Exhibit 10.21
TRUST UNDER CERTAIN KENTUCKY ELECTRIC STEEL, INC. SALARY
CONTINUATION AGREEMENTS
This Agreement made this 14th day of October, 1999 by and
between Kentucky Electric Steel, Inc. ("Company") and Fifth Third
Bank, Ohio Valley ("Trustee").
WHEREAS, Company has adopted the Salary Continuation Agreements
listed in Appendix A (each, an "Agreement" and collectively, the
"Agreements");
WHEREAS, Company has incurred or expects to incur
liability under the terms of such Agreements with respect to the
individuals participating in such Agreements (said individuals are
hereinafter referred to as "Participants" or "Beneficiaries" but
only as long as they remain entitled to a benefit under an Agreement),
said liabilities to be reduced by the monthly benefit payments the
cash surrender value of certain insurance policies listed in the
Agreements ("Policies") may provide;
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of Company's creditors in the event of
Company's Insolvency, as herein defined, until paid under the
Agreements;
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not affect
the status of the Agreements as unfunded Agreements maintained for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I of
the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make
contributions to the Trust to provide itself with a source of funds to
assist it in the meeting of its liabilities under the Agreements;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the
Trust shall be comprised, held and disposed of as follows:
I. Establishment of Trust.
A. Company hereby deposits with Trustee in
trust one dollar ($1.00) which shall become the principal of the
Trust to be held, administered and disposed of by Trustee as
provided in this Trust Agreement.
B. The Trust hereby established is
revocable by Company, it shall become irrevocable upon
a Change of Control (as defined herein).
C. The Trust is intended to be a
grantor trust, of which Company is the grantor, within
the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.
D. The principal of the Trust, and
any earnings thereon shall be held separate and apart
from other funds of Company and shall be used
exclusively for the uses and purposes of Participants
and general creditors as herein set forth.
Participants and their Beneficiaries shall have no
preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights
created under the Agreements and this Trust Agreement
shall be mere unsecured contractual rights of
Participants and their Beneficiaries against Company.
Any assets held by the Trust will be subject to the
claims of Company's general creditors under federal and
state law in the event of Insolvency, as defined in
Section III-A herein.
E. Upon a Change of Control,
Company shall, as soon as possible, but in no event
longer than 5 days following the Change of Control (as
defined herein), make an irrevocable contribution to
the Trust ("Change of Control Contribution") in an
amount that is sufficient to (a) pay all premiums which
shall thereafter become due to fully fund the Policies
to provide the "Monthly Amount" for each Participant
described on Appendix B attached hereto as calculated
by the insurer under each of the Policies and (b) pay
the Gross Up Payment as described in II-A, below. The
Policies are identified as follows:
Policy Number
Insurer
1A22856570
Pacific Life
1A22856560
Pacific Life
1A22856540
Pacific Life
1A22856530
Pacific Life
1953997V
Minnesota Life
II. Payments of Premiums on the Policies.
A. After the Change of Control Contribution has
been made, the Trustee shall thereafter pay all future premiums, to
the extent that funds are available, on each of the Policies until the
earliest of (a) the insured's death, (b) the date that the Policy
value is sufficient to provide the Monthly Amount described in I-E,
above, (c) the date the Policy is canceled by the insured, or (d) the
date the Participant violates Section 5 of his Agreement. As the
Trustee pays premiums on the Policies, the Executive shall incur
income on such payment for tax purposes ("Premium Payment Income").
As Executive incurs Premium Payment Income, the Trustee shall pay to
Executive, to the extent that funds are available, a payment (a
"Gross-Up Payment") in an amount sufficient to enable Executive to pay
all income and employment taxes (including any interest or penalties
imposed with respect to such income and employment taxes) on the Premium
Payment Income as well as all such income and employment taxes imposed
upon the Gross-Up Payment.
B. The entitlement of a Participant or his or her
Beneficiaries to benefits under the Agreements shall be determined by
Company or such party as it shall designate under the Agreements, and
any claim for such benefits shall be considered and reviewed under the
procedures set out in the Agreements.
III. Trustee Responsibility Regarding Payments to Insurance Companies
When Company Is Insolvent.
