Document:

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 transaction) in which no Person, is or 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; or  (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, or to an entity a majority of the combined voting power of the voting securities of which is owned by substantially all of the stockholders of the Company immediately prior to such sale in substantially the same proportions as their ownership of the Company immediately prior to such sale.
ix.                “BENEFICIAL OWNER” shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
x.           “PERSON” shall, except for purposes of SECTION 7 of this Agreement, have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (1) the Company or any subsidiary of the Company, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (3) an underwriter temporarily holding securities pursuant to an offering of such securities or (4) a corporation owned, directly or indirectly, by substantially all of the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
3.             SUCCESSORS; BINDING AGREEMENT.
a.               This Agreement shall be binding on the Company and any successor to all or substantially all of its business or assets. Without limiting the effect of the prior sentence, the Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, the “COMPANY” shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which assumes and agrees to -perform this Agreement 
 

 

 
or which is otherwise obligated under this Agreement by the first sentence of this SECTION 3, by operation of law or otherwise.
b.              This Agreement shall inure to the benefit of and be enforceable by the Employee’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee’s devisee, legatee or other designee or if there is no such devisee, legatee or designee, to the Employee’s estate.
4.             TIMING OF PAYMENT AND RELEASE.
a.               As a condition of receiving from the Company the payments and benefits provided for hereunder, which the Employee otherwise would not be entitled to receive, the Employee understands and agrees that, on the Date of Termination, he will be required to execute a release of all claims against the Company in substantially the form attached hereto as EXHIBIT 1 (the “RELEASE”) as may be modified by the Company in good faith to reflect changes in law or its employment practices. The Employee acknowledges that he has been advised in writing to consult with an attorney prior to executing the Release. The Employee agrees that he will consult with his attorney prior to executing the Release. The Employee and the Company agree that the Employee has a period of seven (7) days following the execution of the Release within which to revoke the Release. The parties also acknowledge and agree that the Release shall not be effective or enforceable until the seven (7) day revocation period expires. The date on which this seven (7) day period expires shall be the effective date of the Release (the “RELEASE EFFECTIVE DATE”).
b.              The Company shall make all payments required under this Agreement within five (5) business days following the Release Effective Date.
c.               The Employee understands that as used in this SECTION 4, the “COMPANY” includes its past, present and future officers, directors, trustees, shareholders, employees, agents, subsidiaries, affiliates, distributors, successors, and assigns, any and all employee benefit plans (and any fiduciary of such plans) sponsored by the Company, and any other persons related to the Company.
d.              Notwithstanding anything in this Agreement to the contrary, this Agreement shall not affect the Company’s right or ability to terminate the employment of the Employee, subject to any other written contract between the Company and the Employee to the contrary.
 

 

 
e.               The Employee agrees that execution and delivery to the Company of any release or disclaimer agreement requested by the Company which is consistent with the provisions of this SECTION 4 and the passage of all necessary waiting periods in connection therewith shall be a condition to the receipt of any payment or benefits to be provided by the Company following the termination of the Employee’s employment with the Company.
5.            NOTICES.   For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, or by expedited (overnight) courier with established national reputation, shipping prepaid or billed to sender, in either case addressed to the respective addresses last given by each party to the other (provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company) or to such other address as either party may have furnished to the other in writing in accordance herewith. All notices and communication shall be deemed to have been received on the date of delivery thereof, on the third business day after the mailing thereof, or on the second day after deposit thereof with an expedited courier service, except that notice of change of address shall be effective only upon receipt.
6.            CONFIDENTIALITY.   For purposes of this SECTION 6, the term “COMPANY” shall include, in addition to the Company, its affiliates, subsidiaries and any of their respective predecessors, successors and assigns. The term “COMPANY’S BUSINESS” shall mean the business of developing, manufacturing, selling or distributing high-performance alloys for service in severe corrosion and high temperature applications.
a.               CONFIDENTIAL INFORMATION.   As used in this Agreement, “CONFIDENTIAL INFORMATION” means any and all confidential, proprietary or other information, whether or not originated by the Employee or the Company, which is in any way related to the past or present Company’s Business and is either designated as confidential or not generally known by or available to the public. Confidential Information includes, but is not limited to (whether or not reduced to writing or designated as confidential) (i) information regarding the Company’s existing and potential customers and vendors; (ii) any contacts (including the existence and contents thereof and parties thereto) to which the Company is a party or is bound; (iii) information regarding products and services being purchased or leased by or provided to the Company; (iv) information received by the Company from third parties under an obligation of confidentiality, restricted, disclosure or restricted use; (v) personnel and financial information of the Company; (vi) information with respect to the Company’s products, services, facilities, business methods, systems, trade secrets, technical know-how, and other intellectual property; (vii) marketing and developmental plans and techniques, price and cost data, forecasts and forecast assumptions, and potential strategies 
 

 

 
of the Company; and (viii) any other information relating to Company which was obtained by the Employee in connection with his employment by the Company, whether before, on or after the Effective Date.
b.              NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.   The Employee acknowledges that the Confidential Information of the Company is a valuable, unique asset of the Company and the Employee’s unauthorized use or disclosure thereof could cause irreparable harm to the Company for which no remedy at law could be adequate. Accordingly, the Employee agrees that the Employee shall hold all Confidential Information of the Company in strict confidence and solely for the benefit of the Company, and that he shall not, directly or indirectly, disclose or use or authorize any third party to disclose or use any Confidential Information, except (i) as required for the performance of the Employee’s duties hereunder, (ii) with the express written consent of the Company, (iii) to the extent that any such information is in or becomes in the public domain other than as a result of the Employee’s breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other government process and in such event, the Employee shall cooperate with the Company in attempting to keep such information confidential. The Employee shall follow all Company policies and procedures to protect all Confidential Information and take any additional precautions necessary to preserve and protect the use or disclosure of any Confidential Information at all times.
c.               OWNERSHIP OF CONFIDENTIAL INFORMATION.   The Employee acknowledges and agrees that all Confidential Information is and shall remain the exclusive property of the Company, whether or not prepared in whole or in part by the Employee and whether or not disclosed to or entrusted to the custody of the Employee. Upon the termination or resignation of his employment by the Company, or at any other time at the request of the Company, the Employee shall promptly deliver to the Company all documents, tapes, disks, or other storage media and any other materials, and all copies thereof in whatever form, in the possession of the Employee pertaining to the Company’s Business, including, but not limited to, any containing Confidential Information.
d.              SURVIVAL.   The Employee’s obligations set forth in this SECTION 6, and the Company’s rights and remedies with respect hereto, shall indefinitely survive the termination of this Agreement and the Employee’s employment by the Company, regardless of the reason therefor.
7.            RESTRICTIVE COVENANTS. For purposes of this SECTION 7, the term “COMPANY” shall include, in addition to the Company, its affiliates, subsidiaries and any of their respective predecessors, successors and assigns.
 

