Exhibit 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of the 1st day of August, 1998 by and
--- ------- -
between UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC., a Delaware corporation (the
"Company"), and Bruce Kennedy (the "Employee").
-------------
WITNESSETH:
In consideration of the covenants and agreements herein contained, and
intending to be legally bound hereby, the Company and Employee agree that this
Agreement including the Employment Offer letter dated June 24, 1998 ("Offer
Letter") which is hereby incorporated by reference, supercedes any previous
and/or existing Employment Agreement between the parties. The Company and
Employee further agree as follows:
Article 1. - Employment
-----------------------
1.1. Employment. The Company agrees to employ Employee, and Employee
----------
agrees to serve the Company, for the period stated in Article 2 hereof (the
"Term of Employment") and upon the other terms and conditions herein provided.
1.2. Position and Responsibilities. The Company employs Employee,
-----------------------------
and Employee agrees to serve as Vice President of Operations of the Company and
to accept such other responsibilities as may be assigned to Employee by the
Company from time to time during the Term of Employment.
1.3. Duties. During the Term of Employment, Employee shall devote
------
all of his business time, attention, skill and efforts to the faithful
performance of his duties hereunder.
Article 2. - Term
-----------------
The Term of Employment shall commence as of August 1 , 1998 (the
-------- -
"Effective Date"), and shall continue until the 1st anniversary of the
---
Effective Date (the "Expiration Date"), unless sooner terminated by one of the
parties as permitted in this Agreement or the term of the Agreement will
automatically extend for one-year periods, expiring on August 1 of each
subsequent year, barring a notice by the Company not to extend, delivered at
least sixty (60) days prior to any expiration date.
Article 3. - Compensation
-------------------------
3.1. Salary. As compensation to the Employee for the performance of
------
services hereunder, the Company shall pay to the Employee a base salary (the
"Salary") of One hundred and fifty thousand dollars ($150,000.00) per year.
----------------------------------------------------
Installments of the Salary shall be paid to the Employee in accordance with the
standard procedure of the Company, which at the present time is once every two
(2) weeks. During the period of this Agreement, Employee's salary shall be
reviewed at least annually and may be adjusted if the Board of Directors of the
Company (the "Board"), the Compensation Committee (the "Compensation
Committee"), or the President of
-1-
the Company (President) determines that an adjustment is appropriate on the
basis of the types of factors it generally takes into account in adjusting the
salaries of employees of the Company.
3.2. Reimbursement of Expenses. The Company will reimburse the
-------------------------
Employee for those customary and necessary business expenses incurred by him in
the performance of his duties and activities on behalf of the Company as Vice
President of Operations. Except as provided in this Agreement, such expenses
will be reimbursed only on presentation by the Employee of appropriate
documentation to substantiate such expenses pursuant to the policies and
procedures of the Company governing reimbursement of business expenses to its
Employees.
3.3. Participation in Plans. The Employee shall be entitled to
----------------------
participate in any incentive compensation or bonus plan, life, medical, dental,
health, hospitalization, travel, accident and/or disability insurance plans and
in any sick leave and/or salary continuation plan, vacation (which shall not be
less than two (2) weeks per year), holiday pay, retirement or employee benefit
plan or program generally offered by the Company to its officers.
3.4. Right to Indemnification. The Company shall indemnify and hold
-------------------------
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, the Employee who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that the Employee, is or was an officer of
the Company, including service with respect to employee benefit plans, against
all liability and loss suffered and expenses (including attorneys' fees)
reasonably incurred by the Employee. The Company shall be required to indemnify
the Employee in connection with a proceeding (or part thereof) initiated by such
person only if the proceeding (or part thereof) was authorized by the Board of
Directors of the Company.
The Company shall pay the expenses (including attorney's fees)
incurred in defending any proceeding in advance of its final disposition,
provided, however, that the payment of expenses incurred by a director or
- -------------------
officer in advance of the final disposition of the proceeding shall be made only
upon receipt of an undertaking by the director or officer to repay all amounts
advanced if it should be ultimately determined that the director or officer is
not entitled to be indemnified under this Article or otherwise.
If a claim for indemnification or payment of expenses under this
Article is not paid in full within sixty days after a written claim therefore
has been received by the Corporation, the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Company shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
The rights conferred on the Employee by this Section 3.4 shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Restated Certificate of Incorporation, the
Company By-Laws, agreement, vote of stockholders or disinterested directors or
otherwise.