A. Trustee shall cease payment of premiums on the
Policies if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject
to a pending proceeding as a debtor under the United States Bankruptcy
Code.
B. At all times during the continuance of this
Trust, as provided in Section I-D hereof, the principal and income of
the Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
C. The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of
Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent and,
pending such determination, Trustee shall discontinue payment of
premiums on the Policies.
D. Unless Trustee has actual knowledge of
Company's Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is Insolvent, Trustee
shall have no duty to inquire whether Company is Insolvent. Trustee
may in all events rely on such evidence concerning Company's solvency
as may be furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning Company's
solvency.
E. If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments of premiums
on the Policies and shall hold the assets of the Trust for the benefit
of Company's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Participants or their Beneficiaries
to pursue their rights as general creditors of Company with respect to
benefits due under the Agreements or otherwise.
F. Trustee shall resume the payment of premiums
on the Policies in accordance with Section II of this Trust Agreement
only after Trustee has determined that Company is not Insolvent (or is
no longer Insolvent).
G. Provided that there are sufficient assets, if
Trustee discontinues the payment of premiums on the Policies pursuant
to Section III-A hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due under the policies for the period
of such discontinuance, less the aggregate amount of any premium
payments made by Company in lieu of the payments provided for
hereunder during any such period of discontinuance.
IV. Payments to Company.
A. Except as provided in Section III hereof,
Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all
payment of premiums have been made on the Policies.
V. Investment Authority.
A. In no event may Trustee invest in securities
(including stock or rights to acquire stock) or obligations issued by
Company, other than a de minimis amount held in common investment
vehicles in which Trustee invests. All rights associated with assets
of the Trust shall be exercised by Trustee or the person designated by
Trustee, and shall in no event be exercisable by or rest with
Participants.
VI. Disposition of Income.
A. During the term of this Trust, all income
received by the Trust, net of expenses and taxes, shall be accumulated
and reinvested.
VII. Accounting by Trustee.
A. Trustee shall keep accurate and detailed
records of all investments, receipts, disbursements, and all other
transactions required to be made, including such specific records as
shall be agreed upon in writing between Company and Trustee. Within
ninety (90) days following the close of each calendar year and within
sixty (60) days after the removal or resignation of Trustee, Trustee
shall deliver to Company a written account of its administration of
the Trust during such year or during the period from the close of the
last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities
and investments purchased and sold with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property
held in the Trust at the end of such year or as of the date of such
removal or resignation, as the case may be.
VIII. Responsibility of Trustee.
A. Trustee shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with
like aims, provided, however, that Trustee shall incur no liability to
any person for any action taken pursuant to a direction, request or
approval given by Company which is contemplated by, and in conformity
with, the terms of the Agreements or this Trust and is given in
writing by Company. In the event of a dispute between Company and a
party, Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
B. If Trustee undertakes or defends any
litigation arising in connection with this Trust, Company agrees to
indemnify Trustee against Trustee's costs, expenses and liabilities
(including, without limitation, attorneys' fees and expenses) relating
thereto and to be primarily liable for such payments. If Company does
not pay such costs, expenses and liabilities in a reasonably timely
manner, Trustee may obtain payment from the Trust.
C. Trustee may consult with legal counsel (who
may also be counsel for Company generally) with respect to any of its
duties or obligations hereunder.
D. Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
E. Trustee shall have, without exclusion, all
powers conferred on Trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an insurance
policy is held as an asset of the Trust, Trustee shall have no power
to name a beneficiary of the policy other than the Trust, to assign
the policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
F. Notwithstanding any powers granted to Trustee
pursuant to this Trust Agreement or to applicable law, Trustee shall
not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the
meaning of section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Internal Revenue Code.
IX. Compensation and Expenses of Trustee.
A. Company shall pay all administrative and
Trustee's fees and expenses.
X. Resignation and Removal of Trustee.
A. Trustee may resign at any time by written
notice to Company, which shall be effective thirty (30) days after
receipt of such notice unless Company and Trustee agree otherwise.
B. Trustee may be removed by Company on ten (10)
days notice or upon shorter notice accepted by Trustee.