 

 
a.               NON-COMPETITION.   During the Restricted Period and within the Restricted Area (each as defined in subsection (c) below), the Employee shall not, directly or indirectly, perform on behalf of any Competitor (as defined in subsection (c) below) the same or similar services as those that the Employee performed for the Company during the Employee’s employment by the Company or otherwise. In addition, the Employee shall not, during the Restricted Period or within the Restricted Area, directly or indirectly engage in, own, manage, operate, join, control, tend money or other assistance to, or participate in or be connected with (as an officer, director, member, manager, partner, shareholder, consultant, employee, agent, or otherwise), any Competitor.
b.              NON-SOLICITATION.   During the Restricted Period, the Employee shall not, directly or indirectly, for himself or on behalf of any Person (as defined in subsection (c) below), (i) solicit or attempt to solicit any Customers (as defined in subsection (c) below) or prospective Customers with whom the Employee had contact at any time during the Employee’s employment by the Company; (ii) divert or attempt to divert any business of the Company to any other Person; (iii) solicit or attempt to solicit for employment, endeavor to entice away from the Company, recruit, hire, or otherwise interfere with the Company’s relationship with, any Person who is employed by or otherwise engaged to perform services for the Company (or was employed or otherwise engaged to perform services for the Company, as of any given time, within the immediately preceding twenty-four (24) month period); (iv) cause or assist, or attempt to cause or assist, any employee or other service provider to leave the Company; or (v) otherwise interfere in any manner with the employment or business relationships of the  Company or the business or operations then being conducted by the Company.
c.               DEFINITIONS.   For purposes of this SECTION 7, the following definitions have the following meanings:
i.              “COMPETITOR” means any Person that engages in a business that is the same as, or similar to, the Company’s Business.
ii.  “CUSTOMER” means any Person which, as of any given date, used or purchased or contracted to use or purchase any services or products from the Company within the immediately preceding twenty-four (24) month period.
iii.       “PERSON” means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, or unincorporated organization, or any governmental agency, officer, department, commission, board, bureau, or instrumentality thereof,
 

 

 
iv.    “RESTRICTED AREA” means, because the market for the Company’s Business is global, or has the potential of being global, and is not dependent upon the physical location or presence of the Company, the Employee, or any individual or entity that may be in violation of this Agreement, the broadest geographic region enforceable by law (excluding any location where this type of restriction is prohibited by law) as follows: (A) everywhere in the world that has access to the Company’s Business because of the availability of the Internet; (B) everywhere in the world that the Employee has the ability to compete with the Company’s Business through the Internet; (C) each state, commonwealth, territory, province and other political subdivision located in North America; (D) each state, commonwealth, territory and other political subdivision of the United States of America; (E) Indiana and any state in which the Employee has performed any services for the Company; (F) any geographical area in which the Company has performed any services or sold any products; (G) any geographical area in which the Company or any of its subsidiaries have engaged in the Company’s Business, which has resulted in aggregate sales revenues of at least $25,000 during any year in the five (5) year period immediately preceding the commencement of the Restricted Period; (H) any state or other jurisdiction where the Company had an office at any time during the Employee’s employment by the Company; (I) within one hundred (100) miles of any location in which the Company had an office at any time during the Employee’s employment by the Company; and (J) within one hundred (100) miles of any location in which the Employee provided services for the Company.
v.       “RESTRICTED PERIOD” means the period of time during Employee’s employment by the Company plus a period of twelve (12) months from the Date of Termination. In the event of a breach of this Agreement by the Employee, the Restricted Period will be extended automatically by the period of the breach.
d.              SURVIVAL.   The Employee’s obligations set forth in this SECTION 7, and the Company’s rights and remedies with respect thereto, will remain in full force and effect during the Restricted Period and until full resolution of any dispute related to the performance of the Employee’s obligations during the Restricted Period.
e.               PUBLIC COMPANY EXCEPTION.   The prohibitions contained in this SECTION 7 do not prohibit the Employee’s ownership of stock which is publicly traded, provided that (1) the investment is passive, (2) the Employee has no other involvement with the company, (3) the Employee’s interest is less than five percent (5%) of the shares of the company, and (4) 
 

