This Employment Agreement involves
Title: AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of the date set forth below and effective as of the Effective Date (defined below), by and between Haynes International, Inc. (the "COMPANY"), a Delaware corporation, and Francis J. Petro (the "EXECUTIVE").
WHEREAS, the Company and the Executive previously entered into that certain Executive Employment Agreement, dated as of January 1, 2003 (the "EMPLOYMENT AGREEMENT");
WHEREAS, the Company and the Executive previously entered into that certain Severance Agreement (the "SEVERANCE AGREEMENT") dated as of January 29, 2000 whereby the rights and obligations of the Executive in the event of a termination associated with a change in control of the Company were set forth;
WHEREAS, on March 29, 2004, the Company filed a voluntary petition for bankruptcy under Chapter 11 of Title 11 of the U.S. Code (11 USC Section 101, ET. SEQ.) in the U.S. Bankruptcy Court for the Southern District of Indiana (the "BANKRUPTCY"); and
WHEREAS, the Company and the Executive desire to amend and restate the Employment Agreement on the terms and conditions set forth herein such that this Agreement shall supersede and replace both the Employment Agreement and the Severance Agreement and shall address the Executive’s employment and termination of employment with the Company following the Company’s emergence from Bankruptcy.
NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. EMPLOYMENT.
(a) PRIOR AGREEMENTS. Effective as of the effective date of the Company’s plan of reorganization (the "PLAN OF REORGANIZATION") as filed with the U.S. Bankruptcy Court for the Southern District of Indiana (the "EFFECTIVE DATE"), the Executive’s employment with the Company and benefits upon a termination of employment shall be governed by this Agreement, which restates and supersedes each of the Employment Agreement and the Severance Agreement.
(b) OFFER AND ACCEPTANCE. During the Employment Term (as defined in SECTION 1(d) below), the Company agrees to employ the Executive in the position of President and Chief Executive Officer of the Company upon the terms and subject to the conditions set forth herein, and the Executive agrees to remain in the employ of the Company on such terms and conditions.
(c) DUTIES. The Executive’s duties shall include those duties that are consistent with his position as President and Chief Executive Officer of the Company as well as those reasonably assigned to him from time to time, in good faith, by the Board of Directors of the Company (the "BOARD"). The Executive shall (i) devote his working hours, on a full-time basis, to his duties under this Agreement; (ii) faithfully, industriously and loyally serve the Company; (iii) comply in all material respects with the lawful and reasonable directions and instructions given to him by the Board; and (iv) use his reasonable best efforts to promote and serve the interests of the Company. The Executive shall comply in all material respects with all applicable laws, rules and regulations relating to the performance of the Executive’s duties and responsibilities hereunder. The Executive agrees to serve as (i) a member of the Board and on any of the board of directors of any subsidiary or affiliate of the Company, and (ii) as an officer of any subsidiary or affiliate of the Company, without any additional compensation while he is employed by the Company. Upon termination of the Executive’s employment by the Company for any reason, the Executive shall immediately resign from the Board and any other position as a member of the board of directors or as an officer of any such subsidiary or affiliate of the Company.
(d) EMPLOYMENT TERM. The Executive’s employment by the Company under this Agreement shall commence on the Effective Date and shall continue thereafter and shall terminate on September 30, 2007 (the "EMPLOYMENT TERM"), unless renewed by a subsequent written agreement of the parties. The Executive’s employment by the Company shall be subject to termination at any time during the Employment Term as provided in subsection (f) of this SECTION 1. As used herein, the term "EMPLOYMENT TERM" shall mean the actual period of time during which the Executive is employed by the Company under the terms and conditions of this Agreement.
(e) COMPENSATION AND BENEFITS. During the Employment Term, the Company shall pay and provide the following compensation and other benefits to the Executive as full compensation for all services rendered by the Executive as an employee of the Company under the terms and conditions of this Agreement. All payments made to the Executive hereunder shall be subject to appropriate payroll deductions and other withholdings required by law.