C. Upon a Change of Control, as defined herein,
Trustee may not be removed by Company without the unanimous consent of
the Participants.
D. If Trustee resigns within three (3) years
after a Change of Control, as defined herein, Company shall apply to a
court of competent jurisdiction for the appointment of a successor
Trustee or for instructions unless the Company and all Participants
agree upon a successor Trustee.
E. If Trustee resigns or is removed within three
(3) years of a Change of Control, as defined herein, Trustee shall
select a successor Trustee in accordance with the provisions of
Section XI-B hereof prior to the effective date of Trustee's
resignation or removal.
F. Upon resignation or removal of Trustee and
appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed
within 60 days after receipt of notice of resignation, removal or
transfer, unless Company extends the time limit.
G. If Trustee resigns or is removed, a successor
shall be appointed, in accordance with Section XI hereof, by the
effective date of resignation or removal under paragraph(s) A or B of
this section. If no such appointment has been made, Trustee may apply
to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of Trustee in connection with the
proceeding shall be allowed as administrative expenses of the Trust.
XI. Appointment of Successor.
A. If Trustee resigns or is removed in accordance
with Section X-A or B hereof, Company may appoint any third party,
such as a bank trust department or other party that may be granted
corporate trustee powers under state law, as a successor to replace
Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall have
all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall
execute any instrument necessary or reasonably requested by Company or
the successor Trustee to evidence the transfer.
B. If Trustee resigns or is removed pursuant to
the provisions of Section X-E hereof and selects a successor Trustee,
Trustee may appoint any third party such as a bank trust department or
other party that may be granted corporate trustee powers under state
law. The appointment of a successor Trustee shall be effective when
accepted in writing by the new Trustee. The new Trustee shall have
all the rights and powers of the former Trustee, including ownership
rights in Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by the successor Trustee
to evidence the transfer.
C. The successor Trustee need not examine the
records and acts of any prior Trustee and may retain or dispose of
existing Trust assets, subject to Sections 7 and 8 hereof. The
successor Trustee shall not be responsible for and Company shall
indemnify and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes
successor Trustee.
XII. Amendment or Termination.
A. This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing,
no such amendment shall conflict with the terms of the
Agreements or shall make the Trust revocable after it has become
irrevocable in accordance with Section I-B hereof.
B. The Trust shall not terminate until the date on which all
premiums have been paid on the Policies as required by Section
II. Upon termination of the Trust any assets remaining in the
Trust shall be returned to Company.
C. This Trust Agreement may not be amended by Company following a
Change of Control, as defined herein without the unanimous
consent of the Participants.
XIII. Miscellaneous.
A. Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
B. Benefits payable to Participants and their Beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at
law or in equity), alienated, pledged, encumbered or subjected
to attachment, garnishment, levy, execution or other legal or
equitable process.
C. This Trust Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky without
regard to the principles of conflicts of law which might
otherwise apply.
D. For purposes of this Trust, Change of Control shall mean (i) the
consummation of (A) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common
Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the
merger have substantially the same proportionate ownership of
common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of all or
substantially all the assets of the Company, or (ii) the
approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company,
other than in connection with a bankruptcy or reorganization
proceeding of the Company under applicable federal or state
bankruptcy laws, or (iii) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than the Company or
a subsidiary thereof or any employee benefit plan sponsored by
the Company or a subsidiary thereof, becoming the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in
the election of directors, as a result of a tender or exchange
offer, open market purchases, privately-negotiated purchases or
otherwise, or (iv) at any time during a period of two (2)
consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company ceasing
for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company's
shareholders of each new director during such two-year period
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the
beginning of such two-year period.
XIV. Effective Date.
A. The effective date of this Trust Agreement
shall be ______________, 1999.
FIFTH THIRD BANK, OHIO VALLEY KENTUCKY ELECTRIC STEEL, INC.
