Execution Copy

 

**EMPLOYMENT AGREEMENT**

EMPLOYMENT AGREEMENT made effective as of the first day of January 2008            between NOVAMERICAN STEEL INC., a Delaware corporation (the “Corporation”),            with its principal offices at 28 West 44th Street, 16th Floor,            New York, NY 10036 and KAREN NARWOLD (the “Executive”). Each of the            Executive and the Corporation are called, individually, a “Party” and,            collectively, the “Parties”.

WITNESSETH:

WHEREAS, the Corporation desires to employ the Executive and the            Executive desires to be employed by the Corporation, as a senior executive of the            Corporation;

NOW, THEREFORE, in consideration of the premises and the mutual            covenants and agreements contained herein and other good, valuable and sufficient            consideration, the receipt of which is hereby acknowledged, the parties, intending to            be legally bound, hereby agree as follows:

1.         Employment. The Corporation hereby agrees            to employ the Executive, and the Executive hereby agrees to be employed by the            Corporation, on the terms and conditions set forth herein.

|   | 2. | Position and                            Duties. |
|--------|----|-------------------------------------------------|

(a)       The Executive shall serve            as the Vice President, Chief Administrative Officer and General Counsel of the            Corporation. The Executive shall report to the Chief Executive Officer of the            Corporation (the “CEO”). The Executive shall have such responsibilities and            duties as are customary for such position and as may be assigned by the CEO to the            Executive from time to time.

(b)       The Executive shall devote            all of the Executive’s working time and efforts to the business and affairs of            the Corporation;provided,however, that the Executive may from time            to time serve on boards of trustees or directors of a limited number of (i)            not-for-profit organizations so long as she shall have advised the Board of Directors            of the Corporation (the “Board”) of her intention to so serve prior to the            commencement of such service and (ii) for-profit organizations so long as the Board            shall have approved such service prior to commencement of such service and Executive            may manage her personal investments so long as such management does not interfere with            performance of her responsibilities or duties hereunder. The proviso to the preceding            sentence shall not limit the obligations of the Executive under Section 7.

|   | 3. | Compensation and                            Benefits. |
|--------|----|-------------------------------------------------------|

(a)       The Executive’s            salary shall be $400,000 per year during which this Agreement is in effect. Such salary            shall be paid in accordance with the Corporation’s payroll practices. Such salary            shall be subject to review each year by the Board and may be

 

----

increased (but not decreased) in the discretion of the Board. The            Executive’s salary, as then in effect, is called the            “Salary”.

(b)       The independent directors            of the Board shall determine performance targets and metrics for the Executive for each            year during which this Agreement is in effect. The Executive will be eligible to            receive a performance bonus each year. The bonus is expected to be no less than 50% and            no greater than 100% of the Salary. The independent directors of the Board shall            determine, in their discretion, the amount of the bonus, if any, for each year. The            bonus will be paid in accordance with the Corporation’s payroll practices no            later than March 15 following the year in respect of which the bonus is            earned.

(c)       The Executive shall be            entitled to receive reimbursement, in accordance with the Corporation’s expense            reimbursement practices, for all reasonable and customary expenses incurred by the            Executive in connection with performance of her duties and responsibilities;provided, that such expenses are incurred            and reported in accordance with the Corporation’s expense reimbursement policies            and procedures. Without limiting such expenses, such expenses include expenses for            reasonable and customary temporary accommodations near the Corporation’s            facilities located more than 35 miles outside of New York, New York for the Executive            and, if the Executive is required to work from such facilities for an extended period,            the Executive’s spouse and dependents and related travel arrangements.

(d)       The Executive shall be            entitled to participate in or receive benefits under any medical, pension, profit            sharing or other employee benefit plan or arrangement generally made available by the            Corporation now or in the future to its executives and management employees (or to            their family members) subject to the terms and conditions of such plans and            arrangements.

(e)       The Executive shall be            entitled to four (4) weeks vacation each year, with carryover of unused vacation days            in accordance with the Corporation’s vacation policy.

|   | 4. | Termination. |
|--------|----|--------------|

(a)       Termination by Corporation. The            Executive’s employment may be terminated by the Corporation at any time with or            without Cause (as defined in Section 5(e)(ii)) or if the Executive becomes Disabled (as            defined in Section 5(e)(i)), by notifying the Executive, in which case the termination            shall be effective immediately upon receipt of such notice by the Executive.

(b)       Termination by the Executive. The            Executive’s employment may be terminated by the Executive with or without Good            Reason (as defined in Section 5(e)(iii)) by notifying the Board within ninety (90) days            following the first occurrence of the event or circumstance constituting Good Reason,            in which case the termination shall be effective thirty (30) days following the receipt            of such notice by the Board;provided, that the event or circumstance is            not cured within thirty (30) days following such notice to the Board. Any failure to so            notify the Board within the applicable ninety (90) day period constitutes a waiver by            the

 

2

 

----

Executive of her right to terminate her employment for Good Reason as to            such applicable event(s) or circumstance(s).

