatory authorities in
other states for companies in situations similar to that of the
Company's, as well as the IEPA's initial reaction, management
believes that the modified closure plan will ultimately be
permitted. In the event that the proposed modification is not
ultimately permitted by the IEPA, the Company would likely incur
closure costs greater than the amount recorded.
Employees. As of December 31, 1994, the Company
employed approximately 1,900 employees, 350 of whom are
classified as management, administrative and sales personnel.
The Company's 950 hourly employees at the Alton
Plant are covered by a collective bargaining agreement that
expires in September of 1997. The compensation for the majority
of the Company's employees is based partially on productivity in
accordance with various incentive plans. None of the Company's
other employees is covered by a collective bargaining agreement.
The Company has never experienced a strike, and it believes that
its relations with its employees are good.
Item 2. Properties.
The Company's steelmaking facilities are located
on a 400-acre site in Alton, Illinois, and consist of two
electric furnaces with a combined rated production capacity of
over 850,000 net tons per year, a continuous bloom casting
facility, a roughing mill and 14-inch bar mill, soaking pits,
bloom rolling mill, billet rolling mill, 8-inch bar mill, rod
mill, 22-inch strip mill, facilities for the manufacture of
continuous butt-weld pipe and wire finishing facilities. The
Company also has a rail-water terminal at Alton, a pipe finishing
plant in Vandalia, Illinois, a chain manufacturing plant in
Maryville, Missouri, a wire mill in Memphis, Tennessee, a wire
oil tempering facility in Fremont, Indiana and an electric
resistance weld tubing mill in Benwood, West Virginia. The
Company operates a pipe mill in Bucks County, Pennsylvania which
is leased from USX Corporation. The lease expires September 30,
1996 with options to renew until September 30, 2006.
The Company's property is well maintained and
adequate for efficient production of its existing product line.
The majority of the Company's properties are owned in fee. For
its executive offices the Company presently leases space in the
Metropolitan Square Building in downtown St. Louis under a lease
expiring on April 30, 2004.
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Item 3. Legal Proceedings.
There are various claims pending involving the
Company and its subsidiaries with respect to environmental,
hazardous substance, product liability, personal injury, and
other matters arising out of the routine conduct of it business.
The Company believes it has meritorious defenses with respect to
all claims and litigation and the ultimate disposition of such
matters will not materially affect its financial position or
results of operations.
Item 4. Submission of Matters to a Vote of Security
Holders.
NONE
* * * * * *
The executive officers of the Company and their
ages are as follows:
Name Age Position
John B. McKinney 62 President, Chief Executive Officer
and Director
Michael H. Lane 52 Vice President-Finance, Treasurer
and Secretary
J. William Hebenstreit 49 Vice President-Operations
Larry J. Schnurbusch 48 Vice President-Administration
H. Bruce Nethington 53 Vice President-Human Resources
John B. McKinney was elected President and Chief
Executive Officer of the Company in January 1983. Mr. McKinney
has been a director of the Company since 1981 and is also a
director of Boatmen's Trust Company and The Automobile Club of
Missouri.
Michael H. Lane was elected Vice President-
Finance, Treasurer and Secretary of the Company in 1983.
J. William Hebenstreit was elected Vice President-
Operations of the Company in 1983.
Larry J. Schnurbusch was elected Vice President-
Administration in 1993. Prior to 1993, he served as Director of
Corporate Administration of the Company.
H. Bruce Nethington was elected Vice President-
Human Resources in 1993. Prior to 1993, he served as Director of
Industrial Relations of the Company.
* * * * * *
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PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.
Laclede's common stock is traded on the NASDAQ
National Market System and the symbol is LCLD. As of January 15,
1995 there were approximately 610 stockholders of record.
Market
Price Range 1994 1993
Quarter High Low High Low
First $18-3/4 $15-1/4 $25-1/4 $16-1/2
Second $16-3/4 $12-3/4 $25-1/4 $21
Third $14-3/4 $11-1/2 $22 $15-3/4
Fourth $12-1/2 $ 9-3/4 $16-3/4 $13-3/4
Dividends Per
Share Paid on
Common Stock 1994 1993
NONE NONE
Item 6. Selected Financial Data.
Five-Year Financial Summary
(In Thousands of Dollars Except Per Share Data)
1994 1993 1992 1991 1990
Net Sales $341,289 $328,766 $274,468 $260,938 $287,344
Earnings (Loss) Before
Cumulative Effect of Change
in Accounting
Principle $ 4,462 $ 3,107 $ (7,547)* $ (8,332) $ 4,876
Net Earnings (Loss) $ 4,462 $(43,436) $ (7,547)* $ (8,332) $ 4,876
Net Earnings (Loss)
per share $ 1.10 $ (10.71) $ (1.86)* $ (2.05) $ 1.20
Other Financial Data
Total assets $343,251 $349,814 $312,142 $301,724 $305,845
Working capital 88,906 88,833 83,403 85,823 101,399
Capital expenditures 14,747 12,782 19,845 16,149 25,339
Long-term debt 100,801 100,926 103,908 93,179 95,127
Stockholders' equity 53,743 42,590 98,013 108,671 117,671
Stockholders' equity
per share $ 13.25 $ 10.50 $ 24.16 $ 26.79 $ 29.14
Cash dividends per share $ -- $ -- $ -- $ .20 $ .40
* Includes special charges which reduced net earnings by $11.6
million or $2.86 per share.
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Operating Results 1992 to 1994
Net earnings for 1994 of $4.5 million represent a
44% increase over 1993 earnings before the cumulative effect of a
change in accounting principle of $3.1 million. As discussed in
Note 5 to the Consolidated Financial Statements, effective
January 1, 1993 the Company adopted the new accounting standard
for postretirement medical benefits which resulted in the
recording of a one-time after tax charge of $46.5 million. As a
result of this accounting change the Company incurred a net loss
for the year 1993 of $43.4 million.
The consolidated net loss for 1992 was $7.5
million which includes after-tax special charges of $11.6 million
as discussed below under "Steel Operations".
The change in net sales for the last three fiscal
years is analyzed as follows:
(In Thousands)
1994 Vs. 1993 1993 Vs. 1992 1992 Vs. 1991
Increase in net sales $12,523 $54,298 $13,530
Comprised of:
Increase (Decrease)
in volume $(14,044) $42,575 $19,227
Increase (Decrease)
in price $ 26,567 $11,723 $(5,697)
Steel Operations
Net sales in 1994 increased by $12.5 million or
3.8% from 1993, reflecting a significant increase in average
selling prices partially offset by a lower volume of tons
shipped. Cost of products sold increased by $8.7 million or
2.9%, primarily as a result of higher costs for the Company's
basic raw material, ferrous scrap.
Net sales in 1993 increased by $54.3 million or
19.8% from 1992, as a result of a 15.0% increase in steel
shipments and an increase in average sales prices of about 4.3%.
Cost of products sold increased by $53.9 million or 22.1% in
1993. The increase in cost of products sold is proportionately
higher than the increase in 1993 steel shipments, primarily as a
result of higher scrap costs. As overall demand for steel has
increased, the Company has experienced a sharp rise in the price
of scrap. The average scrap usage cost in 1994 and 1993 each
represents an increase over the prior year of approximately 25%.
The high demand for steel is evident in Industry production
statistics with the estimated percentage of capacity utilization
increasing from 82% in 1992 to 89% in 1993 and 91% in 1994.
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However, there are also other factors affecting
the supply of scrap that could be considered structural changes,
including the growth in electric furnace production which is
almost totally dependent on ferrous scrap as a raw material.
Electric furnaces now account for approximately 38% of domestic
steel production.
In both 1993 and 1994 the Company was able to
recover the increased scrap costs through higher selling prices
for its products. Management believes that price increases
implemented in the first quarter of 1995 will continue to
minimize the effect of higher scrap costs.
Because of its size in relation to the steel
industry, as well as its diverse product mix, under normal
economic conditions the Company is able to operate at high levels
of capacity utilization.
The $46.5 million charge for postretirement
medical benefits in 1993 is net of $28.5 million in deferred tax
benefits. Non-current assets at December 31, 1994 includes $21.7
million in net deferred income taxes. In recording these
deferred tax benefits, no valuation allowance was deemed
necessary as a result of management's evaluation of the
likelihood that all of the deferred tax assets will be realized.
In making this evaluation management considered historical
earnings trends and the impact which changes in operations are
expected to have on future earnings. Additionally, consideration
was given to the inherent long-term nature of the Company's most
significant deferred tax asset for the related postretirement
benefit obligations other than pensions ($31.7 million at
December 31, 1994), for which recovery upon payment is expected
to be spread over many future years.
The general level of historical earnings, along
with expected improvements in future earnings as a result of
actions taken by management to implement its strategic plan for
various cost reductions, is expected to be sufficient to allow
for utilization of all recorded net deferred income tax assets,
including net operating loss and minimum tax carryovers, as they
reverse or within the related expiration periods.
In 1993 the Company successfully initiated a
change in its Melt Shop at the Alton Plant which has had a
significant effect on the cost of Tubular Products. Historically
the Company had used the continuous cast process on about 40% of
its raw steel production. This lower cost cast steel had been
targeted primarily for the special bar quality business and, to a
lesser extent, some of the rod and wire business. The Company
modified its continuous caster in order to produce slabs to be
used in the production of skelp for tubular products. This
change in process enables the Company to use cast steel for
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production of the majority of its tubular products, resulting in
a significant savings when compared to the ingot process. In
1994 the Company produced 67% of its steel by the continuous cast
process.
In the second quarter of 1992 the Company recorded
pre-tax special charges of $14.5 million for restructuring of
wire operations and $4.2 million for estimated environmental
costs related to the processing of accumulated electric arc
furnace dust. These special charges reduced after-tax net
earnings by $11.6 million. The restructuring cost provision
related to the Company's decision to increase the capacity of the
Fremont Plant by installation of new equipment, and to close the
Alton wire facility. For additional discussion of this
restructuring charge as well as the provision for environmental
costs also see "Divisions and Subsidiaries" and "Liquidity and
Capital Resources".
In order to comply with EPA regulations, since
1991 the Company has incurred costs for outside processing of
currently generated electric arc furnace dust, pending completion
and operation of the High Temperature Metals Recovery (HTMR)
facility at the Alton Plant. Such costs amounted to $.7 million
in 1992, $2.1 million in 1993, and $2.3 million in 1994. See
Note 6 to the Consolidated Financial Statements and "Liquidity
and Capital Resources" for further discussion.
Increases in selling, general and administrative
expenses in 1993 compared to 1992 were primarily a result of
higher salaried employment costs. The increase in interest
expense in 1994 is primarily the result of an increase in short-
term interest rates. In 1994 the Company recorded a gain of $1.1
million related to the sale of various items of steel mill
equipment. Higher depreciation expense each year is a result of
increased capital expenditure levels.
General inflation and changing prices have not had
a significant effect on the Company's sales and revenues, which
are more related to factors such as domestic steel capacity,
currency levels, demand for the Company's products, and the
impact of foreign steel imports. Imported steel typically has
the greatest impact on the Company's tubular products.
Divisions and Subsidiaries
The Company operates a cold drawn wire mill in
Memphis, Tennessee and an oil tempered wire facility in Fremont,
Indiana. The Memphis Plant has not had a significant impact on
Company operating results since its acquisition in 1985. Prior
to 1991 the Fremont Plant accounted for less than 20% of the
Company's oil tempered wire production. In 1991 the Company
increased the capacity of the Fremont Plant with the installation
of two new state-of-the-art oil tempering lines. In the second
- 14 -<PAGE>
quarter of 1992 the Company made a decision to further expand oil
tempering capacity at Fremont to include all size ranges. The
1992 restructuring charge referred to under "Steel Operations"
relates to this decision. A substantial portion of the Wire
Operations at the Alton Plant were shut down in 1994.
The Company's wholly-owned subsidiary, Laclede
Chain Manufacturing Company, operates a manufacturing plant in
Maryville, Missouri and a warehouse and sales operation in
Portland, Oregon. The Laclede Chain operation made a significant
contribution to consolidated earnings in the years 1992-1994,
particularly in the fourth quarter of the year when tire chain
sales were seasonally strong.
Laclede's Benwood, West Virginia Plant
manufactures electric weld resistance tubular products for the
structural pipe industry. This tubing is made using skelp from
the Alton Plant. Shipments of ERW pipe, which began slowly in
1990 have been increasing since. Operating results of the
Benwood facility improved substantially in 1994 as a result of
higher volume, sales price increases, lower cost skelp produced
from continuous cast steel at the Alton Plant, and productivity
improvements.
In 1991, Laclede completed an agreement with USX
Corporation to purchase the pipe inventory and lease the Pipe
Mill Operations located at the Fairless Works in Bucks County,
Pennsylvania. The Company successfully began operation of one of
the two continuous weld mills with the production and shipment of
a substantial quantity of tubular products from this low cost
facility in the second half of 1992. Shipments of continuous
weld pipe from the Fairless Plant increased significantly in 1993
and remained at approximately the same level in 1994.
In 1992 the Company constructed a tubular
finishing plant in Vandalia, Illinois. The Vandalia facility
processes semi-finished pipe produced at the Alton Pipe Mill.
Shipping from the Vandalia Plant began in the second half of
1992. In 1993 the Company completed the equipment installation
and transfer of all planned finishing operations from the Alton
Plant to this low cost processing plant. In 1994 the majority of
Laclede's continuous weld pipe shipments were made from either
the Fairless or Vandalia Plant.
Liquidity and Capital Resources
At December 31, 1994 the Company had $88.9 million
in net working capital with the ratio of current assets to
current liabilities at 2.5 to 1. In 1994 the Company reduced
total long and short-term bank debt by $6.8 million. Outstanding
Revenue Bonds were reduced by $9.4 million including the
prepayment of the Solid Waste Disposal Revenue Bonds discussed
below.
- 15 -<PAGE>
For the years 1994 and 1993 earnings before the
cumulative effect of a change in accounting principle plus
depreciation and the change in deferred taxes generated $ 13.8
million and $11.9 million in cash flow, respectively.
Despite the net loss of $7.5 million for 1992,
$13.4 million in cash was generated, after adding special charges
and depreciation and deducting deferred taxes.
Inventories increased by $5.0 million in 1994,
primarily as a result of increasing scrap costs, including its
effect on semi-finished and finished inventory costs. Accounts
payable at December 31, 1994 was $11.6 million higher than the
balance at the beginning of the year, reflecting higher inventory
levels of scrap. For the three years ended December 31, 1994
inventories increased by $3.4 million, while in the same period
$22.6 million was contributed to the Company's pension trust
funds.
In September 1994 the Company entered into a new
five-year Loan and Security Agreement with three banks which
provides for a total availability of up to $95 million. This
Agreement replaced an $80 million Revolving Credit Agreement
which was due to expire in September 1995. At December 31, 1994
$75.7 million in borrowings and $2.6 million in letters of credit
were outstanding under the Loan and Security Agreement. At the
beginning of 1995 the interest rate under the Agreement ranges
between 8.1% and 9.5%. In February 1995 the Agreement was
amended to increase the revolving credit maximum availability
from $85 million to $95 million. See Note 4 to the Consolidated
Financial Statements for details of the Loan and Security
Agreement. Management believes that internally generated funds
and its new banking arrangements will be adequate to finance all
planned capital expenditures, which will be approximately $15.0
million in 1995.
In the second quarter of 1993 the Company was
advised by Elkem Technology that the High Temperature Metals
Recovery (HTMR) System to process electric furnace dust at the
Alton Plant would not be able to meet its original goal to
recover prime western grade zinc from the dust. Accordingly,
management negotiated a settlement of the contract with Elkem and
the Company received a refund of $13.6 million, as well as title
to the HTMR System. The Company is in the final stages of
modifying the facility in order to treat current generation of
dust economically and in accordance with EPA standards. A
portion of the funds received from Elkem together with additional
Company funds is being used to complete this modification of the
HTMR System. The remaining refund from Elkem of $8.1 million was
applied as a prepayment of a portion of the outstanding Solid
Waste Disposal Revenue Bonds in 1994. Refer to Note 6 to the
Consolidated Financial Statements for additional discussion of
these issues.
- 16 -<PAGE>
The Company presently is not paying dividends on
its common stock. Restoration of common stock dividends will
depend on various factors including an improvement in business
conditions and sustained profitability.
The Company knows of no other trends, demands,
commitments, events or uncertainties that will or are likely to
materially affect its liquidity.
Item 8. Financial Statements and Supplementary Data.
The index to the Financial Statements of the
Company and the independent auditors' report of Deloitte & Touche
LLP appear on pages 18 and 39.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
NONE
PART III
As permitted by General Instruction G, with the exception of
information on Executive Officers of the Registrant set forth in
Part I hereof, information required in Part III is incorporated
by reference to the definitive proxy statement of Registrant for
the 1995 Annual Meeting which the Registrant will file with the
Commission no later than April 30, 1995.
- 17 -<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) Documents Filed as Part of This Report
The following is an index of the financial
statements and schedules included in this Report.
(1) Financial Statements
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Page
Consolidated Statements of Operations and Retained Earnings
for the years ended December 31, 1994, 1993 and 1992 . . . 21
Consolidated Balance Sheets, December 31, 1994 and 1993 . . 22
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . 24
Notes to Consolidated Financial Statements . . . . . . . . . 25
Independent Auditors' Report on Financial Statements . . . . 39
(2) Consolidated Financial Statement Schedules
NONE
- 18 -<PAGE>
(3) Exhibits
The following is an index of the exhibits included
in this Report or incorporated herein by reference.
(3)(a) Registrant's Certificate of Incorporation as
amended October 7, 1988. (Incorporated by
reference to Exhibit (3)(a) in Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1993.)
(3)(b) By-laws of Registrant amended May 22, 1987.
(Incorporated by reference to Exhibit (3)(b) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)
(4)(a) Registrant's Loan and Security Agreement dated as
of September 7, 1994. (Incorporated by reference
to Exhibit (4)(a) in Registrant's quarterly report
on Form 10-Q for September 30, 1994.)
(4)(b) First Amendment dated February 15, 1995 to
Registrant's Loan and Security Agreement.
(10)(a)* Discretionary incentive compensation plan for
Executive Officers of the Registrant.
