EXECUTION COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of February 7, 2006,
among RathGibson, Inc. (the "Company") and its affiliated
companies, RGCH
Holdings Corp. ("Holdings") and RGCH Holdings LLC (the "LLC"), and
Harley B.
Kaplan (the "Executive") (together, the "Parties").
WHEREAS, the Parties wish to establish the terms of the Executive's
employment with the Company.
Accordingly, the Parties agree as follows:
1.
Employment and Acceptance. The Company, Holdings and the LLC
shall employ the Executive, and the Executive shall accept
employment, subject
to the terms of this Agreement, on the "Closing Date," as defined
under the
Stock Purchase Agreement by and among the Company, the LLC, and the
current
holders of all capital stock of the Company, dated as of December
6, 2005 (the
"Effective Date").
2.
Term. Subject to earlier termination pursuant to Section 5 of
this Agreement, the employment relationship hereunder shall
continue from the
Effective Date until the third anniversary of the Effective Date
(the "Initial
Term") and shall extend for successive one (1) year terms
thereafter, unless any
Party shall have given ninety (90) days written notice to the
other, prior to
the expiration of the Initial Term or extended term, that it does
not wish to
extend the Term. As used in this Agreement, the "Term" shall refer
to the period
beginning on the Effective Date and ending on the date the
Executive's
employment terminates in accordance with this Section 2 or Section
5. In the
event that the Executive's employment terminates, the Company's
obligation to
continue to pay all Base Salary (defined below in Section 4.1), as
adjusted,
"Bonus" (defined below in Section 4.2), and other benefits then
accrued shall
terminate except as may be provided for in Section 6 of this
Agreement.
3.
Duties and Title.
3.1
Title. The Executive shall serve in the capacity of
Chief Executive Officer and President of the Company, Holdings, and
the LLC, and
shall report solely and directly to the Board of Directors of the
LLC (the
"Board").
3.2
Duties. The Executive will have the same authority and
responsibilities as he held in his position as President and Chief
Executive
Officer of the Company prior to the Effective Date and will perform
such
executive duties customarily performed by a president and chief
executive
officer of a company in similar lines of business as the Company,
including such
duties as may be assigned to the Executive by the Board. The
Executive will
devote all his full business time and attention to the performance
of such
duties and to the promotion of the business and interests of the
Company,
Holdings, the LLC, and their subsidiaries. This Section 3.2,
however, shall not
prevent the Executive, during the Term, from serving as a member of
the board of
directors of two other companies or the board of directors of civic
and
charitable organizations, provided that such membership does not
materially
interfere with the Executive's performance of his duties under this
Agreement or
conflict with Section 7.3 of this Agreement.
4.
Compensation and Benefits by the Company. As compensation for
all services rendered pursuant to this Agreement, the Company shall
provide the
Executive the following during the Term:
4.1
Base Salary. The Company will pay to the Executive an
annual base salary of $424,000, payable in accordance with the
customary payroll
practices of the Company ("Base Salary"), less applicable
withholdings for
federal, state, and local taxes. The Board will review annually the
Executive's
Base Salary for upward adjustment.
4.2
Bonus. The Executive shall be eligible to receive an
annual bonus ("Bonus") under a plan established by the Company in
the amount
determined by the compensation committee of the Board; provided
that the annual
bonus opportunity shall be no less favorable than the bonus
opportunity provided
to the Executive under the RathGibson Executive Bonus Plan, as in
effect
immediately prior to the Closing Date.
4.3
Participation in Employee Benefit Plans. The Executive
shall be entitled, if and to the extent eligible, to participate in
all of the
applicable benefit plans of the Company, which may be available to
other senior
executives of the Company, pursuant to the terms of such plans and
on the same
terms as other senior executives of the Company. Notwithstanding
the foregoing,
the Executive shall not, at any time, receive any personal loans
from the
Company pursuant to any benefit plan or otherwise.
4.4
Perquisites, The Executive shall be entitled to receive
the same perquisites, in kind and quantity, as the Executive was
entitled to
receive from the Company as of the date of the Stock Purchase
Agreement,
including reimbursement for the rental costs for the Executive's
condominium in
Janesville, Wisconsin, reimbursement for expenses related to the
Executive's
weekend travel between Chicago, Illinois and Janesville, Wisconsin,
reimbursement for reasonable expenses for the Executive's wife's
travel between
North Branch, New Jersey and Chicago, Illinois, and payment of
$5,200 per year
for Janesville Country Club membership fees. The Company agrees to
make payment
to the Executive, up to $25,000 each year, to account for any
incremental income
tax liability incurred by the Executive with respect to the
payments made under
this Section 4.4 (except the annual payment for Janesville Country
Club
membership fees) so that the Executive is in the same position he
would have
enjoyed if such payments had not been subject to income tax.
