EXHIBIT 10.1
FORM OF
TERMINATION BENEFITS AGREEMENT
THIS TERMINATION BENEFITS AGREEMENT
(“AGREEMENT”) is executed as of the date set forth
below to be effective as of ___________ (the “EFFECTIVE
DATE”) (defined below) by and between Haynes International,
Inc., a Delaware corporation (the “COMPANY”), and
____________, an individual residing in the State of Indiana (the
“EMPLOYEE”).
WITNESSETH
WHEREAS, the Board of Directors of
the Company (the “BOARD”) has determined that it is in
the best interests of the Company and its shareholders for the
Company to agree to provide benefits under circumstances described
below to the Employee in connection with employment by the Company
and due to Employee’s responsibility for policy-making
functions within the Company and in exchange for the
Employee’s agreements in Sections 6 and 7 hereof;
NOW, THEREFORE, in consideration of
the mutual covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby recognized, the Company and the Employee agree as
follows:
AGREEMENT
1.
TERM OF AGREEMENT. This Agreement shall commence as of
the Effective Date and shall continue in effect until September 30,
2007; provided, however, that commencing on October 1, 2007 (the
“RENEWAL DATE”) and on each two-year anniversary
thereafter, the term of this Agreement shall automatically be
extended for two (2) years (until the two-year anniversary of the
Renewal Date next following) unless either the Company or the
Employee shall have given written notice to the other at least
sixty (60) days prior thereto that the term of this Agreement shall
not be so extended (the “TERM”).
2.
TERMINATION BENEFITS.
a.
If, during the Term of this
Agreement, the Employee’s employment with the Company shall
be terminated, the Employee shall be entitled to receive the
following compensation and benefits (in addition to any
compensation and benefits provided for under any of the
Company’s employee benefit plans, policies and practices or
as required by law):
i.
TERMINATION WITHOUT CAUSE, FOR GOOD
REASON, OR DUE TO DISABILITY OR DEATH. If the
Employee’s employment with the Company shall be terminated by
the
Company without Cause, by the
Employee for Good Reason, or by reason of the Employee’s
Disability or death:
1.
the Employee or the Employee’s
heirs, estate, personal representative or legal guardian, as
appropriate, shall be entitled to receive a lump sum cash payment
equal to the sum of:
a.
the Employee’s accrued but
unpaid Base Salary through the Date of Termination;
b.
any accrued but unpaid compensation,
including but not limited to any unpaid bonus compensation and
reimbursement, in accordance with the then prevailing reimbursement
practices of the Company, for all reasonable and customary business
expenses incurred by the Employee in connection with his employment
by the Company as of the Date of Termination; and
c.
a bonus for the fiscal year in which
the Date of Termination occurs in an amount equal to the
Employee’s target bonus for such fiscal year under the bonus
or incentive compensation plan maintained by the Company,
calculated as if the Employee earned one hundred percent (100%) of
such target bonus (the “SEVERANCE BONUS”), multiplied
by a fraction, the numerator of which is the number of days the
Employee worked in the fiscal year in which the Date of Termination
occurs and the denominator of which is three hundred sixty five
(365); and
2
a. on a
termination of employment by the Company without Cause or by the
Employee for Good Reason, any unvested stock options held by the
Employee will terminate immediately and all vested stock options
held by the Employee will remain exercisable for six (6) months
following the Date of Termination, but in no event later than the
expiration date of the stock options as specified in the applicable
grant letter, and
b.
upon a termination of employment by
reason of the Employee’s Disability or death, any unvested
stock options held by the Employee will vest immediately and all
options held by the Employee will remain exercisable for six (6)
months from the Date of Termination, but in
no event later than the expiration
date of such stock options as specified in the applicable grant
letter.
ii.
TERMINATION FOR CAUSE, WITHOUT GOOD
REASON, OR DUE TO RETIREMENT. If the Employee’s employment
with the Company shall be terminated by the Company for Cause, by
the Employee without Good Reason, or by reason of the
Employee’s Retirement:
1.
the Employee shall be entitled to
receive a lump sum cash payment equal to the sum of:
a.
the Employee’s accrued but
unpaid Base Salary through the Date of Termination; and
b.
any accrued but unpaid compensation,
including but not limited to any unpaid bonus compensation and
reimbursement, in accordance with the then prevailing reimbursement
practices of the Company, for all reasonable and customary business
expenses incurred by the Employee in connection with his employment
by the Company as of the Date of Termination; and
2.
a.
upon a termination of employment by
the Company for Cause or by the Employee without Good Reason, all
vested and unvested stock options held by the Employee shall
terminate immediately, and
b.
upon the Employee’s
Retirement, all unvested stock options held by the Employee shall
terminate immediately and any vested stock options held by the
Employee shall remain exercisable for six (6) months following the
Date of Termination but in no event later than the expiration date
of such stock options as specified in the applicable grant
letter.
iii.
TERMINATION WITHOUT CAUSE OR FOR
GOOD REASON FOLLOWING A CHANGE IN CONTROL. If the Employee’s
employment with the Company shall be terminated by the Company
without Cause or by the Employee for Good Reason within twelve (12)
months following a Change in Control and during the Term of this
Agreement (including any extensions or deemed extensions thereof as
provided in SECTION 1 above):
1.
the Employee shall be entitled to
receive a lump sum cash payment equal to the sum of:
a.
the Employee’s accrued but
unpaid Base Salary through the Date of Termination;
b.
the Employee’s Base Salary
that would be payable for the period from the Date of Termination
through the first (1st) anniversary thereof (the “SEVERANCE
PERIOD”);
c.
any accrued but unpaid compensation,
including but not limited to any unpaid bonus compensation and
reimbursement, in accordance with the then prevailing reimbursement
practices of the Company, for all reasonable and customary business
expenses incurred by the Employee in connection with his employment
by the Company as of the Date of Termination; and
d.
the Severance Bonus;
2.
any unvested stock options held by
the Employee will vest immediately and all stock options held by
the Employee will remain exercisable for one (1) year from the Date
of Termination, but in no event later than the expiration date of
the stock options as specified in the applicable grant letter;
and
3.
during the Severance Period, the
Company shall provide to the Employee and Employee’s
dependents any medical, hospitalization and life insurance benefits
that the Employee received from the Company immediately prior to
the Date of Termination; PROVIDED, HOWEVER, that any such benefits
coverage shall cease to the extent that the Employee obtains
comparable medical, hospitalization or life insurance benefits (as
the case may be) from any other employer during such Severance
Period.
b.