(Incorporated by reference to Exhibit (10)(a) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)
(10)(b)* 1989 Stock Appreciation Rights Plan for Officers
of the Registrant. (Incorporated by reference to
Exhibit A of Registrant's Proxy Statement for the
1989 Annual Meeting of the Stockholders).
(10)(c)* Employment Agreements dated October 19, 1994,
between the Registrant and Messrs. John B.
McKinney, Michael H. Lane, J. William Hebenstreit.
H. Bruce Nethington and Larry J. Schnurbusch.
(10)(d) Stock Purchase Agreement dated October 5, 1980
between Registrant and Ivaco Inc. (Incorporated
by reference to Exhibit (10)(e) in Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)
(10)(e)* Key Employee Retirement Plan. (Incorporated by
reference to section entitled Benefit Plans from
Registrant's Proxy Statement for the 1995 Annual
Meeting of the Stockholders).
- 19 -<PAGE>
(22) Subsidiaries of Registrant.
NOTE
Copies of exhibits will be supplied upon written
request and payment of the Registrant's fee of
$.25 per page requested.
* Represents management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant to
Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
During the quarter ended December 31, 1994, no
reports on Form 8-K were filed by Registrant.
- 20 -<PAGE>
<TABLE>
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
and Retained Earnings
(In Thousands of Dollars except Per Share Amounts)
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
NET SALES $ 341,289 $ 328,766 $ 274,468
COSTS AND EXPENSES:
Cost of products sold 306,351 297,670 243,806
Selling, general and administrative expenses 14,039 13,755 12,290
Depreciation 7,625 7,464 7,165
Interest expense, net 6,940 4,866 4,679
Special charges:
Restructuring of operations ---- ---- 14,500
Environmental costs ---- ---- 4,200
Gain on sale of equipment (1,103) ---- ----
Total costs and expenses 333,852 323,755 286,640
EARNINGS (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 7,437 5,011 (12,172)
PROVISION (CREDIT) FOR INCOME TAXES 2,975 1,904 (4,625)
EARNINGS (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 4,462 3,107 (7,547)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR
POSTRETIREMENT MEDICAL BENEFITS,
NET OF TAX ---- (46,543) ----
NET EARNINGS (LOSS) 4,462 (43,436) (7,547)
RETAINED EARNINGS AT BEGINNING OF YEAR 3,360 46,796 54,343
RETAINED EARNINGS AT END OF YEAR $ 7,822 $ 3,360 $ 46,796
PER SHARE DATA:
Earnings (loss) before cumulative effect
of change in accounting principle $ 1.10 $ 0.77 $ (1.86)
Cumulative effect of change in accounting
principle for postretirement medical benefits,
net of tax ---- (11.48) ----
Net earnings (loss) $ 1.10 $ (10.71) $ (1.86)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- 21 -
<TABLE>
Consolidated Balance Sheets
Assets
(In Thousands of Dollars except Per Share Amounts)
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 159 $ 894
Bond funds in trust ---- 9,700
Accounts receivable, less allowances of $2,635 in 1994 and $2,366 in 1993 45,587 46,527
Prepaid expenses 1,202 351
Income taxes recoverable 546 596
Inventories:
Finished 45,407 50,165
Semi-finished 26,193 22,617
Raw materials 15,853 9,515
Supplies 15,013 15,129
Total inventories 102,466 97,426
Total current assets 149,960 155,494
NON-CURRENT ASSETS:
Intangible assets 21,101 23,252
Bond funds in trust 2,385 5,474
Prepaid pension contributions 17,795 15,713
Deferred income taxes 21,726 27,083
Other 3,522 1,654
Total non-current assets 66,529 73,176
PLANT AND EQUIPMENT, AT COST:
Land 1,615 1,614
Buildings 29,559 29,173
Machinery and equipment 225,063 212,871
256,237 243,658
Less - accumulated depreciation 129,475 122,514
Net plant and equipment 126,762 121,144
TOTAL ASSETS $ 343,251 $ 349,814
</TABLE>
- 22 -
<TABLE>
Liabilities and Stockholders' Equity
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 36,462 $ 25,421
Accrued compensation 9,798 8,788
Current portion of long-term debt 2,484 10,981
Notes payable to banks ---- 7,500
Accrued costs of pension plans 9,830 9,963
Other 2,480 4,008
Total current liabilities 61,054 66,661
NON-CURRENT LIABILITIES:
Accrued costs of pension plans 41,413 54,287
Accrued postretirement medical benefits 79,180 77,801
Other 7,060 7,549
LONG-TERM DEBT 100,801 100,926
COMMITMENTS AND CONTINGENCIES - NOTE 10 ---- ----
STOCKHOLDERS' EQUITY:
Preferred stock without par value, authorized
2,000,000 shares with none issued ---- ----
Common stock, $13.33 par value, authorized
5,000,000 shares, issued and outstanding 4,056,140 shares 54,081 54,081
Capital in excess of par 247 247
Retained earnings 7,822 3,360
Minimum pension liability adjustment (8,407) (15,098)
Total stockholders' equity 53,743 42,590
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 343,251 $ 349,814
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- 23 -
<TABLE>
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 4,462 $ (43,436) $ (7,547)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle
for postretirement medical benefits ---- 46,543 ----
Depreciation 7,625 7,464 7,165
Gain on sale of equipment (1,103) ---- ----
Special charges ---- ---- 18,700
Change in deferred income taxes 1,708 1,303 (4,886)
Changes in assets and liabilities that provided (used) cash:
Accounts receivable 940 (5,897) (5,291)
Inventories (5,040) (1,959) 3,553
Accounts payable and accrued expenses 11,601 (7,197) (5,169)
Pension cost less than funding (2,742) (5,723) (448)
Accrued postretirement medical benefits 1,379 2,732 ----
Net cash provided by (used in) operating activities 18,830 (6,170) 6,077
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 1,000 ---- ----
Capital expenditures (14,747) (11,358) (17,632)
Net cash used in investing activities (13,747) (11,358) (17,632)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayments) under revolving credit agreem (16,412) 15,500 11,000
Proceeds from term loan 10,000 ---- ----
Payments on long-term debt (9,710) (929) (289)
Proceeds from (additions to) bond funds in trust 12,789 (11,707) 2,691
Refund under contract for HTMR facility ---- 13,600 ----
Payment of financing costs (2,485) ---- ----
Net cash provided by (used in) financing activities $ (5,818) $ 16,464 $ 13,402
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year $ (735) $ (1,064) $ 1,847
At beginning of year 894 1,958 111
At end of year $ 159 $ 894 $ 1,958
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $ 7,147 $ 4,760 $ 4,704
Income taxes paid (refunded) $ 1,218 $ 1,010 $ (2,196)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- 24 -
Note 1
Business and Accounting Policies:
Laclede Steel Company is in the business of manufacturing carbon for
markets throughout the United States and Canada. The Company's policies are
summarized as follows:
Principles of Consolidation
The consolidated financial statements include the accounts of Laclede
Steel Company and its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity
of three months or less at date of purchase to be cash equivalents.
Inventories
Inventories of finished and semi-finished products, raw materials and
supplies are stated at the lower of cost, predominantly moving average, or
market. Market determination is based on the net realizable value of the total
of the components of each major category of inventory.
Plant and Equipment
Plant and equipment, consisting primarily of steel making and related
facilities, are carried at cost. Major renewals and betterments are
capitalized, while replacements, rebuilding costs and repairs are charged to
operations. The cost of normal retirements is charged to accumulated
depreciation and salvage realized, if any, is credited thereto.
Depreciation
The Company follows the policy of providing for depreciation of plant and
equipment by charging operations with amounts sufficient to amortize the cost
over their estimated useful lives. Depreciation is computed on the
straight-line method for financial reporting purposes. Accelerated
depreciation methods are used for tax purposes.
Income Taxes
Deferred income taxes are provided for the temporary differences between
the tax basis of the Company's assets and liabilities and their financial
reporting amounts at each year end, utilizing currently enacted tax rates. See
Note 3 for details of significant temporary differences.
- 25 -<PAGE>
Earnings Per Share
Earnings per common share are based on the weighted average shares
outstanding during the year. Weighted average shares outstanding were
4,056,140 for 1994, 1993 and 1992.
Note 2
Intangible Assets:
In accordance with FASB Statement No. 87, "Employers' Accounting for
Pensions," the Company has recorded an intangible asset of $18,550,000 at
December 31, 1994 and $20,557,000 at December 31, 1993. See Note 5 for further
discussion.
Intangible assets also include the excess of the purchase price of
acquisitions over the fair value of the net assets acquired and these amounts
are amortized on a straight-line basis over 25 years.
Note 3
Income Taxes:
Effective January 1, 1993 the Company adopted FASB Statement No. 109.
"Accounting for Income Taxes". This statement requires the use of the asset
and liability approach for financial accounting and reporting for income taxes.
Adoption of this statement did not have a material effect on the Company's
financial position or results of operations. The provision for income taxes
represents an effective combined federal and state tax rate of 40% for 1994 and
38% for 1993 and 1992. The provision (credit) for income taxes consists of the
following (thousands of dollars):
1994 1993 1992
Current income taxes $ 1,268 $ 601 $ 261
Deferred income taxes 1,707 1,303 (4,886)
$ 2,975 $ 1,904 $ (4,625)
In 1993 deferred taxes were recorded in the amount of $28,526,00 as a
result of the change in accounting principle for postretirement medical
benefits. Recognition of this tax benefit resulted in a net deferred tax asset
on the consolidated balance sheets. No valuation allowance was deemed
necessary as a result of management's evaluation of the likelihood that all of
the deferred tax assets will be realized.
- 26 -
Deferred tax assets and liabilities are comprised of the following at
December 31 (thousands of dollars):
1994 1993
Deferred tax liabilities:
Depreciation $ (27,064) $ (25,146)
Accrued costs of pension plans (327) --
Total deferred tax liabilities (27,391) (25,146)
Deferred tax assets:
Minimum pension liability
adjustment 5,605 9,254
Postretirement medical benefits 31,672 31,120
Active employee benefit
liabilities 2,550 2,356
Environmental costs 1,524 1,764
Allowances on receivables 967 826
Net operating loss and alternative
minimum tax carryovers 5,901 5,095
Accrued costs of pension plans -- 765
Other 898 1,049
Total deferred tax assets 49,117 52,229
Net deferred tax assets $ 21,726 $ 27,083
Deferred income taxes (asset) were decreased in 1994 by $3,650,000, and
increased in 1993 by $7,348,000 and in 1992 by $1,906,000 as a result of the
tax effects of the minimum pension liability adjustment. These amounts are not
reflected in the tax provisions of either year. See Note 5 for further
discussion.
The applicable statutory federal income tax rate of 34% for each of the
three years is reconciled to the effective income tax rate as follows
(thousands of dollars):
1994 1993 1992
Federal income tax provision
(credit) computed at statutory
tax rate $ 2,529 $ 1,704 $ (4,138)
Amortization of intangible
assets 58 60 47
State income taxes, net 388 140 (534)
Provision (credit) for
income taxes $ 2,975 $ 1,904 $ (4,625)
- 27 -
Note 4
Debt:
Long-term debt consists of the following at December 31
(thousands of dollars):
1994 1993
Bank Loan and Security Agreement:
Revolving Loan $66,088 $ --
Term Loan 9,642 --
Bank Revolving Credit Agreement -- 75,000
Solid Waste Disposal Revenue Bonds:
7.25% Bonds due August 1, 1994 -- 275
7.5% Bonds due August 1, 1995 295 295
8.375% Bonds due from 1996 to 2008 6,930 6,930
8.5% Bonds due from 2009 to 2020 9,430 17,500
8% Pollution Control Revenue Bonds due
October 1, 2001 (annual sinking fund
payments began in 1993) 10,020 10,680
8% Industrial Development Revenue Bonds
due October 1, 2001 (annual sinking fund
payments began in 1992) 835 890
11% Industrial Revenue Bonds due in monthly
installments until March 1, 1995 45 337
103,285 111,907
Less amounts payable within one year 2,484 10,981
$100,801 $100,926
In September 1994 the Company entered into a new five-year
Loan and Security Agreement with three banks consisting of an
$85,000,000 Revolving Loan and a $10,000,000 Term Loan, payable
monthly over five years. The new facility replaces the $80
million Revolving Credit Agreement. Interest on the new
Revolving Loan is payable at either prime plus 1/2% or a
Eurodollar rate, at the Company's option. Interest on the Term
Loan is payable at either prime plus 1% or a Eurodollar rate,
also at the Company's option. At December 31, 1994, the interest
rates ranged from 8.1% to 9.5%. In October 1994 the Company
entered into a two-year interest rate cap agreement covering
$40,000,000 in borrowings, which limits interest costs if LIBOR
rates reach 7%.
- 28 -<PAGE>
Under terms of the Loan and Security Agreement the Company
granted security interests in accounts receivable and inventory
to the participating banks to support the Revolving Loan. The
Term Loan is secured by certain Plant and Equipment.
The most restrictive provisions of the Company's loan
agreements, as amended, include the following:
A. The Company shall maintain net worth, as defined, of not
less than $18,600,000 plus 50% of consolidated net earnings
after August 1994. As of December 31, 1994 the Company's
consolidated net worth exceeded the minimum required amount
by $3,052,000.
B. The Company shall maintain a consolidated fixed charge
coverage ratio, as defined, of not less than 1.1 to 1.0,
calculated at the end of each quarter for the preceding four
quarters. For the four quarters ended December 31, 1994 the
calculated consolidated fixed charge coverage ratio was 1.42
to 1.0.
C. Payment of cash dividends is limited to 50% of cumulative
net earnings after December 31, 1993. As of December 31,
1994 $2,231,000 is available for dividends.
In 1990 the Company completed the permanent financing for
its electric furnace flue dust treatment facility by the issuance
of $25,000,000 in Solid Waste Disposal Revenue Bonds through the
Southwestern Illinois Development Authority. The Bonds were
issued with an average life in excess of 20 years and an average
interest rate of approximately 8.5%. As discussed further in
Note 6 $8,070,000 in bonds outstanding were retired in 1994.
The Company has no compensating balance arrangements.
Excluding the Revolving Loan, aggregate maturities of long-term
borrowings at December 31, 1994 for the next five years are as
follows:
1995 $2,484,000
1996 2,459,000
1997 2,484,000
1998 2,514,000
1999 5,066,000
The Company estimates that the fair value of its long-term
debt in the aggregate approximates the carrying value at December
31, 1994 and 1993.
- 29 -<PAGE>
Note 5
Employee Benefits:
DEFINED BENEFIT PENSION PLANS -
The Company has several non-contributory defined benefit pension plans
providing retirement benefits for substantially all employees. Benefits under
the plans are primarily based on years of service and employee's compensation
prior to retirement. Annual pension plan funding is based on the range of
deductible contributions permitted by ERISA regulations, taking into account
the Company's current income tax situation.
The components of pension cost are as follows (thousands of dollars):
1994 1993 1992
Service cost $ 2,021 $ 1,904 $ 1,814
Interest cost on projected
benefit obligation 13,340 14,219 13,932
Actual return on plan assets 4,322 (11,409) (7,988)
Net amortization and deferral (14,003) 205 (2,781)
Net periodic pension cost 5,680 4,919 4,977
Curtailment loss recognized -- -- 5,828
Total pension cost $ 5,680 $ 4,919 $10,805
In the second quarter of 1992 the Company recorded a restructuring cost
provision which included a $5,828,000 curtailment loss related to planned work
force reductions. See Note 6 to the Consolidated Financial Statements for
additional discussion.
The projected benefit obligations at December 31, 1994 and 1993 were
determined using assumed discount rates of 8.75% and 7.25%, respectively. The
assumed discount rate is based on market conditions and reflects annuity
purchase rates available to theoretically settle plan obligations. For all
plans other than the Alton Plant Hourly Employees' Plan, the assumed rate of
increase in compensation levels was 2% for all years. Reflecting the Labor
Agreement for Alton hourly employees, a 3% rate of increase in compensation was
assumed for 1993 and 1% thereafter. The weighted average assumed long-term
rate of return on the market-related value of plan assets was 11.7% for all
years, reflecting the performance on fund investments which consist of common
stocks and fixed income securities.
- 30 -<PAGE>
<TABLE>
A summary of the funded status of the plans is as follows (thousands of dollars):
<CAPTION>
December 31
1994 1993
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Total Benefits Exceed Assets Total
<S> <C> <C> <C> <C> <C> <C>
Actuarial present
value of
accumulated benefit
obligation:
Vested $ (40,394) $(105,317) $(145,711) $(49,832) $(123,390) $(173,222)
Non-Vested (1,534) (6,280) (7,814) (1,980) (8,456) (10,436)
Total $ (41,928) $(111,597) $(153,525) $(51,812) $(131,846) $(183,658)
Projected benefit
obligation $ (43,279) $(111,943) $(155,222) $(52,643) $(132,671) $(185,314)
Plan assets at
fair value 43,830 61,956 105,786 53,693 68,615 122,308
Projected benefit
obligation (in
excess of) less
than plan assets 551 (49,987) (49,436) 1,050 (64,056) (63,006)
Unrecognized net
(asset) obligation
at transition date,
January 1, 1987 (1,151) 12,233 11,082 (1,315) 13,981 12,666
Unrecognized losses,
net 14,524 14,357 28,881 13,762 25,180 38,942
Unrecognized prior
service cost 2,280 6,307 8,587 1,205 6,565 7,770
Adjustment required
to recognize minimum
liability -- (32,562) (32,562) -- (44,909) (44,909)
Net pension cost
recorded on balance
sheet $ 16,204 $ (49,652) $ (33,448) $ 14,702 $ (63,239) $ (48,537)
</TABLE>
- 31 -
In accordance with FASB Statement No. 87, the Company has recorded an
additional minimum pension liability for underfunded plans of $32,562,000 at
December 31, 1994 and $44,909,000 at December 31, 1993, representing the excess
of unfunded accumulated benefit obligations over previously recorded pension
cost liabilities. A corresponding amount is recognized as an intangible asset
except to the extent that these additional liabilities exceed related
unrecognized prior service cost and net transition obligation, in which case
the increase in liabilities is charged directly to stockholders' equity. As of
December 31, 1994, $14,012,000 of the excess minimum pension liability resulted
in a charge to equity, net of income taxes, of $8,407,000. As of December 31,
1993, the excess minimum liability was $24,352,000 and the after-tax charge to
equity was $15,098,000.
PROFIT SHARING PLAN -
The Company maintains a defined contribution profit sharing thrift plan
covering a majority of its salaried employees. Company contributions for 1994
amounted to $684,000 and for 1993 amounted to $652,000. There was no profit
sharing contribution for 1992.