4.5
Vacation. The Executive shall be entitled to twenty (20)
days of paid vacation each fiscal year of the Company. All accrued
and unused
vacation time shall expire on the last day of the fiscal year of
the Company.
The Executive shall not be entitled to payment for unused vacation
days upon the
termination of his employment except as set forth in Section 6.2
below.
4.6
Expense Reimbursement. The Executive shall be entitled
to receive reimbursement for all appropriate business expenses
incurred by him
in connection with his duties under this Agreement in accordance
with the
policies of the Company as in effect from time to time.
5.
Termination of Employment.
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5.1
Death. The Executive's employment hereunder shall
terminate immediately upon his death.
5.2
Disability. The Company may immediately terminate the
Executive's employment due to his "Disability." For purposes of
this Agreement,
"Disability" shall mean a good faith determination by the Board in
accordance
with applicable law that as a result of a physical or mental injury
or illness,
the Executive is unable to perform the essential functions of his
job with or
without reasonable accommodation for a period of (i) ninety (90)
consecutive
days or (ii) one hundred eighty (180) days in any twelve (12) month
period.
5.3
By the Company for Cause. The Company may immediately
terminate the Executive's employment, for "Cause" (as defined
below), by action
of the Board, upon written notice by the Board to the Executive
identifying the
act or acts constituting Cause. For purposes of this Agreement,
"Cause" means:
(i) the Executive's willful and continued failure (other than as a
result of
incapacity due to mental or physical impairment) to substantially
perform his
duties hereunder, which is not remedied within thirty (30) days
after receipt of
written notice from the Board specifying such failure; (ii) the
Executive's
conviction of or plea of nolo contendre to any felony or other
crime involving
moral turpitude; (iii) the Executive's knowing unlawful use or
possession of
illegal drugs; or (iv) the Executive's commission of a material bad
faith act of
fraud, embezzlement, misappropriation, willful misconduct, gross
negligence, or
breach of fiduciary duty, in each case against the Company,
Holdings, the LLC,
or any of their subsidiaries.
5.4
By the Company without Cause. The Company may
immediately terminate the Executive's employment without Cause at
any time
without prior notice.
5.5
By the Executive. The Executive may terminate his
employment hereunder at any time, with or without "Good Reason" (as
defined
below), upon thirty (30) days prior written notice to the Company.
The
Executive's employment shall terminate as of thirty (30) days from
the date
notice is given, unless, with respect to a notice regarding a
termination based
on Good Reason, the Company corrects the circumstances constituting
Good Reason
within such thirty (30) day period. For purposes of this Agreement,
"Good
Reason" means, without the Executive's consent, (i) a reduction in
Base Salary;
(ii) a material adverse reduction in the Executive's employee
benefits; (iii) a
change in the Executive's title or material adverse reduction in
his
responsibilities materially inconsistent with the position of the
President and
Chief Executive Officer of the Company, Holdings, and the LLC; (iv)
a
requirement to report to any other person employed by the Company
or any other
group of people other than the Board; or (v) a change in the
Executive's place
of work to a location more than fifty (50) miles from the
Executive's principal
place of work as of the Effective Date (i.e., Janesville,
Wisconsin); provided,
however, that Good Reason shall not include acts which are cured by
the Company
within thirty (30) days following the Company's receipt of written
notice from
the Executive of the existence of circumstances constituting Good
Reason. Any
notice of termination for Good Reason must be given within thirty
(30) days
following the Executive's learning of circumstances constituting
Good Reason.
5.6
Removal from any Boards and Position. If the Executive's
employment is terminated for any reason under this Agreement, he
shall be deemed
to resign (i) if a member, from the Board or any other board to
which he has
been appointed or nominated by or on behalf of the Company,
Holdings or the LLC
and (ii) from any position with the Company,
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Holdings, the LLC, or any of their subsidiaries, including, but not
limited to,
an officer of the Company.
6.
Obligations upon Termination.
6.1
By the Company for Cause or by the Executive Without
Good Reason or Due to Death or Disability. If (i) the Executive's
employment
with the Company terminates due to his death; (ii) the Company
terminates the
Executive's employment with the Company for Cause; (iii) the
Company terminates
the Executive's employment with the Company due to the Executive's
Disability;
or (iv) the Executive terminates his employment with the Company
without Good
Reason, the Executive or the Executive's legal representatives (as
appropriate),
shall be entitled to receive the following:
(a)
the Executive's accrued but unpaid Base Salary and
benefits set forth in Section 4.3, if any, to the date of
termination (the
"Accrued Benefits"); and
(b)
expenses reimbursable under Section 4.6 incurred
but not yet reimbursed to the Executive to the date of termination.
