Document:

Exhibit 10.21

FORM OF

DIRECTOR INDEMNIFICATION AGREEMENT

This Director
Indemnification Agreement (this “Agreement”), dated as of this     
day of August, 2006, is made by and between Haynes International, Inc., a
Delaware corporation (the “Company”), and                                  
(“Indemnitee”).

RECITALS:

WHEREAS, Section
141 of the Delaware General Corporation Law provides that a corporation’s business
and affairs shall be managed by or under the direction of its board of
directors;

WHEREAS, by
virtue of the managerial prerogatives vested in the directors of a Delaware
corporation, directors act as fiduciaries of the corporation and its
stockholders;

WHEREAS, it
is critically important to the Company and its stockholders that the Company be
able to attract and retain the most capable persons reasonably available to serve
as directors of the Company;

WHEREAS, in
recognition of the need for corporations to be able to induce capable and
responsible persons to accept positions in corporate management, Delaware law
authorizes (and in some instances requires) corporations to indemnify their
directors and officers, and further authorizes corporations to purchase and
maintain insurance for the benefit of their directors and officers;

WHEREAS, the
number of lawsuits challenging the judgment and actions of directors of corporations,
the costs of defending those lawsuits and the threat to directors’ personal
assets have all materially increased over the past several years, chilling the
willingness of capable persons to undertake the responsibilities imposed on corporate
directors;

WHEREAS, recent
federal legislation and rules adopted by the Securities and Exchange Commission
have imposed additional disclosure and corporate governance obligations on
directors of public companies and have exposed such directors to new and
substantially broadened liabilities;

WHEREAS, Indemnitee
is a director of the Company and his or her willingness to serve in such
capacity is predicated, in substantial part, upon the Company’s willingness to
indemnify him or her in accordance with the principles reflected above, to the
fullest extent permitted by the laws of the state of Delaware, and upon the
other undertakings set forth in this Agreement; and

WHEREAS, in
recognition of the need to provide Indemnitee with substantial protection
against personal liability, in order to procure Indemnitee’s continued service
as a director of the Company and to enhance Indemnitee’s ability to serve the
Company in an effective manner, and in order to provide such protection
pursuant to express contract rights (intended to be enforceable irrespective
of, among other things, any amendment to the Company’s certificate of

 

 

incorporation or
bylaws (collectively, the “Governance Documents”), any change in the
composition of the Company’s Board of Directors (the “Board”) or any
change-in-control or business combination transaction relating to the Company),
the Company desires to provide in this Agreement for the indemnification of and
the advancement of Expenses (as defined in Section 1.01(f)) to
Indemnitee as set forth in this Agreement and for the continued coverage of
Indemnitee under the Company’s directors’ and officers’ liability insurance
policies;

NOW,
THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:

AGREEMENT:

ARTICLE I

Section 1.01.        Definitions. In addition to
terms defined elsewhere herein, the terms hereinafter set forth when used
herein shall have the following meanings and the following definitions shall be
equally applicable to both the singular and plural forms of any of the terms
herein defined:

(a)           “Change in
Control” means the occurrence of any of the following events:

(i)               any “person,” as
such term is used in Sections 13(d) and 14(d) of the Exchange Act (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than thirty percent (30%) of either the then-outstanding
shares of common stock of the Company (“Outstanding Common Stock”) or the
combined voting power of the Company’s then outstanding securities (“Outstanding
Company Voting Securities”);

(ii)              at any time
during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board and any new director (other than
a director designated by a person who has entered into an agreement with the Company
to effect a transaction described in clauses (i), (iii), or (iv) of this
subsection (a) or whose initial assumption of office occurred as a result of an
actual or threatened election contest (as described in Rule 14a-12(c) of the
Exchange Act) with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Company) whose election to the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds (2/3) of the directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board;

 2
 

 

 

(iii)             consummation of
a reorganization, merger, statutory share exchange or consolidation or similar
corporate transaction involving the Company or any of its Subsidiaries, a sale
or other disposition of all or substantially all of the assets of the Company
or an acquisition of assets or stock of another entity by the Company or any of
its Subsidiaries (each a “Business Combination”) unless, in each case,
following such Business Combination (i) all or substantially all of the
individuals and entities that were the beneficial owners of the Outstanding
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including a corporation
that, as a result of such Business Combination, owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more Subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(ii) no person or entity (excluding (A) any entity resulting from such Business
Combination or (B) any employee benefit plan (or related trust) of the Company or
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly fifteen (15%) or more of either the then- outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership
existed prior to such Business Combination, and (iii) at least a majority of
the members of the board of directors of the corporation resulting from such
Business Combination were Incumbent Directors at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or

(iv)            the stockholders
of the Company approve a plan of complete liquidation or dissolution of the
Company.

(b)           “Claim” means:
(i) any threatened, asserted, pending or completed claim, demand, action, suit
or proceeding, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or proceeding, including any and
all appeals, whether civil, criminal, administrative, arbitrative,
investigative or other, whether formal or informal, and whether made pursuant
to federal, state or other law; and (ii) any threatened, pending or completed
inquiry or investigation, whether made, instituted or conducted by the Company
or any other person, including any federal, state or other governmental entity,
that Indemnitee determines might lead to the institution of any such claim,
demand, action, suit or proceeding. For purposes of this definition, the term “threatened”
will be deemed to include Indemnitee’s good faith belief that a claim or other
assertion may lead to a Claim.

(c)           “Controlled
Affiliate” means any corporation, limited liability company, partnership,
joint venture, trust or other entity or enterprise, whether or not for profit,
that

 3
 

 

is directly or
indirectly controlled by the Company. For purposes of this definition, “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of an entity or enterprise, whether
through the ownership of voting securities, through other voting rights, by
contract or otherwise; provided that direct or indirect
beneficial ownership of capital stock or other interests in an entity or
enterprise entitling the holder to cast twenty percent (20%) or more of the
total number of votes generally entitled to be cast in the election of
directors (or persons performing comparable functions) of such entity or
enterprise shall be deemed to constitute control for purposes of this
definition.

(d)           “Disinterested
Director” means a director of the Company who is not and was not a party to
the Claim in respect of which indemnification is sought by Indemnitee.

(e)           “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

(f)            “Expenses”
means all attorney’s fees, disbursements and retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, fax transmission
charges, secretarial services, delivery service fees and all other
disbursements or expenses paid or incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or preparing
to be a witness in, or otherwise participating in, an Indemnifiable Claim, or
in connection with seeking indemnification under this Agreement. Expenses will
also include Expenses paid or incurred in connection with any appeal resulting
from any Indemnifiable Claim, including the premium, security for and other
costs relating to any appeal bond or its equivalent. Expenses, however, will
not include amounts paid in settlement by Indemnitee or the amount of judgments
or fines against Indemnitee

(g)           “Incumbent
Directors” means the individuals who, as of the date hereof, are directors
of the Company and any individual becoming a director subsequent to the date
hereof whose election, nomination for election by the Company’s stockholders,
or appointment, was approved by a vote of at least two-thirds (2/3) of the then
Incumbent Directors (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination); provided, however,
that an individual shall not be an Incumbent Director if such individual’s
election or appointment to the Board occurs as a result of an actual or
threatened election contest (as described in Rule 14a-12(c) of the Exchange
Act) with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than the Board.

(h)           “Indemnifiable
Claim” means any Claim based upon, arising out of or resulting from: (i)
any actual, alleged or suspected act or failure to act by Indemnitee in his or
her capacity as a director, officer, employee or agent of the Company or as a
director, officer, employee, member, manager, trustee or agent of any other
corporation, limited liability company, partnership, joint venture, trust or
other entity or enterprise, whether or not for profit, as to which Indemnitee
is or was serving at the request of the

 4
 

 

 

Company as a
director, officer, employee, member, manager, trustee or agent; (ii) any
actual, alleged or suspected act or failure to act by Indemnitee in respect of
any business, transaction, communication, filing, disclosure or other activity
of the Company or any other entity or enterprise referred to in clause (i) of
this sentence; or (iii) Indemnitee’s status as a current or former director,
officer, employee or agent of the Company or as a current or former director,
officer, employee, member, manager, trustee or agent of the Company or any
other entity or enterprise referred to in clause (i) of this sentence or any
actual, alleged or suspected act or failure to act by Indemnitee in connection
with any obligation or restriction imposed upon Indemnitee by reason of such
status. In addition to any service at the actual request of the Company, for
purposes of this Agreement, Indemnitee shall be deemed to be serving or to have
served at the request of the Company as a director, officer, employee, member,
manager, trustee or agent of another entity or enterprise if Indemnitee is or
was serving as a director, officer, employee, member, manager, trustee or agent
of such entity or enterprise and (a) such entity or enterprise is or at the
time of such service was a Controlled Affiliate, (b) such entity or enterprise
is or at the time of such service was an employee benefit plan (or related
trust) sponsored or maintained by the Company or a Controlled Affiliate or (c)
the Company or a Controlled Affiliate directly or indirectly caused or
authorized Indemnitee to be nominated, elected, appointed, designated,
employed, engaged or selected to serve in such capacity.

(i)            “Indemnifiable
Losses” means any and all Losses relating to, arising out of or resulting
from any Indemnifiable Claim.

(j)            “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced
in matters of corporation law and neither presently is, nor in the past five (5)
years has been, retained to represent: (i) the Company (or any Subsidiary), the
Board (or any committee) or Indemnitee in any matter material to either such
party (other than with respect to matters concerning the Indemnitee under this
Agreement, or of other indemnitees under similar indemnification agreements);
or (ii) any other named (or, as to a threatened matter, reasonably likely to be
named) party to the Indemnifiable Claim giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.

(k)           “Losses”
means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties
(whether civil, criminal or other) and amounts paid in settlements, including
all interest, assessments and other charges paid or payable in connection with
or in respect of any of the foregoing.

(l)            “Subsidiary”
means an entity in which the Company directly or indirectly beneficially owns
fifty percent (50%) or more of the outstanding voting securities.

Section 1.02.        Indemnification Obligation.
Subject to Section 1.07, the Company shall indemnify, defend and hold
harmless Indemnitee, to the fullest extent permitted or required by the Company’s
Governance Documents and the laws of the State of Delaware in effect on the

 5
 

 

 

date hereof or as the same may from time to time hereafter be amended,
interpreted or replaced to increase the scope of such permitted
indemnification, against any and all Indemnifiable Claims and Indemnifiable
Losses; provided, however, that, except as provided in Sections
1.04 and 1.23, Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim initiated by Indemnitee
against the Company or any director or officer of the Company unless the
Company has joined in or consented to the initiation of such Claim.

Section 1.03.        Advancement of Expenses.
Indemnitee shall have the right to advancement by the Company to the fullest
extent permitted by the laws of the State of Delaware prior to the final
disposition of any Indemnifiable Claim of any and all Expenses relating to,
arising out of or resulting from any Indemnifiable Claim paid or incurred by
Indemnitee or which Indemnitee determines are reasonably likely to be paid or
incurred by Indemnitee. Indemnitee’s right to such advancement is not subject
to the satisfaction of any standard of conduct. Without limiting the generality
or effect of the foregoing, within five (5) business days after any request by
Indemnitee, the Company shall, in accordance with such request (but without
duplication): (a) pay such Expenses on behalf of Indemnitee; (b) advance to
Indemnitee funds in an amount sufficient to pay such Expenses; or (c) reimburse
Indemnitee for such Expenses; provided that Indemnitee shall
repay, without interest any amounts actually advanced to Indemnitee that, at
the final disposition of the Indemnifiable Claim to which the advance related,
were in excess of amounts paid or payable by Indemnitee in respect of Expenses
relating to, arising out of or resulting from such Indemnifiable Claim. In
connection with any such payment, advancement or reimbursement, Indemnitee
shall execute and deliver to the Company an undertaking, which need not be
secured and shall be accepted without reference to Indemnitee’s ability to
repay the Expenses, by or on behalf of the Indemnitee, to repay any amounts
paid, advanced or reimbursed by the Company of Expenses relating to, arising
out of or resulting from any Indemnifiable Claim of which it shall have been
determined, following the final disposition of such Indemnifiable Claim and in
accordance with Section 1.07, that Indemnitee is not entitled to
indemnification hereunder.