POSTRETIREMENT MEDICAL BENEFIT PLANS -
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for active and retired employees. A
significant portion of the Company's employees may become eligible for the
retiree benefits if they reach retirement age while working for the Company.
Effective January 1, 1993 the Company adopted FASB Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", which
requires accounting for the cost of retiree medical benefits other than
pensions on an accrual basis. Implementation of this new standard also
requires the recognition of a transition obligation based on the aggregate
amount that would have been accrued in prior years had the new standard been
in effect for those years. In accordance with this new standard the Company
elected to recognize the entire transition obligation as of January 1, 1993
and, accordingly, recorded a non cash charge of $46,543,000, after recognition
of $28,526,000 in deferred tax benefits.
The components of net periodic postretirement medical benefit costs are as
follows (thousands of dollars):
1994 1993
Service cost $ 846 $ 759
Interest cost 5,658 6,612
Net periodic cost 6,504 7,371
Recognition of transition
obligation -- 75,069
Total cost $ 6,504 $82,440
Prior to 1993, the costs of medical benefits for retired employees
were expensed as incurred, and totaled $4,318,000 for 1992. The actual
postretirement medical benefits paid amounted to $5,439,000 in 1994 and
$4,863,000 in 1993.
- 32 -
<PAGE>
A summary of the status of the plans is as follows (thousands of dollars):
December 31, December 31,
1994 1993
Accumulated postretirement
benefit obligation (APBO):
Retirees $ (41,390) $ (42,651)
Fully eligible active
employees (15,709) (18,252)
Other active employees (13,944) (18,560)
Total (71,043) (79,463)
Fair value of plan assets -- --
Funded status (71,043) (79,463)
Unrecognized net (gain)
loss (8,137) 1,662
Accrued postretirement
benefit cost $ (79,180) $ (77,801)
The assumed discount rate used to measure the APBO was 8.75% at December
31, 1994, and 7.25% at December 31, 1993. The assumed future health care cost
trend rate is approximately 9.5%, gradually declining to 3.25% in nine years.
A one percentage point increase in the assumed health care cost trend rates for
each future year would have increased the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost by $607,000 for
1994 and $716,000 for 1993, and would have increased the APBO by $5,924,000 as
of December 31, 1994 and by $7,237,000 as of December 31, 1993.
STOCK APPRECIATION RIGHTS PLANS -
In March 1989, the Board of Directors adopted the 1989 Stock Appreciation
Rights Plan for Non-Officers and the 1989 Stock Appreciation Rights Plan for
Officers. The Board granted 54,800 rights in 1989, 40,500 rights in 1990,
44,700 rights in 1991 and 13,000 rights in 1992 under the Non-Officer Plan and
60,800 rights in 1989, 50,500 rights in 1990, 48,700 rights in 1991 and 16,000
rights in 1992 under the Officer Plan. The remaining unexercised 1989 grants
expired in 1994. The exercise price under both Plans is $15.00 for 1990
grants, $9.50 for 1991 grants and $14.75 for 1992 grants. As of December 31,
1994, 20,750 rights under the Officer Plan and 19,150 rights under the
Non-Officer Plan had not been exercised. Compensation expense of $849,000 and
$926,000 was recorded in 1993 and 1992, respectively, for the excess of market
price over grant prices on the Company's Stock Appreciation Rights Plans.
- 33 -
Note 6
Special Charges:
Restructuring of Wire Operations - In the second quarter of
1992 the Board of Directors approved management's recommendation
to increase the capacity of the Fremont, Indiana Plant by
installation of new equipment at that location, and to close the
Alton, Illinois wire facility.
Therefore, in 1992 the Company recorded a restructuring cost
provision totaling $14,500,000 ($8,990,000 after taxes). The
cost provision consisted principally of pension costs related to
planned work force reductions, write-down of equipment to
estimated realizable value, and abnormal operating costs to be
absorbed during the transition period. The wire restructuring
was completed in 1994.
Environmental Costs - In connection with its Melt Shop
operations the Company generates electric furnace dust, which the
Environmental Protection Agency (EPA) has designated as a
hazardous waste.
Prior to August 1988, with EPA approval, the Company had
temporarily stored electric furnace dust on site at the Alton
Plant. In 1988 the EPA issued new regulations requiring the
Company to treat electric furnace dust prior to disposition or
permanent storage.
In 1989 the Company reached an agreement with Elkem
Technology to construct a High Temperature Metals Recovery (HTMR)
System at the Alton Plant intended to treat newly generated dust
as well as the existing storage pile, and reclaim zinc in the
process. Management's studies at the time indicated that the
amount of zinc recoveries from the process would substantially
reduce or even offset the facility's cost of operations. The
total cost of this project was estimated at $25,000,000, however,
the final capital cost was to be based on performance tests prior
to the Company's assuming control of the operation.
In the second quarter of 1992, management updated its
original economic study of the HTMR System. As a result of this
evaluation the Company recorded a cost provision in the second
quarter of $4,200,000 ($2,604,000 after taxes) which represented
the then estimated cost of processing previously accumulated dust
in the HTMR System when it is fully operational.
In the second quarter of 1993 the Company was advised by
Elkem Technology that the HTMR System would not be able to meet
its original goals, including the recovery of prime western grade
zinc, which is an essential criterion under the contract, and
accordingly, commissioning of the facility would cease. On May
17, 1993, the Company and Elkem Technology negotiated a settlement
- 34 -<PAGE>
of the original contract, under which Elkem refunded $13,600,000
to the Company and relinquished control of and legal title to the
HTMR System. The Company is in the final stages of modifying the
facility in order to treat current generation of dust
economically, and in accordance with EPA standards. A portion of
the funds received from Elkem together with additional Company
funds is being used to complete this modification of the HTMR
System. The remaining refund from Elkem of $8,070,000 was
applied as a prepayment of a portion of the outstanding Solid
Waste Disposal Revenue Bonds in 1994. Refer to Note 4 to the
Consolidated Financial Statements for additional discussion of
these issues. The Company's investment in the HTMR System at
December 31, 1994 is approximately $15,700,000.
The Company's prior closure plan, approved by the Illinois
Environmental Protection Agency (IEPA), is based upon utilization
of the HTMR System to process existing electric furnace dust
piles. However, because the HTMR System did not meet its
original goal and is being modified to treat only current
generation of dust, the Company developed a modified closure
plan. This plan provides for the closure of existing electric
furnace dust piles in place. Based on estimates provided by an
independent consultant it appears that the cost of this plan will
not exceed the $3,800,000 amount included in non-current
liabilities at December 31, 1994 for the disposal of the existing
EAF dust.
Implementation of the Company's modified closure plan
requires approval of the IEPA. Management held initial
discussions with the IEPA, and based on a favorable response to
the Company's proposal at this preliminary meeting, the Company
filed a modified closure plan.
While management believes such modified closure plan
represents the best available alternative, approval by the IEPA
is not assured and considerable time may be required to resolve
the issues involved. However, based on other closure plans
accepted by the environmental regulatory authorities in other
states for companies in similar situations to that of the
Company's, as well as the IEPA's reaction, management believes
that the modified closure plan will ultimately be permitted. In
the event that the proposed modification is not ultimately
permitted by the IEPA, the Company would likely incur closure
costs greater than the amount of the special charge recorded in
the second quarter of 1992.
- 35 -<PAGE>
Note 7
Common Stock:
Ivaco, Inc. of Montreal, Canada presently owns 2,108,650
shares of the Company's common stock or 49.8% of the total number
of shares outstanding. An agreement between the Company and
Ivaco, Inc. provides that the Company shall take the necessary
action to cause four designees of Ivaco to be seated on the
Company's nine-member Board of Directors and gives certain rights
to Ivaco with respect to new shares offered by the Company.
In January 1993 the Company was advised that Ivaco is
exploring the possibility of disposing of its interest in Laclede
Steel Company. This step is being taken as part of Ivaco's
overall plan to reduce debt and strengthen its financial
position.
Note 8
Interest Expense, Net:
Interest expense capitalized in 1994, 1993 and 1992 was
$2,148,000, $2,014,000 and $1,754,000, respectively. The
majority of this interest relates to the Solid Waste Disposal
Revenue Bond funds used to finance the construction of the HTMR
facility.
- 36 -<PAGE>
<TABLE>
Note 9
Quarterly Results of Operations: (Unaudited)
The results of operations by quarter for 1994 and 1993 were as
follows (in thousands of dollars except per share data):
<CAPTION>
QUARTER ENDED
1994 1993
Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $84,697 $80,559 $85,308 $90,725 $ 76,034 $79,190 $85,272 $88,270
Cost of
products sold 77,614 72,457 77,153 79,127 68,512 72,077 78,029 79,052
Net sales less
cost of
products sold $ 7,083 $ 8,102 $ 8,155 $11,598 $ 7,522 $ 7,113 $ 7,243 $ 9,218
Net earnings
before cumulative
effect of change
in accounting
principle $ 127 $ 862 $ 763 $ 2,710 $ 883 $ 696 $ 296 $ 1,232
Net earnings
(loss) $ 127 $ 862 $ 763 $ 2,710 $(45,660)* $ 696 $ 296 $ 1,232
Net earnings
(loss) per share $ 0.03 $ 0.21 $ 0.19 $ 0.67 $ (11.26)* $ 0.17 $ 0.07 $ 0.31
<FN>
*Includes cumulative effect of change in accounting principle which
reduced net earnings by $46.5 million or $11.48 per share.
</TABLE>
- 37 -
Note 10
Commitments And Contingencies:
The Company has non-cancelable operating leases for office
space and certain equipment through 2004. Future minimum lease
commitments required under these leases are as follows:
1995 $2,504,000
1996 2,226,000
1997 1,873,000
1998 1,739,000
1999 1,459,000
Thereafter 5,023,000
TOTAL $14,824,000
Rent expense under all leases in 1994, 1993 and 1992 was
$2,578,000, $2,333,000 and $1,816,000, respectively.
There are various claims pending involving the Company and
its subsidiaries with respect to environmental, hazardous
substance and other matters arising out of the routine conduct of
the business. Such claims either have not been reduced to
litigation or if suit has been filed are in the discovery stage.
Therefore the total liability on pending claims at December 31,
1994, if any, cannot be determined.
The Company believes it has meritorious defenses with
respect to all claims and litigation and the ultimate disposition
of such matters will not materially affect its financial position
or results of operations.
- 38 -<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board Of Directors
And Stockholders Of
Laclede Steel Company:
We have audited the accompanying consolidated balance sheets
of Laclede Steel Company and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of operations
and retained earnings and of cash flows for each of the three
years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of Laclede Steel Company and subsidiaries as of December 31, 1994
and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 5 to the Consolidated Financial
Statements, effective January 1, 1993, the Company changed its
method of accounting for postretirement medical benefits to
conform with Statement of Financial Accounting Standards No. 106.
Deloitte & Touche LLP
January 23, 1995
St. Louis, Missouri
- 39 -<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
March 7, 1995 /s/ John B. McKinney
Date John B. McKinney
President
Principal Executive Officer
Director
March 7, 1995 /s/ Michael H. Lane
Date Michael H. Lane
Vice President-Finance
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the
Securities Exchange Act of 1934, this amendment has been signed
below by the following persons on behalf of the Registrant and in
the capacities and on the dates includes.
March 15, 1995 /s/ Donald F. Gunning
Date Donald F. Gunning
Director
March 15, 1995 /s/ A. William Hager
Date A. William Hager
Director
March 15, 1995 /s/ E. Lawrence Keyes, Jr.
Date E. Lawrence Keyes, Jr.
Director
March 15, 1995 /s/ Robert H. Quenon
Date Robert H. Quenon
Director
March 15, 1995 /s/ Lawrence K. Roos
Date Lawrence K. Roos
Director
March 15, 1995 /s/ Edwin J. Spiegel, Jr.
Date Edwin J. Spiegel, Jr.
Director
March 21, 1995 /s/ Lester Varn, Jr.
Date Lester Varn, Jr.
Director
March 16, 1995 /s/ George H. Walker III
Date George H. Walker III
Director
AMENDMENT NO. 1 EXHIBIT (4)(b)
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 7, 1994
THIS AMENDMENT NO. 1 dated as of February 15, 1995 (this "Amendment")
is entered into among BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation
("BABC"), THE BANK OF NEW YORK COMMERCIAL CORPORATION, a New York corporation
("BNYCC"), THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, a national banking
association ("Boatmen's") (BABC, BNYCC and Boatmen's and their respective
successors and assigns being sometimes hereinafter referred to collectively as
the "Lenders" and each of BABC, BNYCC and Boatmen's and its successors and
assigns being sometimes hereinafter referred to individually as a "Lender"),
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as agent for the
Lenders (in such capacity as agent, the "Agent"), LACLEDE STEEL COMPANY, a
Delaware corporation (the "Parent"), and LACLEDE CHAIN MANUFACTURING COMPANY, a
Delaware corporation ("Laclede Chain"), and LACLEDE MID AMERICA INC., an
Indiana corporation ("Laclede Mid America") (the Parent, Laclede Chain and
Laclede Mid America being sometimes hereinafter referred to collectively as the
"Borrowers" and each of the Parent, Laclede Chain and Laclede Mid America being
sometimes hereinafter referred to individually as a "Borrower"). Capitalized
terms used herein but not defined herein shall have the meanings provided in
the Loan Agreement.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Lenders and the Agent are parties to a
certain Loan and Security Agreement dated as of September 7, 1994 (the "Loan
Agreement"); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed to
amend the Loan Agreement on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree
as follows:
Section 1. Amendment of the Loan Agreement. Effective as of
February 21, 1995, subject to the fulfillment of the conditions precedent set
forth in Section 2 below, the Loan Agreement is hereby amended as follows:
(a) The definition of "Capital Expenditures" contained in
Section 1.1 is hereby deleted in its entirety and the following definition
is substituted therefor:
"Capital Expenditures" means, for any fiscal period, (a) the
cost of any fixed asset or improvement, or replacement, substitution,
or addition thereto, acquired during such period and having a useful
life of more than one year, including, without limitation, those
costs arising in connection with the direct or indirect acquisition
of such assets by way of increased product or service charges or
offset items or in connection with a Capital Lease plus (b) the
amount of any cash expended during such period in consummating any
Quasi Asset Acquisition; provided, that Capital Expenditures shall be
deemed not to include (i) the cost, up to a maximum amount of
$5,300,000 of purchasing and implementing a new ladle furnace and
related melt shop and rolling mill Equipment for the Parent's Alton
steel mill plant located in Alton, Illinois (provided, that any such
cost in excess of $5,300,000 would constitute Capital Expenditures);
(ii) the cost of acquiring the Fairless Hills Equipment; (iii) any
expenditure in connection with the High Temperature Metals Recovery
System Facility located at the Parent's Alton steel mill plant
located in Alton, Illinois, to the extent such expenditure is
financed in whole by funds derived from the Solid Waste Disposal
Bonds; (iv) the cost, up to a maximum amount of $2,000,000, of any
fixed asset or improvement, or replacement, substitution or addition
thereto, purchased, directly or indirectly, with monies received by
Laclede Mid America under the terms and conditions of that certain
Asset Purchase Agreement, dated as of November 7, 1994, between
Laclede Mid America and Leggett & Platt, Incorporated, a Missouri
corporation, a copy of which Asset Purchase Agreement has been
provided to the Agent (provided, that any such cost in excess of
$2,000,000 would constitute Capital Expenditures); and (v) the cost,
up to a maximum amount of $3,000,000, of any fixed asset or
improvement, or replacement, substitution or addition thereto,
purchased, directly or indirectly, with monies derived from (A) the
sale, for an amount not to exceed $1,000,000, of up to three percent
(3%) of the common stock of Laclede Mid America to Nissho Iwai
American Corporation, or one of its affiliates, and/or (B) a loan, in
an amount not to exceed $2,000,000, by Nissho Iwai American
Corporation, or one of its affiliates, to Laclede Mid America
(provided, that any such cost in excess of $3,000,000 would
constitute Capital Expenditures).
(b) The definition of "Revolver Facility" contained in Section
1.1 is hereby deleted in its entirety and the following definition is
substituted therefor:
"Revolver Facility" means $95,000,000 or the agreement by the
Lenders and the Agent to provide Revolving Loans and Letters of
Credit up to such amount subject to the terms of this Agreement, as
the context may require.
(c) The amount of "$95,000,000" appearing in the first sentence
of Section 2.1 is hereby deleted in its entirety and the amount of
$105,000,000 is substituted therefor.
(d) Section 2.2(k) is amended to add the following provisions
immediately following the section heading of such Section and prior to the
provisions contained in subsection (i) thereof:
The Agent and the Lenders hereby agree that, except in the case of
Settlement Loans and Agent Advances, each Lender's funded portion of
the Revolving Loans is intended to be equal at all times to such
Lender's Pro Rata Share of the outstanding Revolving Loans. The
Agent and the Lenders agree (which agreement shall not be for the
benefit of or enforceable by any Borrower) that in order to
facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Revolving Loans, the
Settlement Loans and the Agent Advances shall take place on a
periodic basis in accordance with the following provisions:
(e) Section 2.2(k) is further amended to delete the first
sentence of subsection (i) thereof and to substitute the following
therefor:
The Agent shall request settlement ("Settlement") with the Lenders on
a weekly basis, or on a more frequent basis if so determined by the
Agent, with respect to (1) each outstanding Settlement Loan, (2) each
outstanding Agent Advance, and (3) collections received, by notifying
the other Lenders by telecopy, telephone or other similar form of
transmission, of such requested Settlement, no later than 11:00 a.m.
(San Francisco, California time) on the date of such requested
Settlement (the "Settlement Date").
