Exhibit 10.5

 

AK STEEL CORPORATION

 

LONG-TERM PERFORMANCE PLAN

 

(as amended and restated as of January 16, 2003)

 

 

Introduction

 

The name of this plan is the AK Steel Corporation Long-Term Performance Plan
(the “Plan”). AK Steel Corporation (the “Company”) adopted the Plan in 1995 to
enhance the Company’s focus on its long-term performance relative to that of its
principal competitors in the flat rolled steel industry (the “Peer Group”) and
to reward certain employees for enhancing the profitability of the Company over
extended periods of time. The Plan is hereby amended and restated as set forth
in this document.

 

The Plan is a payroll practice intended to motivate selected employees to meet
certain performance goals. The Plan is not intended to be an employee benefit
plan within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, and the Plan shall be interpreted,
administered and enforced to the extent possible in a manner consistent with
that intent. Any obligations under the Plan shall be the joint and several
obligations of AK Steel Holding Corporation, the Company, and each of their
respective subsidiaries and affiliates. The Plan is designed to comply with the
performance-based compensation exception under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”).

 

1.    Administration of the Plan.

 

This Plan shall be administered by the Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”). The Committee shall
consist of not less than two members of the Board who shall be appointed from
time to time by, and shall serve at the discretion of, the Board. Each member of
the Committee shall be an “outside director” within the meaning of Section
162(m) of the Code and related regulations, an “independent director” as defined
in the rules and regulations of the New York Stock Exchange, and a “non-employee
director” as defined in Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended. The Human Resources Department of the Company shall
maintain records of authorized participants for each period described in
paragraph 4 below (the “Performance Period”).

 

2.    Participation.

 

Each elected officer of the Company shall be eligible to participate in this
Plan, and certain other management employees of the Company (“Plan Member” or
“Plan Members”) shall be eligible to participate in this Plan upon selection by
the Chairman of the Board or his delegate, the Executive Management Committee
(the “EMC”), subject to the approval and/or review from time to time by the
Committee. The EMC shall consist of the Company’s Chief Executive Officer,
President, Vice President—Human Resources, and such other individuals as may be
designated from time to time by the Chief Executive Officer. Notwithstanding the
foregoing, any covered employee, as defined in Section 162(m)(3) of the Code
(“Covered Employee”), shall be designated to participate in the Plan by the
Committee in writing within the time period prescribed by Section 162(m) of the
Code and related regulations.

 

3.    Bonus Opportunity Targets.

 

Each Plan Member shall be assigned a Bonus Opportunity Target Percentage
(“Target Percentage”) at the time the Plan Member is selected for participation
in this Plan. A Plan Member’s Target Percentage may be changed from time to time
at the discretion of the Committee or, in the case of Plan Members who are not
elected officers, by the EMC. Notwithstanding the foregoing, the Committee shall
assign or change, in writing, the Target Percentage for any Covered Employee for
a particular Performance Period within the time period prescribed by Section
162(m) of the Code and related regulations.

 

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A Plan Member’s Target Percentage is the maximum percentage of his annual base
salary (as defined below) that can be achieved with respect to any Performance
Period for which he is selected for participation. A Plan Member’s Target
Percentage is multiplied by his annual base salary for the final year of the
Performance Period for which the calculation of a Performance Award is made in
order to arrive at his Bonus Opportunity Target Amount (“Target Amount”). A Plan
Member’s annual base salary for purposes of this Plan shall be determined by
multiplying his monthly rate of base salary for the last month of the relevant
Performance Period by twelve (12).

 

Any amount awarded to a Plan Member under this Plan shall be referred to herein
as a “Performance Award.” If a Plan Member is designated to participate in the
Plan after the commencement of a Performance Period, his Performance Award, if
any, will be prorated based on his period of participation in the Plan during
such Performance Period.

 

4.    Performance Periods.

 

Each Performance Period shall consist of a period of three consecutive calendar
years. The first such three-year period commenced on January 1, 1995 and ended
on December 31, 1997.

 

5.    Performance Award Payment Date.

 

The Performance Award Payment Date is the date on which any Performance Awards
are paid to Plan Members, which date shall not be more than 120 days following
the last day of the final year of each Performance Period. Before any
Performance Award is paid to a Covered Employee, the Committee shall certify in
writing that the criteria for receiving a Performance Award pursuant to the
terms of this Plan have been satisfied.