6.2
By the Company Without Cause or By the Executive for
Good Reason. If the Company terminates the Executive's employment
without Cause
or if the Executive terminates his employment for Good Reason, the
Executive
shall be entitled to receive the following, upon execution without
revocation of
a valid general release of all claims against the Company,
Holdings, the LLC,
and Castle Harlan, Inc., substantially in the form attached hereto
as EXHIBIT A:
(a)
the Accrued Benefits;
(b)
the Executive's accrued but unpaid vacation, if
any, to the date of termination;
(c)
continued Base Salary for twenty four (24) months
after the date of termination, payable in monthly installments;
(d)
an amount equal to the product of the annual
target Bonus payable to the Executive with respect to the year in
which
his employment with the Company terminates and a fraction, the
numerator
of which is the number of days the Executive was employed during
the year
in which the Executive's employment terminates and the denominator
of
which is 365, payable twenty (20) days after the date of
termination; and
(e)
continued coverage under the Company's medical and
dental plans for twenty four (24) months after the date of
termination;
provided, that the Company may provide such coverage through
reimbursement
of the cost of continuation of group health coverage, pursuant to
the
Consolidated Omnibus Budget Reconciliation Act of 1986, to the
extent the
Executive is eligible and subject to the terms of the plan and the
law.
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6.3
Election Not to Extend the Term. In the event that any
Party elects not to extend the Term pursuant to Section 2 of this
Agreement,
unless the Executive's employment with the Company is earlier
terminated
pursuant to Section 5 of this Agreement, the Executive's
termination of
employment hereunder (whether or not the Executive continues as an
employee of
the Company thereafter) shall be deemed to occur on the close of
business on the
day immediately preceding the next scheduled date on which the
extension begins,
and the Executive shall be entitled to receive the Accrued
Benefits. In addition
to the Accrued Benefits, the Executive shall also be entitled to
receive, upon
execution without revocation of a valid general release of all
claims against
the Company, Holdings, the LLC, and Castle Harlan, Inc.,
substantially in the
form attached hereto as EXHIBIT A, continued Base Salary for twelve
(12) months
after the date of termination, payable in monthly installments, in
the event
that the Company elects not to extend the Term pursuant to Section
2 of this
Agreement.
6.4
Nondisparagement. Except in connection with any legal
dispute between the Parties or an order of a court or governmental
agency with
jurisdiction, the Executive shall not at any time (whether during
or after the
Term) publish or communicate to any person or entity any
"Disparaging" (as
defined below) remarks, comments or statements concerning the
Company, Holdings,
the LLC, Castle Harlan, Inc., their parents, subsidiaries and
affiliates, and
their respective present and former members, partners, directors,
officers,
shareholders, employees, agents, attorneys, successors and assigns,
and the
Company, Holdings, the LLC, and Castle Harlan, Inc. shall not at
any time
(whether during or after the Term) publish or communicate to any
person or
entity any Disparaging remarks, comments or statements concerning
the Executive
and shall instruct their respective present members, partners,
directors, and
officers to not at any time publish or communicate to any person or
entity any
Disparaging remarks, comments or statements concerning the
Executive.
"Disparaging" remarks, comments or statements are those that impugn
the
character, honesty, integrity or morality or business acumen or
abilities in
connection with any aspect of the operation of business of the
individual or
entity being disparaged.
7.
Restrictions and Obligations of the Executive.
7.1
Confidentiality. (a) During the course of the
Executive's employment by the Company (prior to and during the
Term), the
Executive has had and will have access to certain trade secrets and
confidential
and proprietary information relating to the Company, Holdings, the
LLC, and
their subsidiaries (the "Protected Parties") which is not readily
available from
sources outside the Company. The confidential and proprietary
information and,
in any material respect, trade secrets of the Protected Parties are
among their
most valuable assets, including but not limited to, their customer,
supplier and
vendor lists; databases; competitive strategies; computer programs,
frameworks,
or models; marketing programs; sales, financial, marketing,
training and
technical information; product development (and proprietary product
data); and
any other information, whether communicated orally, electronically,
in writing
or in other tangible forms, concerning how the Protected Parties
create,
develop, acquire or maintain their products and marketing plans,
target their
potential customers and operate their retail and other businesses.
The Protected
Parties invested, and continue to invest, considerable amounts of
time and money
in their process, technology, and know-how; obtaining and
developing the
goodwill of their customers; their other external relationships;
their data
systems and data bases; and all the information described above
(hereinafter
collectively referred to as "Confidential Information"), and any
misappropriation or unauthorized disclosure of Confidential
Information in any
form would irreparably harm the Protected Parties. The
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Executive acknowledges that such Confidential Information
constitutes valuable,
highly confidential, special and unique property of the Protected
Parties. The
Executive shall hold in a fiduciary capacity for the benefit of the
Protected
Parties all Confidential Information relating to the Protected
Parties and their
businesses, which shall have been obtained by the Executive during
the
Executive's employment by the Company, Holdin