 

 
the Employee makes full disclosure to the Company of the stock at the time that the Employee acquires the shares of stock.
8.              ASSIGNMENT OF INVENTIONS.   Any and all inventions, improvements, discoveries, designs, works of authorship, concepts or ideas, or expressions whereof, whether or not subject to patents, copyrights, trademarks or service mark protections, and whether or not reduced to practice, that are conceived or developed by the Employee while employed with the Company and which relate to or result from the actual or anticipated business, work, research or investigation of the Company (collectively, “INVENTIONS”), shall be the sole and exclusive property of the Company. The Employee shall do all things reasonably requested by the Company to assign to and vest in the Company the entire right, title and interest to any such Inventions and to obtain full protection therefor.  Notwithstanding the foregoing, the provisions of this Agreement do not apply to an Invention for which no equipment, supplies, facility, or Confidential Information of the Company was used and which was developed entirely on the Employee’s own time, unless (a) the Invention relates (i) to the Company’s Business, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the Invention results from any work performed by the Employee for the Company.
9.              REASONABLENESS.   The Employee has carefully considered the nature, extent and duration of the restrictions and obligations contained in this Agreement, including, without limitation, the geographical coverage contained in SECTION 7 and the time periods contained in SECTION 6 and SECTION 7, and acknowledges and agrees that such restrictions are fair and reasonable in all respects to protect the legitimate interests of the Company and that these restrictions are designed for the reasonable protection of the Company’s Business.
10.            REMEDIES.   The Employee recognizes that any breach of this Agreement shall cause irreparable injury to the Company, inadequately compensable in monetary damages. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, the Employee agrees that the Company shall be able to seek and obtain injunctive relief in the form of a temporary restraining order, preliminary injunction, or permanent injunction, in each case without notice or bond, against the Employee to enforce this Agreement. The Company shall not be required to demonstrate actual injury or damage to obtain injunctive relief from the courts. To the extent that any damages are calculable resulting from the breach of this Agreement, the Company shall also be entitled to recover damages, including, but not limited to, any lost profits of the Company and/or its affiliates or subsidiaries. For purposes of this Agreement, lost profits of the Company shall be deemed to include all gross revenues resulting from any activity of the Employee in violation of this Agreement and all such revenues shall be held in trust for the benefit of the Company. Any recovery of damages by the Company shall be in addition to and not in lieu of the injunctive relief to which the Company is entitled. In no event will a damage recovery be considered a penalty in liquidated damages. In addition, in any action at law or in equity arising out of this Agreement, the prevailing party shall be entitled to recover, in addition to any damages caused by a breach of this Agreement, all costs and expenses, including, but not limited to, reasonable attorneys’ fees, expenses, and court costs incurred by such party in connection with such action or 
 

 

 

proceeding. Without limiting the Company’s rights
under this SECTION 10 or any other remedies of the Company, if a court of
competent jurisdiction determines that the Employee breached any of the
provisions of SECTIONS 6 or 7 of this Agreement, the Company will have the
right to cease making any payments or providing any benefits otherwise due to
the Employee under the terms and conditions of this Agreement.

11.            CLAIMS BY THE EMPLOYEE.   The Employee acknowledges and agrees that any claim or cause of action by the Employee against the Company shall not constitute a defense to the enforcement of the restrictions and covenants set forth in this Agreement and shall not be used to prohibit injunctive relief.
12.            MISCELLANEOUS.   No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof may have been made by either party which are not expressly set forth in this Agreement.
13.            APPLICABLE LAW AND FORUM.   This Agreement has been entered into in the State of Indiana and shall be governed by and construed in accordance with the laws of the State of Indiana. The parties agree that any action in law or equity brought by either party arising from or in connection with this Agreement or arising from or in connection with the performance by either party of its obligations hereunder shall be brought only in the United States District Court for the Southern District of Indiana, Indianapolis Division or the Circuit Court of Howard County, Indiana, and the parties hereto consent to the jurisdiction of such forums.
14.            SEVERABILITY.   If a court having proper jurisdiction holds a particular provision of this Agreement unenforceable or invalid for any reason, that provision shall be modified only to the extent necessary in the opinion of such court to make it enforceable and valid and the remainder of this Agreement shall be deemed valid and enforceable and shall be enforced to the greatest extent possible under the then existing law. In the event the court determines such modification is not possible, the provision shall be deemed severable and deleted, and all other provisions of this Agreement shall remain unchanged and in full force and effect.
15.            ENFORCEABILITY IN JURISDICTIONS.   The parties hereto intend to and hereby confer jurisdiction to enforce the covenants contained in SECTIONS 6 and 7 above upon the courts of any state within the geographical scope of such covenants. If the courts of any one or more of such states shall hold any of the previous covenants unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company’s rights to the relief provided above in the courts of any other states within the 
 

 

 

geographical scope of
such covenants, as to breaches of such covenants in such other respective
jurisdictions, the above covenants as they relate to each state being, for this
purpose, severable into diverse and independent covenants.

16.            FAIR DEALING.   The Employee acknowledges that the Company has negotiated this Agreement in good faith and has been fair in its dealing with the Employee. The Employee shall not raise any defense and expressly waives any defense against the Company based upon any alleged breach of good faith or fair dealing by the Company in connection with this Agreement.
17.            ENTIRE AGREEMENT; RELEASE.   This Agreement constitutes the entire agreement between the parties hereto, and, effective as of the Effective Date, supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto, with respect to the subject matter hereof.
18.            OPPORTUNITY TO CONSULT COUNSEL.   THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND HAS BEEN GIVEN ADEQUATE OPPORTUNITY, AND HAS BEEN ENCOURAGED BY THE COMPANY, TO CONSULT WITH LEGAL COUNSEL OF HIS CHOICE CONCERNING THE TERMS HEREOF BEFORE EXECUTING THIS AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 

 
  
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duty authorized officer and the Employee has executed this Agreement, each as of the Effective Date.

	
  

  	
   

  	
  COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HAYNES INTERNATIONAL, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Printed: Francis J.
  Petro

  	
   

  
	
   

  	
   

  	
  Title:    President
  and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Printed:

  	
   

  	
   

  	
   

  	
   

  
	
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  EMPLOYEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WITNESS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 
  
SCHEDULE OF EMPLOYEES PARTY TO THE TERMINATION BENEFITS AGREEMENT
Cijan, August A.

Douglas, Michael

Kilian, Anastacia S.

Laird, James A.

Losch, Marlin C.

Martin, Marcel

Maudlin, Dan W.

Neel, Jean C.

Pinkham, Scott R.

Spalding, Gregory M.