Section 1.04.        Indemnification for Additional
Expenses. Without limiting the generality or effect of the foregoing,
the Company shall indemnify and hold harmless Indemnitee against and, if
requested by Indemnitee, shall reimburse Indemnitee for, or advance to
Indemnitee, within five (5) business days of such request, any and all Expenses
paid or incurred by Indemnitee or which Indemnitee determines are reasonably
likely to be paid or incurred by Indemnitee in connection with any Claim made,
instituted or conducted by Indemnitee for: (a) indemnification or reimbursement
or advance payment of Expenses by the Company under any provision of this
Agreement, or under any other agreement or provision of the Governance
Documents now or hereafter in effect relating to Indemnifiable Claims; and/or
(b) recovery under any directors’ and officers’ liability insurance policies
maintained by the Company, regardless in each case of whether Indemnitee
ultimately is determined to be entitled to such indemnification, reimbursement,
advance or insurance recovery, as the case may be; provided, however,
that Indemnitee shall return, without interest, any such advance of Expenses
(or portion thereof) that remains unspent at the final disposition of the Claim
to which the advance related.

Section 1.05.        Partial Indemnity. If
Indemnitee is entitled under any provision of this Agreement to indemnification
by the Company for some or a portion of any Indemnifiable Loss,

 6
 

 

 

but not for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled.

Section 1.06.        Procedure for Notification.
To obtain indemnification under this Agreement in respect of an Indemnifiable
Claim or Indemnifiable Loss, Indemnitee shall submit to the Company a written
request therefor, including a brief description (based upon information then
available to Indemnitee) of such Indemnifiable Claim or Indemnifiable Loss. If,
at the time of the receipt of such request, the Company has directors’ and
officers’ liability insurance in effect under which coverage for such
Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company
shall give prompt written notice of such Indemnifiable Claim or Indemnifiable
Loss to the applicable insurers in accordance with the procedures set forth in
the applicable policies. The Company shall provide to Indemnitee a copy of such
notice delivered to the applicable insurers, and copies of all subsequent
correspondence between the Company and such insurers regarding the
Indemnifiable Claim or Indemnifiable Loss, in each case substantially
concurrently with the delivery or receipt thereof by the Company. The failure
by Indemnitee to timely notify the Company of any Indemnifiable Claim or Indemnifiable
Loss shall not relieve the Company from any liability hereunder unless, and
only to the extent that, the Company did not otherwise learn of such
Indemnifiable Claim or Indemnifiable Loss and such failure results in
forfeiture by the Company of substantial defenses, rights or insurance
coverage.

Section 1.07.        Determination of Right to
Indemnification.

(a)           To the extent that
Indemnitee shall have been successful on the merits or otherwise in defense of
any Indemnifiable Claim or any portion thereof or in defense of any issue or
matter therein, including dismissal without prejudice, Indemnitee shall be
indemnified against all Indemnifiable Losses relating to, arising out of or
resulting from such Indemnifiable Claim in accordance with Section 1.02
and no Standard of Conduct Determination (as defined in Section 1.07(b))
shall be required.

(b)           To the extent that
the provisions of Section 1.07(a) are inapplicable to an Indemnifiable
Claim that shall have been finally disposed of, any determination of whether
Indemnitee has satisfied any applicable standard of conduct under Delaware law
that is a legally required condition precedent to indemnification of Indemnitee
hereunder against Indemnifiable Losses relating to, arising out of or resulting
from such Indemnifiable Claim (a “Standard of Conduct Determination”)
shall be made as follows: (i) if a Change in Control shall not have occurred,
or if a Change in Control shall have occurred but Indemnitee shall have
requested that the Standard of Conduct Determination be made pursuant to this
clause (i), (A) by a majority vote of the Disinterested Directors, even if less
than a quorum of the Board, (B) if such Disinterested Directors so direct, by a
majority vote of a committee of Disinterested Directors designated by a
majority vote of all Disinterested Directors, or (C) if there are no such
Disinterested Directors, by Independent Counsel in a written opinion addressed
to the Board, a copy of which shall be delivered to Indemnitee; and (ii) if a
Change in Control shall have occurred and Indemnitee shall not have requested
that the Standard of Conduct Determination be made pursuant to clause (i), by
Independent Counsel in a written opinion addressed to the Board, a copy of
which shall be delivered to Indemnitee. Indemnitee will cooperate with the
person or persons making such Standard of Conduct Determination, including

 7
 

 

 

providing to
such person or persons, upon reasonable advance request, any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. The Company shall indemnify and hold harmless Indemnitee against
and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to
Indemnitee, within five (5) business days of such request, any and all costs
and expenses (including attorneys’ and experts’ fees and expenses) incurred by
Indemnitee in so cooperating with the person or persons making such Standard of
Conduct Determination. The person, persons or entity chosen to make the
Standard of Conduct Determination will act reasonably and in good faith in
making such determination.

(c)           The Company shall
use its reasonable best efforts to cause any Standard of Conduct Determination
required under Section 1.07(b) to be made as promptly as practicable. If
(i) the person or persons empowered or selected under Section 1.07 to
make the Standard of Conduct Determination shall not have made a determination
within thirty (30) days after the later of (A) receipt by the Company of
written notice from Indemnitee advising the Company of the final disposition of
the applicable Indemnifiable Claim (the date of such receipt being the “Notification
Date”) and (B) the selection of an Independent Counsel, if such
determination is to be made by Independent Counsel, that is permitted under the
provisions of Section 1.07(e) to make such determination and (ii) Indemnitee
shall have fulfilled his or her obligations set forth in the second sentence of
Section 1.07(b), then Indemnitee shall be deemed to have satisfied the
applicable standard of conduct; provided that such 30-day period
may be extended for a reasonable time, not to exceed an additional thirty (30)
days, if the person or persons making such determination in good faith requires
such additional time for the obtaining or evaluation or documentation and/or
information relating thereto.

(d)           If (i) Indemnitee
shall be entitled to indemnification hereunder against any Indemnifiable Losses
pursuant to Section 1.07(a), (ii) no determination of whether Indemnitee
has satisfied any applicable standard of conduct under Delaware law is a
legally required condition precedent to indemnification of Indemnitee hereunder
against any Indemnifiable Losses, or (iii) Indemnitee has been determined or
deemed pursuant to Section 1.07(b) or (c) to have satisfied any
applicable standard of conduct under Delaware law which is a legally required
condition precedent to indemnification of Indemnitee hereunder against any
Indemnifiable Losses, then the Company shall pay to Indemnitee, within five (5)
business days after the later of (x) the Notification Date in respect of the
Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are
related, out of which such Indemnifiable Losses arose or from which such
Indemnifiable Losses resulted and (y) the earliest date on which the applicable
criterion specified in clause (i), (ii) or (iii) above shall have been
satisfied, an amount equal to the amount of such Indemnifiable Losses.

(e)           If a Standard of
Conduct Determination is to be made by Independent Counsel pursuant to Section
1.07(b)(i), the Independent Counsel shall be selected by the Board, and the
Company shall give written notice to Indemnitee advising him or her of the
identity of the Independent Counsel so selected. If a Standard of Conduct
Determination is to be made by Independent Counsel pursuant to Section 1.07(b)(ii),
the

 8
 

 

 

Independent
Counsel shall be selected by Indemnitee, and Indemnitee shall give written
notice to the Company advising it of the identity of the Independent Counsel so
selected. In either case, Indemnitee or the Company, as applicable, may, within
ten (10) business days after receiving written notice of selection from the
other, deliver to the other a written objection to such selection; provided,
however, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not satisfy the criteria set forth in the
definition of “Independent Counsel” in Section 1.01(j), and the objection
shall set forth with particularity the factual basis of such assertion. Absent
a proper and timely objection, the person or firm so selected shall act as
Independent Counsel. If such written objection is properly and timely made and
substantiated, (i) the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit and (ii) the non-objecting
party may, at its option, select an alternative Independent Counsel and give
written notice to the other party advising such other party of the identity of
the alternative Independent Counsel so selected, in which case the provisions
of the two immediately preceding sentences and clause (i) of this sentence
shall apply to such subsequent selection and notice. If applicable, the
provisions of clause (ii) of the immediately preceding sentence shall apply to
successive alternative selections. If no Independent Counsel that is permitted
under the foregoing provisions of this Section 1.07(e) to make the
Standard of Conduct Determination shall have been selected within thirty (30)
days after the Company gives its initial notice pursuant to the first sentence
of this Section 1.07(e) or Indemnitee gives its initial notice pursuant
to the second sentence of this Section 1.07(e), as the case may be,
either the Company or Indemnitee may petition the Court of Chancery of the
State of Delaware or other court of competent jurisdiction for resolution of
any objection which shall have been made by the Company or Indemnitee to the
other’s selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person or firm selected by the Court or by such other
person as the Court shall designate, and the person or firm with respect to
whom all objections are so resolved or the person or firm so appointed will act
as Independent Counsel. In all events, the Company shall pay all of the
reasonable fees and expenses of the Independent Counsel incurred in connection
with the Independent Counsel’s determination pursuant to Section 1.07(b).

Section 1.08.        Presumption of Entitlement.
In making any Standard of Conduct Determination, the person or persons making
such determination shall presume that Indemnitee has satisfied the applicable
standard of conduct, and the Company may overcome such presumption only by its
obtaining clear and convincing evidence to the contrary. Any Standard of
Conduct Determination that is adverse to Indemnitee may be challenged by the
Indemnitee in the Court of Chancery of the State of Delaware or other court of
competent jurisdiction. Neither the failure of any person, persons or entity
chosen to make a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief to make such determination,
nor an actual determination by such person, persons or entity that Indemnitee
has not met such standard of conduct or did not have such belief, prior to or
after the commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under this Agreement under
applicable law, will be a defense to Indemnitee’s claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.

 9
 

 

 

Section 1.09.        No Other Presumption. For
purposes of this Agreement, the termination of any Claim by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a plea
of nolo contendere or its equivalent, will not create a presumption that
Indemnitee did not meet any applicable standard of conduct or that
indemnification hereunder is otherwise not permitted. In the event that any
Indemnifiable Claim to which Indemnitee is a party is resolved in any manner
other than by final adverse judgment (as to which all rights of appeal
therefrom have been exhausted or lapsed) against Indemnitee (including, without
limitation, settlement of such Indemnifiable Claim with or without payment of
money or other consideration) it will be presumed that Indemnitee has been
successful on the merits or otherwise in such Indemnifiable Claim. Anyone
seeking to overcome this presumption will have the burden of proof and the
burden of persuasion, by clear and convincing evidence.

Section 1.10.        Non-Exclusivity. The rights
of Indemnitee hereunder will be in addition to any other rights Indemnitee may
have under the Governance Documents, or the substantive laws of the Company’s
jurisdiction of incorporation, any other contract or otherwise (collectively, “Other
Indemnity Provisions”); provided, however, that (a) to the
extent that Indemnitee otherwise would have any greater right to
indemnification under any Other Indemnity Provision, Indemnitee will be deemed
to have such greater right hereunder and (b) to the extent that any change is
made to any Other Indemnity Provision which permits any greater right to
indemnification than that provided under this Agreement as of the date hereof,
Indemnitee will be deemed to have such greater right hereunder. The Company
will not adopt any amendment to any of the Governance Documents the effect of
which would be to deny, diminish or encumber Indemnitee’s right to
indemnification under this Agreement or any Other Indemnity Provision.

Section 1.11.        Liability Insurance and Funding.
For the duration of Indemnitee’s service as a director and/or officer of the
Company, and thereafter for so long as Indemnitee shall be subject to any
pending or possible Indemnifiable Claim, the Company shall use commercially
reasonable efforts (taking into account the scope and amount of coverage
available relative to the cost thereof) to cause to be maintained in effect
policies of directors’ and officers’ liability insurance providing coverage for
directors and/or officers of the Company that is at least substantially
comparable in scope and amount to that provided by the Company’s current
policies of directors’ and officers’ liability insurance. The Company shall
provide Indemnitee with a copy of all directors’ and officers’ liability
insurance applications, binders, policies, declarations, endorsements and other
related materials, and shall provide Indemnitee with a reasonable opportunity
to review and comment on the same. Without limiting the generality or effect of
the two immediately preceding sentences, the Company shall not discontinue or
significantly reduce the scope or amount of coverage from one policy period to
the next: (i) without the prior approval thereof by a majority vote of the
Incumbent Directors, even if less than a quorum; or (ii) if at the time that
any such discontinuation or significant reduction in the scope or amount of
coverage is proposed there are no Incumbent Directors, without the prior
written consent of Indemnitee (which consent shall not be unreasonably withheld
or delayed). In all policies of directors’ and officers’ liability insurance
obtained by the Company, Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee the same rights and benefits, subject to the
same limitations, as are accorded to the Company’s directors and officers most
favorably insured by such policy. The Company may, but shall not be required
to, create a trust fund, grant a security interest or use other means,
including without limitation a letter of credit, to ensure the

 10
 

 

 

payment of such amounts as may be necessary to satisfy its obligations
to indemnify and advance expenses pursuant to this Agreement.

