Approved by the Haynes International, Inc.
Board of Directors on September 1, 2004
Haynes International, Inc.
Compensation Committee of the Board of Directors
Charter
Purposes of the Committee
The primary purposes of the Compensation Committee ("Committee") of the Board of Directors (the "Board") of Haynes International, Inc. (the "Company") are to exercise the power and authority of the Board of Directors relating to the compensation of officers of the Company, establish the Committee's philosophy and policies regarding executive and director compensation, and review the compensation of directors and executive officers.1
This charter is not intended to create any responsibility or liability for the members of the Committee, except as otherwise exists in accordance with applicable state or federal law.
Composition and Structure
The membership of the Committee shall consist of at least three directors who shall be free of any relationship that, in the opinion of the Board, would interfere with his or her individual exercise of independent judgment, and shall meet the director independence requirements as set forth in the listing standards of the Marketplace Rules of The NASDAQ Stock Market, Inc.
The Board of Directors shall appoint one member of the Committee as chairperson. He or she shall be responsible for leadership of the Committee, including preparing the agenda, presiding over the meetings, making Committee assignments and reporting to the Board of Directors. The Chairperson will also maintain regular liaison with the CEO and CFO.
Committee members shall serve at the pleasure of the Board and for such terms as the Board may determine. The Board may, at any time and in its complete discretion, replace a Committee member upon the majority vote of the Board. Any vacancy on the Committee shall be filled by the majority vote of the Board.
Meetings
The Committee shall meet at least annually, or more frequently as circumstances dictate, at such time and place determined by the Board or the Committee Chair. A majority of the members currently holding office constitutes a quorum for the transaction of business. The Committee shall take action by the affirmative vote of a majority of Committee members present at a duly held meeting. The Committee may meet in person or telephonically, and may act by unanimous written consent when deemed necessary or desirable by the Committee or its Chair.
The Committee may require any officer or employee of the Company or its subsidiaries, or the Company's outside counsel or independent auditor, to attend a Committee meeting or to meet with any members of, or representatives of, the Committee, and to provide pertinent information as the Committee deems necessary or appropriate; provided, however, that the CEO may not be present during a vote or deliberations concerning his or her salary. The Committee shall maintain minutes and other relevant documentation of all its meetings.
Resources and Authority
The Committee shall have the resources and appropriate funding, as determined by the Committee, to discharge its duties and responsibilities. The Committee shall have the authority to retain and discharge, and approve fees and other terms and conditions for retention of independent experts in accounting and auditing, legal counsel and other experts or advisors, as the Committee deems necessary or desirable in the fulfillment of its duties, the cost of such independent experts to be borne by the Company, all without the necessity of the approval of the Board; provided, however, that Committee shall provide notice to the Chief Financial Officer prior to making any such expenditures.
Responsibilities
The Committee shall have the following responsibilities:
1. In consultation with the Board and the executive officers, establish the Committee's philosophy and policies regarding director and executive compensation, and oversee the development and implementation of director and executive compensation programs.
2. Based on the performance evaluation conducted by the Board, set the CEO's compensation level, and set performance goals and approve awards for the CEO under incentive compensation plans.
3. Review and approve the individual elements of total compensation for the executive management of the Company other than the CEO and communicate in the annual Compensation Committee Report to the shareholders, if required, the specific relationship of corporate performance to executive compensation.
4. Review and approve revisions to the Company's executive officer salary range structure and annual salary increase guidelines.
5. Assure that the Company's executive incentive compensation program, including the annual and long-term incentive plans, is administered in a manner consistent with the Committee's compensation philosophy and policies as to participation, target annual incentive awards, corporate financial goals, and actual awards paid to executive officers.
6. Review the Company's employee benefit programs and approve changes, subject, where appropriate, to shareholder or Board approval.
7. Make recommendations to the Board with respect to the Company's incentive compensation plans and equity-based plans, oversee the activities of the individuals and committees responsible for administering these plans, and discharge any responsibilities imposed on the Committee by any of these plans.
8. In consultation with the executive officers, oversee regulatory compliance with respect to compensation matters, including overseeing the Company's policies on structuring compensation programs to preserve tax deductibility, and, as and when required, establishing performance goals and certifying that performance goals have been attained for purposed of Section 162(m) of the Internal Revenue Code to assure maximum deductibility for the Company.
9. Prepare and issue the evaluations and reports required under "Committee Reports" below.
10. Any other duties or responsibilities expressly delegated to the Committee by the Board from time to time relating to the Company's executive compensation programs.
Committee Reports
The Committee shall produce the following reports and provide them to the Board.
1. An annual report of the Executive Compensation Committee on Executive Compensation, which shall be included in the Company's annual proxy statement, if any, or annual report on Form 10K filed with the SEC in accordance with applicable SEC rules and regulations.
2. An annual performance evaluation of the Committee, which evaluation must compare the performance of the Committee with the requirements of this Charter and set forth the goals and objectives of the Committee for the upcoming year. The performance evaluation should also recommend to the Board any improvements to this Charter deemed necessary or desirable by the Committee. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate. The report to the Board may take the form or an oral report by the Chair of the Committee or any other member of the Committee designated by the Committee to make this report.
3. A summary of the proceedings of each Committee meeting shall be presented to the Board at its next regularly scheduled meeting. Meeting notices, agendas, and minutes of Committee meetings will be promptly sent to the Board.
Charter Amendments
If and to the extent that, by reason of any change or amendment to applicable law or regulation or the NASDAQ Marketplace Rules or other rules applicable to NASDAQ issuers, the Company is required to maintain a compensation committee that has composition, structure, duties, authority or responsibility that is different than provided by this Charter, then (and to that extent) this Charter shall be deemed amended in such a manner as to cause the Committee to comply with such changed or amended laws, rules or regulations.
1 The term "executive officer" shall include, but not be limited to, any "named executive officer" as defined by Item 402 of Regulation S-K.
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