Sponaugle, Charles, J.

Young, Jeffrey L.Exhibit 10.14

FORM OF

HAYNES INTERNATIONAL, INC.

AMENDED AND RESTATED STOCK OPTION PLAN

As adopted by the Board of Directors as of November 7,
2005.

The Board of Directors of Haynes International, Inc.
(the “Company”) has determined that the best interests of the Company will be
served by making available to eligible employees and directors of the Company
and its Subsidiaries a means to acquire shares of the Company’s common stock
(the “Shares”) through the granting of stock options.  The Haynes International, Inc. Stock Option
Plan (the “Plan”) is intended to promote the growth of the Company and its
shareholders by attracting and motivating key employees and directors whose
efforts are deemed worthy of encouragement through the incentive effects of
stock options.

The Shares purchased pursuant to the Plan shall be
subject to certain restrictions, the details of which are set forth below.  There is currently no public market for the
Shares.  The future market price, if any,
of the Shares may be highly volatile depending on a number of factors.  In addition, the ownership of the Company
represented by Options may be diluted by the future issuances of Shares or
convertible securities.

Accordingly, the Company’s Board of Directors adopts
this Plan in accordance with the Plan of Reorganization (as defined below),
effective as of the Effective Date.

1.             DEFINITIONS.  For
purposes of the Plan, the following terms, when capitalized, shall have the
meaning set forth below:

(a)           “Board” or “Board of Directors” means
the board of directors of the Company.

(b)           “CEO” means the Chief Executive
Officer of the Company.

(c)           “Code” means the Internal Revenue
Code of 1986, as amended.

(d)           “Committee” means the Compensation
Committee of the Board, and the composition of the Committee shall be governed
by the Compensation Committee Charter as adopted by the Board and as amended
from time to time.

(e)           “Company” means Haynes International,
Inc.

(f)            “Director” means any person serving
on the Board of Directors of the Company.

(g)           “Disability” means total and
permanent disability as defined in the Haynes International Inc. Pension Plan.

 

(h)           “Discretionary Participant” means any
additional Participant as may be designated on a limited basis by the Committee
upon the recommendation of the CEO to accommodate new hires, promotions and
other similar circumstances.

(i)            “Effective Date” has the meaning set
forth in the Plan of Reorganization.

(j)            “Employee” means any person,
including officers, employed by the Company or any Subsidiary.  The payment of a director’s fee by the Company
shall not be sufficient to constitute employment by the Company.

(k)           “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

(l)            “Executive” means executives
occupying the management positions listed on EXHIBIT A attached hereto.

(m)          “Fair Market Value” per share as of a
particular date means the last reported sale price (on the day immediately
preceding such date) of the Shares quoted on the NASDAQ National Market or the
NASDAQ SmallCap Market (or any other exchange or national market system upon
which price quotations for the Shares are regularly available); provided,
however, if price quotations for the Shares are not regularly available on any
exchange or national market system, Fair Market Value per share shall mean, as
of any date, the fair market value of such Shares on such date as determined in
good faith by the Board or Committee.

(n)           “Good Reason” means the occurrence of
any of the following actions or failures to act, but in each case only if it is
not consented to by the Optionee in writing: (a) a material adverse change in
the Optionee’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 Optionee’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
Optionee; (c) solely in the case of the CEO, any change of more than fifty (50)
miles in the location of the principal place of employment of the CEO
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 Optionee 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 Optionee (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) following the later of the
occurrence of such action or the Optionee’s knowledge thereof, unless the
Optionee has given the Company written notice thereof prior to such date.

(o)           “New Common Stock” has the meaning
set forth in the Plan of Reorganization.

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(p)           “Non-Employee Director” means a
Director who is a “non-employee director” within the meaning of Rule 16b-3 and
who is also an “outside director” within the meaning of Section 162(m) of the
Code.

(q)           “Option” means any stock option
issued pursuant to the Plan.  Options
will be “Nonqualified Options” which are defined as options not intended to
meet the requirements of Section 422 of the Code.

(r)            “Option Agreement” means the written
agreement by and between the Participant and the Company setting forth the
terms and conditions of an Option.  Each
Option Agreement shall be subject to the terms and conditions of the Plan and
need not be identical.

(s)           “Optionee” means the holder of an
outstanding Option granted under the Plan.

(t)            “Participant” means the CEO,
Executive, Non-Employee Director or Discretionary Participant who has entered
into an Option Agreement with the Company pursuant to this Plan.

(u)           “Plan” means this Haynes
International, Inc. Stock Option Plan as provided herein and as may be amended
from time to time.

(v)           “Plan of Reorganization” means the
First Amended Plan of Reorganization for the Company that was filed with the
United States Bankruptcy Court Southern District Indianapolis Division and
approved on August 16, 2004.

(w)          “Retirement” means in the case of the
CEO, a resignation by the CEO after having reached age fifty-five (55), but in
no event prior to September 30, 2007, and, in the case of any other
Participant, a resignation after reaching age fifty-five (55) and completing at
least five (5) years of service with the Company, but in no event prior to September
30, 2007.

(x)            “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect
from time to time.

(y)           “Share” means a share of common stock
of the Company authorized under the Plan of Reorganization, as may be adjusted
in accordance with Section 5(b) below.

(z)            “Shares Outstanding” means the total
number of Shares outstanding on a fully diluted basis, as reflected in the
Company’s financial statements for purposes of determining earnings per share.

(aa)         “Subsidiary” and “Subsidiaries” used
herein means a company or companies of which 80% or more of the total voting
power of the equity of each such company and 80% or more of the total value of
the equity of each such company are owned by the Company or a Subsidiary of the
Company.

