| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On October 8, 2019, Ward J. Timken, Jr. stepped down as Chief Executive Officer and President of TimkenSteel Corporation (the “Company”) and as Chairman of the Company’s Board of Directors (the “Board”), effective immediately.
Under the terms of his Severance Agreement with the Company, Mr. Timken’s departure was treated as a termination without cause, and he will receive a lump sum cash severance payout equal in value to $4,038,012, representing two times his current base salary rate plus two times his target annual cash incentive opportunity for 2019. Mr. Timken will be eligible to receive a pro rata payout, equal to about 77%, of any 2019 annual cash incentive earned by the Company’s actual performance through the end of the year. Mr. Timken will also receive up to two years of health care coverage reimbursement under his Severance Agreement, valued at about $30,000, plus customary executive outplacement services under Company policy, valued at about $20,000.
Mr. Timken and his family (and their related parties) remain substantial shareholders in the Company. Regarding Mr. Timken’s outstanding equity awards, the Compensation Committee of the Board (the “Committee”) acted to approve pro rata termination without cause treatment for his 2019 time-based restricted stock units (“RSUs”), 2019 stock options and 2019 performance-based RSUs (“PRSUs”) under the “layoff” provisions of the applicable award agreements. For Mr. Timken’s stock options and PRSUs issued by the Company before 2019, the Committee acted to provide for similar treatment for those awards. As a result, Mr. Timken will (i) continue to vest in approximately 44,000 RSUs, (ii) accelerate vest in the remaining 79,990 and 94,750 of his 2016 and 2017 stock options, respectively, in another 101,100 of his 2018 stock options and in 46,000 of his 2019 stock options (all of which are currently underwater), and (iii) continue to vest in all 115,000 of his target 2018 PRSUs and 105,287 of his target 2019 PRSUs, with final payout results to be based on actual performance for such awards. In addition, Mr. Timken will have up to three years to exercise his vested Company stock options.
In exchange for certain of his severance benefits, Mr. Timken will execute a customary general release of claims in favor of the Company, plus will be subject to customary restrictive covenants.
On October 8, 2019, in connection with Mr. Timken’s separation from the Company, the Board appointed Terry L. Dunlap as the Company’s Interim Chief Executive Officer and President, effective immediately.
Mr. Dunlap, age 60, has been a member of the Board since August 2015. Mr. Dunlap’s experience covers many aspects of the metals industry, including sales, marketing, manufacturing, supply chain, logistics, procurement and information technology. Mr. Dunlap has been the principal at Sweetwater LLC, a consulting and investing business with a focus on manufacturing and technology, since 2015. Prior to founding Sweetwater LLC, Mr. Dunlap spent 31 years with Allegheny Technologies Inc., a diversified specialty metals producer, serving in various positions, most recently as executive vice president of ATI’s flat-rolled products group from 2011 until his retirement in December 2014. He was also president of ATI Allegheny Ludlum from 2002 to 2014 and served on the boards of two ATI Joint Venture companies. Mr. Dunlap is a past member of the Metals Service Center Institute (MSCI) national board and vice president of the Indiana University of Pennsylvania Foundation Board. Mr. Dunlap also serves on the boards of Matthews International and Ampco-Pittsburgh Corporation.
For his service as Interim Chief Executive Officer and President, Mr. Dunlap will be entitled to receive a monthly cash payment of $115,000. Mr. Dunlap will also receive aone-time RSU award with a value of approximately $1,000,000 in connection with his appointment that will generally vest upon theone-year anniversary of the grant of the award. Mr. Dunlap will continue to receive the monthly cash payment for at least aone-year period and his RSU award will continue to vest unless Mr. Dunlap voluntarily resigns or is terminated for cause prior to theone-year anniversary of his appointment.