-2-
The Company's obligation, if any, to indemnify the Employee who was or is
serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or nonprofit entity
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or
nonprofit enterprise.
Article 4. - Termination of Employment
--------------------------------------
4.1. Definitions. For the purposes hereof:
-----------
(a) "Disability" shall be deemed to have occurred at the same
time as the Employee has been determined to be entitled to benefits under the
Company's Short Term or Long Term Disability Plan then in effect.
(b) "Cause" shall mean any of the following: (i) Employee's
personal dishonesty, incompetence or willful misconduct; (ii) Employee's willful
violation of any law or material rule or regulation, provided that such
violation is demonstrably and materially injurious to the assets, operations or
business prospects of the Company; (iii) the conversion or embezzlement for the
personal benefit of the Employee of corporate funds or property or a material
business opportunity of the Company; (iv) the misuse by the Employee for his
personal benefit of any trade secrets or other information of the Company in
violation of the provisions of Article 7 of this Agreement; or (v) Employee's
material breach of any other provision of this Agreement which is not cured
within thirty (30) days of receipt of notice of such breach from Company.
(c) "Good Reason" shall, absent the Employee's express written
consent to such action, mean the occurrence of any one of the following: (i)
following a Change of Control, the removal of the Employee as Vice President of
Operations of the Company (by reason other than death, disability or cause);
(ii) any material breach by the Company of its respective or joint obligations
contained in this Agreement not cured within 30 days after written notice; (iii)
the assignment to the Employee of any duties inconsistent with his status as
Vice President of Operations of the Company or a substantial alteration in the
nature or status of the Employee's duties and responsibilities which renders the
Employee's position to be of less dignity, responsibility or scope; (iv) a
reduction by the Company in the Employee's annual base salary as in effect on
the date hereof or as the same may be increased from time to time, except for
proportional across-the-board salary reductions due to economic conditions of
the Company similarly affecting all Employees of the Company, for at least six
(6) months, provided, however, that in no event shall the Employee's base salary
be reduced by more than fifteen percent (15%) below the per year amount set
forth in Section 3.1 hereof without the Employee's consent; (v) the relocation
of the principal executive offices of the Company to a location outside the
Greater Pittsburgh Metropolitan area or the Company's requiring the Employee to
be based anywhere other than Company's principal executive offices except for
required travel on Company's business; or (vi) any material reduction by the
Company of the benefits enjoyed by the Employee under any of the savings, life
insurance, medical, health-and-accident, disability or other employee welfare
benefit plans or programs, including vacation days, corporate time, provided
that this paragraph (vi) shall not apply to any proportional across-the-board
reduction or action similarly affecting all executives of the Company; (vii)
within sixty (60) days of receipt of notice not to extend this Agreement, the
-3-
employee may elect to resign for "Good Reason" in which case the notice not to
extend shall constitute notice to the Company by the employee of the "Good
Reason."
Notwithstanding the foregoing, except as stated in (vii) of this section,
no event of "Good Reason" shall be deemed to have occurred unless Employee
provides to the President of the Company written notice of the facts and
circumstances which Employee believes constitutes "Good Reason" under this
Section 4.1(c) and such facts and circumstances are not corrected or otherwise
cured by the Company within thirty (30) days of receipt thereof.
For purposes of this Agreement, a Change of Control shall be deemed to have
occurred the earlier of (i) if, in any transaction or a series of related
transactions consummated in a ninety day period, more than fifty percent (50%)
of the then outstanding voting common stock of the Company is sold to a person
or group; (ii) a merger or consolidation of the Company and another entity in
which the Company is not the surviving corporation or in which more than fifty
percent (50%) of the equity ownership of the Company changes and (iii) the sale
of substantially all of the assets of the Company.
(d) "Notice of Termination" shall mean written notice which
shall indicate the specific termination or resignation provisions in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination or resignation
under the provision so indicated and shall include a certified statement of the
Company President approving such termination in the case of a Termination by the
Company for Cause or Without Cause.
(e) "Date of Termination" shall mean the date specified in the
Notice of Termination as the effective date the Employee's employment is
terminated for any reason or the Employee's effective date of resignation, which
ever is earlier.