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(bb)         “Terminated for Cause,” “Termination
for Cause” or “Cause” means, (i) if the Optionee is a party to an employment or
service agreement with the Company or its Subsidiaries and such agreement
provides for a definition of Cause, the definition therein contained, or, (ii)
if no such agreement exists, a termination by reason of the good faith
determination of the Board that the Optionee (A) continually failed to
substantially perform his duties with the Company (other than a failure
resulting from the Optionee’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 Optionee’s duties with the Company or a
Subsidiary, repeated absences from work without a reasonable excuse, or
intoxication with alcohol or illegal drugs while on the Company’s or a
Subsidiary’s premises during regular business hours, (B) engaged in conduct
which constituted a material breach of such Optionee’s employment agreement (if
applicable), (C) 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 (D) 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
(E) 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 Optionee 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;”
provided, however, the Optionee shall not be deemed to have been Terminated for
Cause unless there shall have been delivered to the Optionee a copy of a
resolution duly adopted by the Board.  If
the Company has reasonable belief that the Optionee has committed any of the
acts described above, it may suspend the Optionee (with or without pay) while
it investigates whether it has or could have Cause to terminate the Optionee.  The Company may terminate the Optionee for
Cause prior to the completion of its investigation; provided, that, if it is
ultimately determined that the Optionee has not committed an act which would
constitute Cause, Optionee shall be treated as if he were terminated without
Cause.

2.             ADMINISTRATION OF THE PLAN.

(a)           COMMITTEE.  The Plan shall be administered by the
Committee.  The Committee shall have full
authority to administer the Plan, authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for administering
the Plan as it may deem necessary in order to comply with the requirements of
the Plan, or in order to conform to any regulation or to any change in any law
or regulation applicable thereto.

(b)           ACTIONS OF THE COMMITTEE.  All actions taken and all interpretations and
determinations made by the Committee in good faith (including determinations of
Fair Market Value) shall be final and binding upon all Participants, the
Company, and all other interested persons.  No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Committee shall, in addition to
their rights as 

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Directors, be fully protected to the extent
permitted by law by the Company with respect to any such action, determination,
or interpretation.

(c)           POWERS OF THE COMMITTEE.  Subject to the provisions of the Plan, the Committee
shall have the authority, in its discretion: (i) to determine, upon review of
the relevant information, the Fair Market Value of the Shares; (ii) to
determine the persons to whom Options shall be granted, the time or times at
which Options shall be granted, the number of Shares to be represented by each
Option, and the exercise price per Share; (iii) to interpret the Plan; (iv) to prescribe,
amend, and rescind rules and regulations relating to the Plan; (v) to
accelerate or defer (with the consent of the Participant unless otherwise
provided herein) the vesting of any Option; (vi) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted by the Board or the Committee; and (vii)
to make all other determinations deemed necessary or advisable for the
administration of the Plan.

3.             ELIGIBILITY AND PARTICIPATION.

(a)           ELIGIBILITY.  Grants of Options shall be made to the CEO and
the Executives in accordance with Exhibit A and, in the discretion of the
Committee, may be made to any Non-Employee Director or any Discretionary
Participant.

(b)           PARTICIPATION BY DIRECTOR.  Members of the Committee who are eligible either
for Options or have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of any Options pursuant to the Plan,
except that no such member shall act upon the granting of an Option to himself,
but any such member may be counted in determining the existence of a quorum at
any meeting of the Committee and may be counted as part of an action by unanimous
written consent during or with respect to which action is taken to grant
Options to him or her.

4.             EXERCISE PRICE, CONSIDERATION AND FORM OF OPTION
AGREEMENT.

(a)           EXERCISE PRICE.  The price to be paid for Shares upon the
exercise of an Option (“exercise price”) shall be determined by the Committee
at the time such Option is granted.

(b)           PAYMENT OF EXERCISE PRICE.  The exercise price shall be paid in full, at
the time of exercise of the Option, (i) by personal or bank cashier’s check,
(ii) if the Participant may do so without violating Section 16(b) or (c) of the
Exchange Act, and subject to approval by the Committee, by tendering to the
Company whole Shares owned by such Participant having a Fair Market Value at
the time of exercise equal to the exercise price of the Shares to which the
Option is being exercised, (iii) if the Participant may do so without violating
Section 16(b) or (c) of the Exchange Act, and subject to approval by the
Committee, by surrendering sufficient vested options based on the difference
between the exercise price and the Fair Market Value at the time of exercise of
the Shares to equal the exercise price of the Shares to which the Option is
being exercised, or (iv) any combination of (i), (ii) or (iii).  Unless otherwise specifically 

 5
 

 

provided in an Option Agreement, the purchase
price of Shares acquired pursuant to an Option that is paid by delivery to the
Company of other Shares or attestation of ownership thereof acquired, directly
or indirectly from the Company, shall be paid only with Shares that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).

(c)           FORM OF OPTION AGREEMENT.  Each Option shall be evidenced by an Option
Agreement specifying the number of Shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Committee may
determine, subject to the provisions of the Plan.

5.             SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

(a)           NUMBER.  Subject to adjustment as provided in paragraph
(b) of this Section 5, the maximum aggregate number of Shares which may be issued
pursuant to Options granted under the Plan shall not exceed one (1) million
Shares.  To the extent any Option granted
under the Plan shall for any reason expire or otherwise terminate or become unexercisable,
in whole or in part, without having been exercised in full, the Shares not
acquired under such Option shall revert to and thereafter be available for
future grants under the Plan.

(b)           CAPITAL CHANGES.  In the event of any extraordinary dividend or
other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, reclassification, stock split, reverse stock
split, spin-off, or exchange of Shares or other securities of the Company,
issuance of warrants or other rights to purchase Shares or other securities of
the Company, or other similar corporate transaction or event (an “Event”), and
such Event affects the Shares such that an adjustment is reasonably determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan or with respect to an Option, then the Committee shall, in such manner as
it may reasonably deem equitable, take action to make the appropriate
adjustment, including, without limitation, adjusting any or all of the
following: (i) the number and kind of Shares (or other securities or property)
with respect to which Options may be granted or awarded; (ii) the number and
kind of Shares (or other securities or property) subject to outstanding Options;
and (iii) the grant or exercise price with respect to any Option; provided,
however, that no Committee action under this Section 5(b) shall result in a
reduction in the aggregate value of outstanding Options (whether or not vested)
held by any Participant immediately prior to the Event.  The Committee’s determination under this
Section 5(b) shall be final, binding and conclusive.  If any of the foregoing adjustments shall
result in a fractional Share, the fraction shall be disregarded, and the
Company shall have no obligation to make any cash or other payment with respect
to such a fractional Share.