(f) Section 2.2(k) is further amended to add the following
provisions as subsection (iv) thereof:
(iv) If any payments are received by the Agent which, in
accordance with the terms of this Agreement would be applied to the
reduction of the Revolving Loans, and no Settlement Loans or Agent
Advances are then outstanding, the Agent may pay over such amounts to
BABC for application to BABC's Pro Rata Share of such Revolving
Loans. If, as of any Settlement Date, collections received since the
then immediately preceding Settlement Date have been applied to
BABC's Pro Rata Share of the Revolving Loans other than Settlement
Loans and Agent Advances, as provided for in the immediately
preceding sentence, BABC shall pay to the Agent, for the accounts of
the Lenders, to be applied to the outstanding Revolving Loans of such
Lenders, an amount such that each Lender shall have outstanding, as
of such Settlement Date, after giving effect to such payments, its
Pro Rata Share of such Revolving Loans; provided, that the Agent may
net payments due from BABC pursuant to this sentence against payments
due to BABC pursuant to Section 2.2(k)(i) on the applicable
Settlement Date, and require either BABC or the other Lenders, as
applicable, to make only the amount of the payment due after such
netting. As of each Settlement Date, BABC with respect to Settlement
Loans, the Agent with respect to Agent Advances, and each Lender with
respect to the Revolving Loans other than Settlement Loans and Agent
Advances, shall be entitled to interest at the applicable rate or
rates payable under this Agreement on the actual average daily amount
of funds employed by BABC, the Agent and the other Lenders since the
immediately preceding Settlement Date.
(g) Section 8.12 is deleted in its entirety and the following
is substituted therefor:
8.12 Guaranties. Neither the Parent nor any of its
Subsidiaries shall make, issue or become liable on any Guaranty,
except (a) Guaranties in favor of the Agent, and (b) a Guaranty by
the Parent, made on an unsecured basis and pursuant to documentation
in form and substance satisfactory to the Agent and the Majority
Lenders, of a loan in a principal amount not to exceed $2,000,000, to
be extended to Laclede Mid America by Nissho Iwai American
Corporation, or one of its affiliates, incident to improvements being
undertaken by Laclede Mid America at its Fremont, Indiana plant, to
facilitate the production of high tensile oil tempered wire for cold
wound suspension springs.
Section 2. Conditions to Amendment. This Amendment shall become
effective upon the receipt by the Agent of the following:
(a) an amendment fee in the amount of $100,000, which fee shall
be distributed by the Agent to the Lenders in accordance with their Pro
Rata Shares;
(b) six (6) counterparts of this Amendment, executed by each
Borrower and each Lender;
(c) an executed mortgage modification agreement with respect to
the Mortgage, and endorsement to the applicable title insurance policy, in
each case in form and substance satisfactory to the Agent and the Majority
Lenders;
(d) a Secretary's Certificate certifying board of directors'
resolutions for each Borrower, in form and substance satisfactory to the
Agent and the Majority Lenders; and
(e) a certificate signed by the President or a Vice President
and the Chief Financial Officer or Treasurer of each Borrower, in form and
substance satisfactory to the Agent and the Majority Lenders.
Section 3. Commitments. Upon the effectiveness of this Amendment,
the amount of each Lender's Commitment shall be that set forth beside such
Lender's name under the heading "Commitment" on the signature pages of this
Agreement. Such amount may thereafter be adjusted in accordance with the terms
of the Loan Agreement.
Section 4. Representations and Warranties. Each Borrower hereby
represents and warrants that (i) this Amendment constitutes a legal, valid and
binding obligation of such Borrower, enforceable against such Borrower in
accordance with its terms, (ii) the representations and warranties contained in
the Loan Agreement are correct in all material respects as though made on and
as of the date of this Amendment, and (iii) no Event of Default has occurred
and is continuing.
Section 5. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each reference in
the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein",
or words of like import shall mean and be a reference to the Loan
Agreement, as amended hereby, and each reference to the Loan Agreement in
any other document, instrument or agreement executed and/or delivered in
connection with the Loan Agreement shall mean and be a reference to the
Loan Agreement, as amended hereby.
(b) Except as specifically amended above, the Loan Agreement
and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect
and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Agent
or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement, except as specifically set forth herein.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
laws provisions) of the State of Illinois.
Section 8. Section Titles. The section titles contained in this
Amendment are and shall be without substance, meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of February 15, 1995.
LACLEDE STEEL COMPANY
By:
Vice President
LACLEDE CHAIN MANUFACTURING COMPANY
By:
Vice President
LACLEDE MID AMERICA INC.
By:
Vice President
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
Vice President
Commitment: $71,842,100 BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:
Vice President
Commitment: $27,631,600 THE BANK OF NEW YORK COMMERCIAL CORPORATION, as a
Lender
By:
Vice President
Commitment: $ 5,526,300 THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, as a
Lender
By:
Vice President
EMPLOYMENT AGREEMENT EXHIBIT (10)(c)
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 19TH day
of October 1994, by and between LACLEDE STEEL COMPANY, a Delaware corporation
("Employer"), and
JOHN B. McKINNEY ("Employee").
WHEREAS, Employee desires to be employed by Employer and Employer
desires to employ Employee under the terms and conditions set forth in this
Agreement; and
WHEREAS, it is Employer's intention to employ Employee upon the terms
and conditions herein, which recognize and compensate Employee for the
obligations of Employee undertaken hereunder, including specifically, but not
by way of limitation, the agreement of Employee not to compete with the
business of Employer, as provided in paragraph 8(a)(iii) (see page 13), for the
period provided in paragraph 8(a) upon the termination of Employee's employment
by Employer for any reason; it being understood and agreed that Employee is
employed by Employer to protect and expand the business of Employer;
NOW, THEREFORE, in consideration of the foregoing and the promises
and agreements herein contained, the parties agree as follows:
1. Employment. Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer upon the terms and conditions
hereinafter set forth.
2. Term of Employment. The term of Employee's employment under this
Agreement shall be for the period commencing October 19, 1994, and continuing
through August 2, 1999, or upon the earlier occurrence of any of the following
events:
(a) Whenever Employer and Employee shall mutually agree in
writing to terminate Employee's employment by Employer;
(b) Upon the death of Employee;
(c) For "cause," which shall mean Employee's dishonesty or
unlawful acts committed in connection with the business of Employer, and which
results in substantial gain or profit to Employee.
(d) At Employer's option and by action of Employer's Board of
Directors on thirty (30) days' written notice in the event of Employee's
Disability (defined as the failure substantially to discharge Employee's duties
as defined under this Agreement for ninety (90) consecutive days or one hundred
twenty (120) days (whether or not consecutive) in any twelve (12) month period,
as a result of an injury, disease, sickness or other physical or mental
incapacity). A determination of Employee's Disability shall be made by a
qualified medical doctor licensed to practice in the State of Missouri chosen
by Employer subject to Employee's approval, which approval shall not be
unreasonably withheld. Employee shall consent to be examined by Employer's
medical doctor and shall consent to allow Employee's medical doctor to discuss
Employee's medical condition with Employer. Notwithstanding anything to the
contrary contained herein, Employee's Disability shall not be deemed to have
commenced until full coverage with respect to such Disability shall have been
approved by Employer's disability insurance carrier and payment under
Employer's group disability policy for such Disability shall have commenced.
3. Duties of Employee. During Employee's employment by Employer,
Employee shall serve Employer to the best of Employee's ability and shall
perform such duties as are typically performed by a president and chief
executive officer of a steel manufacturing corporation with operations similar
to Employer. Employee agrees to devote Employee's time and efforts to the
business of Employer (except for usual vacations and reasonable time for
attention to personal affairs so long as Employee's performance hereunder is
not adversely affected thereby), and to be loyal and faithful at all times,
constantly endeavoring to improve Employee's ability and knowledge of the
business of Employer in an effort to increase the value of Employee's services
for the mutual benefit of Employee and Employer.
4. Compensation.
(a) Employer agrees to pay Employee for Employee's services
during the term of Employee's employment hereunder. Employee's base salary
shall be the greater of (i) an annual rate of Three Hundred Sixty-Four Thousand
Five Hundred ($364,500.00) or (ii) the highest annual base salary authorized by
the Board of Directors after the date hereof. Employee's base salary shall be
due and payable in twelve (12) equal monthly installments. Additionally,
during the term of Employee's employment by Employer hereunder, Employee's
compensation shall be reviewed and may be increased and/or Employee may be paid
Additional or special compensation including without limitation stock options,
stock appreciation rights and other incentive compensation, or bonuses (based
on the earnings of Employer, the performance of Employee or otherwise) from
time to time by the mutual agreement of Employee and Employer, as determined by
the Board of Directors of Employer. In addition, during the term of this
Agreement, Employee shall receive such fringe benefits as are made available by
Employer from time to time to other employees of Employer at Employee's level
of employment.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason including death or Disability, or (ii) by
Employer without "cause" (as defined in paragraph 2 herein) or by Employer for
any reason during the "Change of Control Period" (as defined in paragraph 5(b)
herein), Employee shall be paid incentive compensation for the fiscal year in
which such termination occurred in an amount equal to the product of (a) the
amount of incentive compensation to which he would have been entitled for such
fiscal year had there been no termination of employment and (b) a fraction, the
numerator of which is the number of days of such fiscal year in which Employee
remained in the employment of Employer and the denominator of which is 365.
5. Life Insurance Benefits.
(a) During the term of this Agreement, Employer shall be
obligated to keep in force life insurance on the life of Employee in the amount
of One Million Seven Hundred Ten Thousand Seven Hundred Twenty Dollars
($1,710,720.00), Eight Hundred Thousand Dollars ($800,000.00) of which will
consist of permanent insurance on the life of Employee owned by Employee or his
designee.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason, or (ii) by Employer without "cause" (as
defined in paragraph 2 herein), or by Employer for any reason during the period
commencing with the date of a Change of Control (as defined in Paragraph 6(b))
and ending the earlier of (a) twenty-four months following the Change of
Control, or (b) August 2, 1999, (the "Change of Control Period"), Employer
agrees to keep in force the permanent life insurance set forth in
subparagraph (a) of this paragraph 5 for the duration of Employee's life.
Employer may fulfill this obligation by satisfying the premium requirement so
that such permanent insurance is fully paid under the terms of such permanent
insurance policy. Employer's obligation to pay permanent life insurance
premiums under this subparagraph (b) will survive the term of this Agreement.
(c) In the event of the termination of Employee's employment by
Employer for "cause" (as defined in paragraph 2 herein), other than during the
Change of Control Period, then Employer's obligation to pay premiums under this
paragraph 5 will cease.
(d) Employer agrees to reimburse Employee for any tax due on
the annual permanent insurance premium paid by Employer.
(e) The amount of insurance described in subparagraph (a) may
be increased by the Board of Directors.
6. Termination.
(a) In the event of the termination of Employee's employment by
Employer, without "cause" (as defined in paragraph 2 herein), then, in lieu of
any further salary payment pursuant to paragraph 4(a) herein, Employer agrees
to pay Employee for the remaining term of this Agreement at an annual rate
equal to the average of Employee's "compensation" for the three fiscal years
preceding the year of such termination. For this purpose the term
"compensation" means Employee's base salary in effect for a particular year
plus the incentive compensation received by Employee with respect to services
rendered in such year whether or not such incentive compensation is actually
paid in such year. Amounts described above due Employee under this
paragraph 6(a) shall be due and payable for the duration of the remaining term
in equal monthly installments. In addition to the foregoing, Employer shall
continue, for the duration of the remaining term, to provide Employee with such
additional fringe benefits to which Employee was entitled as of the day
immediately prior to the date of such termination.
(b) In the event of a Change of Control, (as hereinafter
defined) Employee may terminate his employment hereunder at any time during the
period commencing six months following the Change of Control and ending the
earlier of (a) twenty-four months following the Change of Control or (b)
August 2, 1999. If (a) Employee shall terminate his employment during such
period for any reason other than death or Disability, (b) Employer shall
terminate Employee's employment during the Change of Control Period for any
reason, or (c) Employee terminates his employment during the first six (6)
months of the Change of Control Period for Good Reason as hereinafter defined,
Employer shall pay to Employee upon such termination of employment, in a single
lump cash sum, an amount equal to the lesser of (a) Two Million Nine Hundred
Thousand Dollars ($2,900,000.00) or (b) One Dollar ($1.00) less than 300% of
Employee's Base Amount as hereinafter defined. Such payment shall be in lieu
of further salary payments under paragraph 4(a) or payments (other than
retirement and deferred compensation payments) under paragraph 6(a).
Notwithstanding anything to the contrary contained herein, nothing in this
Agreement shall relieve Employer of its obligation of providing Employee with
all retirement benefits in accordance with the terms of all retirement and
deferred compensation plans in which Employee participates including, without
limitation, Employer's obligation under Section IV of the Key Employee
Retirement Agreement between Employer and Employee maintained pursuant to the
Laclede Steel Company Key Employee Retirement Plan.
The term "Good Reason" shall mean the failure of Employer to comply
with the following requirement: During the Change of Control Period, (i)
Employee'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 Employee at any time during the 90-day
period immediately preceding the date of the Change of Control and (ii)
Employee's services shall be performed at the location where Employee was
employed immediately preceding the date of the Change of Control.
The term "Base Amount" shall mean Employee's average annual
compensation from Employer (as reported on Form W-2) for the five consecutive
calendar years ending with the calendar year immediately preceding the Change
of Control.
The term "Change of Control" shall mean a change of control of a
nature that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), or
any comparable successor provisions. Without limiting the foregoing, a "Change
of Control" also means for purposes of this Agreement, regardless of its
meaning under the provisions of the Exchange Act:
(i) The purchase or other acquisition (other than from Employer) by
any person, entity or group of persons, within the meaning of Section
13(d) or 14(d) of the Exchange Act (excluding, for this purpose, Employer
or its subsidiaries or any employee benefit plan of Employer or its
subsidiaries), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either the then
outstanding shares of common stock or the combined voting power of
Employer's then outstanding voting securities entitled to vote in the
election of directors; or
(ii) The receipt of proxies for the election of directors of Employer
in opposition to management's slate of nominees which proxies aggregate
more than 40% of the then outstanding voting stock of Employer; or
(iii) Individuals who, as of the date hereof, constitute the Board of
Directors of Employer (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least two-thirds of the Board, provided
that any person (other than a person whose election or nomination or whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of Employer, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) who becomes a director subsequent to the date hereof whose
election, or nomination for election by Employer's shareholders, was
approved by a vote of at least three-quarters of the directors then
comprising the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iv) Approval by the stockholders of Employer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were the stockholders of Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or a liquidation or dissolution of
Employer or of the sale of all or substantially all of the assets of
Employer.
(c) In the event of a determination that payments under
paragraph 6(b), together with any other payments which Employee has a right to
receive from Employer constitute a "payment" within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), then Employer shall pay to Employee, in a lump sum, an amount equal to
the sum of (i) any excise tax that would be imposed by Section 4999 of the Code
and payable by Employee, and (ii) an additional amount which, when added to the
amount of the excise tax payable, equals an aggregate payment sufficient to pay
all federal, state and local income taxes due on the aggregate payment,
including interest and penalties, and leave a net amount equal to the excise
tax payable. For purposes of this paragraph, the term "determination" means
(i) a decision by the Tax Court which has become final, as defined in
Section 7481 of the Code or (ii) a judgment, decree, or other order by any
court of competent jurisdiction which has become final. Employer shall pay all
reasonable legal fees incurred in connection with a determination on this
issue. If both Employer and Employee elect to forego a court proceeding on
this issue, Employer agrees to pay Employee the amount set forth in this
paragraph 6(c) without a determination and to pay all reasonable legal fees
incurred prior to such election.
7. Extent of Services. Employee shall devote Employee's time,
attention and energy to the business of Employer, and shall not during the term
of this Agreement, or any extension hereof, without Employer's consent, be
engaged in any other business activity whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; but nothing contained
herein shall be construed as preventing Employee from investing his assets in
such form or manner as will not require any service on the part of Employee in
the operation of the affairs of the corporations or other entities in which
Employee may invest his assets.
8. Covenants of Employee.
(a) During the term of Employee's employment with Employer, and
for a period of one (1) year after the termination of such employment, for
whatever reason, except for the termination of Employee's employment under
circumstances which constitute a violation by Employer of the provisions of
this Agreement, Employee covenants and agrees that Employee will not (except as
required in Employee's duties to Employer), in any manner directly or
indirectly:
(i) Disclose or divulge to any person, entity, firm or
company whatsoever, or use for Employee's own benefit or the benefit of any
other person, entity, firm or company directly or indirectly, in competition
with the business of Employer, as the same may exist at the date of such
cessation, any proprietary business methods, customer lists, supplier lists,
business plans or other information or data of Employer, without regard to
whether all of the foregoing matters will otherwise be deemed confidential,
material or important, the parties hereto stipulating that as between them, the
same are important, material and confidential and greatly affect the effective
and successful conduct of the business and the goodwill of Employer, and that
any breach of the terms of this subparagraph (i) shall be a material breach of
this Agreement;
(ii) Solicit, divert, take away or interfere with any of
the customers, trade, business, patronage, employees or agents of Employer;
(iii) Engage, directly or indirectly, either personally or
as an employee, partner, associate, officer, manager, agent, advisor,
consultant or otherwise, or by means of any corporate or other entity or
device, in any business competitive with the business of Employer.
(b) For purposes hereof, a business will be deemed competitive
if (i) such business involves the manufacture and sale of steel, or any other
business which is competitive, during or as of the date of cessation of
Employee's employment, with any business then being conducted by Employer or as
to which Employer has at such time formulated definitive plans to enter; and
(ii) such business makes substantial sales of products competitive with those
of Employer in any of the States of Missouri, Illinois, Indiana, Iowa, Michigan
and Ohio.
(c) All of the covenants on behalf of Employee contained in
this paragraph 8 shall be construed as agreements independent of any other
provision of this Agreement, and the existence of any claim or cause of action
against Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of these covenants.
(d) It is the intention of the parties to restrict the
activities of Employee under this paragraph 8 only to the extent necessary for
the protection of legitimate business interests of Employer, and the parties
specifically covenant and agree that should any of the clauses or provisions
set forth herein, under any set of circumstances not now foreseen by the
parties, be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws effective during the term of this
Agreement, then and in that event, it is the intention of the parties hereto
that, in lieu of each such clause or provision of this paragraph 8, there shall
be substituted or added, and there is hereby substituted or added, terms to
such illegal, invalid or unenforceable clause or provision as may be legal,
valid and enforceable.
9. Expenses. In addition to compensation paid to Employee under
paragraph 4 hereof, during the period of Employee's employment, Employer will
pay directly or reimburse Employee for reasonable and necessary expenses
incurred by Employee in the interest of the business of Employer. All such
expenses paid by Employee will be reimbursed by Employer upon presentation by
Employee, from time to time, of an itemized account of such expenditures,
accompanied by appropriate receipts or other evidence of payment to the extent
necessary to permit the deductibility thereof for Federal income tax purposes.