Article 5. - Compensation Upon Termination
------------------------------------------
5.1. Death. If the Employee's employment hereunder terminates by
-----
reason of his death, his beneficiaries shall be entitled to receive from the
Company such amounts as are then provided pursuant to plans, programs or
arrangements currently in effect or as approved from time to time by the Board
of Directors.
5.2. Disability. If the Employee's employment hereunder terminates
----------
by reason of his Disability, the Company shall pay to the Employee for a period
of one (1) month, payments on the regular pay dates in an amount equal to 100%
of his then monthly salary, and for a period of five (5) months, payments on the
regular pay dates, 60% of his then monthly salary, in addition thereto, the
Employee shall be entitled to receive such amounts as are then provided pursuant
to plans, programs or arrangements. The Company may carry insurance to cover
this liability and in such case would not require a separate salary
continuation.
-4-
5.3. By the Company with Cause or if the Employee Resigns or Quits
-------------------------------------------------------------
without Good Reason. If the Employee's employment hereunder is terminated by
- -------------------
the Company for Cause, or if the Employee resigns or quits without good reason,
the Company shall pay to the Employee his full base salary through the Date of
Termination but at a rate no greater than that in effect at the time Notice of
Termination is given, and the Company shall have no further obligations to the
Employee under this Agreement.
5.4. By the Company Without Cause or by the Employee by Resignation
--------------------------------------------------------------
for Good Reason. If the Employee's employment hereunder is terminated by the
- ---------------
Company without Cause or is terminated by the Employee pursuant to his
Resignation for Good Reason, then the Employee shall be entitled to the benefits
provided below, which shall constitute complete satisfaction of the obligations
of the Company to the Employee under this Agreement:
(a) The Company shall pay the Employee his full annual base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given.
(b) Subsequent to the Date of Termination, the Company shall pay
as severance pay to the Employee, a lump sum payment equal to the Employee's
full base salary at the rate then in effect for a period of twelve (12) months,
or pay to the Employee the full base salary rate in the regular pay periods for
twelve months from termination.
(c) The Company will provide health care benefits as provided
prior to termination for the employee and eligible dependents for twelve (12)
months at no cost to the employee. This period will not reduce the eligible
COBRA period.
(d) The Employee shall not be required to mitigate the amount
of any payments provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Agreement be
reduced by any compensation earned by the Employee as the result of employment
by another employer, or otherwise.
(e) Notwithstanding any provisions herein to the contrary, the
Employee shall be entitled to receive all benefits to which the Employee is
entitled under the terms of any of the Company's qualified employee benefit
plans and any other plan, program or arrangement relating to retirement or other
benefits including, without limitation, any employee stock ownership plan or any
plan now in effect which is established (with approval of the Board of
Directors) as a supplement to any of the aforenamed plans, except as otherwise
provided in such plans as a result of the Employee's termination of employment.
Article 6. - Duties of Employee After
-------------------------------------
Termination of Employment
-------------------------
Following any termination of Employee's employment and for a period of
ninety (90) days thereafter, the Employee shall fully cooperate with the Company
in all matters relating to the winding up and orderly transfer of the Employee's
work on behalf of the Company. Not later than the effective date of any
termination of the employment, the Employee will immediately deliver to the
Company any and all of the Company's property of any kind or nature
-5-
whatsoever in the Employee's possession, custody or control, including, without
limitation any and all Confidential Information as that term is defined in
Section 7 of this Agreement.
Article 7. - Confidential Information; Invention Assignment
-----------------------------------------------------------
7.1. Confidential Relationship. Employee understands and agrees that
-------------------------
all company manuals, company policies, marketing plans and surveys, product
designs, schematics, specifications and product location and installation data,
formulae, processes, methods, machines, compositions, customer information,
ideas, inventions, financial information and plans of the Company and all
records, correspondence, files, customer lists, data and other information
pertaining to or concerning the Company, its principals, vendors and customers
(collectively the "Confidential Information") contain valuable confidential
information that is owned by the Company, and, therefore, that during the period
of employment hereunder and at all times thereafter, Employee shall not utilize
such Confidential Information for his own benefit or for the benefit of any
person or entity other than the Company, nor shall he divulge or communicate any
such Confidential Information to any person or entity without the express
authorization of the Company. The Employee agrees that, on the termination of
his employment, he will immediately surrender to the Company any and all
Confidential Information in his possession pertaining to the Company and its
business.
