Haynes International - Exhibit 10.12




Exhibit 10.12








        MONITORING    AGREEMENT    (this
"Agreement"),  dated as of  October 1,  2001,  among  HAYNES  HOLDINGS  INC.,  a
Delaware corporation ("HHI"), HAYNES INTERNATIONAL, INC., a Delaware corporation
("Opco"),   and  BLACKSTONE   MANAGEMENT   PARTNERS  L.P.,  a  Delaware  limited
partnership ("BMP").



        
WHEREAS,  BMP,  by and  through  itself,  its  affiliates  and their  respective
officers, employees and representatives,  has expertise in the areas of finance,
strategy,  investment and acquisitions relating to the business of HHI and Opco;
and



        
WHEREAS,  HHI  and  Opco  desire  to  avail  themselves,  for  the  term of this
Agreement,  of the  expertise  of BMP in the  aforesaid  areas and BMP wishes to
provide the services to HHI and Opco as herein set forth;



        
NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and
conditions contained herein, the parties hereto agree as follows:



1.     Appointment.  HHI and Opco hereby appoint BMP to
render the advisory and  consulting  services  described in Section 2 hereof for
the term of this Agreement.



2.       Services.  BMP hereby  agrees  that during the
term of this  Agreement it shall render to HHI and Opco, by and through  itself,
its affiliates, and their respective officers,  employees and representatives as
BMP in its sole  discretion  shall  designate  from time to time,  advisory  and
consulting  services  in  relation  to  the  affairs  of  HHI,  Opco  and  their
subsidiaries,  including,  without  limitation,  (i)  advice  in  operating  the
business of HHI, Opco and their  subsidiaries on a day-to-day  basis (ii) advice
in designing financing  structures and advice regarding  relationships with HHI,
Opco and their  subsidiaries’  lenders and bankers;  (iii) advice regarding
the  structure and timing of public  offerings of debt and equity  securities of
HHI, Opco and their subsidiaries; (iv) advice regarding property dispositions or
acquisitions;  and (v) such other  advice  directly  related or ancillary to the
above  advisory  services as may be reasonably  requested by HHI and Opco. It is
expressly  agreed that the services to be performed  hereunder shall not include
investment  banking or other financial  advisory services rendered by BMP or its
affiliates  to HHI  and  Opco  in  connection  with  any  specific  acquisition,
divestiture,  refinancing  or  recapitalization  by HHI,  Opco  or any of  their
subsidiaries.  BMP  may be  entitled  to  receive  additional  compensation  for
providing  services of the type  specified in the  preceding  sentence by mutual
agreement of HHI, Opco or such subsidiary and BMP.



3.     Fees.   In   consideration   of   the   services
contemplated  by  Section  2, for the term of this  Agreement,  HHI and Opco and
their  respective  successors,  jointly  and  severally,  agree to pay to BMP an
annual fee (the  “Monitoring  Fee”) of $950,000,  payable in quarterly
installments  on December  31,  March 31, June 30 and  September 30 of each year
commencing on October 1, 2001 through September 30, 2002. To the extent required
by any debt  financing of HHI, Opco or their  subsidiaries,  the  Monitoring Fee
shall be deferred until the earlier of (i)  dissolution of HHI, and (ii) payment
of such deferred  Monitoring  Fee is permitted  under such debt  financing.  Any
deferred  Monitoring  Fee shall bear interest at a rate of ten percent (10%) per
annum, compounded annually, from the date deferred until paid.



4.     Reimbursements.  In addition to the fees payable
pursuant to this  Agreement,  HHI and Opco shall,  jointly  and  severally,  pay
directly or reimburse BMP for its Out-of-Pocket Expenses (as defined below). For
the  purposes of this  Agreement,  the term  “Out-of-Pocket  Expenses”
shall mean the reasonable  out-of-pocket  costs and expenses reasonably incurred
by BMP or its affiliates in connection with the services  rendered  hereunder in
pursuing,  or  otherwise  related to, the  business  of HHI or Opco,  including,
without limitation,  (i) fees and disbursements of any independent professionals
and organizations,  including independent accountants,  outside legal counsel or
consultants,  (ii) costs of any outside services or independent contractors such
as  financial  printers,  couriers,  business  publications,  on-line  financial
services or similar  services  and (iii)  transportation,  per diem costs,  word
processing  expenses or any similar  expense not  associated  with its  ordinary
operations. All reimbursements for Out-of-Pocket Expenses shall be made promptly
upon or as soon as  practicable  after  presentation  by BMP to HHI or Opco of a
written statement thereof.





5.     Indemnification.   HHI  and  Opco,  jointly  and
severally,  will  indemnify  and hold  harmless  BMP, its  affiliates  and their
respective  partners  (both  general and limited),  members  (both  managing and
otherwise),  officers,  directors,  employees,  agents and representatives (each
such person being an “Indemnified Party”) from and against any and all
losses,  claims,  damages  and  liabilities,   whether  joint  or  several  (the
“Liabilities”),  related to, arising out of or in connection  with the
advisory  and  consulting  services   contemplated  by  this  Agreement  or  the
engagement  of BMP  pursuant  to,  and the  performance  by BMP of the  services
contemplated by, this Agreement,  whether or not pending or threatened,  whether
or not an  Indemnified  Party  is a  party,  whether  or  not  resulting  in any
liability  and  whether  or not  such  action,  claim,  suit,  investigation  or
proceeding  is  initiated or brought by HHI or Opco.  HHI and Opco,  jointly and
severally,  will reimburse any  Indemnified  Party for all reasonable  costs and
expenses (including  reasonable  attorneys’  fees and expenses) as they are
incurred in connection with  investigating,  preparing,  pursuing,  defending or
assisting in the defense of any action, claim, suit, investigation or proceeding
for which the Indemnified Party would be entitled to  indemnification  under the
terms of the previous sentence,  or any action or proceeding arising there from,
whether or not such Indemnified Party is a party thereto.  HHI and Opco will not
be liable  under the  foregoing  indemnification  provision  with respect to any
Indemnified Party, to the extent that any loss, claim, damage,  liability,  cost
or expense is determined by a court,  in a final  judgment from which no further
appeal may be taken,  to have resulted  primarily  from the gross  negligence or
willful  misconduct of BMP. If an Indemnified Party is reimbursed  hereunder for
any expenses,  such reimbursement of expenses shall be refunded to the extent it
is finally  judicially  determined  that the  Liabilities  in question  resulted
primarily from the gross negligence or willful misconduct of BMP.