10. Documents. Employee agrees that all documents, instruments,
drawings, plans, contracts, proposals, records, notebooks, invoices, statements
and correspondence, including all copies thereof, relating to the business of
Employer, other than purely personal documents, shall be the property of
Employer; and upon the cessation of Employee's employment with Employer, for
whatever reason, all of the same then in Employee's possession, whether
prepared by Employee or others, will be left with or immediately delivered to
Employer.
11. Remedies. It is agreed that any material breach or evasion of
any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to Employer and will authorize recourse to injunction and/or
specific performance as well as to all other legal or equitable remedies to
which Employer may be entitled. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy whether given hereunder or not or whether hereafter existing at
law or in equity, by statute or otherwise. The election of any one or more
remedies by Employer or Employee shall not constitute a waiver of the right to
pursue other available remedies at any time or cumulatively from time-to-time.
12. Severability. All agreements and covenants herein contained are
severable, and in the event any of them shall be held to be invalid or
unenforceable by any court of competent jurisdiction, this Agreement shall
continue in full force and effect and, subject to paragraph 8(d) hereof, shall
be interpreted as if such invalid agreement or covenant were not contained
herein.
13. Waiver or Modification. No amendment, waiver or modification of
this Agreement or of any covenant, condition or limitation herein contained
shall be valid unless in writing and duly executed by the party to be charged
therewith, and no evidence of any amendment, waiver or modification shall be
offered or received in evidence in any proceeding, arbitration or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such amendment, waiver
or modification is in writing, duly executed as aforesaid, and the parties
further agree that the provisions of this paragraph may not be waived or
modified except as herein set forth. Failure of Employee or Employer to
exercise or otherwise act with respect to any rights granted hereunder in the
event of a breach of any of the terms or conditions hereof by the other party,
shall not be construed as a waiver of such breach, nor prevent Employee or
Employer from thereafter enforcing strict compliance with any and all of the
terms and conditions hereof.
14. Fees and Expenses. If Employee is the prevailing party,
Employer shall pay all of Employee's reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by Employee as
a result of (i) Employee's termination of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
of employment) or (ii) Employee's seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by Employer under which Employee is or may be entitled to receive
benefits.
15. Notices. All notices, requests, demands or other communications
hereunder ("Notice") shall be in writing and shall be given by registered or
certified mail, return receipt requested:
if to Employer to:
Laclede Steel Company
Attn: Michael H. Lane
15th Floor
One Metropolitan Square
St. Louis, Missouri 63102
and, if to Employee, to:
John B. McKinney
19 Picardy
St. Louis, Missouri 63124
or to such other addresses as to which the parties hereto give Notice in
accordance with this paragraph 15.
16. Construction. This Agreement shall be governed by and construed
and interpreted according to the laws of the State of Missouri, notwithstanding
the place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction. For all purposes hereof,
reference to Employer shall include each and every subsidiary and affiliated
company of Employer.
17. Assignability. The services to be performed by Employee
hereunder are personal in nature and therefore Employee shall not assign his
rights or delegate his obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and void.
18. Successors. Subject to the provisions of paragraph 17, this
Agreement shall be binding upon and shall inure to the benefit of Employer and
Employee and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
19. Prior Employment Agreements. Any prior Employment Agreement
between Employer and Employee is hereby terminated by mutual agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
______________________________
JOHN B. McKINNEY
"Employee"
LACLEDE STEEL COMPANY
By____________________________
Michael H. Lane, Vice President,
Treasurer and Secretary
"Employer"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 19th day
of October 1994, by and between LACLEDE STEEL COMPANY, a Delaware corporation
("Employer"), and JOSEPH W. HEBENSTREIT ("Employee").
WHEREAS, Employee desires to be employed by Employer and Employer
desires to employ Employee under the terms and conditions set forth in this
Agreement; and
WHEREAS, it is Employer's intention to employ Employee upon the terms
and conditions herein, which recognize and compensate Employee for the
obligations of Employee undertaken hereunder, including specifically, but not
by way of limitation, the agreement of Employee not to compete with the
business of Employer, as provided in paragraph 8(a)(iii) (see page 12), for the
period provided in paragraph 8(a) upon the termination of Employee's employment
by Employer for any reason; it being understood and agreed that Employee is
employed by Employer to protect and expand the business of Employer;
NOW, THEREFORE, in consideration of the foregoing and the promises
and agreements herein contained, the parties agree as follows:
20. Employment. Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer upon the terms and conditions
hereinafter set forth.
21. Term of Employment. The term of Employee's employment under
this Agreement shall be for the period commencing October, 1994, and continuing
through August 2, 1999, or upon the earlier occurrence of any of the following
events:
(a) Whenever Employer and Employee shall mutually agree in
writing to terminate Employee's employment by Employer;
(b) Upon the death of Employee;
(c) For "cause," which shall mean Employee's dishonesty or
unlawful acts committed in connection with the business of Employer, and which
results in substantial gain or profit to Employee.
(d) At Employer's option and by action of Employer's Board of
Directors on thirty (30) days' written notice in the event of Employee's
Disability (defined as the failure substantially to discharge Employee's duties
as defined under this Agreement for ninety (90) consecutive days or one hundred
twenty (120) days (whether or not consecutive) in any twelve (12) month period,
as a result of an injury, disease, sickness or other physical or mental
incapacity). A determination of Employee's Disability shall be made by a
qualified medical doctor licensed to practice in the State of Missouri chosen
by Employer subject to Employee's approval, which approval shall not be
unreasonably withheld. Employee shall consent to be examined by Employer's
medical doctor and shall consent to allow Employee's medical doctor to discuss
Employee's medical condition with Employer. Notwithstanding anything to the
contrary contained herein, Employee's Disability shall not be deemed to have
commenced until full coverage with respect to such Disability shall have been
approved by Employer's disability insurance carrier and payment under
Employer's group disability policy for such Disability shall have commenced.
22. Duties of Employee. During Employee's employment by Employer,
Employee shall serve Employer to the best of Employee's ability and shall
perform such duties as are typically performed by the Employer's executive
officer with principal responsibility of managing the Employer's manufacturing
operations. Employee agrees to devote Employee's time and efforts to the
business of Employer (except for usual vacations and reasonable time for
attention to personal affairs so long as Employee's performance hereunder is
not adversely affected thereby), and to be loyal and faithful at all times,
constantly endeavoring to improve Employee's ability and knowledge of the
business of Employer in an effort to increase the value of Employee's services
for the mutual benefit of Employee and Employer.
23. Compensation.
(a) Employer agrees to pay Employee for Employee's services
during the term of Employee's employment hereunder. Employee's base salary
shall be the greater of (i) an annual rate of Two Hundred Forty-Three Thousand
Five Hundred Dollars ($243,500.00) or (ii) the highest annual base salary
authorized by the Board of Directors after the date hereof. Employee's base
salary shall be due and payable in twelve (12) equal monthly installments.
Additionally, during the term of Employee's employment by Employer hereunder,
Employee's compensation shall be reviewed and may be increased and/or Employee
may be paid additional or special compensation including without limitation
stock options, stock appreciation rights and other incentive compensation, or
bonuses (based on the earnings of Employer, the performance of Employee or
otherwise) from time to time by the mutual agreement of Employee and Employer,
as determined by the Board of Directors of Employer. In addition, during the
term of this Agreement, Employee shall receive such fringe benefits as are made
available by Employer from time to time to other employees of Employer at
Employee's level of employment.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason including death or Disability, or (ii) by
Employer without "cause" (as defined in paragraph 2 herein) or by Employer for
any reason during the "Change of Control Period" (as defined in paragraph 5(b)
herein), Employee shall be paid incentive compensation for the fiscal year in
which such termination occurred in an amount equal to the product of (a) the
amount of incentive compensation to which he would have been entitled for such
fiscal year had there been no termination of employment and (b) a fraction, the
numerator of which is the number of days of such fiscal year in which Employee
remained in the employment of Employer and the denominator of which is 365.
24. Life Insurance Benefits.
(a) During the term of this Agreement, Employer shall be
obligated to keep in force life insurance on the life of Employee in the amount
of One Million Fourteen Thousand Dollars ($1,014,000.00), Six Hundred Thousand
Dollars ($600,000.00) of which will consist of permanent insurance on the life
of Employee owned by Employee or his designee.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason, or (ii) by Employer without "cause" (as
defined in paragraph 2 herein), or by Employer for any reason during the period
commencing with the date of a Change of Control (as defined in Paragraph 6(b))
and ending the earlier of (a) twenty-four months following the Change of
Control, or (b) August 2, 1999 (the "Change of Control Period") Employer agrees
to keep in force the permanent life insurance set forth in subparagraph (a) of
this paragraph 5 for the duration of Employee's life. Employer may fulfill
this obligation by satisfying the premium requirement so that such permanent
insurance is fully paid under the terms of such permanent insurance policy.
Employer's obligation to pay permanent life insurance premiums under this
subparagraph (b) will survive the term of this Agreement.
(c) In the event of the termination of Employee's employment by
Employer for "cause" (as defined in paragraph 2 herein), other than during the
Change of Control Period, then Employer's obligation to pay premiums under this
paragraph 5 will cease.
(d) Employer agrees to reimburse Employee for any tax due on
the annual permanent insurance premium paid by Employer.
(e) The amount of insurance described in subparagraph (a) may
be increased by the Board of Directors.
25. Termination.
(a) In the event of the termination of Employee's employment by
Employer, without "cause" (as defined in paragraph 2 herein), then, in lieu of
any further salary payment pursuant to paragraph 4(a) herein, Employer agrees
to pay Employee for the remaining term of this Agreement at an annual rate
equal to the average of Employee's "compensation" for the three fiscal years
preceding the year of such termination. For this purpose the term
"compensation" means Employee's base salary in effect for a particular year
plus the incentive compensation received by Employee with respect to services
rendered in such year whether or not such incentive compensation is actually
paid in such year. Amounts described above due Employee under this paragraph
6(a) shall be due and payable for the duration of the remaining term in equal
monthly installments. In addition to the foregoing, Employer shall continue,
for the duration of the remaining term, to provide Employee with such
additional fringe benefits to which Employee was entitled as of the day
immediately prior to the date of such termination.
(b) In the event of a Change of Control, (as hereinafter
defined) Employee may terminate his employment hereunder at any time during the
period commencing six months following the Change of Control and ending the
earlier of (a) twenty-four months following the Change of Control or (b)
August 2, 1999. If (a) Employee shall terminate his employment during such
period for any reason other than death or Disability, (b) Employer shall
terminate Employee's employment during the Change of Control Period for any
reason, or (c) Employee terminates his employment during the first six (6)
months of the Change of Control Period for Good Reason as hereinafter defined,
Employer shall pay to Employee upon such termination of employment, in a single
lump cash sum, an amount equal to the lesser of (a) One Million Four Hundred
Thousand Dollars ($1,400,000.00) or (b) One Dollar ($1.00) less than 300% of
Employee's Base Amount as hereinafter defined. Such payment shall be in lieu
of further salary payments under paragraph 4(a) or payments (other than
retirement and deferred compensation payments) under paragraph 6(a).
Notwithstanding anything to the contrary contained herein, nothing in this
Agreement shall relieve Employer of its obligation of providing Employee with
all retirement benefits in accordance with the terms of all retirement and
deferred compensation plans in which Employee participates including, without
limitation, Employer's obligation under Section IV of the Key Employee
Retirement Agreement between Employer and Employee maintained pursuant to the
Laclede Steel Company Key Employee Retirement Plan.
The term "Good Reason" shall mean the failure of Employer to comply
with the following requirement: During the Change of Control Period, (i)
Employee'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 Employee at any time during the 90-day
period immediately preceding the date of the Change of Control and (ii)
Employee's services shall be performed at the location where Employee was
employed immediately preceding the date of the Change of Control.
The term "Base Amount" shall mean Employee's average annual
compensation from Employer (as reported on Form W-2) for the five consecutive
calendar years ending with the calendar year immediately preceding the Change
of Control.
The term "Change of Control" shall mean a change of control of a
nature that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), or
any comparable successor provisions. Without limiting the foregoing, a "Change
of Control" also means for purposes of this Agreement, regardless of its
meaning under the provisions of the Exchange Act:
(i) The purchase or other acquisition (other than from Employer) by
any person, entity or group of persons, within the meaning of Section
13(d) or 14(d) of the Exchange Act (excluding, for this purpose, Employer
or its subsidiaries or any employee benefit plan of Employer or its
subsidiaries), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either the then
outstanding shares of common stock or the combined voting power of
Employer's then outstanding voting securities entitled to vote in the
election of directors; or
(ii) The receipt of proxies for the election of directors of Employer
in opposition to management's slate of nominees which proxies aggregate
more than 40% of the then outstanding voting stock of Employer; or
(iii) Individuals who, as of the date hereof, constitute the Board of
Directors of Employer (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least two-thirds of the Board, provided
that any person (other than a person whose election or nomination or whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of Employer, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) who becomes a director subsequent to the date hereof whose
election, or nomination for election by Employer's shareholders, was
approved by a vote of at least three-quarters of the directors then
comprising the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iv) Approval by the stockholders of Employer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were the stockholders of Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or a liquidation or dissolution of
Employer or of the sale of all or substantially all of the assets of
Employer.
(c) In the event of a determination that payments under
paragraph 6(b), together with any other payments which Employee has a right to
receive from Employer constitute a "payment" within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), then Employer shall pay to Employee, in a lump sum, an amount equal to
the sum of (i) any excise tax that would be imposed by Section 4999 of the Code
and payable by Employee, and (ii) an additional amount which, when added to the
amount of the excise tax payable, equals an aggregate payment sufficient to pay
all federal, state and local income taxes due on the aggregate payment,
including interest and penalties, and leave a net amount equal to the excise
tax payable. For purposes of this paragraph, the term "determination" means
(i) a decision by the Tax Court which has become final, as defined in
Section 7481 of the Code or (ii) a judgment, decree, or other order by any
court of competent jurisdiction which has become final. Employer shall pay all
reasonable legal fees incurred in connection with a determination on this
issue. If both Employer and Employee elect to forego a court proceeding on
this issue, Employer agrees to pay Employee the amount set forth in this
paragraph 6(c) without a determination and to pay all reasonable legal fees
incurred prior to such election.
26. Extent of Services. Employee shall devote Employee's time,
attention and energy to the business of Employer, and shall not during the term
of this Agreement, or any extension hereof, without Employer's consent, be
engaged in any other business activity whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; but nothing contained
herein shall be construed as preventing Employee from investing his assets in
such form or manner as will not require any service on the part of Employee in
the operation of the affairs of the corporations or other entities in which
Employee may invest his assets.
27. Covenants of Employee.
(a) During the term of Employee's employment with Employer, and
for a period of one (1) year after the termination of such employment, for
whatever reason, except for the termination of Employee's employment under
circumstances which constitute a violation by Employer of the provisions of
this Agreement, Employee covenants and agrees that Employee will not (except as
required in Employee's duties to Employer), in any manner directly or
indirectly:
(i) Disclose or divulge to any person, entity, firm or
company whatsoever, or use for Employee's own benefit or the benefit of any
other person, entity, firm or company directly or indirectly, in competition
with the business of Employer, as the same may exist at the date of such
cessation, any proprietary business methods, customer lists, supplier lists,
business plans or other information or data of Employer, without regard to
whether all of the foregoing matters will otherwise be deemed confidential,
material or important, the parties hereto stipulating that as between them, the
same are important, material and confidential and greatly affect the effective
and successful conduct of the business and the goodwill of Employer, and that
any breach of the terms of this subparagraph (i) shall be a material breach of
this Agreement;
(ii) Solicit, divert, take away or interfere with any of
the customers, trade, business, patronage, employees or agents of Employer;
(iii) Engage, directly or indirectly, either personally or
as an employee, partner, associate, officer, manager, agent, advisor,
consultant or otherwise, or by means of any corporate or other entity or
device, in any business competitive with the business of Employer.
(b) For purposes hereof, a business will be deemed competitive
if (i) such business involves the manufacture and sale of steel, or any other
business which is competitive, during or as of the date of cessation of
Employee's employment, with any business then being conducted by Employer or as
to which Employer has at such time formulated definitive plans to enter; and
(ii) such business makes substantial sales of products competitive with those
of Employer in any of the States of Missouri, Illinois, Indiana, Iowa, Michigan
and Ohio.
(c) All of the covenants on behalf of Employee contained in
this paragraph 8 shall be construed as agreements independent of any other
provision of this Agreement, and the existence of any claim or cause of action
against Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of these covenants.
(d) It is the intention of the parties to restrict the
activities of Employee under this paragraph 8 only to the extent necessary for
the protection of legitimate business interests of Employer, and the parties
specifically covenant and agree that should any of the clauses or provisions
set forth herein, under any set of circumstances not now foreseen by the
parties, be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws effective during the term of this
Agreement, then and in that event, it is the intention of the parties hereto
that, in lieu of each such clause or provision of this paragraph 8, there shall
be substituted or added, and there is hereby substituted or added, terms to
such illegal, invalid or unenforceable clause or provision as may be legal,
valid and enforceable.
28. Expenses. In addition to compensation paid to Employee under
paragraph 4 hereof, during the period of Employee's employment, Employer will
pay directly or reimburse Employee for reasonable and necessary expenses
incurred by Employee in the interest of the business of Employer. All such
expenses paid by Employee will be reimbursed by Employer upon presentation by
Employee, from time to time, of an itemized account of such expenditures,
accompanied by appropriate receipts or other evidence of payment to the extent
necessary to permit the deductibility thereof for Federal income tax purposes.
29. Documents. Employee agrees that all documents, instruments,
drawings, plans, contracts, proposals, records, notebooks, invoices, statements
and correspondence, including all copies thereof, relating to the business of
Employer, other than purely personal documents, shall be the property of
Employer; and upon the cessation of Employee's employment with Employer, for
whatever reason, all of the same then in Employee's possession, whether
prepared by Employee or others, will be left with or immediately delivered to
Employer.
30. Remedies. It is agreed that any material breach or evasion of
any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to Employer and will authorize recourse to injunction and/or
specific performance as well as to all other legal or equitable remedies to
which Employer may be entitled. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy whether given hereunder or not or whether hereafter existing at
law or in equity, by statute or otherwise. The election of any one or more
remedies by Employer or Employee shall not constitute a waiver of the right to
pursue other available remedies at any time or cumulatively from time-to-time.