Section 1.12.        Subrogation. In the event of
payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the related rights of recovery of Indemnitee against
other persons or entities (other than Indemnitee’s successors), including any
entity or enterprise referred to in clause (i) of the definition of “Indemnifiable
Claim” in Section 1.01(h). Indemnitee shall execute all papers
reasonably required to evidence such rights (all of Indemnitee’s reasonable
Expenses, including attorneys’ fees and charges, related thereto to be
reimbursed by or, at the option of Indemnitee, advanced by the Company).

Section 1.13.        No Duplication of Payments.
The Company shall not be liable under this Agreement to make any payment to
Indemnitee in respect of any Indemnifiable Losses to the extent Indemnitee has
otherwise actually received payment (net of any unreimbursed Expenses of the
Indemnitee incurred in connection therewith) under any insurance policy, the Governance
Documents and Other Indemnity Provisions or otherwise (including from any entity
or enterprise referred to in clause (i) of the definition of “Indemnifiable
Claim” in Section 1.01(h)) in respect of such Indemnifiable Losses
otherwise indemnifiable hereunder.

Section 1.14.        Defense of Claims. The
Company shall be entitled to participate in the defense of any Indemnifiable
Claim or to assume the defense thereof, with counsel reasonably satisfactory to
the Indemnitee; provided that if Indemnitee believes, after
consultation with counsel selected by Indemnitee, that: (a) the use of counsel
chosen by the Company to represent Indemnitee would present such counsel with an
actual or potential conflict; (b) the named parties in any such Indemnifiable
Claim (including any impleaded parties) include both the Company and Indemnitee
and Indemnitee shall conclude that there may be one or more legal defenses
available to him or her that are different from or in addition to those
available to the Company; or (c) any such representation by such counsel would
be precluded under the applicable standards of professional conduct then
prevailing, then Indemnitee shall be entitled to retain separate counsel (but
not more than one law firm plus, if applicable, local counsel in respect of any
particular Indemnifiable Claim) at the Company’s expense. The Company shall not
be liable to Indemnitee under this Agreement for any amounts paid in settlement
of any threatened or pending Indemnifiable Claim effected without the Company’s
prior written consent. The Company shall not, without the prior written consent
of the Indemnitee, effect any settlement of any threatened or pending
Indemnifiable Claim to which the Indemnitee is, or could have been, a party
unless such settlement solely involves the payment of money and includes a
complete and unconditional release of the Indemnitee from all liability on any
claims that are the subject matter of such Indemnifiable Claim. Neither the
Company nor Indemnitee shall unreasonably withhold its consent to any proposed
settlement; provided that Indemnitee may withhold consent to any
settlement that does not provide a complete and unconditional release of
Indemnitee. Notwithstanding the foregoing, the Company will not be entitled to
assume the defense of any Indemnifiable Claim as to which Indemnitee has
reasonably made the conclusion provided for in Section 1.14(b).

Section 1.15.        Action by Indemnitee. In the
event that (i) a determination is made pursuant to this Agreement that
Indemnitee is not entitled to indemnification under this Agreement, (ii) an
advancement of Expenses is not timely made pursuant to this Agreement, (iii)

 11
 

 

 

no determination of entitlement to indemnification is made within the
applicable time periods specified in this Agreement or (iv) payment of
indemnified amounts is not made within the applicable time periods specified
herein, Indemnitee will be entitled to an adjudication in an appropriate court
of the State of Delaware, or in any other court of competent jurisdiction, of
his or her entitlement to such indemnification or payment of the advancement of
Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award
in arbitration to be conducted by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. The
provisions of Delaware law (without regard to its conflict of laws rules) will
apply to any such arbitration. The Company will not oppose Indemnitee’s right
to seek any such adjudication or award in arbitration.

Section 1.16.        Company Bears Expenses if Indemnitee
Seeks Adjudication. In the event that Indemnitee, pursuant to Section
1.15, seeks a judicial adjudication or arbitration of his or her rights to
indemnification under, or to recover damages for breach of, this Agreement, any
other agreement for indemnification, the indemnification or advancement of
expenses provisions in the Governance Documents, payment of Expenses in advance
or contribution hereunder or to recover under any director and officer
liability insurance policies maintained by the Company, the Company will, if
Indemnitee ultimately is determined to be entitled to such indemnification,
payment of Expenses in advance or contribution or insurance recovery to the
fullest extent permitted by law, indemnify and hold harmless Indemnitee against
any and all Expenses that are paid or incurred by Indemnitee in connection with
such judicial adjudication or arbitration.

Section 1.17.        Company Bound by Provisions of this
Agreement. The Company will be precluded from asserting in any judicial
or arbitration proceeding commenced pursuant to Section 1.15 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and will stipulate in any such judicial or arbitration proceeding
that the Company is bound by all the provisions of this Agreement.

Section 1.18.        Successors and Binding Agreement.

(a)           The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company, by agreement in form and substance
satisfactory to Indemnitee and his or her counsel, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement shall be binding upon and inure to the benefit of the Company
and any successor to the Company, including without limitation any person
acquiring directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the “Company”
for purposes of this Agreement), but shall not otherwise be assignable or
delegatable by the Company.

(b)           This Agreement shall
inure to the benefit of and be enforceable by the Indemnitee’s personal or
legal representatives, executors, administrators, heirs, distributees, legatees
and other successors.

 12
 

 

 

(c)           This Agreement is
personal in nature and neither of the parties hereto shall, without the consent
of the other, assign or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 1.18(a) and (b).
Without limiting the generality or effect of the foregoing, Indemnitee’s right
to receive payments hereunder shall not be assignable, whether by pledge,
creation of a security interest or otherwise, other than by a transfer by the
Indemnitee’s will or by the laws of descent and distribution, and, in the event
of any attempted assignment or transfer contrary to this Section 1.18(c),
the Company shall have no liability to pay any amount so attempted to be
assigned or transferred.

Section 1.19.        Notices. For all purposes of
this Agreement, all communications, including without limitation notices,
consents, requests or approvals, required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given when hand
delivered or dispatched by electronic facsimile transmission (with receipt
thereof orally confirmed), or five (5) business days after having been mailed
by United States registered or certified mail, return receipt requested,
postage prepaid or one (1) business day after having been sent for next-day
delivery by a nationally recognized overnight courier service, addressed to the
Company (to the attention of the Secretary of the Company) and to Indemnitee at
the applicable address shown below, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address will be effective only upon receipt.

	
  If to the Company:

  	
  Haynes International, Inc.

  
	
   

  	
  1020 West Park Avenue

  
	
   

  	
  P.O. Box 9013

  
	
   

  	
  Kokomo, Indiana 46904-9015

  
	
   

  	
  Attn.: V.P.-General Counsel/Corporate Secretary

  
	
   

  	
  Tel.: (765) 456-6012

  
	
   

  	
  Fax: (765) 456-6905

  
	
   

  	
   

  
	
  If to
  Indemnitee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tel.:

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  

 

Section 1.20.        Governing Law. The validity,
interpretation, construction and performance of this Agreement shall be
governed by and construed in accordance with the substantive laws of the State
of Delaware, without giving effect to the principles of conflict of laws of
such State. The Company and Indemnitee each hereby irrevocably consent to the
jurisdiction of the Chancery Court of the State of Delaware for all purposes in
connection with any action or proceeding which arises out of or relates to this
Agreement and agree that any action instituted under this Agreement shall be
brought only in the Chancery Court of the State of Delaware.

Section 1.21.        Validity. If any provision of
this Agreement or the application of any provision hereof to any person or
circumstance is held invalid, unenforceable or otherwise

 13
 

 

 

illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstance shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent, and only to the extent, necessary to make it
enforceable, valid or legal. In the event that any court or other adjudicative
body shall decline to reform any provision of this Agreement held to be
invalid, unenforceable or otherwise illegal as contemplated by the immediately
preceding sentence, the parties hereto shall take all such action as may be
necessary or appropriate to replace the provision so held to be invalid,
unenforceable or otherwise illegal with one or more alternative provisions that
effectuate the purpose and intent of the original provisions of this Agreement
as fully as possible without being invalid, unenforceable or otherwise illegal.

Section 1.22.        Miscellaneous. No provision
of this Agreement may be waived, modified, amended or discharged unless such
waiver, modification, amendment or discharge is agreed to in writing signed by Indemnitee
and the Company. No waiver by either party hereto at any time of any breach by
the other party hereto 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 agreements or representations, oral or otherwise, expressed
or implied with respect to the subject matter hereof have been made by either
party that are not set forth expressly in this Agreement.

Section 1.23.        Legal Fees and Expenses. It
is the intent of the Company that Indemnitee not be required to incur legal
fees and or other Expenses associated with the interpretation, exercise,
enforcement or defense of Indemnitee’s rights under this Agreement by
litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to Indemnitee
hereunder. Accordingly, without limiting the generality or effect of any other
provision hereof, the Company irrevocably authorizes the Indemnitee from time
to time to retain counsel of Indemnitee’s choice, at the expense of the Company
as hereafter provided, to advise and represent Indemnitee in connection with
any such interpretation, exercise, enforcement or defense, including without
limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company or any director, officer, stockholder or other
person affiliated with the Company. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to Indemnitee’s entering into an attorney-client
relationship with such counsel, and in that connection the Company and Indemnitee
agree that a confidential relationship shall exist between Indemnitee and such
counsel. Without respect to whether Indemnitee prevails, in whole or in part,
in connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys’ and related fees and
expenses incurred by Indemnitee in connection with any of the foregoing.

Section 1.24.        Construction. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question on intent or interpretation arises, this
Agreement must be construed as if drafted jointly by the parties and no
presumption or burden of proof must arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. The word “including”
shall mean including without limitation. Any reference to the singular in this
Agreement shall also include the plural and vice versa. The word “knowledge”
shall mean knowledge obtained or obtainable after due inquiry and reasonable
investigation.

 14
 

 

 

Section 1.25.        Headings. The headings of the
sections of this Agreement are inserted solely for convenience of reference and
shall not be deemed to affect the meaning or interpretation of this Agreement.

Section 1.26.        Counterparts. This Agreement
may be executed in two counterparts, each of which will be deemed to be an
original but both of which together shall constitute one and the same
agreement.

[SIGNATURES APPEAR ON
FOLLOWING PAGE]

 15
 

 

 

IN
WITNESS WHEREOF, Indemnitee has executed and the Company has
caused its duly authorized representative to execute this Agreement as of the
date first above written.

	
  

  	
  HAYNES INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  “INDEMNITEE”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 16
 

 

SCHEDULE
OF DIRECTORS PARTY TO THE DIRECTOR

INDEMNIFICATION AGREEMENT

Bohan, Paul J.

Campion, Donald C.

Corey, John C.

Getz, Robert H.

McCarthy, Timothy J.

Petro, Francis J.

Wall, William P.

Zabel, Ronald W.

 17Exhibit
10.22

Portions of this
Exhibit 10.22 have been omitted based upon a request for confidential
treatment. This Exhibit 10.22, including the non-public information, has been
filed separately with the Securities and Exchange Commission. “[*]” designates
portions of this document that have been redacted pursuant to the request for
confidential treatment filed with the Securities and Exchange Commission.

This CONVERSION SERVICES
AGREEMENT (this “Agreement”) is made this 17th day of November 2006 by and
between,

Haynes International,
Inc., a corporation organized and duly existing under the laws of the State of
Delaware, having its head office at 1020 West Park Avenue, Kokomo, Indiana
46904-9013, hereinafter referred to as “HAYNES”;

and

Titanium Metals
Corporation, a corporation organized and duly existing under the laws of the
State of Delaware, having its head office at 5430 LBJ Freeway, Suite 1700,
Dallas, TX 75240, hereinafter referred to as “TIMET.”