(c)           SALE PROTECTION.  In the event that the Company’s Shares are not
readily traded on a national exchange or quotations system, and the Company is
sold in a sale or merger, the Fair Market Value of the Shares received upon the
exercise of each vested Option shall be the value per Share payable or used in
such transaction.

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(d)           TERMINATION OF OPTIONS. Unless
otherwise provided in an Option Agreement and except in the case of a Change in
Control (as defined below) which shall have the effect provided by Section 11, upon
the occurrence of an Event or other corporate event or transaction in which
outstanding Options are not to be assumed or otherwise continued following such
an Event or other corporate event or transaction, the Committee may, in its discretion,
terminate any outstanding Option without a Participant’s consent and (i)
provide for the purchase of any such Option for an amount of cash equal to the
positive amount (if any) that could have been attained upon the exercise of
such Option or realization of the Participant’s rights had such Option been
currently exercisable or payable or fully vested, net of the exercise price for
such Option; and/or (ii) provide that such Option shall be exercisable (whether
or not vested) as to all Shares covered thereby for at least thirty (30) days
prior to such an Event or other corporate event or transaction.

(e)           FUTURE TRANSACTIONS.  The existence of the Plan, any Option
Agreement and the Options granted hereunder shall not affect or restrict in any
way the right or power of the Company or the shareholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or other
change in the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Shares or the rights thereof
or which are convertible into or exchangeable for Shares, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

6.             EXERCISE OF STOCK OPTIONS.

(a)           VESTING.  Except as provided otherwise in this Plan or
the applicable Option Agreement, each Option shall become vested and
exercisable in three (3) equal installments such that the Option may be
exercised as to Shares covered by the first installment from and after the first
anniversary of the date of the grant of the Option, with the second and third
installments becoming vested and exercisable on the two succeeding anniversary
dates.  Except as provided herein, or except
as specifically restricted by the Committee, any Option may be exercised in
whole at any time or in part at any time to the extent that such Shares under
the Option are then vested and exercisable.  In no event, however, may any Option be
exercised after the expiration of its exercise period, as described in Section
6(b), below.

(b)           EXERCISE PERIOD.  Notwithstanding any provision herein to the contrary,
any Option granted pursuant to this Plan shall expire, to the extent not
exercised, no later than the tenth (10th) anniversary of the date on which it
was granted.  Such time or times shall be
set forth in the Option Agreement evidencing such Option.

(c)           NOTICE OF EXERCISE.  A Participant electing to exercise an Option shall
give written notice to the Company, as specified by the Option Agreement, of
his election to purchase a specified number of Shares.  Such notice shall be accompanied by 

 7
 

 

the instrument evidencing such Option and any
other documents required by the Company, and payment of the exercise price of
the Shares the Participant has elected to purchase.  If the notice of election to exercise is given
by the executor or administrator of a deceased Participant, or by the person or
persons to whom the Option has been transferred by the Participant’s will or
the applicable laws of descent and distribution, the Company will be under no
obligation to deliver Shares pursuant to such exercise unless and until the
Company is satisfied that the person or persons giving such notice is or are entitled
to exercise the Option.

(d)           TERMINATION OF EMPLOYMENT WITHOUT CAUSE
OR FOR GOOD REASON.

(i)            Unless specifically provided
otherwise in the Option Agreement, if the CEO’s employment is Terminated
without Cause by the Company or by the CEO for Good Reason during the term of
his employment agreement, all unvested Options of the CEO shall vest
immediately and all Options held by the CEO shall remain exercisable for one
(1) year following termination of employment, but in no event later than the expiration
date of such Option as specified in the applicable Option Agreement.  If the Option is not exercised during this period
it shall be void and deemed to have been forfeited and be of no further force
or effect.  In the CEO’s employment terminates
on September 30, 2007 upon expiration of the employment term under his
employment agreement, any unvested Options shall terminate immediately and any
vested Options shall remain exercisable for ninety (90) days following termination
of employment.  If the Option is not
exercised during this period, it shall be void and deemed to have been forfeited
and be of no further force or effect.

(ii)           Unless specifically provided
otherwise in the Option Agreement, if the employment of an Executive or
Discretionary Participant is Terminated without Cause by the Company or by the
Executive or Discretionary Participant for Good Reason, all unvested Options
held by the Executive or Discretionary Participant, as the case may be, shall
terminate immediately and any vested Options shall remain exercisable for six
(6) months following the date of such event, but in no event later than the
expiration of such Options as specified in the applicable Option Agreement.  If the Option is not exercised during this
period, it shall be void and deemed to have been forfeited and be of no further
force or effect.

(e)           TERMINATION DUE TO DEATH, DISABILITY
OR RETIREMENT.

(i)            In addition to any rights under
Section 10, upon the death, Disability or Retirement of the CEO, all unvested
Options shall vest immediately and all Options held by the CEO shall remain
exercisable for one (1) year in the event of death or Disability and six (6)
months in the event of Retirement following the date of any such event, but in
no event later than the expiration date of Option as specified in the applicable
Option Agreement.  If the Option is not 

 8
 

 

exercised during this period it shall be void
and deemed to have been forfeited and be of no further force or effect.