31. Severability. All agreements and covenants herein contained are
severable, and in the event any of them shall be held to be invalid or
unenforceable by any court of competent jurisdiction, this Agreement shall
continue in full force and effect and, subject to paragraph 8(d) hereof, shall
be interpreted as if such invalid agreement or covenant were not contained
herein.
32. Waiver or Modification. No amendment, waiver or modification of
this Agreement or of any covenant, condition or limitation herein contained
shall be valid unless in writing and duly executed by the party to be charged
therewith, and no evidence of any amendment, waiver or modification shall be
offered or received in evidence in any proceeding, arbitration or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such amendment, waiver
or modification is in writing, duly executed as aforesaid, and the parties
further agree that the provisions of this paragraph may not be waived or
modified except as herein set forth. Failure of Employee or Employer to
exercise or otherwise act with respect to any rights granted hereunder in the
event of a breach of any of the terms or conditions hereof by the other party,
shall not be construed as a waiver of such breach, nor prevent Employee or
Employer from thereafter enforcing strict compliance with any and all of the
terms and conditions hereof.
33. Fees and Expenses. If Employee is the prevailing party,
Employer shall pay all of Employee's reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by Employee as
a result of (i) Employee's termination of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
of employment) or (ii) Employee's seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by Employer under which Employee is or may be entitled to receive
benefits.
34. Notices. All notices, requests, demands or other communications
hereunder ("Notice") shall be in writing and shall be given by registered or
certified mail, return receipt requested:
if to Employer to:
Laclede Steel Company
Attn: John B. McKinney
15th Floor
One Metropolitan Square
St. Louis, Missouri 63102
and, if to Employee, to:
Joseph W. Hebenstreit
10 Hunter's Point
O'Fallon, Illinois 62269-0452
or to such other addresses as to which the parties hereto give Notice in
accordance with this paragraph 15.
35. Construction. This Agreement shall be governed by and construed
and interpreted according to the laws of the State of Missouri, notwithstanding
the place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction. For all purposes hereof,
reference to Employer shall include each and every subsidiary and affiliated
company of Employer.
36. Assignability. The services to be performed by Employee
hereunder are personal in nature and therefore Employee shall not assign his
rights or delegate his obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and void.
37. Successors. Subject to the provisions of paragraph 17, this
Agreement shall be binding upon and shall inure to the benefit of Employer and
Employee and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
38. Prior Employment Agreements. Any prior Employment Agreement
between Employer and Employee is hereby terminated by mutual agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
______________________________
JOSEPH W. HEBENSTREIT
"Employee"
LACLEDE STEEL COMPANY
By____________________________
John B. McKinney, President
"Employer"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 19th day
of October 1994, by and between LACLEDE STEEL COMPANY, a Delaware corporation
("Employer"), and MICHAEL H. LANE ("Employee").
WHEREAS, Employee desires to be employed by Employer and Employer
desires to employ Employee under the terms and conditions set forth in this
Agreement; and
WHEREAS, it is Employer's intention to employ Employee upon the terms
and conditions herein, which recognize and compensate Employee for the
obligations of Employee undertaken hereunder, including specifically, but not
by way of limitation, the agreement of Employee not to compete with the
business of Employer, as provided in paragraph 8(a)(iii) (see page 13), for the
period provided in paragraph 8(a) upon the termination of Employee's employment
by Employer for any reason; it being understood and agreed that Employee is
employed by Employer to protect and expand the business of Employer;
NOW, THEREFORE, in consideration of the foregoing and the promises
and agreements herein contained, the parties agree as follows:
39. Employment. Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer upon the terms and conditions
hereinafter set forth.
40. Term of Employment. The term of Employee's employment under
this Agreement shall be for the period commencing October 19, 1994, and
continuing through August 2, 1999 or upon the earlier occurrence of any of the
following events:
(a) Whenever Employer and Employee shall mutually agree in
writing to terminate Employee's employment by Employer;
(b) Upon the death of Employee;
(c) For "cause," which shall mean Employee's dishonesty or
unlawful acts committed in connection with the business of Employer, and which
results in substantial gain or profit to Employee.
(d) At Employer's option and by action of Employer's Board of
Directors on thirty (30) days' written notice in the event of Employee's
Disability (defined as the failure substantially to discharge Employee's duties
as defined under this Agreement for ninety (90) consecutive days or one hundred
twenty (120) days (whether or not consecutive) in any twelve (12) month period,
as a result of an injury, disease, sickness or other physical or mental
incapacity). A determination of Employee's Disability shall be made by a
qualified medical doctor licensed to practice in the State of Missouri chosen
by Employer subject to Employee's approval, which approval shall not be
unreasonably withheld. Employee shall consent to be examined by Employer's
medical doctor and shall consent to allow Employee's medical doctor to discuss
Employee's medical condition with Employer. Notwithstanding anything to the
contrary contained herein, Employee's Disability shall not be deemed to have
commenced until full coverage with respect to such Disability shall have been
approved by Employer's disability insurance carrier and payment under
Employer's group disability policy for such Disability shall have commenced.
41. Duties of Employee. During Employee's employment by Employer,
Employee shall serve Employer to the best of Employee's ability and shall
perform such duties as are typically performed by the Vice President/Finance
and Chief Financial Officer of Employer. Employee agrees to devote Employee's
time and efforts to the business of Employer (except for usual vacations and
reasonable time for attention to personal affairs so long as Employee's
performance hereunder is not adversely affected thereby), and to be loyal and
faithful at all times, constantly endeavoring to improve Employee's ability and
knowledge of the business of Employer in an effort to increase the value of
Employee's services for the mutual benefit of Employee and Employer.
42. Compensation.
(a) Employer agrees to pay Employee for Employee's services
during the term of Employee's employment hereunder. Employee's base salary
shall be the greater of (i) an annual rate of Two Hundred Forty-Three Thousand
Five Hundred Dollars ($243,500.00) or (ii) the highest annual base salary
authorized by the Board of Directors after the date hereof. Employee's base
salary shall be due and payable in twelve (12) equal monthly installments.
Additionally, during the term of Employee's employment by Employer hereunder,
Employee's compensation shall be reviewed and may be increased and/or Employee
may be paid additional or special compensation including without limitation
stock options, stock appreciation rights and other incentive compensation, or
bonuses (based on the earnings of Employer, the performance of Employee or
otherwise) from time to time by the mutual agreement of Employee and Employer,
as determined by the Board of Directors of Employer. In addition, during the
term of this Agreement, Employee shall receive such fringe benefits as are made
available by Employer from time to time to other employees of Employer at
Employee's level of employment.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason including death or Disability, or (ii) by
Employer without "cause" (as defined in paragraph 2 herein) or by Employer for
any reason during the "Change of Control Period" (as defined in paragraph 5(b)
herein), Employee shall be paid incentive compensation for the fiscal year in
which such termination occurred in an amount equal to the product of (a) the
amount of incentive compensation to which he would have been entitled for such
fiscal year had there been no termination of employment and (b) a fraction, the
numerator of which is the number of days of such fiscal year in which Employee
remained in the employment of Employer and the denominator of which is 365.
43. Life Insurance Benefits.
(a) During the term of this Agreement, Employer shall be
obligated to keep in force life insurance on the life of Employee in the amount
of One Million Fourteen Thousand Dollars ($1,014,000.00), Six Hundred Thousand
Dollars ($600,000.00) of which will consist of permanent insurance on the life
of Employee owned by Employee or his designee.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason, or (ii) by Employer without "cause" (as
defined in paragraph 2 herein), or by Employer for any reason during the period
commencing with the date of a Change of Control (as defined in Paragraph 6(b))
and ending the earlier of (a) twenty-four months following the Change of
Control, or (b) August 2, 1999, (the "Change of Control Period"), Employer
agrees to keep in force the permanent life insurance set forth in
subparagraph (a) of this paragraph 5 for the duration of Employee's life.
Employer may fulfill this obligation by satisfying the premium requirement so
that such permanent insurance is fully paid under the terms of such permanent
insurance policy. Employer's obligation to pay permanent life insurance
premiums under this subparagraph (b) will survive the term of this Agreement.
(c) In the event of the termination of Employee's employment by
Employer for "cause" (as defined in paragraph 2 herein), other than during the
Change of Control Period, then Employer's obligation to pay premiums under this
paragraph 5 will cease.
(d) Employer agrees to reimburse Employee for any tax due on
the annual permanent insurance premium paid by Employer.
(e) The amount of insurance described in subparagraph (a) may
be increased by the Board of Directors.
44. Termination.
(a) In the event of the termination of Employee's employment by
Employer, without "cause" (as defined in paragraph 2 herein), then, in lieu of
any further salary payment pursuant to paragraph 4(a) herein, Employer agrees
to pay Employee for the remaining term of this Agreement at an annual rate
equal to the average of Employee's "compensation" for the three fiscal years
preceding the year of such termination. For this purpose the term
"compensation" means Employee's base salary in effect for a particular year
plus the incentive compensation received by Employee with respect to services
rendered in such year whether or not such incentive compensation is actually
paid in such year. Amounts described above due Employee under this paragraph
6(a) shall be due and payable for the duration of the remaining term in equal
monthly installments. In addition to the foregoing, Employer shall continue,
for the duration of the remaining term, to provide Employee with such
additional fringe benefits to which Employee was entitled as of the day
immediately prior to the date of such termination.
(b) In the event of a Change of Control, (as hereinafter
defined) Employee may terminate his employment hereunder at any time during the
period commencing six months following the Change of Control and ending the
earlier of (a) twenty-four months following the Change of Control or (b)
August 2, 1999. If (a) Employee shall terminate his employment during such
period for any reason other than death or Disability, (b) Employer shall
terminate Employee's employment during the Change of Control Period for any
reason, or (c) Employee terminates his employment during the first six (6)
months of the Change of Control Period for Good Reason as hereinafter defined,
Employer shall pay to Employee upon such termination of employment, in a single
lump cash sum, an amount equal to the lesser of (a) One Million Four Hundred
Thousand Dollars ($1,400,000.00) or (b) One Dollar ($1.00) less than 300% of
Employee's Base Amount as hereinafter defined. Such payment shall be in lieu
of further salary payments under paragraph 4(a) or payments (other than
retirement and deferred compensation payments) under paragraph 6(a).
Notwithstanding anything to the contrary contained herein, nothing in this
Agreement shall relieve Employer of its obligation of providing Employee with
all retirement benefits in accordance with the terms of all retirement and
deferred compensation plans in which Employee participates including, without
limitation, Employer's obligation under Section IV of the Key Employee
Retirement Agreement between Employer and Employee maintained pursuant to the
Laclede Steel Company Key Employee Retirement Plan.
The term "Good Reason" shall mean the failure of Employer to comply
with the following requirement: During the Change of Control Period, (i)
Employee'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 Employee at any time during the 90-day
period immediately preceding the date of the Change of Control and (ii)
Employee's services shall be performed at the location where Employee was
employed immediately preceding the date of the Change of Control.
The term "Base Amount" shall mean Employee's average annual
compensation from Employer (as reported on Form W-2) for the five consecutive
calendar years ending with the calendar year immediately preceding the Change
of Control.
The term "Change of Control" shall mean a change of control of a
nature that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), or
any comparable successor provisions. Without limiting the foregoing, a "Change
of Control" also means for purposes of this Agreement, regardless of its
meaning under the provisions of the Exchange Act:
(i) The purchase or other acquisition (other than from Employer) by
any person, entity or group of persons, within the meaning of Section
13(d) or 14(d) of the Exchange Act (excluding, for this purpose, Employer
or its subsidiaries or any employee benefit plan of Employer or its
subsidiaries), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either the then
outstanding shares of common stock or the combined voting power of
Employer's then outstanding voting securities entitled to vote in the
election of directors; or
(ii) The receipt of proxies for the election of directors of Employer
in opposition to management's slate of nominees which proxies aggregate
more than 40% of the then outstanding voting stock of Employer; or
(iii) Individuals who, as of the date hereof, constitute the Board of
Directors of Employer (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least two-thirds of the Board, provided
that any person (other than a person whose election or nomination or whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of Employer, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) who becomes a director subsequent to the date hereof whose
election, or nomination for election by Employer's shareholders, was
approved by a vote of at least three-quarters of the directors then
comprising the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iv) Approval by the stockholders of Employer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were the stockholders of Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or a liquidation or dissolution of
Employer or of the sale of all or substantially all of the assets of
Employer.
(c) In the event of a determination that payments under
paragraph 6(b), together with any other payments which Employee has a right to
receive from Employer constitute a "payment" within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), then Employer shall pay to Employee, in a lump sum, an amount equal to
the sum of (i) any excise tax that would be imposed by Section 4999 of the Code
and payable by Employee, and (ii) an additional amount which, when added to the
amount of the excise tax payable, equals an aggregate payment sufficient to pay
all federal, state and local income taxes due on the aggregate payment,
including interest and penalties, and leave a net amount equal to the excise
tax payable. For purposes of this paragraph, the term "determination" means
(i) a decision by the Tax Court which has become final, as defined in
Section 7481 of the Code or (ii) a judgment, decree, or other order by any
court of competent jurisdiction which has become final. Employer shall pay all
reasonable legal fees incurred in connection with a determination on this
issue. If both Employer and Employee elect to forego a court proceeding on
this issue, Employer agrees to pay Employee the amount set forth in this
paragraph 6(c) without a determination and to pay all reasonable legal fees
incurred prior to such election.
45. Extent of Services. Employee shall devote Employee's time,
attention and energy to the business of Employer, and shall not during the term
of this Agreement, or any extension hereof, without Employer's consent, be
engaged in any other business activity whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; but nothing contained
herein shall be construed as preventing Employee from investing his assets in
such form or manner as will not require any service on the part of Employee in
the operation of the affairs of the corporations or other entities in which
Employee may invest his assets.
46. Covenants of Employee.
(a) During the term of Employee's employment with Employer, and
for a period of one (1) year after the termination of such employment, for
whatever reason, except for the termination of Employee's employment under
circumstances which constitute a violation by Employer of the provisions of
this Agreement, Employee covenants and agrees that Employee will not (except as
required in Employee's duties to Employer), in any manner directly or
indirectly:
(i) Disclose or divulge to any person, entity, firm or
company whatsoever, or use for Employee's own benefit or the benefit of any
other person, entity, firm or company directly or indirectly, in competition
with the business of Employer, as the same may exist at the date of such
cessation, any proprietary business methods, customer lists, supplier lists,
business plans or other information or data of Employer, without regard to
whether all of the foregoing matters will otherwise be deemed confidential,
material or important, the parties hereto stipulating that as between them, the
same are important, material and confidential and greatly affect the effective
and successful conduct of the business and the goodwill of Employer, and that
any breach of the terms of this subparagraph (i) shall be a material breach of
this Agreement;
(ii) Solicit, divert, take away or interfere with any of
the customers, trade, business, patronage, employees or agents of Employer;
(iii) Engage, directly or indirectly, either personally or
as an employee, partner, associate, officer, manager, agent, advisor,
consultant or otherwise, or by means of any corporate or other entity or
device, in any business competitive with the business of Employer.
(b) For purposes hereof, a business will be deemed competitive
if (i) such business involves the manufacture and sale of steel, or any other
business which is competitive, during or as of the date of cessation of
Employee's employment, with any business then being conducted by Employer or as
to which Employer has at such time formulated definitive plans to enter; and
(ii) such business makes substantial sales of products competitive with those
of Employer in any of the States of Missouri, Illinois, Indiana, Iowa, Michigan
and Ohio.
(c) All of the covenants on behalf of Employee contained in
this paragraph 8 shall be construed as agreements independent of any other
provision of this Agreement, and the existence of any claim or cause of action
against Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of these covenants.
(d) It is the intention of the parties to restrict the
activities of Employee under this paragraph 8 only to the extent necessary for
the protection of legitimate business interests of Employer, and the parties
specifically covenant and agree that should any of the clauses or provisions
set forth herein, under any set of circumstances not now foreseen by the
parties, be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws effective during the term of this
Agreement, then and in that event, it is the intention of the parties hereto
that, in lieu of each such clause or provision of this paragraph 8, there shall
be substituted or added, and there is hereby substituted or added, terms to
such illegal, invalid or unenforceable clause or provision as may be legal,
valid and enforceable.
47. Expenses. In addition to compensation paid to Employee under
paragraph 4 hereof, during the period of Employee's employment, Employer will
pay directly or reimburse Employee for reasonable and necessary expenses
incurred by Employee in the interest of the business of Employer. All such
expenses paid by Employee will be reimbursed by Employer upon presentation by
Employee, from time to time, of an itemized account of such expenditures,
accompanied by appropriate receipts or other evidence of payment to the extent
necessary to permit the deductibility thereof for Federal income tax purposes.
48. Documents. Employee agrees that all documents, instruments,
drawings, plans, contracts, proposals, records, notebooks, invoices, statements
and correspondence, including all copies thereof, relating to the business of
Employer, other than purely personal documents, shall be the property of
Employer; and upon the cessation of Employee's employment with Employer, for
whatever reason, all of the same then in Employee's possession, whether
prepared by Employee or others, will be left with or immediately delivered to
Employer.
49. Remedies. It is agreed that any material breach or evasion of
any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to Employer and will authorize recourse to injunction and/or
specific performance as well as to all other legal or equitable remedies to
which Employer may be entitled. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy whether given hereunder or not or whether hereafter existing at
law or in equity, by statute or otherwise. The election of any one or more
remedies by Employer or Employee shall not constitute a waiver of the right to
pursue other available remedies at any time or cumulatively from time-to-time.
50. Severability. All agreements and covenants herein contained are
severable, and in the event any of them shall be held to be invalid or
unenforceable by any court of competent jurisdiction, this Agreement shall
continue in full force and effect and, subject to paragraph 8(d) hereof, shall
be interpreted as if such invalid agreement or covenant were not contained
herein.
51. Waiver or Modification. No amendment, waiver or modification of
this Agreement or of any covenant, condition or limitation herein contained
shall be valid unless in writing and duly executed by the party to be charged
therewith, and no evidence of any amendment, waiver or modification shall be
offered or received in evidence in any proceeding, arbitration or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such amendment, waiver
or modification is in writing, duly executed as aforesaid, and the parties
further agree that the provisions of this paragraph may not be waived or
modified except as herein set forth. Failure of Employee or Employer to
exercise or otherwise act with respect to any rights granted hereunder in the
event of a breach of any of the terms or conditions hereof by the other party,
shall not be construed as a waiver of such breach, nor prevent Employee or
Employer from thereafter enforcing strict compliance with any and all of the
terms and conditions hereof.