HAYNES and TIMET are each
hereinafter individually referred to as a “Party” or collectively as the “Parties.”

RECITALS

A.           Contemporaneous
with the entry into this Agreement, HAYNES and TIMET have entered into certain
transactions evidenced by the Transaction Documents (as hereinafter defined);

B.             TIMET
requires, and HAYNES has agreed, to provide, the Titanium Conversion Services
(as hereinafter defined);

C.             HAYNES
is technically capable of performing the Titanium Conversion Services;

D.            In
connection with its performance hereunder, Haynes will obtain know-how from
TIMET that could competitively harm TIMET if Haynes were to perform Titanium
Conversion Services on behalf of a competitor of TIMET; and

E.              In
order to increase TIMET’s competitiveness for customers against fully
integrated titanium producers, TIMET needs long-term access to a guaranteed
source of Titanium Conversion Services.

NOW THEREFORE, in
consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, HAYNES and TIMET agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the following defined terms have the
meanings set forth in this Article 1:

“Acceptance Procedure” shall have the meaning
set forth in Section 4.3(a).

“Access and Security Agreement” shall mean that
certain Access and Security Agreement of even date herewith by and between
HAYNES and TIMET.

“Affiliate” shall mean any legal corporation,
entity, firm or person directly or indirectly owned by or under the same
ownership as either Party, for so long as such ownership lasts.  Ownership shall exist through the direct or
indirect:  (i) ownership or control
of more than fifty percent (50%) of the nominal value of the issued equity
share capital or of more than fifty percent (50%) of the shares entitling the
holders to vote for the election of directors or officers or persons performing
similar functions, or (ii) right by any other means to elect or appoint
directors, officers or persons performing similar functions, who have a
majority vote.

“Agreement” shall mean this Conversion Services
Agreement, and each of the exhibits attached hereto and forming an integral
part hereof, as the foregoing may from time to time hereafter be amended,
supplemented or modified.

“Arbitration Demand” shall have the meaning set
forth in Section 12.2(b).

“Arbitration Response” shall have the meaning
set forth in Section 12.2(c).

“Base Prices” shall mean the base prices set
forth and/or calculated pursuant to Section 3.1.

“CC Termination” shall have the meaning set
forth in Section 13.2(c).

“Change in Control” shall mean (i) a merger or
consolidation of HAYNES where HAYNES is not the surviving entity or the current
stockholders of HAYNES hold less than 50% of the voting securities of HAYNES
after such merger or consolidation, (ii) any person (as defined in the
Exchange Act) (other than HAYNES, any of its subsidiaries or any trustee,
fiduciary or other person holding securities under any employee share ownership
plan or any other employee benefit plan of HAYNES or any of its subsidiaries),
together with its affiliates and associates (as such terms are defined in Rule
12b-2 under the Exchange Act), shall have become the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act) of 50% or more of the outstanding
voting securities of HAYNES, (iii) a sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of HAYNES, or the Operating Assets, or (iv) any
other transaction or series of related transactions effectively changing the
control of HAYNES to any person or entity.

“Confidential Information” shall have the
meaning set forth in Section 9.2.

 2
 

“Damages” shall mean, collectively, any damage,
liability, loss, or cost (including, but not limited to, reasonable attorneys’
fees and other costs and expenses directly related to proceedings or
investigations or the defense of any claim), but shall not include any
consequential or incidental damages suffered directly by a Party hereto, except
as otherwise expressly indicated.

“Direct Cost” shall have the meaning set forth
in Section 2.3(b).

“Dispute” shall mean any dispute, controversy,
or claim between the Parties arising out of, relating to, or connected with
this Agreement or the breach or invalidity hereof.

“Effective Termination Date” shall have the
meaning set forth in Section 13.2(c).

“Event of Default” shall have the meaning set
forth in Section 5.2.

“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.

“Force Majeure” shall have the meaning set
forth in Section 8.1.

“4-High Facility” shall have the meaning set
forth under the term “Mill” as defined in the Access and Security Agreement.

“HAYNES” shall have the meaning set forth in the
introduction hereto.

“HAYNES Successor” shall have the meaning set
forth in Section 11.2.

“Joint Proprietary Information” shall have the
meaning set forth in Section 2.6.

“Liquidated Damages” shall have the meaning set
forth in Section 5.3(a).

“Loan Date” shall have the meaning set forth in
Section 2.1(c).

“Material” shall mean any and all titanium
material delivered by TIMET or its designee(s) to HAYNES for Titanium
Conversion Services performed hereunder.

“Maximum Annual Volume” shall have the meaning
set forth in Section 2.1(a).

“Maximum Cycle Time” shall mean the Maximum
Cycle Time set forth on Exhibit A.

“Maximum Monthly Volume” shall have the meaning
set forth in Section 2.1(e).

“Non-Compete Amendment” shall have the meaning
set forth in Section 11.2.

“Non-Compete Amendment Fee” shall have the
meaning set forth in Section 11.2.

“On-Time Delivery Rate” shall be the percentage
of deliveries delivered on-time as calculated each month according to the
following formula:

OTD = (TD – R)/TD

 3
 

Where:

“OTD” is the On-Time Delivery Rate (expressed as a percentage).

“R” is the number of orders (by Purchase Order Number) delivered after
the Scheduled Delivery Date.

“TD” is the total number of orders (by Purchase Order Number) scheduled
for the calendar month.

“Operating Assets” shall mean the 4-High
Facility, together with the “Equipment,” “Intellectual Property,” “Contract
Rights” and “Real Estate” (as such terms are defined in the Access and Security
Agreement), used in connection with the performance of the Titanium Conversion
Services.  The term “Operating Assets” as
used herein shall be deemed to have the same meaning assigned to the term “Operating
Assets” in the Access and Security Agreement.

“Option” shall have the meaning set forth in
Section 2.1(b).

“Option Note” shall have the meaning set forth
in Section 2.1(d).

“Option Notice” shall have the meaning set
forth in Section 2.1(b).

“Parties” shall mean HAYNES and TIMET.

“Party” shall mean HAYNES or TIMET, as the case
may be.

“Proprietary Information” shall have the
meaning set forth in Section 2.6.

“Purchase Order Number” shall mean the unique
TIMET identification associated with the complete processing of a single batch
or heat of titanium.

“QTP Rate” means the Quality Throughput Pass
rate or First Time Pass rate shall be calculated monthly in accordance with the
following formula:

QTP = (TD-R)/TD

Where:

“QTP” is the Quality Throughput Pass rate (expressed as a percentage).

“R” it the total number of orders (measured by Purchase Order Number)
rejected due to not meeting acceptance requirements of Section 4.3.

“TD” is the total number of orders (measured by Purchase Order Numbers)
scheduled for the calendar month.

“Scheduled Delivery Date” shall mean the date
HAYNES shall be required to deliver a titanium product resulting from its
provision of Titanium Conversion Services

 4
 

determined based on the addition of the number of
effective calendar days set forth on Exhibit A under the column with the
heading “Maximum Cycle Times” to the date the relevant Submission Sheet is
received by HAYNES.

“Steering Committee” shall have the meaning set
forth in Section 2.1(c).

“Submission Sheet” shall mean a simplified
order form issued for Material deemed by the Parties a purchase order from
TIMET authorizing HAYNES to perform Titanium Conversion Services under this
Agreement.  The Submission Sheet will
contain a summary listing of products required for the scheduled rolling
campaign, the Purchase Order Number, heat number, product code reference, input
weight and other relevant information.

“Termination Fee” shall have the meaning set
forth in Section 13.2(c).

“Titanium Conversion Services” shall mean the
processing of Materials performed with the Operating Assets and related
equipment, which includes hot rolling and the related processes required to
produce the products listed on Exhibit A.

“TIMET” shall have the meaning set forth in the
introduction hereto.

“Transaction Documents” means, collectively,
the Access and Security Agreement, this Agreement and the Option Note and any
other document or instrument delivered in connection herewith or therewith.

ARTICLE 2

TITANIUM CONVERSION SERVICES

2.1                                 Maximum
Volumes.

(a)                                  Upon
the terms set forth herein, HAYNES agrees that for each year during the term of
this Agreement, HAYNES shall supply TIMET or its designee(s) with Titanium
Conversion Services on the Operating Assets of up to ten (10) million output
pounds annually (as it may be increased as set forth in Section 2.1(b) below,
the “Maximum Annual Volume”).  The
foregoing represents a capacity guarantee and HAYNES agrees that at all times
during the term of this Agreement it shall dedicate to TIMET adequate capacity
for the performance of Titanium Conversion Services on a timely basis as
required herein subject to the Maximum Annual Volume and Maximum Monthly
Volume.  HAYNES shall be responsible for
all capital equipment, trained personnel, maintenance, utilities and other
expenses incurred to produce the products identified on Exhibit A.

(b)                                 TIMET
shall have the option (the “Option”), exercisable by written notice (the “Option
Notice”) from TIMET to HAYNES, to order Titanium Conversion Services of up to
an additional ten (10) million output pounds annually (such that the Maximum
Annual Volume shall be up to twenty (20) million output pounds annually);
provided, however, that the Maximum Annual Volume shall not increase unless and
until the occurrence of one of the events set forth in Section 2.1(c)(i) or
(ii).

 5
 

After the Loan
Date (as defined below), the increased volumes will be staged into HAYNES’
production schedule in mutually agreeable increments, provided that (i) no
later than eighteen (18) months after the Loan Date, the Maximum Annual Volume
shall be up to fifteen (15) million output pounds, and (ii) not later than
thirty (30) months after the Loan Date and in all subsequent years, the Maximum
Annual Volume shall be up to twenty (20) million output pounds.

(c)                                  Upon
the delivery of the Option Notice, HAYNES and TIMET shall promptly form a
steering committee consisting of two (2) representatives of each of HAYNES and
TIMET (the “Steering Committee”).  The
Steering Committee will determine and approve any capital expenditures
necessary to achieve the additional capacity. 
At TIMET’s option, TIMET may either (i) follow the Steering Committee’s
determination, approve the necessary capital expenditures and offer to lend
HAYNES up to an aggregate of Twelve Million Dollars ($12,000,000) for such
capital investments; or (ii) without seeking Steering Committee approval, offer
to lend HAYNES Twelve Million Dollars ($12,000,000) to use for capital
investments that are required to achieve the additional capacity (the date
HAYNES receives written notice of TIMET’s action under either (i) or (ii) to be
referred to as the “Loan Date”).

(d)                                 HAYNES
shall have up to two (2) months from the Loan Date to evaluate and obtain an
alternative source of financing to the terms proposed by TIMET and set forth in
Exhibit B attached hereto in order to fund the capital expenditures necessary
to achieve the additional capacity.  If
HAYNES obtains an alternative source of financing within such two-month period,
HAYNES will not be required to accept TIMET financing in order to satisfy the
Option.  If HAYNES does not obtain an
alternative source of financing within such two-month period, HAYNES shall
deliver to TIMET by the end of such period a secured promissory note (the “Option
Note”) for the amount of the loan in the form attached hereto as Exhibit
B.  The Option Note will be secured as
set forth in the Access and Security Agreement. 
The Steering Committee will continue to confer at regularly scheduled
meetings on the needs and status of the capital expansion projects with respect
to which the proceeds of the Option Note have been or will be utilized, to
review progress reports of the project managers, and to develop project
milestones and project plans as necessary and appropriate.  The proceeds of the Option Note shall be
utilized only for capital expenditures approved by the Steering Committee.

(e)                                  Any
delivery by HAYNES of a product ordered during a calendar year and delivered in
the subsequent calendar year shall not count against the Maximum Annual Volume
for such subsequent calendar year, but will count against the Maximum Annual
Volume for the year in which the product was ordered.

(f)                                    HAYNES
will not be obligated to provide Titanium Conversion Services for any one-month
period in excess of one hundred and twenty percent (120%) of one twelfth (1/12)
of the Maximum Annual Volume (the “Maximum Monthly

 6
 

Volume”).  Any late delivery of Titanium Conversion
Services by HAYNES shall not count against the Maximum Monthly Volume.  Any late delivery of Titanium Conversion
Services by HAYNES that extends past the end of the year in which the services
were ordered shall not count against the Maximum Annual Volume for any
subsequent year.  Any Titanium Conversion
Services that TIMET determines pursuant to the Acceptance Procedure in Section
4.3 do not comply with the warranty set forth in Section 6.1 shall not count
against the Maximum Monthly Volume or the Maximum Annual Volume.