7.2. Assignment of Rights. All inventions, discoveries, designs,
--------------------
developments, technology, computer programs, writings and reports that are made
or conceived of by the Employee in the course of his employment with the
Company, whether or not patentable or copyrightable, shall become and remain the
sole property of the Company without additional compensation to Employee. The
Employee recognizes that all such works shall be considered works-for-hire and
hereby transfers and assigns any right, title, copyright and interest that
Employee acquires in such works to the Company and will, from time to time, give
the Company all reasonable assistance, execute all papers and do all things that
may reasonably be required to protect and preserve the rights of the Company in
such works.
7.3. No Breach of Other Obligations. The Employee represents that,
------------------------------
in the course of performing services for the Company, he will not breach any
agreement he may have with others with respect to confidential information, and
will not bring to the Company or use in any way any materials or documents
obtained from others under an agreement of confidentiality.
Article 8. - Source of Payments
-------------------------------
All payments provided for under this Agreement shall be paid in cash
from the general funds of the Company unless the Company in its sole discretion,
elects to have insurance coverage to provide for payments, and no special or
separate fund shall be established and no other segregation of assets shall be
made to assure payment unless specifically permitted herein. No trust or
fiduciary relationship with respect to payments shall be deemed created hereby
and,
-6-
to the extent that any person acquires a right to receive payments hereunder,
such right shall be no greater than the rights of a general creditor of the
Company.
Article 9. - Miscellaneous
--------------------------
9.1. Indulgences, Etc. Neither the failure nor any delay on the part
----------------
of either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
9.2. Notices. All notices or communications hereunder shall be in
-------
writing, addressed as follows:
To the Company:
President
Universal Stainless & Alloy Products, Inc.
600 Mayer Street
Bridgeville, PA 15017
To the Employee:
Bruce Kennedy
751 Lincoln Road
Grosse Pointe, MI 48230
Any such notice or communication shall be sent by certified or registered mail,
return receipt requested, postage prepaid, addressed as above (or to such other
address as such party may designate in writing from time to time), and the
actual date of receipt, as shown by the receipt therefor, shall determine the
time at which notice was given.
9.3. Assignment; Agreement. This Agreement shall be binding upon and
---------------------
inure to the benefit of the heirs and personal representatives of the Employee,
but neither this Agreement nor any rights hereunder shall be assignable or
otherwise subject to hypothecation by the Employee.
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) to expressly assume and agree to perform
this 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 his Agreement and shall entitle the
Employee to compensation from the Employer in the same amount and on the same
terms as the Employee would be entitled hereunder if the Employee terminated his
employment pursuant to his Resignation for Good Reason, except that for purposes
of implementing the foregoing, the
-7-
date on which any such succession becomes effective shall be the Date of
Termination. As used in this Agreement, "Company" shall mean as hereinbefore
defined and any successor to the business and/or assets as aforesaid of either
of them which assumes and agrees to perform this Agreement by operation of law
or otherwise.
9.4. Entire Agreement; Amendment. This Agreement, including the
---------------------------
Employment Offer, represents the entire agreement of the parties with respect to
the subject matter hereof and will supersede all prior agreements and
understandings between the Employee and the Company regarding the subject matter
herein. This Agreement may be amended or any provision hereof waived at any
time only by written agreement of the parties hereto.
9.5. Governing Law. This Agreement and its validity, interpretation,
-------------
performance and enforcement shall be governed by the laws of the Commonwealth of
Pennsylvania, other than the conflict of laws provisions of such laws.
9.6. Severability. If, for any reason, any provision of this
------------
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity shall
in no way affect the remainder of such provision that is not held so invalid,
and the remainder of such provision, together with all other provisions of this
Agreement, shall to the full extent consistent with law continue in full force
and effect.
9.7. Headings. The Article and Section headings in this Agreement
--------
are for convenience of reference only; they form no part of this Agreement and
shall not affect its interpretation.
9.8. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have duly executed
this Agreement as of the day and year first written above.
UNIVERSAL STAINLESS & ALLOY
PRODUCTS, INC.
By:
------------------------------
C.M. McAninch
Title: President & CEO
---------------
EMPLOYEE
---------------------------------
Bruce Kennedy
-8-