(c)       Notice of Termination. Any notification            under this Section to either Party shall indicate the specific termination provision in            this Agreement relied upon and set forth in reasonable detail the facts and            circumstances claimed to provide a basis for termination under the provision so            indicated.

5.         Compensation Upon Termination. Upon            termination of the Executive’s employment for any reason, the Executive is deemed            to have resigned, as of the date of such termination of employment, from the Board and            any committees of the Corporation or its affiliates on which she serves.

(a)       If the Corporation shall            terminate the Executive’s employment for any reason other than for Cause,            including due to the Executive’s Disability, or if the Executive resigns for Good            Reason, subject to Sections 5(f) and 5(h), the Executive shall be entitled to the            following:

(i)        A lump sum payment,            within thirty (30) days following the termination of the Executive’s employment,            which includes all amounts due to the Executive through the date of her termination,            including any accrued but unpaid Salary and/or bonus and any accrued and unused            vacation days;

(ii)       A lump sum payment, within            sixty (60) days following the termination of the Executive’s employment, equal to            the product of (A) the Salary plus the minimum bonus of 50% of the Salary multiplied by            (B) a fraction, the numerator of which is the number of months (full and partial)            remaining between the date of termination and December 31, 2010 and the denominator of            which is twelve (12), but in no event shall the fraction equal less than one (1) (the            “Severance Period”);

(iii)      Continued participation in the            Corporation’s health plans (medical and dental), at the same cost to the            Executive as immediately prior to such termination of employment, for the longer of (A)            the Severance Period and (B) eighteen (18) months;provided, that if the Executive is entitled            to participate in a health plan provided by a new employer, any payment by the            Corporation for continued participation in the Corporation’s health plans shall            cease (although participation may continue solely at the Executive’s cost, to the            extent participation must be offered under federal law);provided,further, that if the new employer plan does            not have preexisting condition coverage, the Executive may continue medical coverage            with the Company for the balance of the period described above, without affecting the            cost to the Executive.The Corporation anticipates that health            benefits made available pursuant to this clause (iii) will be provided in accordance            with applicable continuation coverage requirements under federal and state            law.

(iv)      Continuation of life insurance            coverage at the same level and at the same cost to the Executive as immediately prior            to such termination of employment, for the longer of (A) the Severance Period and (B)            eighteen (18) months;

 

3

 

----

(v)       Reimbursement for            reasonable outplacement services for 12 months following the termination of the            Executive’s employment. The Parties shall use their good faith efforts to locate            a provider, and determine the scope of, outplacement services which are reasonably            acceptable to both parties.

(vi)      Except as provided in this            Section 5(a), the Corporation will have no further obligations to the Executive under            this Agreement following the Executive’s termination of employment under the            circumstances described in this Section 5(a).

(b)       If the Executive’s            employment with the Corporation shall terminate due to either (i) the Executive’s            termination other than for Good Reason or (ii) by the Corporation’s termination            of the Executive’s employment for Cause, then the Executive shall be entitled to            receive her Salary through the date of termination (which Salary shall not include any            accrued and unused vacation days). Except as provided in this Section 5(b), the            Corporation shall have no further obligations to the Executive under this Agreement            following the Executive’s termination of employment under the circumstances            described in this Section 5(b).

(c)       If the Executive’s            employment with the Corporation shall terminate due to the Executive’s death,            then the Executive’s estate shall be entitled to the amounts described in Section            5(a)(i) and (ii) and the Executive’s surviving spouse and dependents, if any,            shall be entitled to continued participation in the Corporation’s health plans            (medical and dental) as described in Section 5(a)(iii) above. Except as provided in            this Section 5(c), the Corporation shall have no further obligations to the Executive            under this Agreement following the Executive’s termination of employment under            the circumstances described in this Section 5(c).

(d)       In the event a Change of            Control (as defined in Section 5(e)(iv)) of the Corporation occurs after December 31,            2008 but prior to the termination of the Executive’s employment, then, for            purposes of Section 5(a), the “Severance Period” shall mean the number of            months (full and partial) remaining between the date of termination and the two year            anniversary of the effective date of the Change of Control.

|   | (e) | Definitions: |
|--------|-----|--------------|

(i)        “Disability”            means the Executive becomes “disabled” as defined in the            Corporation’s long term disability plan or, if there is no such plan, the            Executive becomes physically or mentally incapacitated and absent and/or unable to            perform her duties on a full-time basis for 90 days in any 180 consecutive day            period.