(g)                                 TIMET
will not be permitted to exercise the Option unless it has complied with the
provisions of Section 3.4(b) for a period of at least the prior four months.

2.2                                 Cooperation.  HAYNES and TIMET shall cooperate to determine
HAYNES’ production scheduling of the Operating Assets consistent with the
provisions of this Agreement.  The
Parties recognize that they need to cooperate to achieve TIMET and TIMET
customer qualifications for process practices, operating procedures and product
specifications for the Titanium Conversion Services.  In cooperation with TIMET technical
resources, HAYNES shall provide the necessary technical personnel to further
develop process practices, operating procedures and product specifications
required to achieve full product qualifications and performance target
initiatives.

2.3                                 Product
Codes.

(a)                                  Exhibit
A sets forth a product code and pricing for each titanium product form
currently expected to be manufactured utilizing Titanium Conversion
Services.  This list will be updated as
required during the term of this Agreement.

(b)                                 In
the event TIMET desires to develop new process practices, operating procedures
and product specifications for Titanium Conversion Services for which a product
code is not listed on Exhibit A, TIMET shall promptly notify HAYNES, and
process practices, operating procedures and product specifications for such
product codes shall be jointly developed by TIMET and HAYNES as promptly as
reasonably practical.  Once HAYNES and
TIMET complete trials and agree upon the process practices, operating
procedures, product specifications and Maximum Cycle Time, the product shall be
assigned a product code.  The Parties
then promptly shall prepare and execute an updated Exhibit A to
incorporate such new product and its corresponding Maximum Cycle Time, Base
Price and product code.  The initial Base
Price for additional services provided under this Agreement shall be
established at [ * ].  All capital costs
incurred that are required to develop such process practices, operating
procedures and product specifications for any product codes added to
Exhibit A pursuant to this Section 2.3(b) shall be shared equally
between the Parties and, unless otherwise agreed to in writing by the head of
manufacturing of each Party, no process qualification may require a total
capital expenditure in excess of [ * ]. 
TIMET shall reimburse HAYNES for the cost of trial rolling services
performed while developing such process practices, operating procedures and
product specifications for new product codes at [ * ].

 7
 

2.4                                 Forecasts.

(a)                                  Annual
Forecasts.  No later than December
1st each year, TIMET will provide HAYNES with a forecast for the following
calendar year of its anticipated monthly volume requirements by product code
for Titanium Conversion Services.  Within
five (5) business days of receipt of TIMET’s forecast, HAYNES will provide to
TIMET its scheduled production interruptions for holidays and maintenance.  Prior to December 15, the Parties will
exchange and reconcile the forecasts and scheduled interruptions to serve as
the initial annual forecast by month for the upcoming year.

(b)                                 Scheduling
of Conversion Services.  During the
third week of each calendar month, TIMET will supply to HAYNES a forecast of
estimated Material quantities that will be scheduled for Titanium Conversion
Services to be performed by HAYNES in the coming calendar month, which
forecasts will be non-binding but made by TIMET in good faith.

2.5                                 Submission
Sheets.

(a)                                  TIMET
shall purchase Titanium Conversion Services from HAYNES on the basis of firm
Submission Sheets.

(b)                                 Each
Submission Sheet shall contain the following:

(i)                                     reference
to this Agreement;

(ii)                                  the
specific product code from Exhibit A;

(iii)                               a
Purchase Order Number;

(iv)                              reference
to standard process practice, operating procedures and product specifications
(including but not limited to parameters associated with gauge, flatness, as
rolled surface condition, yield and mechanical properties), which shall include
but not be limited to standard operating procedures, rolling pass schedules,
work instructions, heating practices and similar process instructions; and

(v)                                 such
other information as the Parties reasonably agree is necessary or advisable for
more efficient performance of this Agreement.

2.6                                 Ownership
of Proprietary Information.  TIMET
shall retain sole and exclusive ownership of and all right, title and interest
in and to all know-how, concepts, techniques, methodologies, ideas, process
practices, operating procedures and product specifications, including all
updates, modifications, improvements and enhancements thereof that relate to
the provision of the Titanium Conversion Services (the “Proprietary Information”)
provided or developed by TIMET prior to and during the term of this
Agreement.  TIMET shall also retain sole
and exclusive ownership of Proprietary Information developed jointly by TIMET
and HAYNES or any HAYNES Successor prior to and

 8
 

during the term of this Agreement (the “Joint
Proprietary Information”).  TIMET hereby
grants HAYNES or any HAYNES Successor a non-exclusive, worldwide, fully paid
and irrevocable license to use any Joint Proprietary Information; provided,
however, that HAYNES cannot use such Joint Proprietary Information in competition
with TIMET during the term of this Agreement. 
Furthermore, such license to use Joint Proprietary Information shall
terminate automatically upon the occurrence of an Event of Default listed in
Section 5.2(a) or 5.2(b) hereof.  All
Proprietary Information shall constitute Confidential Information within the
meaning of Article 9 hereof; provided, however, that HAYNES or any HAYNES
Successor shall be permitted to disclose Joint Proprietary Information as
necessary to obtain the benefits of the license granted hereunder.

ARTICLE 3

PRICES AND PAYMENT

3.1                                 Base Prices.

(a)                                  The
Base Prices for Titanium Conversion Services that are effective upon
commencement of this Agreement are set forth in Exhibit A (such prices are
expressed on a per pound basis by input weight, product and size).

(b)                                 Effective
January 1 of each year during the term of this Agreement commencing in 2007,
the Base Prices then in effect [ * ].

3.2                                 Calculation
of Adjustments.  As soon as the [ * ]
identified in Section 3.1(b) above is available for a calendar year,
HAYNES shall provide to TIMET its written determination of the adjusted Base
Prices for the following year based upon the foregoing formula, and HAYNES
shall supply TIMET with copies of [ * ]. 
In the event that TIMET finds a mistake in the calculations provided by
HAYNES, TIMET shall notify HAYNES as soon as possible with an explanation of
the error, and the Parties will work in good faith to make an appropriate
adjustment to the adjusted Base Price.

3.3                                 Changes
to [ * ].  If during the performance
of this Agreement, the [ * ] identified in Section 3.1(b) ceases to exist
or to be published, the Parties shall apply instead the relevant factor
published by any successor to the [ * ] or the most compatible factor still
published by the [ * ], respectively, or in the absence of both of the
foregoing, such substitute factor or factors upon which the Parties may
mutually agree.

3.4                                 Terms
of Delivery and Payment.

(a)                                  Except
as otherwise set forth herein, all prices are FOB HAYNES’ facility.

(b)                                 Payment
is due based on terms and conditions of the Submission Sheet acknowledgement,
and all payments will be due and payable within thirty (30) days of the date of
the invoice.  No invoice will be sent
prior to completion of all relevant services without the prior written consent
of TIMET.  All invoices shall contain the
Submission Sheet and Purchase Order Number and the description, quantity and
unit price of the Titanium Conversion Services provided.

 9
 

3.5                                 Packaging.  Haynes and TIMET shall work in good faith to
package Materials with respect to which Titanium Conversion Services have been
provided in accordance with good commercial practice so as to protect against
damage to such Materials that will result from weather or transportation.  In addition, such Material will be packaged
in accordance with any special requirement of the carrier to which they will be
consigned for delivery.  Any specified
special packaging costs will be borne by TIMET.

ARTICLE 4

PRODUCTION AND QUALITY ASSURANCE MATTERS

4.1                                 TIMET’s
Technical Assistance.  In order for
HAYNES to provide Titanium Conversion Services to TIMET hereunder, TIMET shall
make available to HAYNES technical assistance to help HAYNES achieve TIMET’s
standard process practice, operating procedures and product specification as
described in Section 2.5(b)(iv).

4.2                                 Documentation.  HAYNES shall provide copies of any
documentation related to non-conformances or defects.

4.3                                 Acceptance
Procedure.

(a)                                  The
term “Acceptance Procedure” shall mean and refer to that procedure to be
performed by TIMET the purpose of which is to verify that the Titanium
Conversion Services have been performed by HAYNES in accordance with the
warranty set forth in Section 6.1.  TIMET
shall perform the Acceptance Procedure on titanium products manufactured by
HAYNES under this Agreement [ * ] 
following delivery by HAYNES to TIMET of the titanium product resulting
from the Titanium Conversion Services.

(b)                                 If
TIMET determines that the Titanium Conversion Services do not comply with the
warranty set forth in Section 6.1, TIMET shall notify HAYNES in writing by
means of a “non-conformance form” of such failures or defects within five (5)
days of TIMET’s completion of the Acceptance Procedure that has resulted in the
discovery of the failures or defects.  In
such circumstances, TIMET shall have and be entitled to the rights and remedies
described in Section 5.1.

(c)                                  Subject
to TIMET’s other rights and remedies described in Section 5.1 and
Article 6, if TIMET has not notified HAYNES of any failures or defects in
the Titanium Conversion Services or the titanium product resulting from the
performance by HAYNES of the Titanium Conversion Services within [ * ]
following delivery by HAYNES to TIMET of such titanium product, or if prior to
the expiration of such [ * ] period TIMET shall have transferred title to such
titanium product to a third party, TIMET shall be deemed to have accepted such
product.

4.4                                 Ownership
of Material.  HAYNES disclaims any
rights in the Materials delivered to it under this Agreement.  All Material delivered to HAYNES by TIMET for
performance of Titanium Conversion Services, including all recoverable scraps
generated in the performance of the services hereunder, shall belong to and
remain the property of TIMET

 10
 

or its designee(s) and shall be returned by
HAYNES to TIMET after performance of the Titanium Conversion Services.

4.5                                 Risk
of Loss.  Risk of loss of the
Material and products manufactured therefrom shall pass upon their delivery
from TIMET to HAYNES for Titanium Conversion Services FOB HAYNES facility.  Risk of loss of the products resulting from
the Titanium Conversion Services performed by HAYNES shall pass from HAYNES to
TIMET upon their delivery to TIMET FOB HAYNES facility.

4.6                                 Quality
Assurance Matters.

(a)                                  Upon
reasonable advance notice and during normal business hours, HAYNES shall permit
TIMET to conduct a formal audit of the 4-High Facility as well as all related
administrative and/or support facilities for quality assurance and control
purposes (either alone or with any TIMET customer); provided, however, that
such audit shall not disrupt materially the progress of the work carried out in
the relevant facilities.

(b)                                 HAYNES
agrees to maintain and keep in good working order and repair, all at its sole
cost and expense, all equipment utilized by HAYNES to perform Titanium
Conversion Services, which shall be deemed to mean such equipment shall, at a
minimum, meet or exceed the OEM design capability and functionality for slab,
plate and coil production.

(c)                                  HAYNES
and its Affiliates shall maintain the policies and operating practices for
quality control and assurance processes required to evidence aerospace and
industrial qualifications required by TIMET or TIMET’s customers.  Quality assurance processes include, without
limitation, documentation, record retention, process improvement agreements and
quality assurance system compliance and audit rights to TIMET or its customers.

ARTICLE 5

BREACH OF WARRANTY; EVENTS OF DEFAULT; REMEDIES

5.1                                 Remedies
for Manufacturing or Product Defects Discovered by Acceptance Procedure or
Discovery of Breach of Warranty.  If
TIMET determines by performance of the Acceptance Procedure as outlined in
Section 4.3 that any Titanium Conversion Services do not comply with the
warranty set forth in Section 6.1, then TIMET shall be entitled to the
following remedies only:

(a)                                  HAYNES
shall promptly, at its choice and cost, either (i) re-perform the
defective Titanium Conversion Services (or any part thereof) as may be
necessary to correct the failures or defects, or (ii) reimburse TIMET the
amount paid by TIMET for the defective Titanium Conversion Services (or any
part thereof), or if TIMET has not yet paid such amounts to HAYNES, HAYNES will
not invoice TIMET for such amounts.

 11
 

(b)                                 In
addition, for any Material (in part or whole) rendered unusable as a
result of HAYNES’ gross negligence, HAYNES shall promptly pay to TIMET an
amount equal to the sum of the cost of the Material (as indicated by TIMET’s
books and records) plus costs associated with scrap preparation minus a credit
for the market value of such unusable Material at prevailing scrap prices.

