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Exhibit 10.14
May 20, 1997
Harry B. Watkins
Vice President -
Technical Marketing & Tubular Group
RMI Titanium Company
1000 Warren Avenue
Niles, Ohio 44446-0269
Dear Mr. Watkins:
This Letter Agreement sets forth the basis upon which I have been authorized by
the Board of Directors of RMI Titanium Company ("Company") to continue your
employment in the officer position described in Paragraph 1 below for the
Employment Period (as hereinafter defined). The "Employment Period" shall
initially be the period June 1, 1997 through May 31, 2000; provided, however,
that on June 1, 2000 and each June 1 thereafter, the Employment Period shall
automatically be extended for one additional year unless, not later than the
immediately preceding February 1, either you or the Company shall have given
written notice to the other that you or it does not wish to extend the
Employment Period; and provided further that the Employment Period shall
terminate automatically when you attain age sixty-five (65). In the event this
Letter Agreement is terminated for any reason other than your death, your
obligations as set forth in Paragraph 9 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated January
21, 1997.
1. During the Employment Period, you will serve as Vice
President, Technical Marketing & Tubular Group, of the
Company (or on any other officer position within the
Company to which you may hereafter be elected by the
Company's Board of Directors), performing all duties and
functions appropriate to that office, as well as such
additional duties as the Company's Executive Vice
President & Chief Financial Officer or Board of Directors
may, from time to time, assign to you. During the
Employment Period, you will devote your full time and
best efforts to the performance of all such duties.
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Mr. Harry B. Watkins
May 20, 1997
Page 2
2. During the Employment Period, the Company will pay you,
in equal monthly installments, as compensation for your
services an annual salary of $130,000.00. This annual
salary may be increased from time to time in the sole
discretion of the Company, but may only be decreased by
the Company with your written consent. Such annual
salary, whether increased or decreased, shall constitute
your "Base Salary". In addition, you may be awarded such
bonuses as the Board of Directors of the Company
determines to be appropriate under the Company's Annual
Incentive Compensation Plan or any successor bonus plan.
You will also be eligible to participate in the Company's
1995 Stock Plan, or any successor stock plan.
3. In the event of your death during the Employment Period, your
right to all compensation under this Letter Agreement
allocable to days subsequent to your death shall terminate and
no further payments shall be due to you, your personal
representative, or your estate, except for that portion, if
any, of your Base Salary that is accrued and unpaid upon the
date of your death.
4. In the event you become physically or mentally disabled,
in the sole judgment of physicians selected by the
Company's Board of Directors, such that you cannot
perform the duties and functions contracted for pursuant
to this Letter Agreement, and should such disability
continue for at least 180 consecutive days (or in the
judgment of such physicians, be likely to continue for at
least 180 consecutive days), the Company may terminate
your employment upon written notice to you. If your
employment is terminated because of physical or mental
disability, your right to all compensation under this
Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall
be due to you, your personal representative, or your
estate, except for that portion, if any, of your Base
Salary that is accrued and unpaid upon the date of
termination.
5. The Company may, upon written notice to you fixing the
date of termination, terminate your services during the
Employment Period for Cause, (as Cause is defined in
Paragraph 7(c) below). In such event, your right to
receive continued compensation under this Letter
Agreement will terminate and no further installments will
be paid to you, except for that portion, if any, of your
Base Salary that is accrued and unpaid upon the date of
termination.
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Mr. Harry B. Watkins
May 20, 1997
Page 3
6. In addition to your annual Base Salary as set forth in
Paragraph 2 above, you will be entitled in each calendar
year to a vacation with pay in accordance with the
vacation policies of the Company. You will also be
entitled to: (1) participate in all of the Company's
existing and future employee benefit programs applicable
to officers of the Company in accordance with the terms
of such benefit program plan documents; (2) receive one
comprehensive physical examination, at Company expense,
in each calendar year, such examination to be conducted
by the Cleveland Clinic or comparable facility and
provided in accordance with terms and conditions
comparable to those applicable to medical examinations
for USX executive officers; and (3) tax preparation and
financial planning advice under terms and conditions
comparable to those applicable to USX executive
management.
7. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in
Control" of the Company shall mean a change in
control of a nature that would be required to be
reported by it in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided,
that, without limitation, such a change in control
shall be deemed to have occurred if:
(1) Any person (within the meaning of that term
as used in Sections 13(d) and 14(d) of the
Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty percent (20%) or more of
the combined voting power of the Company's
then outstanding voting securities;
provided, however, that for purposes of this
Agreement the term "Person" shall not
include (i) the Company or any of its
majority-owned subsidiaries, (ii) a trustee
or other fiduciary holding securities under
an employee benefit plan of the Company or
any of its subsidiaries, (iii) an
underwriter temporarily holding securities
pursuant to an offering of such securities,
or (iv) a corporation owned, directly or
indirectly, by the stockholders of
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Mr. Harry B. Watkins
May 20, 1997
Page 4
the Company in substantially the same
proportions as their ownership of stock of
the Company, (v) USX Corporation; or
(2) The following individuals cease for any
reason to constitute a majority of the
number of directors then serving on the
Board of Directors of the Company;
individuals who, on the date hereof, are
serving as directors on the Board and any
new director (other than a director whose
initial assumption of office is in
connection with an actual or threatened
election contest, including but not limited
to a consent solicitation, relating to the
election of directors of the Company) whose
appointment or election by the Board or
nomination for election by the Company's
stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then
still in office who either were directors on
the date hereof or whose appointment,
election or nomination for election was
previously so approved, or
(3) There is consummated a merger or
consolidation of the Company or a subsidiary
thereof with any other corporation, other
than a merger or consolidation which would
result in the holders of the voting
securities of the Company outstanding
immediately prior thereto holding securities
which represent immediately after such
merger or consolidation at least 50% of the
combined voting power of the voting
securities of the entity surviving the
merger or consolidation, (or the parent of
such surviving entity) or the shareholders
of the Company approve a plan of complete
liquidation of the Company, or there is
consummated the sale or other disposition of
all or substantially all of the
Corporation's assets.
(b) If any of the events described above constituting a
Change in Control of the Company shall have
occurred, you shall be entitled to the benefits
provided in Paragraph 7(f) hereof upon the
termination of your employment during the term of
this Letter Agreement unless such termination is
(i) because of your death or disability, (ii) by
the Company for Cause, (iii) by you other than for
Good Reason, or (iv) on or after the date that you
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Mr. Harry B. Watkins
May 20, 1997
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attain age sixty-five (65). In the event your
employment with the Company is terminated for any
reason prior to the occurrence of a Change in
Control, you shall not be entitled to any benefits
under this Paragraph 7; provided, however, that if
your employment is terminated prior to a Change in
Control without Cause at the direction of a person
who has entered into an agreement with the Company,
the consummation of which will constitute a Change in
Control, your employment shall be deemed to have
terminated following a Change in Control. Your
entitlement to benefits under any of the Company's
retirement plans will not adversely affect your
rights to receive payments hereunder.
(c) Termination by the Company of your employment for
"Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially
perform your duties with the Company (other than
any such failure resulting from termination by you
for Good Reason), after a demand for substantial
performance is delivered to you that specifically
identifies the manner in which the Company believes
that you have not substantially performed your
duties, and you have failed to resume substantial
performance of your duties on a continuous basis
within fourteen (14) days of receiving such demand,
(ii) the willful engaging by you in conduct which
is demonstrably and materially injurious to the
Company, monetarily or otherwise or (iii) your
conviction of any felony or conviction of a
misdemeanor which impairs your ability
substantially to perform your duties with the
Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by
you not in good faith and without reasonable belief
that your action or omission was in the best
interest of the Company.