(ii)       “Cause” means            the Executive’s (A) willful, intentional or grossly negligent failure to            substantially perform her duties (other than due to Disability) after the CEO or the            Board has given lawful directive to so perform; (B) conviction of or plea of no contest            to a crime constituting (I) a felony or (II) a misdemeanor involving deceit, dishonesty            or fraud that relates to the Corporation; or (C) willful, intentional or grossly            negligent conduct which is materially injurious to the Corporation, monetarily or            otherwise. The Executive’s employment shall not be deemed to have been terminated            for Cause without (x) reasonable written notice to the Executive setting forth the            reasons for the Corporation’s intention to

 

4

 

----

terminate for Cause and (y) the opportunity to cure (if curable) within            15 days of such written notice of the event(s) giving rise to such notice.

(iii)      “Good Reason”            means: (A) any failure to pay or reduction in the Executive’s Salary; (B) the            assignment of duties or responsibilities to the Executive that are materially and            adversely inconsistent with the Executive’s position, including a material            diminution in duties or responsibilities or title; (C) a material breach by the            Corporation of this Agreement or any other material agreement between the Executive and            the Corporation; (D) the failure of the Corporation to obtain the assumption of this            Agreement in writing by each successor to the Corporation; or (E) any circumstance in            which the Corporation is directing the Executive to participate in illegal            activity;provided, that the events            and circumstances described in clauses (A) through (E) above shall not constitute Good            Reason (I) if the Executive consents to such event or circumstance or (II) if such            event or circumstance has been cured within thirty (30) days after notice of such event            or circumstance has been given by the Executive to the Board.

(iv)      A “Change of            Control” shall be deemed to occur upon the occurrence of any of the following            events or circumstances:

(A)      any “person” or            “group” within the meaning of Section 13(d) or 14(d)(2) of the Securities            Exchange Act of 1934 (the “Act”) becomes the beneficial owner of 40% or            more of the then outstanding common stock of the Corporation or 40% or more of the then            outstanding voting securities of the Corporation;

(B)      any “person” or            “group” within the meaning of Section 13(d) or 14(d)(2) of the Act            acquires, by proxy or otherwise, the right to vote on any matter or question with            respect to 40% or more of the then outstanding common stock of the Corporation or 40%            or more of the combined voting power of the then outstanding voting securities of the            Corporation;

(C)      Present Directors and New            Directors cease for any reason to constitute a majority of the Board (and, for purposes            of this clause (C), “Present Directors” shall mean individuals who, at the            beginning of any consecutive twenty-four month period, were members of the Board and            “New Directors” shall mean individuals whose election by the Board or whose            nomination for election as directors by the Corporation’s stockholders was            approved by at least two-thirds of the Present Directors and New Directors then in            office);

(D)      the stockholders of the            Corporation approve a plan of dissolution or complete or substantially complete            liquidation of the Corporation; or

|   | (E) | upon the consummation of: |
|--------|-----|---------------------------|

I.         any            reorganization, restructuring, recapitalization, reincorporation, merger, consolidation            or similar form of corporate transaction involving the Corporation (a “Business            Combination”) unless, following such Business Combination, (a) all or            substantially all of the individuals and entities who were the beneficial owners of the            common

             

5

             

----

stock of the Corporation and the voting securities of the Corporation            outstanding immediately prior to such Business Combination beneficially own, directly            or indirectly, more than 40% of the common equity securities and the combined voting            power of the voting securities of the entity resulting from such Business Combination            (including the Corporation, if it is such resulting entity) outstanding after such            Business Combination (including, without limitation, an entity that, as a result of            such Business Combination, owns the Corporation or all or substantially all of the            assets of the Corporation and its subsidiaries on a consolidated basis, either directly            or through one or more subsidiaries) in substantially the same proportions as their            ownership of common stock of the Corporation and combined voting power of the voting            securities of the Corporation, respectively, outstanding immediately prior to such            Business Combination, (b) no “person” or “group” within the            meaning of Section 13(d) or 14(d)(2) of the Act (excluding (x) any entity resulting            from such Business Combination and (y) any employee benefit plan (or related trust) of            any entity resulting from such Business Combination) beneficially owns 40% or more of            the common equity securities or of the combined voting power of the voting securities            of the entity resulting from such Business Combination (including the Corporation, if            it is such resulting entity) outstanding after such Business Combination (including,            without limitation, an entity that, as a result of such Business Combination, owns the            Corporation or all or substantially all of the assets of the Corporation and its            subsidiaries on a consolidated basis,, either directly or through one or more            subsidiaries), except to the extent that such beneficial ownership existed prior to            such Business Combination with respect to the common stock of the Corporation and the            voting securities of the Corporation, and (c) at least a majority of the members of the            board of directors (or similar governing body) of the entity resulting from such            Business Combination were members of the Board at the earliest of the time of the            execution of the initial agreement providing for such Business Combination, the time of            the action of the Board approving such Business Combination or, if such approval is            required or sought, at the time of action of the stockholders approving such Business            Combination; or

II.        any sale, lease,            exchange or other transfer (in one transaction or a series of related transactions) of            all or a majority of the assets of the Corporation, whether held directly or indirectly            through one or more subsidiaries (excluding any pledge, mortgage, grant of security            interest, sale-leaseback or similar transaction, but including any foreclosure            sale).