5.2                                 Event of Default.  An “Event of Default” shall mean any of the
events listed below.  With respect to an
Event of Default listed in Section 5.2(b) or 5.2(c), HAYNES shall have
thirty (30) days from the date of HAYNES’ receipt of TIMET’s notice of default
to remedy such default.

(a)                                  The occurrence of a
Change in Control of HAYNES in which the successor to HAYNES or the Operating
Assets does not assume all of the obligations of the Transaction Documents;
provided, however, that a CC Termination shall not constitute an Event of
Default.

(b)                                 Failure
to comply with the requirements of Section 11.1 (as such Section may be amended
by the Non-Compete Amendment).

(c)                                  In
the event that the On-Time Delivery Rate and/or the QTP Rate is less than [ * ]
for two (2) consecutive months or less than [ * ] for any one (1) month;
provided, however, that a failure to achieve either the On-Time Delivery Rate
and/or the QTP Rate for the mutually agreed upon incremental volume increases
set forth in clauses (i) and (ii) of Section 2.1(b) during the first month
following each such agreed upon incremental volume increase shall not be deemed
to be an Event of Default so long as Haynes is using commercially reasonable
efforts during such one-month period to achieve each such incremental volume
increase.

5.3                                 Remedies.

(a)                                  Upon
the occurrence of an Event of Default that has not been remedied within the
30-day cure period set forth in Section 5.2 (if applicable), TIMET may
terminate this Agreement immediately upon written notice, in which event
(x) the outstanding principal balance of the Option Note, and all accrued
and unpaid interest thereon, and the entire unearned portion of the Fee (as
defined in the Access and Security Agreement) shall be immediately due and
payable and (y) Haynes shall pay in good funds to TIMET within five (5)
business days following such termination Twenty Five Million Dollars
($25,000,000) as liquidated damages (the “Liquidated Damages”).  The Parties agree and acknowledge that TIMET’s
actual Damages in the event of an Event of Default would be extremely difficult
or impracticable to ascertain and that the Liquidated Damages represent the
Parties’ reasonable estimate of such Damages. 
Upon the occurrence of an Event of Default set forth in Section 5.2(c)
that is the result of Force Majeure (as defined in Section 8.1), TIMET’s sole
remedy shall be to terminate this Agreement upon written notice; provided that
TIMET shall have no obligation to terminate this Agreement in such event, but
without waiver of such right of termination, TIMET may elect to terminate this
Agreement at any time

 12
 

that an event
of Force Majeure is continuing; provided, further, that TIMET’s right to
terminate this Agreement as a result of any such event shall cease at such time
as the related event of Force Majeure ceases. 
In the event that TIMET elects to terminate this Agreement upon an Event
of Default that is the result of Force Majeure, the outstanding principal
balance of the Option Note, and all accrued and unpaid interest thereon, and
fifty percent (50%) of the unearned portion of the Fee shall be immediately due
and payable to TIMET; however, no Liquidated Damages shall be due or payable.

(b)                                 Upon
the occurrence of an Event of Default listed in Section 5.2(a) or 5.2(b) hereof
that has not been remedied within the 30-day cure period set forth in Section
5.2 (if applicable), in addition to the remedy set forth in Section 5.3(a),
TIMET shall have all rights and remedies at law or in equity against HAYNES or
any HAYNES Successor for (i) specific performance or other equitable relief and
(ii) damages in an amount equal to the excess, if any, of (x) TIMET’s actual,
consequential and incidental damages arising from the unremedied Event of
Default, over (y) the Liquidated Damages.

(c)                                  Upon
the occurrence of an Event of Default listed in Section 5.2(c) hereof, in
addition to the remedy set forth in Section 5.3(a), the Base Prices shall be
reduced by twenty five percent (25%) until the Event of Default is cured or
TIMET elects to terminate the Agreement and receive repayment of the balance of
the Option Note, and all accrued and unpaid interest thereon, the entire
unearned portion of the Fee (as defined in the Access and Security Agreement)
and the Liquidated Damages.

(d)                                 In
addition to the remedies set forth in this Agreement, the Parties shall be
afforded the rights and remedies set forth in the Access and Security
Agreement, including the TIMET remedies set forth in Section 8 of the Access
and Security Agreement and the Haynes Remedies set forth in Section 12 of the
Access and Security Agreement.

ARTICLE 6

WARRANTY

6.1                                 HAYNES
Warranty.  HAYNES warrants to TIMET
that the Titanium Conversion Services rendered to TIMET by HAYNES shall be
performed in a good and workmanlike fashion in accordance with industry
standards and TIMET’s specified process practice, operating procedures and
product specifications consistent with the terms set forth in the Submission
Sheet.

6.2                                 Investigation
of Claims.  The Parties agree that
any claim relating to an alleged breach of the foregoing warranty by HAYNES
shall be investigated jointly by TIMET and HAYNES.

6.3                                 Remedies
for Breach of Warranty.  TIMET shall
notify HAYNES of any breach of warranty in Section 6.1 after TIMET has
discovered such breach.  If it is
determined that

 13
 

HAYNES has breached the warranty in
Section 6.1, TIMET shall be entitled solely to the remedies set forth in
Section 5.1.

ARTICLE 7

INSURANCE; INDEMNIFICATION

7.1                                 Insurance.  As long as this Agreement is in effect and
for a period of six (6) years thereafter, HAYNES shall maintain (or its
Affiliates shall maintain on HAYNES’ behalf), at their respective sole cost,
the following type of insurance with insurers reasonably acceptable to TIMET:

(a)                                  Commercial
General Liability Insurance.  The
policy shall have a minimum combined single limit of $1,000,000 per occurrence
for bodily injury and property damage with a minimum aggregate limit of
$2,000,000.  The policy shall include
products/completed operations, contractual, fellow-employee, broad form
property damage, and contractor-protective coverages as well as coverage for
the hazards of explosion, collapse and underground (XCU).  The policy shall include a cross
liability/severability of interests provision and coverage shall be on an “occurrence”
basis.  The policy form shall be no less
broad than the latest version issued by the Insurance Services Office (aka
ISO).

(b)                                 Workers’
Compensation/Employers Liability Insurance. 
The policy shall have the following limits:

Workers’ Compensation - Statutory

Employers Liability - $500,000 per occurrence

The policy shall have
alternative employer and borrowed servant coverage.

If HAYNES shall be a
qualified self-insurer for purposes of state workers compensation, evidence of
such qualification shall be sufficient to waive the requirement that workers
compensation insurance be maintained. 
However, HAYNES agrees to waive subrogation for any payments that it (or
its third party administrator) may make as a qualified self-insurer.

(c)                                  Business
Interruptions and Property Floater. 
The policy will cover all risk of loss or damage to all of the Operating
Assets from fire, theft, malicious mischief, explosion, water and all other
hazards or risks of physical damage included within the meaning of the term “extended
coverage.”  The limit shall be at least
equal to the replacement cost of the Operating Assets. The policy will also
contain business interruption coverage.

(d)                                 All
the insurance policies shall provide a waiver of subrogation in favor of TIMET.  In addition, the general liability insurance
policy or policies and the policy insuring against property damage shall name
TIMET as an Additional Insured.

 14

(e)                                  Certificate
of Insurance.  Within a reasonable
time after signing this Agreement, HAYNES shall provide TIMET with an insurance
certificate(s) as evidence that the required insurance is in force.

(f)                                    Renewals.  HAYNES will provide renewal certificates to
TIMET as long as this Agreement is in force. 
Such certificates shall specify that TIMET shall be given thirty (30)
days notice prior to cancellation, material change or notice of non-renewal of
any of the required insurance policies. 
The certificates shall also specify that HAYNES’ insurance shall be
primary in the event of any duplication with that of TIMET.  If requested, HAYNES shall provide TIMET with
copies of the required insurance policies.

7.2                                 Indemnification
and Waiver.  HAYNES agrees to defend
and indemnify TIMET, its employees, directors, stockholders officers and agents
for any claims, costs, expenses (including reasonable attorney fees) or
liability arising from injury (including death and disease) or Damage that
arises out of HAYNES’ performance of the Titanium Conversion Services under
this Agreement unless such injury or Damage shall be the result of the sole
negligence of TIMET.  TIMET shall provide
HAYNES with notice of any matters that qualify for indemnification as soon as
practicable.  The foregoing indemnity
shall not apply to claims, costs, expenses or liability arising from injury or
Damage resulting from products produced by HAYNES through the performance of
Titanium Conversion Services.  With the
exception of TIMET’s obligations under Section 4(b)(ii) of the Access and
Security Agreement, in no event shall TIMET be liable for damage to, or loss
of, HAYNES’ property, equipment or tools or that of HAYNES’ employees or
sub-contractors regardless of the actual or alleged negligence of TIMET.  HAYNES shall indemnify TIMET for any such
claims.

ARTICLE 8

FORCE MAJEURE; CONTINGENCIES

8.1                                 Force
Majeure.  The occurrence of an event
such that delivery of the Titanium Conversion Services is prevented by any
cause, whether foreseeable or unforeseeable, beyond HAYNES’ reasonable control
shall be deemed an event of Force Majeure (a “Force Majeure”), including,
without limitation, the following causes: acts of God; judgments or orders of
any court; a change in the laws that would expressly prohibit HAYNES’
performance of the Titanium Conversion Services; power failure; a catastrophic
breakdown of the Operating Assets; acts of war; acts of terrorism, riot, civil
strife, insurrection or rebellion; labor disputes; or fire, explosion,
earthquake, storm, flood or other severe weather condition.  The term “Force Majeure” shall not be
construed, however, to include commercial impracticability.

8.2                                 Notice;
Mitigation.  As soon as practicable
after the occurrence of Force Majeure, HAYNES shall give notice to TIMET of the
suspension of performance (stating therein the nature of the suspension, the
obligation(s) likely to be affected, the reasons therefor, and a reasonable,
good faith estimate of the period of time during which provision of the
Titanium Conversion Services is expected to be prevented), and thereupon the
contractual delivery schedule or dates of completion shall be extended by a
period of time as

 15
 

necessary to reflect the effect of the
delay.  HAYNES shall take all reasonable
steps to minimize the impact of the Force Majeure under this Agreement and
shall resume provision of the Titanium Conversion Services as soon as
reasonably possible.  The Parties agree
to negotiate in good faith during the continuance of any Force Majeure with
respect to possible ways to minimize the effects of the Force Majeure on the
Parties.

ARTICLE 9

CONFIDENTIALITY

9.1                                 Obligations.  During the term of this Agreement and for a
ten (10) year period thereafter, no Party shall disclose to any third party
(including without limitation, any subcontractor of such Party) any “Confidential
Information” (as defined below) of any other without such Party’s prior written
consent.

9.2                                 Confidential
Information Defined.  “Confidential
Information” means all confidential or proprietary information in whatever form
furnished by or on behalf of one Party to the other Party, except information
which the receiving Party can demonstrate that it:

(a)                                  is
generally available to, or known by, the public other than by reason of
disclosure by the receiving Party;

(b)                                 was
obtained by the receiving Party from a source other than the other Party
hereto; provided, however, that such source was not bound by a duty of
confidentiality with respect to such information;

(c)                                  was
in the lawful possession of the receiving Party prior to the date of this
Agreement without confidentiality restrictions; or

(d)                                 is
intentionally made available by the disclosing Party to a third person on an
unrestricted basis.

9.3                                 Exceptions.  The restrictions set forth in
Section 9.1 above shall not be deemed to include disclosures:

(a)                                  to
officers, directors, employees, agents, lenders, contractors, or
representatives of a Party or an Affiliate of such Party who need to know such
information and agree to be bound by the terms hereof;

(b)                                 required
to be made by law, rule, regulation, order of any court or regulatory body,
discovery request, civil investigative demand, or judicial process; or

(c)                                  to
report the terms of this Agreement or file this Agreement as an exhibit as
required by applicable laws or regulations concerning financial reporting or
disclosure, subject to each Party’s requirement to seek to protect proprietary
or confidential information contained in this Agreement by way of protective
order, confidential treatment request or similar process.