(i) ANNUAL SALARY. During the Employment Term, the Company shall pay to the Executive, in accordance with the then prevailing payroll practices of the Company, a base salary (the "ANNUAL SALARY") at the annual rate of Four Hundred Eighty Thousand Dollars ($480,000) per year.
(ii) BONUSES. With respect to each full fiscal year during the Employment Term, the Executive shall be eligible to receive an annual bonus based upon the achievement by the Company of specific performance requirements (e.g. EBITDA benchmarks’ and/or working capital targets) which shall be determined by the Board in its sole and absolute discretion prior to or at the commencement of the applicable fiscal year (the "BONUS"). The actual amount of the Bonus shall be equal to a percentage of the Annual Salary in effect as
of September 30th of such fiscal year and shall be determined by the Board in its sole and absolute discretion prior to or at the commencement of the applicable fiscal year. Notwithstanding the foregoing, for the 2004 fiscal year only, the target amount for the Bonus shall be sixty percent (60%) of the Annual Salary in effect as of September 30, 2004; provided, however, Executive shall be eligible to receive a minimum Bonus in an amount equal to thirty-five percent (35%) of such Annual Salary and a maximum Bonus equal to one hundred twenty percent (120%) of such Annual Salary, based upon the achievement of the performance requirements, as determined by the Board in its sole and absolute discretion. The Bonus, if earned, shall be paid to the Executive by the Company no later than February 1 of the following calendar year.
(iii) BENEFITS. The Executive shall be eligible to participate in all employee health and welfare benefit plans in which senior executives of the Company are entitled to participate, but participation shall be subject to all of the terms and conditions) of such plans applicable to all such senior executives, including all waiting periods, eligibility requirements, contributions, exclusions and other similar conditions or limitations. In the case of any disability plan, the Company agrees that such plan will provide the benefits contemplated by SECTION 1(e)(iv) or in lieu of such plan participation, the Company will provide to the Executive the disability insurance coverage contemplated by SECTION 1(e)(iv).
(iv) INSURANCE. The Executive shall be entitled to receive long-term disability insurance coverage and the amount of the benefit payments under such insurance coverage shall be not less than sixty percent (60%) of the Annual Salary then in effect (the "DISABILITY INSURANCE"). The Company shall pay all premiums related to the Disability Insurance as long as the Executive is employed by Company hereunder. In addition, the Company shall provide the Executive with a life insurance policy in a face amount equal to five (5) times the Annual Salary then in effect (the "LIFE INSURANCE"), which policy shall be convertible to an individual policy at the election of the Executive upon termination of the Executive’s employment by the Company. The Company shall be the owner of the Life Insurance and shall pay all premiums related thereto prior to termination of the Executive’s employment by the Company.
(v) EXPENSES. The Company shall reimburse the Executive, in accordance with the then prevailing reimbursement practices of the Company, for all reasonable and customary business expenses incurred by the Executive in connection with his employment by the Company, including, but not limited to, all reasonable and customary travel-related expenses incurred in connection with periodic trips to Syracuse, New York, provided, in any case, that the Executive complies with the standard reporting and reimbursement policies as may be established by the Company from time to time.
(vi) VACATION. The Executive shall be entitled to five (5) weeks of vacation, measured on a calendar year basis. The Executive shall schedule vacation periods at reasonable times in accordance with the Company’s vacation policy for senior executives. The Executive shall accrue and receive full compensation and benefits during his vacation periods. Unused vacation leave time shall not entitle the Executive to any additional compensation and may not be carried over to a subsequent calendar year.
(vii) SERP. The Executive shall be entitled to participate in the Haynes International, Inc. Supplemental Executive Retirement Plan on the terms and conditions
as set forth in the Participation Agreement entered into by and between the Executive and the Company dated December 13, 2002 as amended as of the date hereof (the "SERP").