Notwithstanding anything contained herein to the contrary, a Change in            Control shall not be deemed to occur pursuant to clause (A) or (B) above solely because            40% or more of the then outstanding common stock of the Corporation or the then            outstanding voting securities of the Corporation is or becomes beneficially owned or is            directly or indirectly held or acquired

             

6

             

----

by (1) one or more employee benefit plans (or related trusts) maintained            by the Corporation or (2) any one or more of the founding stockholders of the            Corporation.

For purposes of this definition, references to “beneficial            owner” and correlative phrases shall have the same meaning as set forth in Rule            13d-3 under the Act (except that ownership by underwriters (including when acting as            initial purchasers in a private offering) solely for purposes of a distribution or            offering shall not be deemed to be “beneficial ownership”), references to            “affiliate” and “associates” shall have the same meaning as set            forth under the Act and references to the Act shall mean the Exchange Act and the rules            and regulations thereunder as in effect on January 1, 2008.

 

(f)        Release. As a condition precedent to            receipt of the payments provided for in Sections 5(a) and 5(g), no later than sixty            (60) days following the termination of her employment the Executive shall be required            to execute a general release in favor of the Corporation, which release shall exclude            only the payments remaining to be made pursuant to such Sections.

|   | (g) | Excise Tax Gross                            Up. |
|--------|-----|-------------------------------------------------|

(i)        Notwithstanding            anything in this Agreement to the contrary and except as set forth below, in the event            it shall be determined that any payment or distribution by the Corporation or its            affiliates to or for the benefit of the Executive (whether paid or payable or            distributed or distributable pursuant to the terms of this Agreement or otherwise, but            determined without regard to any additional payments required under this Section 5(g))            (a “Payment”) would be subject to the excise tax imposed by Section 4999 of            the Internal Revenue Code of 1986, as amended (the “Code”) or any interest            or penalties are incurred by the Executive with respect to such excise tax (such excise            tax, together with any such interest and penalties, are collectively called the            “Excise Tax”), then the Executive shall be entitled to receive an            additional payment (a “Gross-Up Payment”) in an amount such that after            payment by the Executive of all taxes (including any interest or penalties imposed with            respect to such taxes), including, without limitation, any income taxes (and any            interest and penalties imposed with respect thereto) and Excise Tax imposed upon the            Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the            Excise Tax imposed upon the Payments. Notwithstanding the foregoing, if it shall be            determined that the Executive is entitled to a Gross-Up Payment, but that the Payments            do not exceed $50,000 more than the greatest amount that could be paid to the Executive            such that the receipt of Payments would not give rise to any Excise Tax (the            “Reduced Amount”), then no Gross-Up Payment shall be made to the Executive            and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

(ii)       Subject to the provisions            of Section 5(g)(iii) below, all determinations required to be made under this Section            5(g), including whether and when a Gross-Up Payment is required and the amount of such            Gross-Up Payment and the assumptions to be utilized in arriving at such determination,            shall be made by the then-current accountants of the Corporation or such other            nationally recognized certified public accounting firm as may be designated by the            Executive (the “Accounting Firm”) no later than the later of (i) the last            day of the year in which a termination of the Executive’s employment occurs or            (ii) forty-five (45) days

 

7

 

----

following the termination of the Executive’s employment. The            Accounting Firm shall provide detailed supporting calculations to both Parties            simultaneously with any event giving rise to a Gross-Up Payment. All fees and expenses            of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment,            as determined pursuant to this Section 5(g), shall be paid by the Corporation to the            Executive simultaneously with any event giving rise to a Gross-Up Payment. Absent            manifest error, any determination by the Accounting Firm shall be binding upon the            Corporation and the Executive. As a result of the uncertainty in the application of            Section 4999 of the Code at the time of the initial determination by the Accounting            Firm hereunder, it is possible that Gross-Up Payments which will not have been made by            the Corporation should have been made (“Underpayment”), consistent with the            calculations required to be made hereunder. In the event that the Corporation exhausts            its remedies pursuant to Section 5(g)(iii) and the Executive thereafter is required to            make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the            Underpayment that has occurred and any such Underpayment (including any interest and            penalties thereon) shall be promptly paid by the Corporation to or for the benefit of            the Executive. In the event that the Executive pays the Excise Tax prior to the            determination by the Accounting Firm or payment of the taxes by the Corporation, the            Corporation shall reimburse the Executive for such amount no later than the last day of            the taxable year following the year in which the Executive remits the Excise            Tax.