 16
 

ARTICLE
10

PROVISION OF TITANIUM PRODUCTS

During the term of this Agreement, upon request, TIMET
will supply to HAYNES titanium sheet and plate products of up to two hundred
thousand (200,000) pounds per year in each of 2007 through 2011, up to three
hundred thousand (300,000) pounds per year in each of 2012 through 2016 and up
to five hundred thousand (500,000) pounds per year in each of 2017 through the
end of the term of this Agreement; provided, however, that in any year, TIMET’s
supply of hot-rolled alloy sheet products cannot exceed 25% of the total volume
of titanium plate sheet products supplied by TIMET.  Each purchase and sale shall be made by
separate purchase orders placed by Haynes, and acknowledged within a reasonable
time by TIMET, and such purchases and sales shall be subject to the prevailing
market prices, lead-times, warranties and other terms and conditions applicable
to TIMET customers who place orders on an order-by-order basis.  In the event of any conflict between this
Agreement and either of the HAYNES’ conditions of purchase or the corresponding
TIMET sales acknowledgement, this Agreement shall prevail.  In the event of any conflict between a HAYNES
purchase order and the corresponding TIMET sales acknowledgement, the documents
shall be interpreted together under the Uniform Commercial Code of the State of
Delaware.

ARTICLE
11

NON-COMPETITION

11.1                           Non-Compete
Obligations.  In view of, among other
things, the payment of the Fee by TIMET to HAYNES, the proprietary information
and technical assistance to be made available to HAYNES and TIMET’s provision
of the titanium products as set forth in Article 10, during the term of this
Agreement, HAYNES (including its Affiliates) shall not, except as contemplated
in this Agreement with respect to the performance of Titanium Conversion
Services for the benefit of TIMET and its Affiliates or designees, directly or
indirectly through any Affiliate or other person in which it has an equity
interest, anywhere in the world, (i) provide, directly or indirectly,
Titanium Conversion Services with the Operating Assets to any third party, or
grant any third party access to, or the right to use, either directly or
indirectly, the Operating Assets for purposes of performing any Titanium Conversion
Services; or (ii) engage in the manufacturing of titanium or titanium
alloys other than cold reduced titanium seamless tubing (except as specifically
permitted in this Agreement).  In the
event that TIMET has not fulfilled its obligations under Article 10 hereof
relating to TIMET’s supply of titanium sheet and plate products to HAYNES,
HAYNES shall be relieved of its obligations under clause (ii) of this Article
11 for the period in which such product shortfall occurred (on an annualized
basis) but only to the extent of the actual product supply shortfall.

11.2                           Non-Compete
Amendment.  In the event of a Change
in Control, the successor to HAYNES or its assets (the “HAYNES Successor”)
shall have the option to amend the provisions of Section 11.1(i) as described
below by providing written notice to TIMET of the exercise of such option
within twelve (12) months of the effective date of such Change in Control (the “Non-Compete
Amendment”).  Upon exercise of the
option, the HAYNES Successor shall be required to pay TIMET a non-refundable
fee (the “Non-Compete Amendment Fee”) within five (5) business days following
TIMET’s receipt of

 17
 

such notice of exercise in the amount of
$15,000,000 in immediately available U.S. funds.  If HAYNES exercises the option and pays TIMET
the Non-Compete Amendment Fee, the unearned portion of the Fee shall be reduced
by the amount of the Non-Compete Amendment Fee.

11.3                           Non-Compete
Amendment Provision:  Upon the HAYNES
Successor’s exercise of the option with respect to the Non-Compete Amendment
and payment of the Non-Compete Amendment Fee, Section 11.1(i) shall be deleted
in its entirety and replaced with the following provision:

(i) provide,
directly or indirectly, Titanium Conversion Services with the Operating Assets
to any third party, or grant any third party access to, or the right to use,
either directly or indirectly, the Operating Assets for purposes of performing
any Titanium Conversion Services; provided, however, that the HAYNES Successor
shall be permitted, subject to TIMET’s rights under this Agreement, to perform
Titanium Conversion Services using the Operating Assets for itself, its
Affiliates or any third party up to a maximum aggregate amount of ten (10)
million output pounds of flat-rolled titanium products on an annual basis.

11.4                           No
Further Changes; Conditions  With the
exception of the provision contained in Section 11.3 hereof, the Non-Compete
Amendment shall not be construed to amend or modify any other term or condition
of this Agreement or the Transaction Documents. 
The HAYNES Successor shall be permitted to exercise the option with
respect to the Non-Compete Amendment only if such successor (i) has assumed all
of the obligations of HAYNES under this Agreement and the Transaction Documents
and (ii) is not in default of this Agreement or the Transaction Documents.

ARTICLE
12

GOVERNING LAW; SETTLEMENT OF DISPUTES

12.1                           Governing
Law.  This Agreement shall be
governed, interpreted, construed and enforced in accordance with the laws of
the State of Delaware without recourse to the law regarding the conflicts of
law.

12.2         Voluntary
Settlement of Disputes; Voluntary Arbitration.

(a)                                  If
there shall be any Dispute, the representatives of the Parties should use their
best efforts to resolve the matter on an amicable basis and in a manner fair to
the Parties hereto.  If one Party
notifies another Party that a Dispute has arisen and the Parties are unable the
resolve such Dispute within a period of thirty (30) days from such notice, then
the matter may be referred to senior executive officers (Chief Operating
Officer or its equivalent) of HAYNES and TIMET for attempted resolution, who
shall have a further sixty (60) days from such notice (or such time as both
Parties shall mutually agree) to attempt to resolve such Dispute.  No recourse to arbitration under this
Agreement shall take place unless and until such procedure has been followed.

 18
 

(b)                                 If
a Dispute is not resolved in the manner and within the period described in
Section 12.2(a), any Party may make a written demand that the dispute be
resolved through binding arbitration (an “Arbitration Demand”) in accordance
with the procedures set forth below.

(c)                                  Any
Arbitration Demand shall state specifically the nature of the claim(s), the
relevant time periods, the document(s) if any that are alleged to govern the
dispute, the names of any relevant known witnesses associated with the either
of the parties, the identification of any third parties that may be relevant to
the dispute, a specific dollar amount alleged to be owing, if any, and any
other specific information that may be necessary to define the nature of the
dispute.  The party receiving the
Arbitration Demand shall provide a written response (an “Arbitration Response”)
within ten (10) days after receiving the Arbitration Demand.  The Arbitration Response may be a simple
denial or may set forth in writing any counterclaims including the same type of
information required in an original Arbitration Demand.  If an Arbitration Response includes any
counterclaims or proposals, then the party originally demanding the Arbitration
may reply within ten (10) days after receiving the Arbitration Response.  If any party fails to respond to any notice,
the party shall be deemed to deny the demand.

(d)                                 The
arbitration shall be handled by a single neutral arbitrator.  The Arbitration Demand shall also include the
name of one (1) person proposed to serve as an arbitrator to decide the
dispute.  If the designated person is not
acceptable to the other party, then the party responding to the Arbitration
Demand shall propose the name of one (1) arbitrator.  If that person is unacceptable to the party
seeking the Arbitration, then both parties shall cooperate to select a mutually
agreeable arbitrator.  In the event that
the Parties cannot agree to the selection of a single neutral arbitrator, the
Parties shall submit the selection of the arbitrator to the procedures for the
selection of an arbitrator set forth by the American Arbitration Association, “JAMS”
or a similar recognized alternative dispute resolution body agreed upon by the
Parties.  The fees and expenses of the
neutral arbitrator shall be split by the parties unless the Arbitration Award
provides differently.

(i)                                     The
Arbitration shall be held in Wilmington, Delaware as soon as possible within
ninety (90) calendar days after the selection of arbitrator who will hear the
case.

(ii)                                  Each
Party shall have the right to engage in reasonable pre-arbitration discovery in
the form of requests for production of documents and depositions as allowed by
the arbitrator.  Presentation of the case
shall include: opening statements, testimony of necessary witnesses, stipulated
or properly authenticated documents, and closing statements.  No documents may be submitted as evidence
unless the documents have been provided to the opposing party in advance of the
arbitration as allowed by the arbitrator. 
Either party may demand that a transcript of the hearing be
prepared.  If such a demand is made, then
the parties shall each pay one-half of the cost of the transcript.

 19
 

(iii)                               The
arbitrator shall issue a reasoned decision in writing within thirty (30) days
of the arbitration.  Delaware law, in
conjunction with any applicable federal law, shall be used by the arbitrator to
decide all questions, claims or disputes, notwithstanding any choice of law
provisions to the contrary.  The
arbitrator shall have the authority to order the losing party to pay some or
all or the fees and expenses of the arbitration proceeding to the prevailing
party as part of the arbitration award, including but not limited to any expert
witness fees.  The arbitrator shall not
have the authority to award any incidental, consequential, special (including
multiple or punitive), or other indirect damages to the other party, whether
such claim arises under contract, tort (including strict liability) or other
theory of law.  The decision shall be
final and binding on the parties, except that either party may appeal as
provided in the Delaware Arbitration Act.

(iv)                              The
arbitration award reasoned decision may be enforced in any court having
jurisdiction of the parties and the subject matter.

Notwithstanding anything to the contrary set forth
herein, it is the express intention of the Parties that the provisions,
procedures and requirements of this Section 12.2 are entirely voluntary.  The alternative dispute resolution and
arbitration provisions, procedures or requirements of this Section 12.2 shall
not apply to any Dispute between the Parties absent the Parties’ mutual written
agreement to submit a Dispute to the provisions, procedures and requirements
contained in this Section 12.2.

ARTICLE
13

TERM AND TERMINATION

13.1                           Term.  This Agreement shall become effective
commencing on the date on which the last of the following conditions is met and
shall continue until the date twenty (20) years after the commencement date
unless earlier terminated pursuant to Section 13.2:

(a)                                  Execution
and delivery of this Agreement and the Access and Security Agreement; and

(b)                                 TIMET’s
payment to HAYNES of the Fee as described in Section 2(c) of the Access and
Security Agreement.

Upon the commencement of
the term of this Agreement, HAYNES shall execute and deliver, or cause to be
executed and delivered, to TIMET the non-disturbance agreement pursuant to
Section 3(c) of the Access and Security Agreement and such further instruments
and documents, and shall take such further action as TIMET may reasonably
request, for the purpose of obtaining the full benefits of this Agreement and
the Access and Security Agreement and of the rights and powers granted herein
and therein, and TIMET shall be authorized by HAYNES to file one or more
financing statements, and amendments thereto, relating to the Collateral (as
defined in the Access and Security Agreement).

13.2                           Termination.  This Agreement may be terminated as set forth
herein below.

 20
 

(a)                                  TIMET
may terminate this Agreement upon written notice of termination to HAYNES
(i) upon the occurrence of an Event of Default that has not been remedied
within the 30-day cure period set forth in Section 5.2 (if applicable), or
(ii) upon TIMET’s exercise of its rights under Section 8(b) of the
Access and Security Agreement.

(b)                                 HAYNES
may terminate this Agreement upon written notice of termination to TIMET if at
any time more than 50% of all undisputed outstanding invoices issued to TIMET
have been unpaid for a period of thirty (30) days following TIMET’s receipt of
written notice of default from HAYNES.

(c)                                  Upon
a Change in Control of HAYNES, a HAYNES Successor shall have the right to
terminate this Agreement (a “CC Termination”) by providing written notice of
termination to TIMET within twelve (12) months of the effective date of such
Change in Control, and such CC Termination shall become effective upon the last
day of the ten- (10) year period following the date on which the notice is
received by TIMET (the “Effective Termination Date”).  As a result of its election of a CC
Termination, the HAYNES Successor shall be required to pay to TIMET a
termination fee that is equal to (i) Twenty Five Million Dollars ($25,000,000)
plus (ii) the entire unearned portion of the Fee calculated as of the Effective
Termination Date (the “Termination Fee”). 
The Termination Fee shall be due and payable to TIMET in equal monthly
payments during the period beginning upon TIMET’s receipt of the notice of
termination and ending upon the Effective Termination Date.  Upon its election of a CC Termination, HAYNES
shall deliver to TIMET a promissory note substantially in the form attached
hereto as Exhibit B in the amount of the Termination Fee and with a payment
schedule as reflected in this Section 13.2(c); provided, however, that the
Termination Fee shall not bear interest prior to maturity, and, therefore, the
interest provisions in Exhibit B (other than the Default Rate (as defined in
Exhibit B) shall be deleted; provided, further, that upon a default thereunder,
the Termination Fee shall bear interest at the Default Rate.