(d) For purposes of this Letter Agreement, "Good Reason"
shall mean, without your express written consent, the
occurrence after a Change in Control of the Company
of any one or more of the following:
(1) The assignment to you of duties inconsistent
with your position immediately prior to the
Change in Control;
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Mr. Harry B. Watkins
May 20, 1997
Page 6
(2) A reduction or alteration in the nature of
your position, duties, status or
responsibilities from those in effect
immediately prior to the Change in Control;
(3) The failure by the Company to continue in
effect any of the Company's employee benefit
plans, programs, policies, practices or
arrangements in which you participate (or
substantially equivalent successor or
replacement employee benefit plans,
programs, policies, practices or
arrangements) or the failure by the Company
to continue your participation therein on
substantially the same basis, both in terms
of the amount of benefits provided and the
level of your participation relative to
other participants, as existed immediately
prior to the Change in Control;
(4) The failure of the Company to obtain a
satisfactory agreement from any successor to
the Company to assume and agree to perform
this Letter Agreement;
(5) Any purported termination by the Company of
your employment that is not effected
pursuant to a Notice of Termination
satisfying the requirements of Subparagraph
(e) below, and for purposes of this Letter
Agreement, no such purported termination
shall be effective; and
(6) The Company's requiring you to be based at a
location in excess of fifty (50) miles from
the location where you are based immediately
prior to the Change in Control.
(e) Any termination by the Company for Cause or by you
for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For
purposes of this Letter Agreement, a "Notice of
Termination" shall mean a written notice which
shall indicate the specific termination provision
in this Letter Agreement relied upon and shall set
forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of your employment under the provision
so indicated.
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Mr. Harry B. Watkins
May 20, 1997
Page 7
(f) Following a Change in Control of the Company, as
defined above, upon termination of your employment
you shall be entitled to the following benefits:
(1) If your employment shall be terminated by
the Company for Cause or by you other than
for Good Reason, the Company shall pay you
your full Base Salary through the date of
termination at the rate in effect at the
time Notice of Termination is given, plus
all other amounts to which you are entitled
under any compensation plan of the Company
at the time such payments are due, and the
Company shall have no further obligations to
you under this Agreement.
(2) If your employment terminates by reason of
your death or disability, your benefits
shall be determined in accordance with
Paragraphs 3 and 4 of this Letter Agreement
and the Company's retirement, survivor's
benefits, insurance and other applicable
programs and plans, then in effect.
(3) If your employment by the Company shall be
terminated (i) by the Company other than for
Cause, your death or disability, or (ii) by
you for Good Reason, you shall be entitled
to the benefits (the "Severance Payments")
provided in Paragraphs 7(f)(3), (i), (ii),
(iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and
cancel any further rights you have to
receive any Base Salary that would be
otherwise due under Paragraph 2 of this
Letter Agreement:
(i) The Company shall pay you your full
Base Salary through the date of
termination at the rate in effect at
the time Notice of Termination is
given;
(ii) The Company will pay as severance
benefits to you, not later than the
fifth day following the date of
termination, a lump sum severance
payment (the "Severance Payment")
equal to the product of (1) a
fraction, the numerator of which is
equal to the lesser of (x)
twenty-four (24) or (y) the number of
full and partial months existing
between the date
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Mr. Harry B. Watkins
May 20, 1997
Page 8
of termination and your sixty-fifth
(65th) birthday and the denominator
of which is equal to twelve (12),
and (2) the sum of (x) your annual
Base Salary in effect immediately
prior to the occurrence of the
circumstances giving rise to such
termination, and (y) the amount, if
any, of the arithmetic average of
the annual bonuses awarded to you
under any annual bonus plan of the
Company calculated using the two (2)
years immediately preceding date of
termination;
(iii) The Options previously issued to you
under any option or incentive plan of
the Company to purchase shares of
Common Stock of the Company (Option
Shares), as well as any previously
unvested shares of Restricted Stock
granted to you, shall irrevocably
vest upon any such termination and
the stock options for such Option
Shares shall become thereafter
uncancellable by the Company;
(iv) In the event that you become entitled
to the Severance Payments, if any of
the Severance Payments or other
portion of the Total Payments (as
defined below) will be subject to the
tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue
Code of 1986, as amended (the
"Code"), the Company shall pay to you
at the time specified below, an
additional amount (the "Gross-Up
Payment") such that the net amount
retained by you, after deduction of
(1) any Excise Tax on the Severance
Payments and such other Total
Payments, and (2) any federal, state
and local income tax, FICA-Health
Insurance tax, and Excise Tax upon
the payment provided for by this
paragraph, shall be equal to the
Severance Payments and such other
total Payments. For purposes of