(ii)           In addition to any rights under
Section 10, upon the death or Disability of an Executive, a Director or a
Discretionary Participant, all unvested Options shall vest immediately and all
Options held by such Executive, Director, or Discretionary Participant, as the
case may be, shall remain exercisable for six (6) months following the date of
such event, but in no event later than the expiration date of such Option as
specified in the applicable Option Agreement.  If the Option is not exercised during this
period, it shall be void and deemed to have been forfeited and be of no further
force or effect.

(iii)          Upon the Retirement of the Executive,
a Non-Employee Director, or a Discretionary Participant, all unvested Options
shall terminate immediately and all vested Options held by such Executive,
Non-Employee Director or Discretionary Participant, as the case may be, shall
remain exercisable for six (6) months following the date of such event, but in
no event later than the expiration date of such Options as specified in the
applicable Option Agreement.  If the
Option is not exercised during this period, it shall be void and deemed to have
been forfeited and be of no further force or effect.

(f)            FORFEITURE BY REASON OF TERMINATION
FOR CAUSE OR WITHOUT GOOD REASON.

(i)            Notwithstanding the exercise period
described in Section 6(b), if the employment or service of a Participant or a Director
is Terminated for Cause by the Company, all rights or interests in any Option,
regardless of the extent to which it might otherwise have been vested and
exercisable on the date of such Termination for Cause, shall be void and forfeited
effective on the date of such Termination for Cause, and such Option shall no
longer be exercisable to any extent whatsoever.

(ii)           Unless specifically provided
otherwise in the Option Agreement, if the CEO’s employment is terminated by the
CEO without Good Reason, all unvested Options held by the CEO shall terminate
immediately and all vested Options held by the CEO shall remain exercisable for
thirty (30) days following termination, but in no event later than the expiration
dateof such Option as specified in the applicable Option Agreement.  If the Option is not exercised during this
period, it shall be void and deemed to have been forfeited and be of no further
force or effect.

(iii)          Unless specifically provided otherwise
in the Option Agreement, if the employment of any Participant other than the
CEO is terminated by the Participant without Good Reason, all vested and
unvested Options held by the Participant shall terminate immediately and all
rights or interests therein shall be void and forfeited effective on the date of
such termination.

 9
 

 

(g)           DISPOSITION OF TERMINATED STOCK
OPTIONS.  Any Shares subject to Options
which have been terminated and forfeited as provided above shall not thereafter
be eligible for purchase by the Participant but shall again be available for grant
by the Board or the Committee to other Participants.

7.             RESTRICTIONS ON RESALE OR DISPOSITION OF SHARES.

(a)           IN GENERAL.  Except as specifically provided in Sections
6(e) and 10, any Shares purchased under this Plan shall not be assigned, sold, transferred,
pledged, hypothecated or otherwise disposed of by a Participant.

(b)           ISSUANCE OF SHARES AND COMPLIANCE
WITH SECURITIES LAWS.  The Shares are
being offered in reliance upon an exemption from registration provided by the
federal Securities Act of 1933, as amended (the “Securities Act”), and an
exemption from registration provided by applicable state securities laws.  Accordingly, a Participant may not sell or
transfer the Shares to any person other than the Company without registering
the Shares under the Securities Act or until the Participant has obtained an
opinion of legal counsel satisfactory to the Company that the sale or
disposition is exempt from such registration requirements.  A Participant has no right at any time to require
the Company to register the Shares under federal or state securities laws.  Any person purchasing Shares upon exercise of
an Option issued pursuant to the Plan may be required to make such
representations and furnish such information as may, in the opinion of counsel
for the Company, be appropriate to permit the Company, in light of the existence
or nonexistence with respect to such Shares of an effective registration under
the Securities Act, or any similar state statute, to issue the Shares in
compliance with the provisions of those or any comparable acts.  These restrictions are imposed by federal and
state securities laws.

(c)           SECURITIES RESTRICTIONS.  All certificates for Shares delivered under the
Plan shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions.  If the Committee determines that the issuance
of Shares hereunder is not in compliance with, or subject to an exemption from,
any applicable federal or state securities laws, such shares shall not be
issued until such time as the Committee determines that the issuance is permissible.

8.             NO CONTRACT OF EMPLOYMENT.  Unless otherwise expressed in a separate
writing signed by an authorized officer of the Company, all Employees are
employed for an unspecified period of time and are considered to be “at-will employees.”
Nothing in this Plan shall confer upon any Participant the right to continue in
the employ of the Company or any Subsidiary, nor shall it limit or restrict in
any way the right of the Company or any Subsidiary to discharge the Participant
at any time for any reason whatsoever, with or without cause.

 10
 

 

9.             NO RIGHTS AS A STOCKHOLDER.  A Participant shall have no rights as a stockholder
with respect to any Shares subject to an Option unless and until the
Participant duly exercises the Option, makes full payment of the Option price
and certificates evidencing ownership of Shares are issued to the Participant.  Thereafter, cash dividends, stock dividends,
stock splits and other securities and rights to subscribe shall be paid or
distributed with respect to Shares acquired pursuant to the Plan in the same
manner as such items are paid or distributed to other shareholders of the
Company.  Adjustments to the number and
kind of Shares in the event of certain transactions shall be made as described
in Section 5(b).

10.           NONTRANSFERABILITY OF OPTIONS; DEATH
OR DISABILITY OF PARTICIPANT.  No Option
acquired by a Participant under the Plan shall be assignable or transferable by
a Participant, other than by will or the laws of descent and distribution, and
such Options are exercisable, during his lifetime, only by the Participant.  In the event of the Participant’s death or Disability,
the Option may be exercised by the personal representative of the Participant’s
estate or if no personal representative has been appointed, by the successor(s)
in interest determined under the Participant’s will or under the applicable
laws of descent and distribution during the exercise period set forth in
Section 6(e) herein.  During such exercise
period and only if price quotations for the Shares are NOT available on any
exchange or national market system, in the case of the death or Disability of
the CEO, an Executive, or a Discretionary Participant, such individual in the
case of Disability, or the beneficial holder of such Option in the case of
death, shall have the right during the exercise period provided in Section
6(e)(i) or (ii), as applicable, and in accordance with procedures that the
Committee, in its discretion, may establish from time to time, to demand that
the Company purchase each vested Option at a value equal to the value of the
difference between the Fair Market Value of the Shares of the Company and the
exercise price of such Options.