 

6.    Peer Group.

 

The Peer Group shall consist of Bethlehem Steel Corporation, National Steel
Corporation, Nucor Corporation, and U.S. Steel Group. The Peer Group may be
modified from time to time at the discretion of the Committee; however, to the
extent any modification of the Peer Group impacts the Performance Award to be
received by a Covered Employee, such modification will be made within the time
period prescribed by Section 162(m) of the Code and related regulations.

 

7.    Performance Award Determination.

 

Any Performance Award to be paid to a Plan Member with respect to a Performance
Period shall be the amount determined by multiplying his Target Amount under
paragraph 3 above by the sum of the applicable percentages for the completed
Performance Period and for the final year of the completed Performance Period as
set forth in the chart below. (For example, the #1 ranking indicated in the
first column of the chart below would result in a Performance Award equal to
200% (the sum of the corresponding percentages in the second and third columns)
of a Member’s Target Amount.) The chart is based upon the Company’s earnings
before interest expense, provision for income taxes, depreciation and
amortization (referred to as “EBITDA”) per ton shipped (excluding special and
unusual items) as compared to EBITDA per ton shipped (excluding special and
unusual items) of the Peer Group. The maximum Performance Award that may be paid
to any Covered Employee with respect to any Performance Period shall be $5
million. The Committee may delegate the calculation of Performance Awards to the
Company’s Chief Financial Officer, subject to the Committee’s supervision.

 

The percentages to be applied to a Plan Member’s Target Amount in determining
any Performance Award with respect to a Performance Period shall be based upon
the following chart:

 

EBITDA Per Ton Shipped

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Percentages of Target Amount

Based Upon Relative Performance Ranking

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Ranking of Company Versus

Peer Group

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Percentage for

Completed Performance Period

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Percentage for Final Year of
Completed Performance Period

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1

  100%   100%

2

  50%   50%

3

  25%   25%

 

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8.    Form of Payment.

 

All Performance Awards with respect to a Performance Period will be paid in a
single lump-sum payment either in cash or in a combination of cash and whole
shares of Restricted Stock as determined by the Committee; however, no more than
fifty percent (50%) of any Performance Award shall be paid in Restricted Stock.
The Company shall withhold such payroll or other taxes as it determines to be
necessary or appropriate.

 

If any portion of Performance Awards with respect to a Performance Period are to
be paid in whole shares of Restricted Stock, such shares shall be issued
pursuant to grants of Restricted Stock under the AK Steel Holding Corporation
Stock Incentive Plan (as amended and restated as of January 16, 2003) (the
“SIP”); however, notwithstanding any provision in the SIP to the contrary, the
restrictions on such shares granted under the SIP pursuant to this Plan shall
lapse as to 20% of those shares on each of the first, second, third, fourth and
fifth anniversaries of the Performance Award Payment Date on which such
Restricted Stock was issued. Restricted Stock issued pursuant to this Plan shall
be valued at the average of the high price and the low price of shares traded on
the date the Committee approves issuance of such Restricted Stock.

 

9.    Occurrence of Events During Performance Period.

 

a.    Termination of Employment.

 

If during a calendar year a Plan Member dies, becomes totally and permanently
disabled, retires, or is involuntarily terminated for reasons other than cause,
the Plan Member (or his estate in the case of death) shall be entitled under
this Plan to an amount equal to twice the amount paid to the Plan Member on the
Performance Award Payment Date occurring within that calendar year, less any
amount actually paid to the Plan Member on such Performance Award Payment Date.
Any amount payable under this paragraph 9a shall be paid on the next to occur of
the Performance Award Payment Date falling within that calendar year or within
60 days following such Plan Member’s death or other termination of employment.
Any such amount shall be paid in cash and in full satisfaction of any claims the
Plan Member may have under this Plan.

 

b.    Termination for Cause.

 

If a Plan Member is terminated for cause, as cause may be defined by the
Committee or the EMC, no Performance Award shall be paid under this Plan.

 

c.    Voluntary Termination.

 

Subject to the provisions of paragraph 9a, a Plan Member who voluntarily
terminates employment with the Company prior to any Performance Award Payment
Date shall forfeit all rights hereunder to any payment that is or may be due on
or after such Performance Award Payment Date.

 

d.    Removal from the Plan.