(iii)      The Executive shall notify the            Corporation in writing of any claim by the Internal Revenue Service that, if            successful, would require the payment by the Corporation of the Gross-Up Payment or the            Underpayment. Such notification shall be given as soon as practicable but no later than            10 business days after the Executive is informed in writing of such claim and shall            apprise the Corporation of the nature of such claim and the date on which such claim is            requested to be paid. The Executive shall not pay such claim prior to the expiration of            the 30-day period following the date on which she gives such notice to the Corporation            (or such shorter period ending on the date that any payment of taxes with respect to            such claim is due). If the Corporation notifies the Executive in writing prior to the            expiration of such period that it desires to contest such claim, the Executive            shall:

(A)      provide the Corporation any            information reasonably requested by the Corporation relating to such claim,

(B)      take such action in connection            with contesting such claim as the Corporation shall reasonably request in writing from            time to time, including, without limitation, accepting legal representation with            respect to such claim by an attorney reasonably selected by the Corporation,

(C)      cooperate with the Corporation in            good faith in order effectively to contest such claim, and

(D)      permit the Corporation to            participate in any proceedings relating to such claim;

provided,however, that the Corporation shall bear            and pay directly all costs and expenses (including additional interest and penalties)            incurred in connection with such contest and shall indemnify and hold the Executive            harmless, on an after-tax basis, for any Excise

             

8

             

----

Tax or income tax (including interest and penalties with respect            thereto) imposed as a result of such representation and payment of costs and expenses.            Without limitation on the foregoing provisions of this Section 5(g)(iii), the            Corporation shall control all proceedings taken in connection with such contest and, at            its sole option, may pursue or forgo any and all administrative appeals, proceedings,            hearings and conferences with the taxing authority in respect of such claim and may, at            its sole option, either direct the Executive to pay the tax claimed and sue for a            refund or contest the claim in any permissible manner, and the Executive agrees to            prosecute such contest to a determination before any administrative tribunal, in a            court of initial jurisdiction and in one or more appellate courts, as the Corporation            shall determine; provided, however, that if the Corporation directs the Executive to            pay such claim and sue for a refund, the Corporation shall pay the amount of such            payment to the Executive, along with an additional Gross-Up Payment, and shall            indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax            or income tax (including interest or penalties with respect thereto) imposed with            respect to such payment or with respect to any imputed income with respect to such            payment; and further provided that any extension of the statute of limitations relating            to payment of taxes for the taxable year of the Executive with respect to which such            contested amount is claimed to be due is limited solely to such contested amount.            Furthermore, the Corporation's control of the contest shall be limited to issues with            respect to which a Gross-Up Payment would be payable hereunder and the Executive shall            be entitled to settle or contest, as the case may be, any other issue raised by the            Internal Revenue Service or any other taxing authority. All of the payments by the            Corporation to the Executive under this Section 5(g) shall be made no later than the            last day of the calendar year following the calendar year in which all of the issues            concerning such payments have been finally resolved. It is the parties’ intent            that the timing of the payment of such amounts shall be in compliance with Section 409A            of the Code and the treasury regulations thereunder.

(iv)      If, after the receipt by the            Executive of an amount advanced by the Corporation pursuant to Section 5(g)(iii), the            Executive receives any refund with respect to such claim, the Executive shall (subject            to the Corporation's complying with the requirements of Section 5(g)(iii)), pay to the            Corporation the amount of such refund (together with any interest paid or credited            thereon after taxes applicable thereto) no later than the last day of the calendar year            in which the refund is received by the Executive.

(h)       Six Month Limitation. Notwithstanding any            provision of this Agreement to the contrary, distribution of any amounts that            constitute “deferred compensation” payable to the Executive due to her            “separation from service” within the meaning of Section 409A of the Code,            shall not be made before six months after such separation from service or the            Executive’s death, if earlier (the “Six Month Limitation”). At the            end of such six-month period, payments that would have been made but for the Six Month            Limitation shall be paid in a lump sum, without interest, on the first day of the            seventh month following the Executive’s separation from service and remaining            payments or reimbursements, if any, shall commence, or continue, in accordance with the            relevant provision of this Section 5. Notwithstanding the Six Month Limitation, in the            event that any amounts of “deferred compensation” payable to the Executive            due to her “separation from service” constitute “separation pay only            upon an involuntary separation from service” within the meaning of Section 409A            of the Code (“Separation Pay”),

 

9

 

----

then            all or a portion of such Separation Pay, up to two times the maximum amount that may be            taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code            for the year in which the separation from service occurs (i.e., $460,000 in the event            of a separation from service during 2008), whether paid under this Agreement or            otherwise, may be paid to the Executive during the six-month period following such            separation from service with the Corporation.