6.       Accuracy  of  Information.  HHI and Opco shall
furnish  or  cause  to be  furnished  to BMP such  information  as BMP  believes
appropriate  to its  monitoring  services  hereunder  and to  the  ownership  by
affiliates of BMP of equity  interests of HHI and/or Opco (all such  information
so furnished  being the  “Information”).  HHI and Opco  recognize  and
confirm  that  BMP (i) will use and rely  primarily  on the  Information  and on
information available from generally recognized public sources in performing the
services  contemplated by this Agreement without having  independently  verified
the same, (ii) does not assume  responsibility  for the accuracy or completeness
of the Information and such other information and (iii) is entitled to rely upon
the Information without independent verification.



7.     Term.  This  Agreement  shall be effective as of
the date hereof and shall  continue  until  September  30, 2002,  provided  that
Section 4 shall remain in effect with respect to Out-of-Pocket Expenses incurred
prior to September 30, 2002. The provisions of Sections 5, 6 and 8 and otherwise
as  the   context  so  requires   shall   survive   the   termination   of  this
Agreement.



8.       Permissible Activities.  Subject to applicable
law,  nothing  herein shall in any way preclude  BMP,  its  affiliates  or their
respective  partners  (both  general and limited),  members  (both  managing and
otherwise),  officers,  directors,  employees,  agents or  representatives  from
engaging in any business activities or from performing services for its or their
own account or for the account of others, including for companies that may be in
competition with the business conducted by HHI or Opco.



9.     Miscellaneous.



(a)     No amendment or waiver of any provision of this
Agreement,  or consent to any  departure  by either  party  hereto from any such
provision,  shall be effective unless the same shall be in writing and signed by
all of the parties hereto.  Any amendment,  waiver or consent shall be effective
only in the specific  instance and for the specific purpose for which given. The
waiver by any party of any breach of this  Agreement  shall not operate as or be
construed to be a waiver by such party of any subsequent breach.



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(b)       Any notices or other communications  required
or permitted  hereunder shall be sufficiently  given if delivered  personally or
sent by facsimile,  Federal Express,  or other overnight  courier,  addressed as
follows  or  to  such  other  address  of  which  the  parties  may  have  given
notice:


	
If to BMP:

	
c/o The Blackstone Group L.P.

345 Park Avenue, 31st Floor

New York, New York 10154

Attention: Chinh E. Chu

Facsimile: (212) 583-5722




	
If to HHI or to Opco:
	
Haynes International, Inc.

1020 West Park Avenue

P. O. Box 9013

Kokomo, IN 46904-9013

Attention: Calvin S. McKay

Facsimile: (765) 456-6985







Unless otherwise specified herein, such notices or other communications shall be
deemed  received (i) on the date delivered,  if delivered  personally or sent by
facsimile,  and (ii) one  business  day after  being sent by Federal  Express or
other overnight courier.



(c)     This  Agreement  shall  constitute  the  entire
agreement  between the parties with respect to the subject  matter  hereof,  and
shall  supersede  all previous oral and written (and all  contemporaneous  oral)
negotiations,    commitments,    agreements    and    understandings    relating
hereto.



(d)     This   Agreement  shall  be  governed  by,  and
construed and interpreted in accordance with, the laws of the State of New York.
This  Agreement  shall inure to the benefit of, and be binding  upon,  BMP, HHI,
Opco and their  respective  successors and assigns.  The provisions of Section 5
shall inure to the benefit of each Indemnified Party.



(e)     This  Agreement  may be executed by one or more
parties to this  Agreement  on any number of separate  counterparts,  and all of
said counterparts  taken together shall be deemed to constitute one and the same
instrument.



(f)     The  waiver by any party of any  breach of this
Agreement  shall not operate as or be  construed to be a waiver by such party of
any subsequent breach.



(g)     Any   provision  of  this   Agreement  that  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.



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IN WITNESS  WHEREOF,  the parties have caused this  Agreement to be executed and
delivered by their duly authorized officers or agents as of the date first above
written.


	
	
BLACKSTONE MANAGEMENT

PARTNERS L.P.

By:  Blackstone Management Partners

L.L.C., its General Partner

By:  /s/   Chinh E. Chu







/ss/   Chinh E. Chu

Name:  Chinh E. Chu

Title:  Senior Managing Director







HAYNES HOLDINGS, INC.

By:  Haynes International, Inc.

By:  /s/   Francis J. Petro







/ss/   Francis J. Petro

Name:  Francis J. Petro

Title:  Chief Executive Officer







HAYNES INTERNATIONAL, INC.

By:  /s/   Francis J. Petro







/ss/   Francis J. Petro

Name:  Francis J. Petro

Title:  Chief Executive Officer







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