The Employee shall not be required
to mitigate the amount of any payment provided for in this SECTION
2 by seeking other employment or otherwise, nor, except as provided
in SECTION 2(a)(iii)(3) above, shall the amount of any payment or
benefit provided for in SECTION 2 be reduced by any compensation
earned by the Employee or benefit made available to the Employee as
the result of employment by another employer after the Date of
Termination or otherwise.
c.
For purposes of this Agreement, the
following definitions shall apply:
i.
“DISABILITY” means the
Employee is totally and permanently disabled as defined in the
Haynes International, Inc. Pension Plan.
ii.
“RETIREMENT” means the
voluntary retirement of the Employee after having reached age
fifty-five (55) and having completed at least five (5) years of
service with the Company, but in no event prior to September 1,
2009.
iii.
A termination for
“CAUSE” means a termination by reason of the good faith
determination of the Company’s Board of Directors (the
“BOARD”) that the Employee (1) continually failed to
substantially perform his duties with the Company (other than a
failure resulting from the Employee’s medically documented
incapacity due to physical or mental illness), including, without
limitation, repeated refusal to follow the reasonable directions of
the Company’s Chief Executive Officer, knowing violation of
the law in the course of performance of the Employee’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, (2) engaged
in conduct which constituted a material breach of SECTION 6 or
SECTION 7 of this Agreement, (3) 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, (4) 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 (5) 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 Employee 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 Employee shall
not be deemed to have been terminated for Cause unless there shall
have been delivered to the Employee a copy of a resolution duly
adopted by the Board. If the Company has reasonable belief that the
Employee has committed any of the acts described above, it may
suspend the Employee (with or without pay) while it investigates
whether it has or could have Cause to terminate the Employee. The
Company may terminate the Employee for Cause prior to the
completion of its investigation; provided, that, if it is
ultimately determined that the Employee has not committed an act
which would constitute Cause, the Employee shall be treated as if
he were terminated without Cause.
iv.
A “NOTICE OF
TERMINATION” means a notice which shall indicate the specific
termination provision in this Agreement which is applicable and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee’s
employment under the provision so indicated. For purposes of this
Agreement, no such purported termination shall be effective without
such Notice of Termination. Any purported termination by the
Company or by the Employee shall be communicated by written notice
of termination to the other party hereto in accordance with SECTION
5 hereof.
v.
“DATE OF TERMINATION”
means (i) if the Employee’s employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that the Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty
(30) day period), and (ii) if the Employee’s employment is
terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a termination without Cause
shall not be less than thirty (30) days from the date such Notice
of Termination is given); provided that if within thirty (30) days
after any such Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by
mutual written agreement of the parties, or by the final judgment,
order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been
taken).
vi.
“BASE SALARY” means the
annual base salary of the Employee from the Company, but determined
without regard to any salary reduction agreement of the Employee
under Sections 401(k) and 125 of the Internal Revenue Code of 1986,
as amended (the “CODE”), (or corresponding provisions
of subsequent federal income tax laws) or any salary deferral
agreement of the Employee under any non-qualified deferred
compensation program that may be available to the Employee from
time to time, and excludes (i) incentive or additional cash
compensation; (ii) any amounts included in income because of
Sections 79 or 89 of the Code; and (iii) any amounts paid to the
Employee for reimbursement for expenses or discharging tax
liabilities.
vii.
“GOOD REASON” shall mean
the occurrence, during the Term of this Agreement, of any of the
following actions or failures to act, but in each case only if it
is not consented to by the Employee in writing: (i) a material
adverse change in the Employee’s duties, reporting
responsibilities, titles or elected or appointed offices as
in
effect immediately prior to the
effective date of such change; or (ii) a material reduction
by the Company in the Employee’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 Employee. For purposes of this definition,
none of the actions described in clauses (i) and (ii) above shall
constitute “Good Reason” with respect to the Employee
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
Employee (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 (i) and (ii) above on the sixtieth (60th) day
following the later of the occurrence of such action or the
Employee’s knowledge thereof, unless the Employee has given
the Company written notice thereof prior to such date.
viii.
“CHANGE IN CONTROL”
shall mean the first to occur of the following: (i) any Person
becomes the Beneficial Owner, directly or indirectly, of securities
of the Company representing a majority of the combined voting power
of the Company’s then outstanding securities (assuming
conversion of all outstanding non-voting securities into voting
securities and the exercise of all outstanding options or other
convertible securities); (ii) the following individuals cease
for any reason to constitute a majority of the number of directors
then serving: individuals who, on the Effective Date, constitute
the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for
election by the Company’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the Effective
Date or whose appointment, election or nomination for election was
previously so approved or recommended; (iii) there is
consummated a merger or consolidation of the Company or any direct
or indirect subsidiary of the Company with any other corporation
other than (x) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to
such merger or consolidation continuing to represent, either by
remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof,
a majority of the combined voting
power of the securities of the Company or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