6.         Mitigation. The Executive shall have no            duty to mitigate the payments provided for in Section 5 by seeking other employment or            otherwise and such payment shall not be subject to reduction for any compensation            received by the Executive from employment in any capacity following the termination of            the Executive’s employment with the Corporation.

|   | 7. | Restrictive                            Covenants. |
|--------|----|---------------------------------------------------|

(a)       The Executive agrees that            for the duration of her employment and for a period of one (1) year following the date            of termination thereof, she will not, on her own behalf or on behalf of any other            person or entity, solicit, or encourage to leave the employ of the Corporation any            person who is an employee of the Corporation or any of its subsidiaries or            affiliates.

(b)       The Executive agrees that            for the duration of her employment and for a period of one (1) year following the date            of termination thereof, she will not, on her own behalf or on behalf of any other            person or entity, divert, or attempt to divert, any person from doing business with the            Corporation, or attempt to induce any such person to cease being a customer or supplier            of the Corporation.

(c)       The Executive agrees that            for the duration of her employment and for a period of one (1) year following the date            of termination thereof, she will take no action which is intended, or would reasonably            be expected, to harm (e.g., making public derogatory statements or misusing            confidential Corporation information, it being acknowledged that the Executive’s            employment with a competitor in and of itself shall not be deemed to be harmful to the            Corporation for purposes of this Section 7(c)) the Corporation or its            reputation.

|   | (d) | (Intentionally Omitted.) |
|--------|-----|--------------------------|

(e)       The Executive will not at            any time (whether during or after her employment with the Corporation) disclose or use            for her own benefit or purposes or the benefit or purposes of any other person, entity            or enterprise, other than the Corporation or any of its subsidiaries or affiliates, any            “Confidential Information.” The term “Confidential Information”            means all information (including proprietary information of the Corporation, technical,            business and financial data, trade secrets or know-how, including, but not limited to,            research, product plans, products, services, vendor lists, supplier lists and            suppliers, customer lists and customers, contacts at or knowledge of clients or            prospective clients of the Corporation, pricing information and costs, markets,            software, ideas, concepts, developments, inventions, discoveries, protocols, scripts,            features and modes of operation, interfaces, works of authorship, databases or database            criteria, algorithms, methodologies, processes, formulas, computer codes, technology,            designs, drawings, internal documentation, engineering materials, hardware            configuration information,

 

10

 

----

marketing data, licenses, finances, budgets, projections, forecasts,            strategies, salaries, terms of compensation of employees or other business information            disclosed to the Executive by the Corporation, either directly or indirectly whether in            written, electronic, oral or other form and including trade secrets and non-public,            confidential or proprietary information) relating to the Corporation (including the            past, present or prospective transactions, business, technology, operating methods or            processes, financial condition, financial or business performance, assets, liabilities,            rights, obligations, strategies and plans of the Corporation) furnished by or on behalf            of or obtained from, before or after the date hereof, the Corporation or controlling            persons, directors, officers, employees, affiliates, representatives (including            financial advisors, attorneys and accountants), agents or financing sources            (collectively, “Representatives”) of the Corporation and all files, books,            records, notes, compilations, analyses, forecasts, studies, reports and other documents            (whether in written or electronic form) prepared by, on behalf of or for any third            party, including the Executive, which contain or reflect any of such information            (collectively, “Analyses”). The term “Confidential Information”            does not, however, include information which (i) is part of the public domain,            including information which is not unique to the Corporation or which is generally            known to the industry or the public, through no fault of the Executive or (ii) becomes            known by or available to the Executive after the termination of her employment with the            Corporation on a non-confidential basis from a source (other than the Corporation or            any of its Representatives) which, to the knowledge of the Executive, after due            inquiry, is not prohibited from disclosing such information to the Executive by a            statutory, regulatory, contractual or fiduciary obligation. The Executive agrees that            upon termination of her employment with the Corporation for any reason, she will return            to the Corporation immediately all memoranda, books, papers, plans, information,            letters and other data, and all copies thereof or therefrom, in any way relating to the            business of the Corporation or its subsidiaries or affiliates or licensees