11.           CHANGE IN CONTROL.  In the event of a “Change in Control” (as
defined below), all Options shall become exercisable as to all shares covered
thereby without regard to the normal vesting schedule of the Options: (i)
immediately upon the Change in Control if the Change in Control is of the
nature described in Sections 11(a) or (b); or (ii) starting on a date which is
at least thirty (30) days prior to such Change in Control if the Change in
Control is of the nature described in Sections 11(c) or (d).  If the Options will continue to be
outstanding following the Change in Control, such Options will remain fully
exercisable following the Change in Control and will not be subject to any
other vesting schedule, provided that such Options will expire on the
expiration date as specified in the applicable Option Agreement.  “Change in Control” shall mean the occurrence
of any one of the following events:

(a)           any “Person” other than an Existing
Substantial Shareholder (as defined below) 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);

(b)           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 

 11
 

 

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;

(c)           the consummation of a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation (other than with an Existing Substantial
Shareholder or any of its affiliates), 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 transaction) in which no Person, is or 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; or

(d)           the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets, other than a sale or disposition
by the Company of all or substantially all of the Company’s assets to an entity
controlled by an Existing Substantial Shareholder or any of its affiliates, or
to an entity a majority of the combined voting power of the voting securities
of which is owned by substantially all of the stockholders of the Company
immediately prior to such sale in substantially the same proportions as their
ownership of the Company immediately prior to such sale.  As used herein the term “Existing Substantial
Shareholder” means any Person that alone or together with its affiliates shall
be the Beneficial Owner of or entitled to receive more than 15% of New Common
Stock as of the Effective Date.  As used
herein the term “Beneficial Owner” shall have the meaning set forth in Rule
13d-3 under the Exchange Act.  As used
herein the term “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any subsidiary of the Company, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities or (iv) a corporation
owned, directly or indirectly, by substantially all of the stockholders of the
Company in substantially the same proportions as their ownership of stock of
the Company.

12.           AMENDMENTS; DISCONTINUANCE OF PLAN.  The Board may from time to time alter, amend,
suspend, or discontinue the Plan, including, where applicable, any modifications
or amendments as it shall deem advisable for any reason, including satisfying
the requirements of any law or regulation or any change thereof; provided,
however, except as 

 12
 

 

provided in Section 5, that no such action shall
adversely affect the rights and obligations with respect to Options at that
time outstanding under the Plan; and provided further, that no such action
shall, without the approval of the stockholders of the Company, (a) increase
the maximum number of Shares of common stock that may be made subject to
Options (unless necessary to effect the adjustments required by Section 5(b)).

13.           WITHHOLDING TAXES; TAXES SATISFIED BY
WITHHOLDING OPTIONED SHARES.

(a)           GENERALLY.  The Company or any Subsidiary may take such
steps as it may deem necessary or appropriate for the withholding of any taxes which
the Company or any Subsidiary is required by law or regulation of any
governmental authority, whether federal, state, or local, domestic or foreign,
to withhold in connection with any Option including, but not limited to,
requiring the Participant to pay such tax at the time of exercise or the
withholding of issuance of Shares to be issued upon the exercise of any Option
until the Participant reimburses the Company for the amount the Company is
required to withhold with respect to such taxes, or, at the Company’s sole discretion,
canceling any portion of such issuance of Shares in any amount sufficient to
reimburse itself for the amount it is required to so withhold.

(b)           SATISFYING TAXES BY WITHHOLDING
OPTIONED SHARES.  Option Agreements under
the Plan may, at the discretion of the Board or the Committee, contain a
provision to the effect that all federal and state taxes required to be
withheld or collected from a Participant upon exercise of an Option may be
satisfied by the withholding of a sufficient number of exercised Shares that
are subject to the Option which, valued at Fair Market Value on the date of
exercise, would be equal to the total withholding obligation of the Participant
for the exercise of such Option; provided, however, that if the Company is a
public reporting corporation, no person who is an “officer” of the Company, as
such term is defined in Rule 3b-2 under the Exchange Act, may elect to satisfy
the withholding of federal and state taxes upon the exercise of an Option by
the withholding of exercised Shares that are subject to the Option, unless such
election is made either (i) at least six (6) months prior to the date that the
exercise of the Option becomes a taxable event or (ii) during any of the
periods beginning on the third business day following the date on which the
Company issues a news release containing the operating results of a fiscal
quarter or fiscal year and ending on the twelfth business day following such date.
 Such election shall be deemed made upon
receipt of notice thereof by an officer of the Company, by mail, personal
delivery, or by facsimile message, and shall (unless notice to the contrary is provided
to the Company) be operative for all Option exercises which occur during the
twelve-month period following the election.

14.           EFFECTIVE DATE AND TERM OF PLAN.  The Plan is effective as of the Effective Date
and Options may be granted at any time on or after such date.  No Options shall be granted subsequent to
August 30, 2014 (which is ten (10) years after the effective date of the Plan).

 13
 

 

SCHEDULE OF EXECUTIVE
OFFICERS AND DIRECTORS PARTY TO THE STOCK OPTION AGREEMENT

Bohan, Paul J.

Campion, Donald C. 

Cijan, August A. 

Corey, John C.

Douglas, Michael

Getz, Robert H.

Laird, James A. 

Losch, Marlon

Martin, Marcel 

McCarthy, Timothy J. 

Neel, Jean C. 

Petro, Francis J. 

Pinkham, Scott R.  

Spalding, Gregory M. 

Sponaugle, Charles J. 

Wall, William 

Young, Jeffery

Zabel, Ronald W.

 

 14

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