52. Fees and Expenses. If Employee is the prevailing party,
Employer shall pay all of Employee's reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by Employee as
a result of (i) Employee's termination of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
of employment) or (ii) Employee's seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by Employer under which Employee is or may be entitled to receive
benefits.
53. Notices. All notices, requests, demands or other communications
hereunder ("Notice") shall be in writing and shall be given by registered or
certified mail, return receipt requested:
if to Employer to:
Laclede Steel Company
Attn: John B. McKinney
15th Floor
One Metropolitan Square
St. Louis, Missouri 63102
and, if to Employee, to:
Michael H. Lane
7350 Westover Colonial Lane
St. Louis, Missouri 63119
or to such other addresses as to which the parties hereto give Notice in
accordance with this paragraph 15.
54. Construction. This Agreement shall be governed by and construed
and interpreted according to the laws of the State of Missouri, notwithstanding
the place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction. For all purposes hereof,
reference to Employer shall include each and every subsidiary and affiliated
company of Employer.
55. Assignability. The services to be performed by Employee
hereunder are personal in nature and therefore Employee shall not assign his
rights or delegate his obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and void.
56. Successors. Subject to the provisions of paragraph 17, this
Agreement shall be binding upon and shall inure to the benefit of Employer and
Employee and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
57. Prior Employment Agreements. Any prior Employment Agreement
between Employer and Employee is hereby terminated by mutual agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
______________________________
MICHAEL H. LANE
"Employee"
LACLEDE STEEL COMPANY
By____________________________
John B. McKinney, President
"Employer"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 19th day
of October 1994, by and between LACLEDE STEEL COMPANY, a Delaware corporation
("Employer"), and H. BRUCE NETHINGTON ("Employee").
WHEREAS, Employee desires to be employed by Employer and Employer
desires to employ Employee under the terms and conditions set forth in this
Agreement; and
WHEREAS, it is Employer's intention to employ Employee upon the terms
and conditions herein, which recognize and compensate Employee for the
obligations of Employee undertaken hereunder, including specifically, but not
by way of limitation, the agreement of Employee not to compete with the
business of Employer, as provided in paragraph 8(a)(iii) (see page 12), for the
period provided in paragraph 8(a) upon the termination of Employee's employment
by Employer for any reason; it being understood and agreed that Employee is
employed by Employer to protect and expand the business of Employer;
NOW, THEREFORE, in consideration of the foregoing and the promises
and agreements herein contained, the parties agree as follows:
58. Employment. Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer upon the terms and conditions
hereinafter set forth.
59. Term of Employment. The term of Employee's employment under
this Agreement shall be for the period commencing October 19, 1994, and
continuing through August 2, 1999, or upon the earlier occurrence of any of the
following events:
(a) Whenever Employer and Employee shall mutually agree in
writing to terminate Employee's employment by Employer;
(b) Upon the death of Employee;
(c) For "cause," which shall mean Employee's dishonesty or
unlawful acts committed in connection with the business of Employer, and which
results in substantial gain or profit to Employee.
(d) At Employer's option and by action of Employer's Board of
Directors on thirty (30) days' written notice in the event of Employee's
Disability (defined as the failure substantially to discharge Employee's duties
as defined under this Agreement for ninety (90) consecutive days or one hundred
twenty (120) days (whether or not consecutive) in any twelve (12) month period,
as a result of an injury, disease, sickness or other physical or mental
incapacity). A determination of Employee's Disability shall be made by a
qualified medical doctor licensed to practice in the State of Missouri chosen
by Employer subject to Employee's approval, which approval shall not be
unreasonably withheld. Employee shall consent to be examined by Employer's
medical doctor and shall consent to allow Employee's medical doctor to discuss
Employee's medical condition with Employer. Notwithstanding anything to the
contrary contained herein, Employee's Disability shall not be deemed to have
commenced until full coverage with respect to such Disability shall have been
approved by Employer's disability insurance carrier and payment under
Employer's group disability policy for such Disability shall have commenced.
60. Duties of Employee. During Employee's employment by Employer,
Employee shall serve Employer to the best of Employee's ability and shall
perform such duties as are typically performed by Employer's employee
responsible for Human Resources, Collective Bargaining and Labor Relations.
Employee agrees to devote Employee's time and efforts to the business of
Employer (except for usual vacations and reasonable time for attention to
personal affairs so long as Employee's performance hereunder is not adversely
affected thereby), and to be loyal and faithful at all times, constantly
endeavoring to improve Employee's ability and knowledge of the business of
Employer in an effort to increase the value of Employee's services for the
mutual benefit of Employee and Employer.
61. Compensation.
(a) Employer agrees to pay Employee for Employee's services
during the term of Employee's employment hereunder. Employee's base salary
shall be the greater of (i) an annual rate of One Hundred Sixty-Seven Thousand
Five Hundred Dollars ($167,500.00) (ii) the highest annual base salary
authorized by Employer for Employee after the date hereof. Employee's base
salary shall be due and payable in twelve (12) equal monthly installments.
Additionally, during the term of Employee's employment by Employer hereunder,
Employee's compensation shall be reviewed and may be increased and/or Employee
may be paid additional or special compensation including without limitation
stock options, stock appreciation rights and other incentive compensation, or
bonuses (based on the earnings of Employer, the performance of Employee or
otherwise) from time to time by the mutual agreement of Employee and Employer,
as determined by Employer. In addition, during the term of this Agreement,
Employee shall receive such fringe benefits as are made available by Employer
from time to time to other employees of Employer at Employee's level of
employment.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason including death or Disability, or (ii) by
Employer without "cause" (as defined in paragraph 2 herein) or by Employer for
any reason during the "Change of Control Period" (as defined in paragraph 5(b)
herein), Employee shall be paid incentive compensation for the fiscal year in
which such termination occurred in an amount equal to the product of (a) the
amount of incentive compensation to which he would have been entitled for such
fiscal year had there been no termination of employment and (b) a fraction, the
numerator of which is the number of days of such fiscal year in which Employee
remained in the employment of Employer and the denominator of which is 365.
62. Life Insurance Benefits.
(a) During the term of this Agreement, Employer shall be
obligated to keep in force life insurance on the life of Employee in the amount
of Three Hundred Ninety-Five Thousand Dollars ($395,000.00), Three Hundred
Thousand Dollars ($300,000.00) of which will consist of permanent insurance on
the life of Employee owned by Employee or his designee.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason, or (ii) by Employer without "cause" (as
defined in paragraph 2 herein), or by Employer for any reason during the period
commencing with the date of a Change of Control (as defined in Paragraph 6(b))
and ending the earlier of (a) twenty-four months following the Change of
Control, or (b) August 2, 1999, (the "Change of Control Period"), Employer
agrees to keep in force the permanent life insurance set forth in
subparagraph (a) of this paragraph 5 for the duration of Employee's life.
Employer may fulfill this obligation by satisfying the premium requirement so
that such permanent insurance is fully paid under the terms of such permanent
insurance policy. Employer's obligation to pay permanent life insurance
premiums under this subparagraph (b) will survive the term of this Agreement.
(c) In the event of the termination of Employee's employment by
Employer for "cause" (as defined in paragraph 2 herein), other than during the
Change of Control Period, then Employer's obligation to pay premiums under this
paragraph 5 will cease.
(d) Employer agrees to reimburse Employee for any tax due on
the annual permanent insurance premium paid by Employer.
(e) The amount of insurance described in subparagraph (a) may
be increased by the Board of Directors.
6. Termination.
(a) In the event of the termination of Employee's employment by
Employer, without "cause" (as defined in paragraph 2 herein), then, in lieu of
any further salary payment pursuant to paragraph 4(a) herein, Employer agrees
to pay Employee for the remaining term of this Agreement at an annual rate
equal to the average of Employee's "compensation" for the three fiscal years
preceding the year of such termination. For this purpose the term
"compensation" means Employee's base salary in effect for a particular year
plus the incentive compensation received by the Employee with respect to
services rendered in such year whether or not such incentive compensation is
actually paid in such year. Amounts described above due Employee under this
paragraph 6(a) shall be due and payable for the duration of the remaining term
in equal monthly installments. In addition to the foregoing, Employer shall
continue, for the duration of the remaining term, to provide Employee with such
additional fringe benefits to which Employee was entitled as of the day
immediately prior to the date of such termination.
(b) If (a) Employer shall terminate Employee's employment for
any reason during the period commencing with the date of a Change of Control
(as hereinafter defined) and ending the earlier of (i) twenty-four months after
the Change of Control, or (ii) August 2, 1999 (the "Change of Control Period"),
or (b) Employee shall terminate his employment during the Change of Control
Period for Good Reason as hereinafter defined, Employer shall pay to Employee
upon such termination of employment, in a single lump cash sum, an amount equal
to the lesser of (a) Three Hundred Fifty Thousand Dollars ($350,000) or (b) One
Dollar ($1.00) less than 300% of Employee's Base Amount as hereinafter defined.
Such payment shall be in lieu of further salary payments under paragraph 4(a)
or payments (other than retirement and deferred compensation payments) under
paragraph 6(a). Notwithstanding anything to the contrary contained herein,
nothing in this Agreement shall relieve Employer of its obligation of providing
Employee with all retirement benefits in accordance with the terms of all
retirement and deferred compensation plans in which Employee participates,
including without limitation, Employer's obligation under Section IV of the Key
Employee Retirement Agreement between Employer and Employee maintained pursuant
to the Laclede Steel Company Key Employee Retirement Plan.
The term "Good Reason" shall mean the failure of Employer to comply
with the following requirement: During the Change of Control Period, (i)
Employee'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 Employee at any time during the 90-day
period immediately preceding the date of the Change of Control and (ii)
Employee's services shall be performed at the location where Employee was
employed immediately preceding the date of the Change of Control.
The term "Base Amount" shall mean Employee's average annual
compensation from Employer (as reported on Form W-2) for the five consecutive
calendar years ending with the calendar year immediately preceding the Change
of Control.
The term "Change of Control" shall mean a change of control of a
nature that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), or
any comparable successor provisions. Without limiting the foregoing, a "Change
of Control" also means for purposes of this Agreement, regardless of its
meaning under the provisions of the Exchange Act:
(i) The purchase or other acquisition (other than from Employer) by
any person, entity or group of persons, within the meaning of Section
13(d) or 14(d) of the Exchange Act (excluding, for this purpose, Employer
or its subsidiaries or any employee benefit plan of Employer or its
subsidiaries), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either the then
outstanding shares of common stock or the combined voting power of
Employer's then outstanding voting securities entitled to vote in the
election of directors; or
(ii) The receipt of proxies for the election of directors of Employer
in opposition to management's slate of nominees which proxies aggregate
more than 40% of the then outstanding voting stock of Employer; or
(iii) Individuals who, as of the date hereof, constitute the Board of
Directors of Employer (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least two-thirds of the Board, provided
that any person (other than a person whose election or nomination or whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of Employer, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) who becomes a director subsequent to the date hereof whose
election, or nomination for election by Employer's shareholders, was
approved by a vote of at least three-quarters of the directors then
comprising the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iv) Approval by the stockholders of Employer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were the stockholders of Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or a liquidation or dissolution of
Employer or of the sale of all or substantially all of the assets of
Employer.
(c) In the event of a determination that payments under
paragraph 6(b), together with any other payments which Employee has a right to
receive from Employer constitute a "payment" within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), then Employer shall pay to Employee, in a lump sum, an amount equal to
the sum of (i) any excise tax that would be imposed by Section 4999 of the Code
and payable by Employee, and (ii) an additional amount which, when added to the
amount of the excise tax payable, equals an aggregate payment sufficient to pay
all federal, state and local income taxes due on the aggregate payment,
including interest and penalties, and leave a net amount equal to the excise
tax payable. For purposes of this paragraph, the term "determination" means
(i) a decision by the Tax Court which has become final, as defined in
Section 7481 of the Code or (ii) a judgment, decree, or other order by any
court of competent jurisdiction which has become final. Employer shall pay all
reasonable legal fees incurred in connection with a determination on this
issue. If both Employer and Employee elect to forego a court proceeding on
this issue, Employer agrees to pay Employee the amount set forth in this
paragraph 6(c) without a determination and to pay all reasonable legal fees
incurred prior to such election.
7. Extent of Services. Employee shall devote Employee's time,
attention and energy to the business of Employer, and shall not during the term
of this Agreement, or any extension hereof, without Employer's consent, be
engaged in any other business activity whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; but nothing contained
herein shall be construed as preventing Employee from investing his assets in
such form or manner as will not require any service on the part of Employee in
the operation of the affairs of the corporations or other entities in which
Employee may invest his assets.
8. Covenants of Employee.
(a) During the term of Employee's employment with Employer, and
for a period of one (1) year after the termination of such employment, for
whatever reason, except for the termination of Employee's employment under
circumstances which constitute a violation by Employer of the provisions of
this Agreement, Employee covenants and agrees that Employee will not (except as
required in Employee's duties to Employer), in any manner directly or
indirectly:
(i) Disclose or divulge to any person, entity, firm or
company whatsoever, or use for Employee's own benefit or the benefit of any
other person, entity, firm or company directly or indirectly, in competition
with the business of Employer, as the same may exist at the date of such
cessation, any proprietary business methods, customer lists, supplier lists,
business plans or other information or data of Employer, without regard to
whether all of the foregoing matters will otherwise be deemed confidential,
material or important, the parties hereto stipulating that as between them, the
same are important, material and confidential and greatly affect the effective
and successful conduct of the business and the goodwill of Employer, and that
any breach of the terms of this subparagraph (i) shall be a material breach of
this Agreement;
(ii) Solicit, divert, take away or interfere with any of
the customers, trade, business, patronage, employees or agents of Employer;
(iii) Engage, directly or indirectly, either personally or
as an employee, partner, associate, officer, manager, agent, advisor,
consultant or otherwise, or by means of any corporate or other entity or
device, in any business competitive with the business of Employer.
(b) For purposes hereof, a business will be deemed competitive
if (i) such business involves the manufacture and sale of steel, or any other
business which is competitive, during or as of the date of cessation of
Employee's employment, with any business then being conducted by Employer or as
to which Employer has at such time formulated definitive plans to enter; and
(ii) such business makes substantial sales of products competitive with those
of Employer in any of the States of Missouri, Illinois, Indiana, Iowa, Michigan
and Ohio.
(c) All of the covenants on behalf of Employee contained in
this paragraph 8 shall be construed as agreements independent of any other
provision of this Agreement, and the existence of any claim or cause of action
against Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of these covenants.
(d) It is the intention of the parties to restrict the
activities of Employee under this paragraph 8 only to the extent necessary for
the protection of legitimate business interests of Employer, and the parties
specifically covenant and agree that should any of the clauses or provisions
set forth herein, under any set of circumstances not now foreseen by the
parties, be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws effective during the term of this
Agreement, then and in that event, it is the intention of the parties hereto
that, in lieu of each such clause or provision of this paragraph 8, there shall
be substituted or added, and there is hereby substituted or added, terms to
such illegal, invalid or unenforceable clause or provision as may be legal,
valid and enforceable.
9 Expenses. In addition to compensation paid to Employee under
paragraph 4 hereof, during the period of Employee's employment, Employer will
pay directly or reimburse Employee for reasonable and necessary expenses
incurred by Employee in the interest of the business of Employer. All such
expenses paid by Employee will be reimbursed by Employer upon presentation by
Employee, from time to time, of an itemized account of such expenditures,
accompanied by appropriate receipts or other evidence of payment to the extent
necessary to permit the deductibility thereof for Federal income tax purposes.
10. Documents. Employee agrees that all documents, instruments,
drawings, plans, contracts, proposals, records, notebooks, invoices, statements
and correspondence, including all copies thereof, relating to the business of
Employer, other than purely personal documents, shall be the property of
Employer; and upon the cessation of Employee's employment with Employer, for
whatever reason, all of the same then in Employee's possession, whether
prepared by Employee or others, will be left with or immediately delivered to
Employer.
11. Remedies. It is agreed that any material breach or evasion of
any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to Employer and will authorize recourse to injunction and/or
specific performance as well as to all other legal or equitable remedies to
which Employer may be entitled. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy whether given hereunder or not or whether hereafter existing at
law or in equity, by statute or otherwise. The election of any one or more
remedies by Employer or Employee shall not constitute a waiver of the right to
pursue other available remedies at any time or cumulatively from time-to-time.
12. Severability. All agreements and covenants herein contained are
severable, and in the event any of them shall be held to be invalid or
unenforceable by any court of competent jurisdiction, this Agreement shall
continue in full force and effect and, subject to paragraph 8(d) hereof, shall
be interpreted as if such invalid agreement or covenant were not contained
herein.
13 Waiver or Modification. No amendment, waiver or modification of
this Agreement or of any covenant, condition or limitation herein contained
shall be valid unless in writing and duly executed by the party to be charged
therewith, and no evidence of any amendment, waiver or modification shall be
offered or received in evidence in any proceeding, arbitration or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such amendment, waiver
or modification is in writing, duly executed as aforesaid, and the parties
further agree that the provisions of this paragraph may not be waived or
modified except as herein set forth. Failure of Employee or Employer to
exercise or otherwise act with respect to any rights granted hereunder in the
event of a breach of any of the terms or conditions hereof by the other party,
shall not be construed as a waiver of such breach, nor prevent Employee or
Employer from thereafter enforcing strict compliance with any and all of the
terms and conditions hereof.
14. Fees and Expenses. If Employee is the prevailing party,
Employer shall pay all of Employee's reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by Employee as
a result of (i) Employee's termination of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
of employment) or (ii) Employee's seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by Employer under which Employee is or may be entitled to receive
benefits.
15. Notices. All notices, requests, demands or other communications
hereunder ("Notice") shall be in writing and shall be given by registered or
certified mail, return receipt requested:
if to Employer to:
Laclede Steel Company
Attn: John B. McKinney
15th Floor
One Metropolitan Square
St. Louis, Missouri 63102
and, if to Employee, to:
H. Bruce Nethington
1130 South Geyer Road
St. Louis, Missouri 63122
or to such other addresses as to which the parties hereto give Notice in
accordance with this paragraph 15.
16. Construction. This Agreement shall be governed by and construed
and interpreted according to the laws of the State of Missouri, notwithstanding
the place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction. For all purposes hereof,
reference to Employer shall include each and every subsidiary and affiliated
company of Employer.