(f)        The Executive            acknowledges that money damages for a breach of this Agreement by her is unlikely to be            calculable, that such a breach is likely to cause irreparable harm to the Corporation            and that remedies at law are likely to be inadequate to protect the Corporation against            any actual or threatened breach of this Agreement by the Executive. Accordingly, the            Executive agrees to the granting of injunctive relief in favor of the Corporation in            the event of any such breach or threatened breach of any of the provisions of this            Section 7 (the “Restrictive Covenants”), without proof of actual damages            and without the requirement of posting bond or other security. Such relief shall not be            the exclusive remedy for a breach by the Executive of this Agreement, but shall be in            addition to all other rights and remedies available at law, in equity or otherwise to            the Corporation, including:

(i)        The right and remedy            to have the Restrictive Covenants specifically enforced by any court having equity            jurisdiction, it being acknowledged and agreed that any such breach or threatened            breach of such Restrictive Covenants will cause irreparable injury to the Corporation            and that money damages will not provide an adequate remedy to the Corporation;            and

(ii)       The right to discontinue            the payment of any amounts owing to the Executive under this Agreement or            otherwise;providedthat the            Corporation shall have secured a reasoned opinion of counsel that the Executive’s            activities constitute a material breach of the Restrictive Covenants and which shall            have been provided to the Executive, the delivery of

 

11

 

----

which            shall not be deemed to be a waiver of any applicable privilege. To the extent the            Executive, by notice hereunder, disputes the discontinuance of any payments hereunder,            such payments shall be segregated and deposited in an interest bearing account at a            major financial center bank in New York City pending resolution of the            dispute.

In the event of litigation relating to this Agreement wherein a court of            competent jurisdiction determines in a final, non-appealable order that this Agreement            has been breached by the Executive, then the Executive will reimburse the Corporation            for all costs and expenses (including reasonable legal fees and expenses) incurred in            connection with such litigation and all other litigation related to such            breach.

(g)       If any court determines            that any of the Restrictive Covenants, or any part thereof, is invalid or            unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected            and shall be given full effect, without regard to the invalid portion. In addition, if            any court construes any of the Restrictive Covenants, or any part thereof, to be            unenforceable because of the duration of such provision or the area covered thereby,            such court shall have the power to reduce the duration or area of such provision and,            in its reduced form, such provision shall then be enforceable and shall be            enforced.

8.         Compensation Committee. Any action which is            required to be or may be taken by the Board may be taken by the Compensation Committee            of the Board.

9.         Policies. References to the            Corporation’s policies, plans, practices and arrangements means those in effect            at the relevant time and nothing herein obligates the Corporation to maintain any            policy or restricts the Corporation from changing any policy.

10.       Representation by the Executive. The            Executive hereby represents to the Corporation that the execution and delivery of this            agreement by the Executive and the Corporation and the performance by the Executive of            her responsibilities and duties hereunder shall not constitute a breach of, or            otherwise contravene, the terms of any employment agreement or other agreement or            policy to which the Executive is a party or otherwise bound.

11.       Notice. All notices required or permitted            to be given pursuant to this Agreement shall be given by written notice, shall be            transmitted by personal delivery, registered or certified mail (return receipt            requested, postage prepaid), nationally recognized courier service, facsimile or email,            and shall be addressed to the intended recipient at its address set forth herein. A            Party may designate a new address to which such notices shall thereafter be transmitted            by giving written notice to that effect to the other Party. Each notice transmitted in            the manner described herein shall be deemed to have been (a) delivered to the addressee            as indicated by the return receipt (if transmitted by mail), the mailing label (if            transmitted by courier service), the affidavit of the messenger (if transmitted by            personal delivery) or the answerback, call back or email receipt (if transmitted by            facsimile or email) or (b) presented for delivery to the addressee as so indicated            during normal business hours, if such delivery shall have been refused for any            reason.

12.       Governing Law and Jurisdiction. THE            VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE            GOVERNED

 

12

 

----

BY THE            LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW            RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE            INTERNAL LAWS OF THE STATE OF DELAWARE TO THE RIGHTS AND DUTIES OF THE PARTIES). Each            Party agrees that any proceeding arising out of or relating to this letter agreement or            the breach or threatened breach hereof shall be commenced and prosecuted in a court in            the State of Delaware. Each Party consents and submits to the non-exclusive personal            jurisdiction of any court in the State of Delaware in respect of any such proceeding.            Each Party consents to service of process upon it with respect to any such proceeding            by any means by which notices may be transmitted hereunder or by any other means            permitted by applicable laws and rules. Each Party waives any objection that it may now            or hereafter have to the laying of venue of any such proceeding in any court in the            State of Delaware and any claim that it may now or hereafter have that any such            proceeding in any court in the State of Delaware has been brought in an inconvenient            forum. EACH PARTY WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.