determining whether any of the
payments will be subject to the
Excise Tax and the amount of such
Excise Tax, (1) any other payments or
benefits received or to be received
by you in connection with a Change in
Control of the Company or your
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Mr. Harry B. Watkins
May 20, 1997
Page 9
termination of employment whether
pursuant to the terms of this Letter
Agreement or any other plan,
arrangement or agreement with the
Company, any person whose actions
result in a Change of Control of the
Company or any person affiliated
with the Company or such person
(together with the Severance
Payment, the "Total Payments") shall
be treated as "parachute payments"
within the meaning of Section
280G(b)(2) of the Code, and all
"excess parachute payments" within
the meaning of Section 280G(b)(1)
shall be treated as subject to the
Excise Tax, except to the extent
that in the opinion of tax counsel
selected by the Company's
independent auditors and acceptable
by you such other payments or
benefits (in whole or in part) do
not constitute parachute payments,
or such excess parachute payments
(in whole or in part) represent
reasonable compensation for services
actually rendered within the meaning
of Section 280G(b)(4) of the Code in
excess of the base amount within the
meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject
to the Excise Tax, (2) the amount of
the Total Payments which shall be
treated as subject to the Excise Tax
shall be equal to the lesser of (A)
the total amount of the Total
Payments or (B) the amount of excess
parachute payments within the
meaning of Section 280G(b)(1) (after
applying clause (1), above), and (3)
the value of any non-cash benefits
or any deferred payment or benefit
shall be determined by the Company's
independent auditors in accordance
with the principles of Sections
280G(d)(3) and (4) of the Code. For
purposes of determining the amount
of the Gross-Up Payment, you shall
be deemed to pay federal income
taxes at the highest marginal rate
of federal income taxation in the
calendar year in which the Gross-Up
Payment is to be made and state and
local income taxes at the highest
marginal rate of taxation in the
state and locality of your residence
on the date of termination, net
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Mr. Harry B. Watkins
May 20, 1997
Page 10
of the maximum reduction in federal
income taxes which could be obtained
from deduction of such state and
local taxes. In the event that the
Excise Tax is subsequently
determined to be less than the
amount taken into account hereunder
at the time of termination of your
employment, you shall repay to the
Company at the time that the amount
of such reduction in Excise Tax is
finally determined the portion of
the Gross-Up Payment attributable to
such reduction (plus the portion of
the Gross-Up Payment attributable to
the Excise Tax and federal and state
and local income tax imposed on the
Gross-Up Payment being repaid by you
if such repayment results in a
reduction in Excise Tax and/or a
federal and state and local income
tax deduction) plus interest on the
amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of
the Code. In the event that the
Excise Tax is determined to exceed
the amount taken into account
hereunder at the time of the
termination of your employment
(including by reason of any payment
the existence or amount of which
cannot be determined at the time of
the Gross-Up Payment), the Company
shall make an additional Gross-Up
Payment in respect of such excess
(plus any interest payable with
respect to such excess) at the time
that the amount of such excess is
finally determined.
The payments provided for in the
paragraph above shall be made not
later than the fifth day following
the date of termination; provided,
however, that if the amounts of such
payments cannot be finally
determined on or before such day,
the Company shall pay to you on such
day an estimate as determined in
good faith by the Company of the
minimum amount of such payments and
shall pay the remainder of such
payments (together with interest at
the rate provided in Section
1274(b)(2)(B) of the Code) as soon
as the amount thereof can be
determined but in no event later
than the thirtieth day
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Mr. Harry B. Watkins
May 20, 1997
Page 11
after the date of termination. In
the event that the amount of the
estimated payments exceeds the
amount subsequently determined to
have been due, such excess shall
constitute a loan by the Company to
you payable on the fifth day after
demand by the Company (together with
interest at the rate provided in
Section 1274(b)(2)(B) of the Code);
(v) The Company shall also pay to you all
legal fees and expenses incurred by
you as a result of such termination
of employment (including all such
fees and expenses, if any, incurred
in contesting or disputing any such
termination or in seeking to obtain
or enforce any right or benefit
provided by this Letter Agreement or
in connection with any tax audit or
proceeding to the extent attributable
to the application of Section 4999 of
the Code to any payment or benefit
provided hereunder); and
(vi) For a twenty-four (24) month period
after date of termination, the
Company will arrange to provide you
at the Company's expense with life,
disability, accident and health
insurance benefits substantially
similar to those which you were
receiving immediately prior to the
Notice of Termination; but benefits
otherwise receivable by you pursuant
to this paragraph shall be reduced to
the extent comparable benefits are
actually received by you during the
twenty-four (24) month period
following your termination, and any
such benefits actually received by
you shall be reported to the Company.
