FIRST AMENDMENT TO THE
HAYNES HOLDINGS, INC.
EMPLOYEE STOCK OPTION PLAN
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PRELIMINARY STATEMENT
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Haynes Holdings, Inc., a Delaware corporation (the "Company"), previously
established the Haynes Holdings, Inc. Employee Stock Option Plan (the "Plan").
The Board of Directors of the Company has determined that it is in the best
interests of the Company to amend the Plan as set forth below. All
capitalized terms used but not defined herein shall have the meanings assigned
to them in the Plan.
AMENDMENTS
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The Plan shall be amended as set forth below:
1. The first sentence of Section 2 of the Plan shall be amended in
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its entirety to read as follows:
"The Plan shall be administered by a committee of the Board of
Directors of the Company (the "Committee"). The members of such Committee
shall be determined by the Board of Directors of the Company."
2. The third sentence of the first paragraph of Section 4 of the Plan
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shall be amended in its entirety to read as follows:
"A director of the Company or a Subsidiary who is not also an
employee of the Company or any Subsidiary may be eligible to be granted
Options under the Plan."
3. Section 5(a) of the Plan shall be amended in its entirety to read
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as follows:
"(a) Number of Shares. Subject to adjustment as
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provided in subsection 5(c) hereof, the aggregate number of Common Shares over
which Options may be granted to Participants under the Plan shall be 905,880,
including Options to purchase 556,004 Common Shares which were granted to
certain individuals pursuant to that certain Stock Subscription Agreement by
and among the Company, Haynes International, Inc. ("Haynes") and certain
investors listed on the signature pages thereof, which agreement has been
terminated. If any Option terminates without having been exercised in full,
whether by expiration, cancellation, surrender or otherwise, the number of
Common Shares as to which such Option was not exercised shall be available for
future grants of Options. During the period that Options granted hereunder
are outstanding, the Company shall reserve and keep available such number of
Common Shares as will be sufficient to satisfy all such outstanding Options,
to the extent not exercised."
4. Section 6(a) of the Plan shall be amended in its entirety to read
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as follows:
"(a) Exercise Price. The Committee shall determine,
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in its sole discretion, the exercise price of each Option granted to a
Participant (the "Exercise Price"); provided, however, that the Exercise Price
per share shall not be less than the par value per share of the Common Shares;
provided further, that the Exercise Price per share shall not be less than the
lower of the Book Value (as defined below) or fifty percent (50%) of the Fair
Market Value (as defined below) per share as of the time such Option is
granted. For the purposes of this Agreement, all determinations of the Fair
Market Value and Book Value will be made by the Company's independent auditors
and the calculations hereunder shall be made in accordance with the accounting
practices used by the Company and Haynes and generally accepted accounting
principles in effect on August 31, 1989."
5. Section 6(b) of the Plan shall be amended in its entirety to read
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as follows:
"(b) Duration of Options. Subject to subsection 6(c)
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and Sections 8 and 9 hereof, an Option may be exercised during such period or
periods as the Committee shall specify. Unless otherwise determined by the
Committee and specified in an option agreement relating to an Option, all
Options shall cease to be exercisable and shall terminate upon the earlier of:
(1) the date that is three months after the Participant ceases, for any reason
other than death, Disability (as defined below) or Retirement (as defined
below) to be employed by the Company or any Subsidiary and (2) the date that
is ten years and two days after the date upon which such Option is granted."
6. Section 6(c)(1) of the Plan shall be amended in its entirety to
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read as follows:
"Except as provided in Sections 8 and 9 hereof, Options shall
first become exercisable on the third anniversary of the date such Option is
granted; provided, however, that the Committee may at any time accelerate the
date on which all or any part of such Option may be exercised."
7. The first sentence of Section 6(d) shall be amended in its
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entirety to read as follows:
"Except as determined by the Committee and specified in an
option agreement relating to an Option, a holder of an Option exercising an
Option under the Plan to purchase Common Shares shall pay for such Common
Shares in cash or by certified check, bank draft or money order payable to the
order of the Company."
8. The first sentence of Section 8 of the Plan shall be amended in
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its entirety to read as follows:
"Upon the death, Disability or Retirement of a Participant,
each Option then held by such Participant shall become immediately exercisable
in full."
9. On January 29, 1997, a Change of Control, as defined in Section 9
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of the Plan occurred. Accordingly, all Options granted prior to such date
which had not otherwise vested became vested. Because Section 9 has no
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further effect, or meaning, it shall be deleted in its entirety and replaced
with the following text:
"Section 9. [Reserved]."
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10. Section 11 of the Plan shall be amended in its entirety to read
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as follows:
"Section 11. Restrictions. The Committee may, in its
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discretion, require, as a condition to the grant, holding or exercise of any
Option, that the person granted, holding or exercising such Option become a
party to the Amended Stockholders Agreement, dated as of January 29, 1997, by
and among the Company and the investors listed on the signature pages thereof
(as may be amended from time to time, the "Stockholders Agreement") pursuant
to Section 6.10 thereof."
11. As used herein and in the Plan the following terms shall have the
following meanings:
"Book Value" of a Common Share shall mean as of any date
book value of the Company and its Subsidiaries determined in accordance with
generally accepted accounting principles, divided by the total number of Fully
Diluted Common Shares.
"Disability" shall have the meaning of the term "Total and
Permanent Disability" as such term is defined and in effect in the Haynes
International, Inc. Pension Plan immediately prior to August 31, 1989.
"EBITDA" shall mean, for any period, the sum of the
consolidated net income (or net loss) of the Company and its Subsidiaries for
such period as determined in accordance with generally accepted accounting
principles plus (i) all amounts, to the extent included in the determination
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of such consolidated net income (or loss) for such period, treated as (a)
expenses for depreciation, (b) expenses for interest, (c) amortization of fees
and (d) amortization of intangibles of any kind plus (ii) all taxes accrued
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for such period on or measured by income to the extent included in the
determination of such consolidated net income (or loss) less the net income
(or loss) of any Person other than the Company and its Subsidiaries that is
accounted for by the equity method of accounting except to the extent of the
amount of dividends or distributions paid to the Company and its Subsidiaries;
provided, however, that consolidated net income (or loss) shall be computed
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for the purposes of this definition without giving effect to any items of
extraordinary loss or extraordinary gain for such period.
"Fair Market Value" of a Common Share shall mean as of any
date (A) 6.3 times EBITDA for the immediately preceding four fiscal quarters
less (B) the average Indebtedness of the Company and its Subsidiaries for the
immediately preceding four fiscal quarters, all to be determined on a
consolidated basis, divided by the total number of Fully Diluted Common
Shares.
"Fully Diluted" shall mean, with respect to the Common
Shares, all outstanding Common Shares and all of the Common Shares then
issuable (after giving effect to the contemplated transaction) upon exercise
of any then outstanding options, warrants, convertible or exchangeable
securities or other similar instruments or rights.
"Indebtedness" of the Company and its Subsidiaries shall
mean at any date (i) all indebtedness of the Company and its Subsidiaries for
borrowed money; (ii) all obligations evidenced by notes, bonds, debentures or
similar instruments; and (iii) all obligations under leases which have been or
should be, in accordance with generally accepted accounting principles,
recorded as capital leases.
"Retirement" shall have the meaning of the term "Normal
Retirement" as such term is defined and in effect in the Haynes International,
Inc. Pension Plan immediately prior to August 31, 1989.