13.       Successors and Assigns. This Agreement            shall be binding upon and shall inure to the benefit of the Parties and their            respective successors and assigns. Neither Party shall assign any of its rights or            delegate any of its duties under this Agreement (except to the extent the assignment is            by merger, consolidation or operation of law, in which case such successor must            affirmatively agree to assume this Agreement) without the prior written consent of the            other Party. Except as provided in the preceding sentence, any assignment of rights or            delegation of duties under this Agreement by a Party without the prior written consent            of the other Party shall be void.

14.       Entire Agreement. This Agreement            constitutes the entire agreement between the Parties with respect to the subject matter            hereof and cancels and supersedes all of the previous or contemporaneous contracts,            representations, warranties and understandings (whether oral or written) by or between            the Parties with respect to the subject matter hereof. As used herein, the word            “including” shall in all cases be deemed to be followed by the phrase            “without limitation” and the word “person” shall include            individuals and corporations, societies, companies, partnerships, trusts,            unincorporated associations, governments and governmental instrumentalities, and other            entities of any kind.

15.       Amendments and Modifications. No addition            to, and no cancellation, extension, modification or amendment of, this Agreement shall            be binding upon a Party unless such addition, cancellation, extension, modification or            amendment is set forth in a written instrument which expressly states that it adds to,            amends, cancels, extend or modifies this Agreement and which is executed and delivered            by such Party. No waiver of, or agreement or confirmation under, any provision hereof            shall be binding upon a Party unless such waiver is expressly set forth in a written            instrument which is executed and delivered by a Party. Neither the exercise (from time            to time and at any time) by a Party of, nor the delay or failure (at any time or for            any period of time) to exercise, any right, power or remedy shall constitute a waiver            of the right to exercise, or impair, limit or restrict the exercise of, such right,            power or remedy or any other right, power or remedy at any time and from time to time            thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a            waiver of any other right, power or remedy of such Party or shall, except to the extent            so waived, impair, limit or restrict the exercise of such right, power or            remedy.

 

13

 

----

16.       Counterparts.This Agreement may be signed            in any number of counterparts, each of which (when executed and delivered) shall            constitute an original instrument, but all of which together shall constitute one and            the same instrument. This Agreement shall become effective at such time as counterparts            shall have been executed and delivered by all of the Parties, regardless of whether all            of the Parties have executed the same counterpart. A facsimile of an original shall be            as effective as delivery of such original.

17.       Validity; Severability.If any provision of            this Agreement is held to be illegal, invalid or incapable of being enforced, in whole            or in part, in any jurisdiction under any circumstances for any reason under present or            future laws effective during the term hereof, (i) such provision shall be reformed to            the minimum extent necessary to cause such provision to be valid, enforceable and legal            while preserving the intent of the parties as expressed in, and the benefits to such            parties provided by, such provision or (ii) if such provision cannot be so reformed,            such provision shall be severed from this Agreement and an equitable adjustment shall            be made to this Agreement (including addition of necessary further provisions to this            Agreement) so as to give effect to the intent as so expressed and the benefits so            provided. Such holding shall not affect or impair the validity, enforceability or            legality of such provision in any other jurisdiction or under any other circumstances.            Neither such holding nor such reformation or severance shall affect or impair the            legality, validity or enforceability of any other provision of this letter            agreement.

18.       Taxes and Withholding. The Corporation may            withhold from any amounts payable under this Agreement such federal, state and local            taxes as may be required to be withheld pursuant to applicable law or regulation. The            Parties recognize that certain provisions of this Agreement may be affected by Section            409A of the Code and they, therefore, agree to negotiate in good faith to amend the            Agreement with respect to any changes necessary or advisable to comply with Section            409A. To the extent there are any ambiguities in this Agreement, such ambiguities shall            be construed in a manner that complies with Section 409A.

 

14

 

----

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly            executed and effective as of the date set forth above.

 

|   | NOVAMERICAN STEEL INC.

                             

                              |
|--------|------------------------------------------------------------------------------------------------|
|   | By:                                                                                            | /s/ Scott C. Mason |
|   |                                                                                           | Name: Scott C. Mason |
|   |                                                                                           | Title: Chairman, Compensation Committee |
|   |                                                                                           |
|   | Date:                                                                                          | February 8, 2008 |
|   |                                                                                           |
|   |  

                             

/s/ Karen G. Narwold                               |
|   | The Executive: KAREN NARWOLD                                                                   |
|   |                                                                                           |
|   | Date:                                                                                          | January 31, 2008 |
|   |                                                                                           |
|   |                                                                                           |
|   | Address of the Executive for delivery of                            notice:                    |
|   |                                                                                           |
|   | 1701 N. Bancroft Parkway                                                                       |
|   |                                                                                           |
|   | Wilmington, DE  19806                                                                     |
|   |                                                                                           |
|        |                                                                                                |  |  |

 

 

15