(viii) COMPANY CAR. The Company shall provide the Executive with the use of an automobile owned or leased by the Company at its expense for Company-related purposes (the "COMPANY CAR"). The Company shall pay or reimburse the Executive for all expenses incurred in connection with the Executive’s use of the Company Car, including, but not limited to, insurance, gasoline, registration taxes and maintenance. The Company Car shall be a Buick Park Avenue or an automobile of a similar class. The Executive agrees that the use of the Company Car for personal-related matters will result in imputed income to the Executive and at the end of each calendar year, the Company and its accountants shall reasonably determine the amount of such income to be included in the Executive’s compensation in connection with the personal use of the Company Car and the Executive agrees that he shall be responsible for any and all taxes imposed on such imputed income.
(ix) COUNTRY CLUB MEMBERSHIP. The Company shall reimburse the Executive for all regular monthly membership dues and business-related charges incurred by the Executive in connection with his membership at a country club. The Executive agrees that he shall be responsible for any and all taxes imposed on the reimbursements made pursuant to the preceding sentence.
(x) OPTIONS. As of the Effective Date, the Company shall establish a long-term equity incentive plan in which the Executive is eligible to participate (the "LTIP"). During the Employment Term, the Executive shall remain eligible to participate in the LTIP pursuant to the terms and conditions set forth therein.
(xi) DEATH BENEFIT PLAN. The Executive shall be eligible to participate in the Haynes International, Inc. Death Benefit Plan, as amended, pursuant to the terms and conditions set forth in such plan.
(f) TERMINATION OF EMPLOYMENT. Subject to the terms of Section 1(g) below, the Executive’s employment by the Company may be terminated as follows:
(i) TERMINATION UPON THE EXPIRATION OF THE EMPLOYMENT TERM. Unless otherwise agreed to in writing by the Company and the Executive, the Executive’s employment shall terminate on September 30, 2007 unless terminated earlier pursuant to this SECTION 1(f). In the event that the Executive’s employment terminates upon the expiration of the Employment Term, then the Executive shall be entitled to receive the compensation and benefits set forth in SECTION 1(g)(i).
(ii) TERMINATION FOR CAUSE. The Company may immediately terminate, at any time, Executive’s employment by the Company for "Cause." A termination for "Cause" means a termination by reason of the Board’s good faith determination that the Executive (i) continually failed to substantially perform his duties with the Company (other than a failure resulting from the Executive’s medically documented incapacity due to physical or mental illness) including, without limitation, repeated refusal to follow the reasonable
directions of the Board, knowing violation of the law in the course of performance of the Executive’s duties with the Company, repeated absences from work without a reasonable excuse, or intoxication with alcohol or illegal drugs while on the Company’s premises during regular business hours, (ii) engaged in conduct which constituted a material breach of SECTION 2 or SECTION 3 of this Agreement, (iii) was indicted (or equivalent under applicable law), convicted of, or entered a plea of nolo contendere to the commission of a felony or crime involving dishonesty or moral turpitude, or (iv) engaged in conduct which is demonstrably and materially injurious to the financial condition, business reputation, or otherwise of the Company or its subsidiaries or affiliates, or (v) perpetuated a fraud or embezzlement against the Company or its subsidiaries or affiliates, and in each case the particular act or omission was not cured, if curable, in all material respects by the Executive within thirty (30) days after receipt of written notice from the Board which shall set forth in reasonable detail the nature of the facts and circumstances which constitute Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Executive a copy of a resolution duly adopted by the Board. If the Company has reasonable belief that the Executive has committed any of the acts described above, it may suspend the Executive (with or without pay) while it investigates whether it has or could have Cause to terminate the Executive. The Company may terminate the Executive for Cause prior to the completion of its investigation; provided, that, if it is ultimately determined that the Executive has not committed an act which would constitute Cause, the Executive shall be treated as if he were terminated without Cause.
(iii) TERMINATION WITHOUT CAUSE. The Company may, at any time, terminate the Executive’s employment by Company without Cause by providing prior written notice thereof to the Executive.