By:____________________________ By:________________________________
APPENDIX A
Salary Continuation Agreements
1. Agreement dated October 6, 1999 between Company and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
2. Agreement dated October 6, 1999 between Company and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
3. Agreement dated October 6, 1999 between Company and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
4. Agreement dated October 6, 1999 between Company and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
APPENDIX B
Name of Participant
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Monthly Amount
The "Monthly Amount" for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Participant") is the
monthly benefit which the cash surrender value of the life insurance
policies issued by Pacific Life, Policy Number 1A22856570 and
Minnesota Life, Policy Number 1953997V on the life of the Participant
("Policies") would provide over the same period of time as of the
time of the Participant's termination of employment as determined by a
life insurance agent satisfactory to both the Company and the
Participant, adjusted upward to the amount which said monthly benefit
would equal if it were fully taxable to the Participant and results in
said monthly benefit after payment of taxes. The insurance agent will
calculate the Monthly Amount by assuming that (a) the Policies have
remained in effect until the date of the calculation, (b) the cash
surrender value of the Policies is first withdrawn in an amount equal
to the Participant's tax basis in the Policies, and (c) loans are
then taken out on the Policies but not in excess of the amount which
would reduce the remaining cash surrender value in the Policies below
the amount necessary to keep the Policies in effect until age 100
based upon the insurance carrier's current crediting rates, expenses,
and mortality assumptions in effect on the date of calculation.
Name of Participant
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Monthly Amount
The "Monthly Amount" for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Participant") is the
monthly benefit which the cash surrender value of the life insurance
policy issued by Pacific Life, Policy Number 1A22856530 on the life
of the Participant ("Policy") would provide over the same period of
time as of the time of the Participant's termination of employment as
determined by a life insurance agent satisfactory to both the Company
and the Participant, adjusted upward to the amount which said monthly
benefit would equal if it were fully taxable to the Participant and
results in said monthly benefit after payment of taxes. The insurance
agent will calculate the Monthly Amount by assuming that (a) the
Policy has remained in effect until the date of the calculation, (b)
the cash surrender value of the Policy is first withdrawn in an amount
equal to the Participant's tax basis in the Policy, and (c) loans are
then taken out on the Policy but not in excess of the amount which
would reduce the remaining cash surrender value in the Policy below
the amount necessary to keep the Policy in effect until age 100 based
upon the insurance carrier's current crediting rates, expenses, and
mortality assumptions in effect on the date of calculation.
Name of Participant
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Monthly Amount
The "Monthly Amount" for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Participant") is the
monthly benefit which the cash surrender value of the life insurance
policy issued by Pacific Life, Policy Number 1A22856560 on the life of
the Participant ("Policy") would provide over the same period of time
as of the time of the Participant's termination of employment as
determined by a life insurance agent satisfactory to both the Company
and the Participant, adjusted upward to the amount which said monthly
benefit would equal if it were fully taxable to the Participant and
results in said monthly benefit after payment of taxes. The insurance
agent will calculate the Monthly Amount by assuming that (a) the
Policy has remained in effect until the date of the calculation, (b)
the cash surrender value of the Policy is first withdrawn in an amount
equal to the Participant's tax basis in the Policy, and (c) loans are
then taken out on the Policy but not in excess of the amount which
would reduce the remaining cash surrender value in the Policy below
the amount necessary to keep the Policy in effect until age 100 based
upon the insurance carrier's current crediting rates, expenses, and
mortality assumptions in effect on the date of calculation.
Name of Participant
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Monthly Amount
The "Monthly Amount" for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Participant") is the
monthly benefit which the cash surrender value of the life insurance
policy issued by Pacific Life , Policy Number 1A22856540 on the life
of the Participant ("Policy") would provide over the same period of
time as of the time of the Participant's termination of employment as
determined by a life insurance agent satisfactory to both the Company
and the Participant, adjusted upward to the amount which said monthly
benefit would equal if it were fully taxable to the Participant and
results in said monthly benefit after payment of taxes. The insurance
agent will calculate the Monthly Amount by assuming that (a) the
Policy has remained in effect until the date of the calculation, (b)
the cash surrender value of the Policy is first withdrawn in an amount
equal to the Participant's tax basis in the Policy, and (c) loans are
then taken out on the Policy but not in excess of the amount which
would reduce the remaining cash surrender value in the Policy below
the amount necessary to keep the Policy in effect until age 100 based
upon the insurance carrier's current crediting rates, expenses, and
mortality assumptions in effect on the date of calculation.