13.3                           Consequences
of Termination.  As a consequence of
termination of this Agreement by any Party in accordance with this
Article 13, all rights and obligations of the Parties under this Agreement
shall terminate without any liability of any Party to the other (except for
liability of any Party then in breach under this Agreement for such breach).

13.4                           Waiver.  Any waiver of the option to terminate this
Agreement shall not constitute a waiver of the right to claim Damages or the
right to terminate this Agreement for any subsequent breach or occurrence of
the same or other events herein specified.

13.5                           Survival.  The obligations of the Parties under
Articles 5 (Breach of Warranty; Events of Default; Remedies),
6 (Warranty), 7 (Insurance; Indemnification), 9 (Confidentiality),
12 (Governing Law; Settlement of Disputes) and 13 (Term and Termination)
shall survive termination or expiration of this Agreement.

 21
 

ARTICLE
14

GENERAL

14.1                           Assignment.  All of the terms, covenants, obligations,
warranties, and conditions of this Agreement shall be binding upon, and inure
to the benefit of and be enforceable by, the Parties hereto and their
respective successors and permitted assigns. 
This Agreement and the rights and obligations of the Parties hereunder
may not be assigned by any Party without the prior written consent of the other
Parties.  Notwithstanding the foregoing,
HAYNES shall be permitted to assign this Agreement to its successor in
connection with a Change in Control provided that such successor assumes all of
HAYNES’ obligations under this Agreement and each of the other Transaction
Documents.  Except in reference to TIMET’s
successor(s) and permitted assignee(s), the term designee(s) as used in this
Agreement shall not be construed to alleviate TIMET from its obligations
hereunder or permit TIMET to assign its rights hereunder.

14.2                           Severability.  If any provision of this Agreement or
application of any such provision to any person or circumstance shall be held
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality, or unenforceability shall not affect
any other provision hereof.

14.3                           Notices.  All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when delivered personally, when
sent by verified facsimile (with confirmation copy sent by courier) or three
(3) business days after being sent by courier, in each case addressed as
follows:

If to TIMET:

Titanium Metals
Corporation

PO Box 309

Toronto, OH 43964

Attn:  Jim Pieron, Vice President of
Manufacturing Strategy

Facsimile:  (740) 537-5776

With
a copy to:

Titanium Metals
Corporation

Three Lincoln Centre

5430 LBJ Freeway

Suite 1700

Dallas, TX 75420

Attn:  General Counsel

Facsimile: (972) 448-1445

 22
 

If to HAYNES:

Haynes International, Inc.

1020 West Park Avenue

P.O. Box 9013

Kokomo, Indiana  46904-9013

Attn:  Marcel Martin, Chief Financial Officer

Facsimile: (765) 456-6526

Attn:  Stacy S. Kilian, V.P. – General Counsel

Facsimile: 
(765) 456-6935

With a copy to:

Ice
Miller LLP

One
American Square

34th Floor

Indianapolis,
IN 46282-0200

Attn:  Stephen J. Hackman

Facsimile: 
(317) 592-4666

Each Party mentioned herein may change its address or
facsimile number to which such communications, notices, requests or demands are
to be directed to it by giving written notice to the others in the manner
described in this Section 14.3.

14.4                           Specific
Performance.  Each of the Parties
hereto acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are
breached.  Accordingly, each of the
Parties agrees that the any Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof, in addition to
any other remedy to which it may be entitled in accordance with the applicable
law set forth in Section 12.1.

14.5                           No
Third Party Beneficiaries.  This
Agreement shall not be deemed to create or confer, nor shall the same create or
confer, any rights on or upon third parties.

14.6                           Amendment;
Waiver.  This Agreement may be
amended, modified, supplemented, superseded or cancelled, and any of the terms,
covenants, guarantees, warranties, or conditions hereof may be waived, only by
a written instrument executed by the Parties or, in the case of a waiver, by or
on behalf of the Party waiving compliance. 
The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right at a later time to
enforce the same.  No waiver by any Party
of any condition, or of any breach of any term, covenant, guarantee, or
warranty contained in this Agreement shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of any breach of any other term, covenant, guarantee, or
warranty.

 23
 

14.7                           Captions.  The captions contained in this Agreement are
solely for purposes of identification and convenient reference only and shall
in no way affect, alter or vary the meaning, construction or interpretation
hereof or thereof.

14.8                           Integration.  The exhibits to this Agreement are hereby
incorporated by reference in their entirety. 
If there is any inconsistency among this Agreement or any of its
exhibits, this Agreement shall prevail over the other documents.

14.9                           Effectiveness
of this Agreement.  This Agreement
shall be effective upon the completion of the following conditions:

(a)                                  TIMET’s
perfection of its first priority interest in the Collateral (as defined in the
Access and Security Agreement); and

(b)                                 TIMET’s
payment of the Fee.

 24
 

IN WITNESS HEREOF, the Parties have duly executed this
Agreement as of the date first written above.

 

	
  

  	
  TITANIUM METALS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/BOBBY D. O’BRIEN

  	
   

  
	
   

  	
  Name:

  	
  Bobby D. O’Brien

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HAYNES INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ FRANCIS J.
  PETRO

  	
   

  
	
   

  	
  Name:

  	
  Francis J. Petro

  
	
   

  	
  Title:

  	
  President & CEO

  

 

 25
 

Exhibit A:  Product, Price List and Maximum Cycle Times

[ * ]

 26

EXHIBIT B

FORM OF PROMISSORY
NOTE

	
  $[up to 12,000,000.00]

  	
              ,
  20    

  

 

FOR VALUE RECEIVED, the undersigned, HAYNES
INTERNATIONAL, INC., a Delaware corporation (“Maker”), hereby promises to pay
to the order of TITANIUM METALS CORPORATION, a Delaware corporation (“Payee”),
at its address at 3 Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
76240, in lawful money of the United States of America, the principal sum of
[up to TWELVE MILLION AND NO/100 DOLLARS ($[up to 12,000,000.00]), in
installments as follows:

(a)                                  Twenty-three
(23) successive substantially equal quarterly installments of principal, plus
accrued and unpaid interest, shall be made quarterly on March 31, June 30,
September 30 and December 31 of each year, commencing on the quarter that
begins eighteen (18) months from the Loan Date (as defined in the Conversion
Services Agreement dated as of November 17, 2006 by and between Make and Payee;
and

(b)                                 A
final installment in the amount of the entire principal balance then remaining
unpaid, plus all accrued and unpaid interest, shall be due and payable on                     ,
20      [six years from the date made].

The outstanding principal balance hereof shall bear
interest prior to maturity at the rate equal to the Prime Rate plus one percent
(1.00%) per annum; provided that all past due principal and (to the fullest
extent permitted by law) interest and other amounts payable by Maker under this
Note shall bear interest at the Default Rate (hereinafter defined).  Interest payable at the Default Rate shall be
payable from time to time on demand. 
Interest shall be computed on the basis of the actual number of days
elapsed in the applicable calendar year in which accrued.

Maker shall have the right to prepay, at any time and
from time to time without premium or penalty, the entire unpaid principal
balance of this Note or any portion thereof, and any such prepayment to be made
together with the payment of interest accrued on the amount of principal being
prepaid through the date of such prepayment, and any such partial prepayments
to be applied in inverse order of maturity to the last maturing installment(s)
of principal.

Notwithstanding anything to the contrary contained
herein, no provisions of this Note shall require the payment or permit the
collection of interest in excess of the Maximum Rate (hereinafter
defined).  If any excess of interest in
such respect is herein provided for, or shall be adjudicated to be so provided,
in this Note or otherwise in connection with this loan transaction, the
provisions of this paragraph shall govern and prevail, and neither Maker nor
the sureties, guarantors, successors or assigns of Maker shall be obligated to
pay the excess amount of such interest, or any other excess sum paid for the
use, forbearance or detention of sums loaned pursuant hereto.  If for any reason interest in excess of the
Maximum Rate shall be deemed charged, required or permitted by any court of
competent jurisdiction, any such excess shall be applied as a payment and
reduction of the principal of indebtedness evidenced by this Note; and, if the
principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid 

 B-1
 

to Maker.  In determining whether or not the interest
paid or payable exceeds the Maximum Rate, Maker and Payee shall, to the extent
permitted by applicable law, (i) characterize any non-principal payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.

As used herein, the following terms shall have the
following meanings:

“Default Rate” means the lesser of (a) the Maximum
Rate or (b) the sum of the Prime Rate plus the ten percent (10.00%) per annum.

“Maximum Rate” means the maximum nonusurious rate of interest
permitted to be charged by the holder hereof under applicable federal or
Delaware laws.

“Prime Rate” means, at any time, the rate of interest
per annum reported in the “Money Rates” column of the Wall Street Journal as
the prime rate then in effect, or such other rate of interest mutually
acceptable to the Maker and the Payee. 
In the event the Wall Street Journal ceases publication or ceases to
publish the prime rate, the Payee shall select a comparable publication and
provide notice thereof to the Maker. 
Each change in any interest rate provided for herein based upon the
Prime Rate resulting from a change in the Prime Rate shall take effect without
notice to the Maker at the time of such change in the Prime Rate.

This Note is secured by that certain Access and Security
Agreement, dated                       ,
2006, between Maker and Payee (as the same may be amended, modified,
supplemented or restated from time to time, the “Access and Security Agreement”).

Maker shall be in default hereunder upon the happening
of any of the following events or conditions (each such event or condition
hereinafter referred to as an “Event of Default”):

(a)                                  Maker
shall fail to pay when due any principal of or other amount due on this Note
and such failure shall continue for five (5) days after the date such payment
becomes due.

(b)                                 The
occurrence of a Default under and as defined in the Access and Security
Agreement.

Upon the occurrence of any Event of Default, the
holder hereof may, at its option, declare the entire unpaid principal of and
accrued interest on this Note immediately due and payable without notice,
demand or presentment, all of which are hereby waived, and upon such
declaration, the same shall become and shall be immediately due and payable,
and the holder hereof shall have the right to foreclose or otherwise enforce
all liens or security interests securing payment hereof, or any part hereof,
and offset against this Note any sum or sums owed by the holder hereof to
Maker.  Failure of the holder hereof to exercise
this option shall not constitute a waiver of the right to exercise the same
upon the occurrence of a subsequent Event of Default.

 B-2
 

If the holder hereof expends any effort in any attempt
to enforce payment of all or any part or installment of any sum due the holder
hereunder, or if this Note is placed in the hands of an attorney for
collection, or if it is collected through any legal proceedings, Maker agrees
to pay all collection costs and fees incurred by the holder, including
reasonable attorneys’ fees.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND THE APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.  ANY ACTION OR PROCEEDING UNDER
OR IN CONNECTION WITH THIS NOTE AGAINST MAKER OR ANY OTHER PARTY EVER LIABLE
FOR PAYMENT OF ANY SUMS OF MONEY PAYABLE ON THIS NOTE MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT IN NEW CASTLE COUNTY, DELAWARE.  MAKER AND EACH SUCH OTHER PARTY HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF PAYEE TO BRING ANY ACTION OR PROCEEDING AGAINST MAKER OR
ANY OTHER PARTY LIABLE HEREUNDER OR WITH RESPECT TO ANY COLLATERAL IN ANY STATE
OR FEDERAL COURT IN ANY OTHER JURISDICTION. 
ANY ACTION OR PROCEEDING BY MAKER OR ANY OTHER PARTY LIABLE HEREUNDER
AGAINST PAYEE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN NEW CASTLE COUNTY,
DELAWARE.

Except for notices required by the definition of “Default”
in the Access and Security Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any collateral
securing this Note, all without prejudice to the holder.  The holder shall similarly have the right to
deal in any way, at any time, with one or more of the foregoing parties without
notice to any other party, and to grant any such party any extensions of time
for payment of any said indebtedness, or to release or substitute part or all
of the collateral securing this Note, or to grant any other indulgences or
forbearances whatsoever, without notice to any other party and without in any
way affecting the personal liability of any party hereunder.

 B-3
 

THIS NOTE AND ALL OTHER INSTRUMENTS, DOCUMENTS AND
AGREEMENTS EXECUTED AND DELIVERED BY MAKER IN CONNECTION WITH THE INDEBTEDNESS
EVIDENCED BY THIS NOTE REPRESENT THE FINAL, ENTIRE AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.

	
   

  	
  HAYNES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 B-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]