(iv) RESIGNATION FOR GOOD REASON. The Executive may terminate his employment by the Company for Good Reason (as defined below) by providing written notice thereof to the Company (the "RESIGNATION NOTICE") at least forty-five (45) days prior to the effective date of the resignation, which notice shall set forth in reasonable detail the nature of the facts and circumstances which constitute Good Reason and the Company shall have thirty (30) days after receipt of the Resignation Notice to cure in all material respects the facts and circumstances which constitute Good Reason. For purposes of this Agreement, "GOOD REASON" shall mean the occurrence, during the Employment Term, of any of the following actions or failures to act, but in each case only if it is not consented to by the Executive in writing: (a) a material adverse change in the Executive’s duties, reporting responsibilities, titles or elected or appointed offices as in effect immediately prior to the effective date of such change; (b) a material reduction by the Company in the Executive’s Base Salary or annual bonus opportunity in effect immediately prior to the effective date of such reduction, not including any reduction resulting from changes in the market value of securities or other instruments paid or payable to the Executive; or (c) any change of more than 50 miles in the location of the principal place of employment of the Executive immediately prior to the effective date of such change. For purposes of this definition, none of the actions described in clauses (a) and (b) above shall constitute "Good Reason" with respect to the Executive if it was an isolated and inadvertent action not taken in bad faith by the Company and if it is
remedied by the Company within thirty (30) days after receipt of written notice thereof given by the Executive (or, if the matter is not capable of remedy within thirty (30) days, then within a reasonable period of time following such thirty (30) day period, provided that the Company has commenced such remedy within said thirty (30) day period); provided that "Good Reason" shall cease to exist for any action described in clauses (a) and (b) above on the sixtieth (60th) day following the later of the occurrence of such action or the Executive’s knowledge thereof, unless the Executive has given the Company written notice thereof prior to such date.
(v) RESIGNATION WITHOUT GOOD REASON. The Executive may, at any time, terminate the Executive’s employment by the Company without Good Reason by providing thirty (30) days’ prior written notice thereof to the Company.
(vi) DEATH; DISABILITY OR RETIREMENT. The Executive’s employment shall terminate immediately upon the Executive’s death, Disability, or Retirement (each as defined below). For purposes of this Agreement, "DISABILITY" means the Executive is totally and permanently disabled as defined in the Haynes International, Inc. Pension Plan and "RETIREMENT" means a resignation by the Executive after having reached age fifty-five (55), but in no event prior to September 30, 2007.
(g) EFFECT OF TERMINATION.
(i) TERMINATION UPON THE EXPIRATION OF THE EMPLOYMENT TERM. Upon the termination of the Executive’s employment pursuant to SECTION 1(f)(i), the Executive will be entitled to (A) payment of that portion of the Executive’s then effective) Annual Salary which has been earned but not yet paid through and including the last day of the Executive’s employment (the "TERMINATION DATE"); (B) payment of any Bonus earned by the Executive under the terms and conditions of this Agreement prior to the Termination Date that remains unpaid; (C) reimbursement of any reimbursable business expenses under SECTION 1(e)(v), which were incurred by the Executive through and including the Termination Date; (D) continuation of benefits to which the Executive is entitled under SECTION L(e)(iii) and SECTION 1(e)(iv) through and including the Termination Date and; (E) the SERP that the Executive is entitled to under SECTION 1(e)(vii). In addition, any unvested stock options held by the Executive shall terminate immediately and any vested stock options held by the Executive shall remain exercisable for ninety days (90) following the Termination Date, but in no event later than the expiration date of such stock option as specified in the applicable grant letter.
(ii) TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON. Upon the Company’s termination of the Executive’s employment for Cause pursuant to SECTION 1(f)(ii) or the Executive’s resignation without Good Reason pursuant to SECTION L(f)(v), Executive will be entitled to (A) payment of that portion of the E