Exhibit 10.2.4
Lodestar Energy, Inc.
333 West Vine Street
Suite 1700
Lexington, KY 40507
May 14, 1998
Mr. Mike Francisco
P.O. Box 439
Elkhorn City, KY 41522
Re: Net Worth Appreciation Participation Agreement
Dear Mr. Francisco:
This will confirm the understanding of Lodestar Energy, Inc., (the
"Company"), with you with respect to your Net Worth Appreciation Participation,
intended to constitute additional incentive compensation to you. This letter is
a restatement of, and replaces in its entirety, a similar letter from Rencoal,
Inc. to you dated March 14, 1997, and shall be deemed to have effect from March
14, 1997.
1) Vesting - On April 30, 2000 provided that you continue to be continuously
employed by the Company from the date hereof through that date, you shall
receive a credit of three fourths of one percent (3/4%) and on each of April 30,
2001, and April 30, 2002, you shall receive an additional credit of one fourth
of one percent (1/4%), provided that you are continuously employed by the
Company to the said date, for a maximum credit, if you remain in the employ of
the Company continuously through April 30, 2002 of one and one fourth percent (1
1/4%) ("Maximum Credit"). You shall not receive credit for any partial year,
unless your employment terminates due to death or total disability, in which
case you shall receive a credit of one fourth of one percent (1/4%) for the year
in which such termination takes place, in addition to any other credit
previously vested (up to said Maximum Credit of one and one fourth percent (1
1/4%).
2) Cumulative Net Income Participation Benefit - Upon the termination of
your employment by the Company (other than for cause), or your death or total
disability while in
our employment, you (or your designee or estate) shall be entitled to a payment
("Payment") equal to the product of (a) the total percentage credited to you
under paragraph 1 (a maximum of one and one fourth percent (1 1/4%)) multiplied
by (b) the "cumulative net income". The "cumulative net income" is the amount,
if any, of the cumulative consolidated net income of the Company's parent,
Lodestar Holdings, Inc., ("Holdings") available to its Common Stock, from March
14, 1997 through the end of either (at the Company's option) (x) its fiscal
quarter immediately preceding the date of your termination or (y) the fiscal
quarter in which your date of termination occurs. If there is no positive
"cumulative net income" there shall be no payment. The determination of the
independent public accountants for the Company as to the cumulative net income,
made in accordance with generally accepted accounting principals, consistently
applied, shall be conclusive. There shall be deducted from net income for each
period any amount paid as dividends on the Common Stock of Holdings during such
period. If your employment shall be terminated for cause at any time, you shall
forfeit all rights to receive any Payment.
3) Dividend Participation - If while you are employed by the Company,
Holdings shall pay any cash dividend on its Common Stock, or Holdings or the
Company pay management fees to The Renco Group, Inc. in excess of $1,200,000 per
fiscal year, then the Company shall make a cash payment to you equal to the
total amount of the cash dividend and management fees in excess of $1,200,000
per fiscal year multiplied by your Maximum Credit.
4) Payment - The Payment shall be payable to you (or your designee or
estate) in 40 equal quarterly installments, without interest, commencing three
(3) months after the later of (x) the termination of your employment or (y) your
attaining 62 years of age, and at 3-month intervals thereafter, provided,
however, that in the event of your death or permanent disability, rendering you
unable to engage in your customary employment, the Payment, if it has not
already commenced, will commence. The period during which the payments will be
made is herein called the "Payment Period". You have advised us that your date
of birth is 1/14/56.
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5) Payment Effect on Other Benefits - Any payments made to you pursuant to
this agreement, whether as a result of dividend participation or otherwise, will
not be counted as wages for the purpose of computing other benefits.
6) Sale of Substantially All of Holdings Stock or Assets - If, while you
shall be employed by the Company all or substantially all the stock or assets of
Holdings shall be sold to a person who is not an affiliate of Ira Leon Rennert,
or if The Renco Group, Inc. sells a controlling interest in Holdings, then, upon
the closing of such sale, the Maximum Credit shall be deemed to be vested, and
you shall be entitled to receive, as payment in full of your participation, your
pro rata share one and one fourth percent (1 1/4%) of the "net proceeds" of the
sale available for Holdings Common Stock, in kind, on the same terms and
conditions as Holdings or its shareholder is being paid. "Net proceeds", for
purposes hereof, shall mean the amount, if any, by which the proceeds of the
sale after deducting all expenses of the sale, all applicable taxes, all
liabilities retained by the seller and all amounts to which holders of preferred
stock are entitled exceeds the consolidated net worth applicable to the Common
Stock of Holdings on March 14, 1997. Except for such payment, neither you nor
this Company shall have any further rights or liabilities hereunder.
7) Condition Precedent - Non Compete and Confidentiality - You shall comply
with the following provisions as a condition precedent to your right to receive
Payments:
(a) You acknowledge that, by reason of your employment by the Company, you
will have continuing access to and knowledge of company confidential information
and that improper use or revelation of same by you during or after the
termination of your employment by the Company could cause serious injury to the
business of the Company. Accordingly, you agree that you will forever keep
secret and inviolate all company confidential information which shall have come
or shall hereafter come into your possession, and that you will not use the same
for your own private benefit, or directly or indirectly for the benefit of
others, and that you will not disclose such company confidential information to
any other person.
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(b) You agree that you will not (whether as an officer, director, partner,
proprietor, investor, associate, employee, consultant, adviser, public relations
or advertising representative or otherwise), directly or indirectly, be engaged
in the coal business, or in any other business in which the Company is engaged,
or proposed to engage, at the time of the termination of your employment.
8) Notices - Any notice to be sent pursuant hereto shall be sent by hand,
certified or registered mail or overnight service to you, at the address
indicated above and to the Company, c/o The Renco Group, Inc., 30 Rockefeller
Plaza, New York, New York 10112, to the attention of Ira Leon Rennert, or to any
other address which any of us may designate by notice in writing.
Please confirm that the foregoing correctly sets forth our full agreement
with respect to the subject matter contained herein by signing and returning the
enclosed copy of this letter.
Very truly yours,
LODESTAR ENERGY, INC.
By: /s/ Ira Leon Rennert
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Ira Leon Rennert
Chairman of the Board
CONFIRMED AND AGREED TO:
/s/ Mike Francisco
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Mr. Mike Francisco
P.O. Box 439
Elkhorn City, KY 41522
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