(h) You shall not be required to mitigate the amount of
any Severance Payments provided for in this
Paragraph 7 by seeking other employment or
otherwise, nor, except as provided in Paragraph
(vi) above, shall the amount of any payment or
benefit provided for in this Paragraph 7 be reduced
by any compensation or benefit earned by you as the
result of employment by another employer after the
date of termination, or otherwise.
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Mr. Harry B. Watkins
May 20, 1997
Page 12
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company or
of any division or subsidiary thereof employing you
to expressly assume and agree to perform this
Letter Agreement in the same manner and to the same
extent that the Company would be required to
perform it if no such succession had taken place.
Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any
such succession shall be a breach of this Letter
Agreement and shall entitle you to compensation
from the Company in the same amount and on the same
terms as you would be entitled hereunder if you
terminate your employment for Good Reason.
8. This Letter Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die
while any amount would still be payable to you hereunder
if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance
with the terms of this Letter Agreement, to your devisee,
legatee or other designee or, if there is not such
designee, to your estate.
9. As additional consideration for the compensation and
benefits provided to you pursuant to this Letter
Agreement, you agree that you will not, for a period of
twenty-four (24) months after the end of the Employment
Period, or the termination of your employment with the
Company (whichever first occurs), directly or indirectly,
compete with, engage in the same business as, be employed
by, act a consultant to, or be a director, officer,
employee, owner or partner, or otherwise participate in
or assist (including, without limitation, by soliciting
customers for, or individuals to provide services to),
any business or organization which competes with the
Company; provided, that this restriction shall not apply
if you terminate your employment with the Company for
Good Reason after a Change in Control of the Company.
For purposes of this Paragraph 9, you will not be deemed
to have breached your commitment merely because you own,
directly or indirectly, not more than one percent (1%) of
the outstanding common stock of such a corporation if, at
the time you acquire such stock, such stock is listed on
a national securities exchange or is regularly traded in
the over-the-counter market by a member of either a
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Mr. Harry B. Watkins
May 20, 1997
Page 13
national securities exchange or the National Association of
Securities Dealers, Inc. In order to protect the interest of
the Company, you will also maintain in strict confidence and
not disclose to any other person or entity any information
received from any source in the Company or developed by you in
the course of performing your duties for the Company. This
obligation shall not extend to: (a) anything you can establish
as known to you from a source outside the Company, (b)
anything which has been published or becomes published
hereafter other than by you, or (c) anything which you receive
from a non-Company source without restriction on its
disclosure. Should you breach or threaten to breach the
commitments in this Paragraph 9, and in recognition of the
fact that the Company would not under such circumstances be
adequately compensated by money damages, the Company shall be
entitled, in addition to any other rights and remedies
available to it, to an injunction restraining you from such
breach. Further, you acknowledge and agree that the provisions
of this Paragraph 9 are necessary, reasonable, and
proportionate to protect the Company during such
non-competition period.
10. The validity, interpretation, construction and performance of
this Letter Agreement shall be governed by the laws of the
State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please sign
one original copy of this Letter Agreement and return it to me. You may retain
the second signed original for your files.
Very truly yours,
RMI TITANIUM COMPANY
By:
--------------------------
TIMOTHY G. RUPERT
Executive Vice President &
Chief Financial Officer
CONFIRMED:
- ---------------------------- DATE:
HARRY B. WATKINS -----------------------
Vice President -
Technical Marketing & Tubular Group