17. Assignability. The services to be performed by Employee
hereunder are personal in nature and therefore Employee shall not assign his
rights or delegate his obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and void.
18. Successors. Subject to the provisions of paragraph 17, this
Agreement shall be binding upon and shall inure to the benefit of Employer and
Employee and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
19. Prior Employment Agreements. Any prior Employment Agreement
between Employer and Employee is hereby terminated by mutual agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
______________________________
H. BRUCE NETHINGTON
"Employee"
LACLEDE STEEL COMPANY
By____________________________
John B. McKinney, President
"Employer"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 19th day
of October 1994, by and between LACLEDE STEEL COMPANY, a Delaware corporation
("Employer"), and LARRY J. SCHNURBUSCH ("Employee").
WHEREAS, Employee desires to be employed by Employer and Employer
desires to employ Employee under the terms and conditions set forth in this
Agreement; and
WHEREAS, it is Employer's intention to employ Employee upon the terms
and conditions herein, which recognize and compensate Employee for the
obligations of Employee undertaken hereunder, including specifically, but not
by way of limitation, the agreement of Employee not to compete with the
business of Employer, as provided in paragraph 8(a)(iii) (see page 12), for the
period provided in paragraph 8(a) upon the termination of Employee's employment
by Employer for any reason; it being understood and agreed that Employee is
employed by Employer to protect and expand the business of Employer;
NOW, THEREFORE, in consideration of the foregoing and the promises
and agreements herein contained, the parties agree as follows:
63. Employment. Employer hereby employs Employee, and Employee
hereby accepts such employment from Employer upon the terms and conditions
hereinafter set forth.
64. Term of Employment. The term of Employee's employment under
this Agreement shall be for the period commencing October 19, 1994, and
continuing through August 2, 1999, or upon the earlier occurrence of any of the
following events:
(a) Whenever Employer and Employee shall mutually agree in
writing to terminate Employee's employment by Employer;
(b) Upon the death of Employee;
(c) For "cause," which shall mean Employee's dishonesty or
unlawful acts committed in connection with the business of Employer, and which
results in substantial gain or profit to Employee.
(d) At Employer's option and by action of Employer's Board of
Directors on thirty (30) days' written notice in the event of Employee's
Disability (defined as the failure substantially to discharge Employee's duties
as defined under this Agreement for ninety (90) consecutive days or one hundred
twenty (120) days (whether or not consecutive) in any twelve (12) month period,
as a result of an injury, disease, sickness or other physical or mental
incapacity). A determination of Employee's Disability shall be made by a
qualified medical doctor licensed to practice in the State of Missouri chosen
by Employer subject to Employee's approval, which approval shall not be
unreasonably withheld. Employee shall consent to be examined by Employer's
medical doctor and shall consent to allow Employee's medical doctor to discuss
Employee's medical condition with Employer. Notwithstanding anything to the
contrary contained herein, Employee's Disability shall not be deemed to have
commenced until full coverage with respect to such Disability shall have been
approved by Employer's disability insurance carrier and payment under
Employer's group disability policy for such Disability shall have commenced.
65. Duties of Employee. During Employee's employment by Employer,
Employee shall serve Employer to the best of Employee's ability and shall
perform such duties as are typically performed by Employer's employee
responsible for its engineering, purchasing and energy policies. Employee
agrees to devote Employee's time and efforts to the business of Employer
(except for usual vacations and reasonable time for attention to personal
affairs so long as Employee's performance hereunder is not adversely affected
thereby), and to be loyal and faithful at all times, constantly endeavoring to
improve Employee's ability and knowledge of the business of Employer in an
effort to increase the value of Employee's services for the mutual benefit of
Employee and Employer.
66. Compensation.
(a) Employer agrees to pay Employee for Employee's services
during the term of Employee's employment hereunder. Employee's base salary
shall be the greater of (i) an annual rate of One Hundred Seventy-Eight
Thousand Dollars ($178,000.00) or (ii) the highest annual base salary
authorized by Employer for Employee after the date hereof. Employee's base
salary shall be due and payable in twelve (12) equal monthly installments.
Additionally, during the term of Employee's employment by Employer hereunder,
Employee's compensation shall be reviewed and may be increased and/or Employee
may be paid additional or special compensation including without limitation
stock options, stock appreciation rights and other incentive compensation, or
bonuses (based on the earnings of Employer, the performance of Employee or
otherwise) from time to time by the mutual agreement of Employee and Employer,
as determined by Employer. In addition, during the term of this Agreement,
Employee shall receive such fringe benefits as are made available by Employer
from time to time to other employees of Employer at Employee's level of
employment.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason including death or Disability, or (ii) by
Employer without "cause" (as defined in paragraph 2 herein) or by Employer for
any reason during the "Change of Control Period" (as defined in paragraph 5(b)
herein), Employee shall be paid incentive compensation for the fiscal year in
which such termination occurred in an amount equal to the product of (a) the
amount of incentive compensation to which he would have been entitled for such
fiscal year had there been no termination of employment and (b) a fraction, the
numerator of which is the number of days of such fiscal year in which Employee
remained in the employment of Employer and the denominator of which is 365.
67. Life Insurance Benefits.
(a) During the term of this Agreement, Employer shall be
obligated to keep in force life insurance on the life of Employee in the amount
of Six Hundred Twenty-Two Thousand Dollars ($622,000.00), Three Hundred
Thousand Dollars ($300,000.00) of which will consist of permanent insurance on
the life of Employee owned by Employee or his designee.
(b) In the event of the termination of Employee's employment
either (i) by Employee for any reason, or (ii) by Employer without "cause" (as
defined in paragraph 2 herein), or by Employer for any reason during the period
commencing with the date of a Change of Control (as defined in Paragraph 6(b))
and ending the earlier of (a) twenty-four months following the Change of
Control, or (b) August 2, 1999, (the "Change of Control Period"), Employer
agrees to keep in force the permanent life insurance set forth in
subparagraph (a) of this paragraph 5 for the duration of Employee's life.
Employer may fulfill this obligation by satisfying the premium requirement so
that such permanent insurance is fully paid under the terms of such permanent
insurance policy. Employer's obligation to pay permanent life insurance
premiums under this subparagraph (b) will survive the term of this Agreement.
(c) In the event of the termination of Employee's employment by
Employer for "cause" (as defined in paragraph 2 herein), other than during the
Change of Control Period, then Employer's obligation to pay premiums under this
paragraph 5 will cease.
(d) Employer agrees to reimburse Employee for any tax due on
the annual permanent insurance premium paid by Employer.
(e) The amount of insurance described in subparagraph (a) may
be increased by the Board of Directors.
6. Termination.
(a) In the event of the termination of Employee's employment by
Employer, without "cause" (as defined in paragraph 2 herein), then, in lieu of
any further salary payment pursuant to paragraph 4(a) herein, Employer agrees
to pay Employee for the remaining term of this Agreement at an annual rate
equal to the average of Employee's "compensation" for the three fiscal years
preceding the year of such termination. For this purpose the term
"compensation" means Employee's base salary in effect for a particular year
plus the incentive compensation received by the Employee with respect to
services rendered in such year whether or not such incentive compensation is
actually paid in such year. Amounts described above due Employee under this
paragraph 6(a) shall be due and payable for the duration of the remaining term
in equal monthly installments. In addition to the foregoing, Employer shall
continue, for the duration of the remaining term, to provide Employee with such
additional fringe benefits to which Employee was entitled as of the day
immediately prior to the date of such termination.
(b) If (a) Employer shall terminate Employee's employment for
any reason during the period commencing with the date of a Change of Control
(as hereinafter defined) and ending the earlier of (i) twenty-four months after
the Change of Control, or (ii) August 2, 1999 (the "Change of Control Period"),
or (b) Employee shall terminate his employment during the Change of Control
Period for Good Reason as hereinafter defined, Employer shall pay to Employee
upon such termination of employment, in a single lump cash sum, an amount equal
to the lesser of (a) Five Hundred Fifty Thousand Dollars ($550,000) or (b) One
Dollar ($1.00) less than 300% of Employee's Base Amount as hereinafter defined.
Such payment shall be in lieu of further salary payments under paragraph 4(a)
or payments (other than retirement and deferred compensation payments) under
paragraph 6(a). Notwithstanding anything to the contrary contained herein,
nothing in this Agreement shall relieve Employer of its obligation of providing
Employee with all retirement benefits in accordance with the terms of all
retirement and deferred compensation plans in which Employee participates,
including without limitation, Employer's obligation under Section IV of the Key
Employee Retirement Agreement between Employer and Employee maintained pursuant
to the Laclede Steel Company Key Employee Retirement Plan.
The term "Good Reason" shall mean the failure of Employer to comply
with the following requirement: During the Change of Control Period, (i)
Employee'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 Employee at any time during the 90-day
period immediately preceding the date of the Change of Control and (ii)
Employee's services shall be performed at the location where Employee was
employed immediately preceding the date of the Change of Control.
The term "Base Amount" shall mean Employee's average annual
compensation from Employer (as reported on Form W-2) for the five consecutive
calendar years ending with the calendar year immediately preceding the Change
of Control.
The term "Change of Control" shall mean a change of control of a
nature that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), or
any comparable successor provisions. Without limiting the foregoing, a "Change
of Control" also means for purposes of this Agreement, regardless of its
meaning under the provisions of the Exchange Act:
(i) The purchase or other acquisition (other than from Employer) by
any person, entity or group of persons, within the meaning of Section
13(d) or 14(d) of the Exchange Act (excluding, for this purpose, Employer
or its subsidiaries or any employee benefit plan of Employer or its
subsidiaries), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either the then
outstanding shares of common stock or the combined voting power of
Employer's then outstanding voting securities entitled to vote in the
election of directors; or
(ii) The receipt of proxies for the election of directors of Employer
in opposition to management's slate of nominees which proxies aggregate
more than 40% of the then outstanding voting stock of Employer; or
(iii) Individuals who, as of the date hereof, constitute the Board of
Directors of Employer (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least two-thirds of the Board, provided
that any person (other than a person whose election or nomination or whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of Employer, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) who becomes a director subsequent to the date hereof whose
election, or nomination for election by Employer's shareholders, was
approved by a vote of at least three-quarters of the directors then
comprising the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iv) Approval by the stockholders of Employer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were the stockholders of Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or a liquidation or dissolution of
Employer or of the sale of all or substantially all of the assets of
Employer.
(c) In the event of a determination that payments under
paragraph 6(b), together with any other payments which Employee has a right to
receive from Employer constitute a "payment" within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), then Employer shall pay to Employee, in a lump sum, an amount equal to
the sum of (i) any excise tax that would be imposed by Section 4999 of the Code
and payable by Employee, and (ii) an additional amount which, when added to the
amount of the excise tax payable, equals an aggregate payment sufficient to pay
all federal, state and local income taxes due on the aggregate payment,
including interest and penalties, and leave a net amount equal to the excise
tax payable. For purposes of this paragraph, the term "determination" means
(i) a decision by the Tax Court which has become final, as defined in
Section 7481 of the Code or (ii) a judgment, decree, or other order by any
court of competent jurisdiction which has become final. Employer shall pay all
reasonable legal fees incurred in connection with a determination on this
issue. If both Employer and Employee elect to forego a court proceeding on
this issue, Employer agrees to pay Employee the amount set forth in this
paragraph 6(c) without a determination and to pay all reasonable legal fees
incurred prior to such election.
7. Extent of Services. Employee shall devote Employee's time,
attention and energy to the business of Employer, and shall not during the term
of this Agreement, or any extension hereof, without Employer's consent, be
engaged in any other business activity whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; but nothing contained
herein shall be construed as preventing Employee from investing his assets in
such form or manner as will not require any service on the part of Employee in
the operation of the affairs of the corporations or other entities in which
Employee may invest his assets.
8. Covenants of Employee.
(a) During the term of Employee's employment with Employer, and
for a period of one (1) year after the termination of such employment, for
whatever reason, except for the termination of Employee's employment under
circumstances which constitute a violation by Employer of the provisions of
this Agreement, Employee covenants and agrees that Employee will not (except as
required in Employee's duties to Employer), in any manner directly or
indirectly:
(i) Disclose or divulge to any person, entity, firm or
company whatsoever, or use for Employee's own benefit or the benefit of any
other person, entity, firm or company directly or indirectly, in competition
with the business of Employer, as the same may exist at the date of such
cessation, any proprietary business methods, customer lists, supplier lists,
business plans or other information or data of Employer, without regard to
whether all of the foregoing matters will otherwise be deemed confidential,
material or important, the parties hereto stipulating that as between them, the
same are important, material and confidential and greatly affect the effective
and successful conduct of the business and the goodwill of Employer, and that
any breach of the terms of this subparagraph (i) shall be a material breach of
this Agreement;
(ii) Solicit, divert, take away or interfere with any of
the customers, trade, business, patronage, employees or agents of Employer;
(iii) Engage, directly or indirectly, either personally or
as an employee, partner, associate, officer, manager, agent, advisor,
consultant or otherwise, or by means of any corporate or other entity or
device, in any business competitive with the business of Employer.
(b) For purposes hereof, a business will be deemed competitive
if (i) such business involves the manufacture and sale of steel, or any other
business which is competitive, during or as of the date of cessation of
Employee's employment, with any business then being conducted by Employer or as
to which Employer has at such time formulated definitive plans to enter; and
(ii) such business makes substantial sales of products competitive with those
of Employer in any of the States of Missouri, Illinois, Indiana, Iowa, Michigan
and Ohio.
(c) All of the covenants on behalf of Employee contained in
this paragraph 8 shall be construed as agreements independent of any other
provision of this Agreement, and the existence of any claim or cause of action
against Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of these covenants.
(d) It is the intention of the parties to restrict the
activities of Employee under this paragraph 8 only to the extent necessary for
the protection of legitimate business interests of Employer, and the parties
specifically covenant and agree that should any of the clauses or provisions
set forth herein, under any set of circumstances not now foreseen by the
parties, be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws effective during the term of this
Agreement, then and in that event, it is the intention of the parties hereto
that, in lieu of each such clause or provision of this paragraph 8, there shall
be substituted or added, and there is hereby substituted or added, terms to
such illegal, invalid or unenforceable clause or provision as may be legal,
valid and enforceable.
9 Expenses. In addition to compensation paid to Employee under
paragraph 4 hereof, during the period of Employee's employment, Employer will
pay directly or reimburse Employee for reasonable and necessary expenses
incurred by Employee in the interest of the business of Employer. All such
expenses paid by Employee will be reimbursed by Employer upon presentation by
Employee, from time to time, of an itemized account of such expenditures,
accompanied by appropriate receipts or other evidence of payment to the extent
necessary to permit the deductibility thereof for Federal income tax purposes.
10. Documents. Employee agrees that all documents, instruments,
drawings, plans, contracts, proposals, records, notebooks, invoices, statements
and correspondence, including all copies thereof, relating to the business of
Employer, other than purely personal documents, shall be the property of
Employer; and upon the cessation of Employee's employment with Employer, for
whatever reason, all of the same then in Employee's possession, whether
prepared by Employee or others, will be left with or immediately delivered to
Employer.
11. Remedies. It is agreed that any material breach or evasion of
any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to Employer and will authorize recourse to injunction and/or
specific performance as well as to all other legal or equitable remedies to
which Employer may be entitled. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy whether given hereunder or not or whether hereafter existing at
law or in equity, by statute or otherwise. The election of any one or more
remedies by Employer or Employee shall not constitute a waiver of the right to
pursue other available remedies at any time or cumulatively from time-to-time.
12. Severability. All agreements and covenants herein contained are
severable, and in the event any of them shall be held to be invalid or
unenforceable by any court of competent jurisdiction, this Agreement shall
continue in full force and effect and, subject to paragraph 8(d) hereof, shall
be interpreted as if such invalid agreement or covenant were not contained
herein.
13 Waiver or Modification. No amendment, waiver or modification of
this Agreement or of any covenant, condition or limitation herein contained
shall be valid unless in writing and duly executed by the party to be charged
therewith, and no evidence of any amendment, waiver or modification shall be
offered or received in evidence in any proceeding, arbitration or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such amendment, waiver
or modification is in writing, duly executed as aforesaid, and the parties
further agree that the provisions of this paragraph may not be waived or
modified except as herein set forth. Failure of Employee or Employer to
exercise or otherwise act with respect to any rights granted hereunder in the
event of a breach of any of the terms or conditions hereof by the other party,
shall not be construed as a waiver of such breach, nor prevent Employee or
Employer from thereafter enforcing strict compliance with any and all of the
terms and conditions hereof.
14. Fees and Expenses. If Employee is the prevailing party,
Employer shall pay all of Employee's reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by Employee as
a result of (i) Employee's termination of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any such termination
of employment) or (ii) Employee's seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by Employer under which Employee is or may be entitled to receive
benefits.
15. Notices. All notices, requests, demands or other communications
hereunder ("Notice") shall be in writing and shall be given by registered or
certified mail, return receipt requested:
if to Employer to:
Laclede Steel Company
Attn: John B. McKinney
15th Floor
One Metropolitan Square
St. Louis, Missouri 63102
and, if to Employee, to:
Larry J. Schnurbusch
12248 Winrock
St. Louis, Missouri 63141
or to such other addresses as to which the parties hereto give Notice in
accordance with this paragraph 15.
16. Construction. This Agreement shall be governed by and construed
and interpreted according to the laws of the State of Missouri, notwithstanding
the place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction. For all purposes hereof,
reference to Employer shall include each and every subsidiary and affiliated
company of Employer.
17. Assignability. The services to be performed by Employee
hereunder are personal in nature and therefore Employee shall not assign his
rights or delegate his obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and void.
18. Successors. Subject to the provisions of paragraph 17, this
Agreement shall be binding upon and shall inure to the benefit of Employer and
Employee and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
19. Prior Employment Agreements. Any prior Employment Agreement
between Employer and Employee is hereby terminated by mutual agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
______________________________
LARRY J. SCHNURBUSCH
"Employee"
LACLEDE STEEL COMPANY
By____________________________
John B. McKinney, President
"Employer"
EXHIBIT (22)
Subsidiaries of Registrant
1. Laclede Consulting Services Limited - wholly-owned.
2. Laclede Chain Manufacturing Company - wholly-owned.
3. Laclede Mid America Inc. - wholly-owned.
4. Laclede Pipe Company - wholly-owned.
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