 

A Plan Member may be removed from further participation in this Plan by the
Committee or the EMC and such removal shall be effective as of the date
determined by the Committee or the EMC. In such a case, the Plan Member may
receive, in the sole discretion of the Committee or the EMC, a prorated
Performance Award, if any, based on his period of participation during the
Performance Period in which his removal occurs.

 

10.    Source of Benefits.

 

The Company shall make any cash payments due under the terms of this Plan
directly from its assets or from any trust that the Company may choose to
establish and maintain from time to time. Nothing contained in this Plan shall
give or be deemed to give any Plan Member or any other person any interest in
any property of any such trust or in any property of the Company, nor shall any
Plan Member or any other person have any right under this Plan not expressly
provided by the terms hereof, as such terms may be interpreted and applied by
the Committee in its discretion.

 

11.    Liability of Officers and Plan Members.

 

No current or former employee, officer, director or agent of AK Steel Holding
Corporation or of the Company shall be personally liable to any Plan Member or
other person with respect to any benefit under this Plan or for any action taken
by any such person in the administration or interpretation of this Plan.

 

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12.    Unsecured General Creditor.

 

The rights of a Plan Member (or his designated beneficiary in the event of his
death) under this Plan shall only be the rights of a general unsecured creditor
of the Company, and the Plan Member (or his designated beneficiary) shall not
have any legal or equitable right, interest, or other claim in any property or
assets of the Company by reason of the establishment of this Plan.

 

13.    Arbitration.

 

Any dispute under this Plan shall be submitted to binding arbitration subject to
the rules of the American Arbitration Association before an arbitrator selected
by the Company and acceptable to the Plan Member. If the Plan Member objects to
the appointment of the arbitrator selected by the Company, and the Company does
not appoint an arbitrator acceptable to the Plan Member, then the Company and
the Plan Member shall each select an arbitrator and those two arbitrators shall
collectively appoint a third arbitrator who shall alone hear and resolve the
dispute. The Company and the Plan Member shall share equally the costs of
arbitration. No Company agreement of indemnity, whether under its Articles of
Incorporation, the bylaws or otherwise, and no insurance by the Company, shall
apply to pay or reimburse any Plan Member’s costs of arbitration.

 

14.    Amendment or Termination of Plan.

 

The Board expressly reserves for itself and for the Committee the right and the
power to amend or terminate the Plan at any time. In such a case, unless the
Committee otherwise expressly provides at the time the action is taken, no
Performance Awards shall be paid to any Plan Member on or after the date of such
action.

 

15.    Miscellaneous.

 

a.    Assignability.

 

Plan Members shall not alienate, assign, sell, transfer, pledge, encumber,
attach, mortgage, or otherwise hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder. No part of the amounts payable
hereunder shall, prior to actual payment, be subject to seizure or sequestration
for the payment of any debts, judgments, alimony, or separate maintenance, nor
shall any person have any other claim to any benefit payable under this Plan as
a result of a divorce or the Plan Member’s, or any other person’s bankruptcy or
insolvency.

 

b.    Obligations to the Company.

 

If a Plan Member becomes entitled to payment of any amounts under this Plan, and
if at such time the Plan Member has any outstanding debt, obligation, or other
liability representing an amount owed to the Company, then the Company may
offset such amounts against the amounts otherwise payable under this Plan.  Such
determination shall be made by the Committee or the Board.

 

c.    No Promise of Continued Employment.

 

Nothing in this Plan or in any materials describing or relating to this Plan
grants, nor should it be deemed to grant, any person any employment right, nor
does participation in this Plan imply that any person has been employed for any
specific term or duration or that any person has any right to remain in the
employ of the Company. Subject to the provisions of paragraph 9 hereof, the
Company retains the right to change or terminate any condition of employment of
any Plan Member without regard to any effect any such change has or may have on
such person’s rights hereunder.

 

d.    Captions.

 

The captions to the paragraphs of this Plan are for convenience only and shall
not control or affect the meaning or construction of any of its provisions.

 

 

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e.    Pronouns.

 

Masculine pronouns and other words of masculine gender shall refer to both men
and women.

 

f.    Validity.

 

In the event any provision of this Plan is found by a court of competent
jurisdiction to be invalid, void, or unenforceable, such provision shall be
stricken and the remaining provisions shall continue in full force and effect.

 

g.    Applicable Law.

 

This Plan is subject to interpretation under federal law and, to the extent
applicable, the law of the State of Ohio.

 

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