Document:

Exhibit
10.28

HAYNES INTERNATIONAL, INC.

SECOND AMENDED AND RESTATED STOCK OPTION PLAN

As adopted by the Board of Directors as of January 22, 2007

The Board of Directors of Haynes International, Inc.
(the “Company”) has determined that the best interests of the Company will be
served by making available to eligible employees and directors of the Company
and its Subsidiaries a means to acquire shares of the Company’s common stock
(the “Shares”) through the granting of stock options.  The Haynes International, Inc. Stock Option
Plan, as amended or amended and restated from time to time (the “Plan”), is
intended to promote the growth of the Company and its shareholders by
attracting and motivating key employees and directors whose efforts are deemed
worthy of encouragement through the incentive effects of stock options.

The Shares purchased pursuant to the Plan shall be
subject to certain restrictions, the details of which are set forth below.  There is currently no public market for the
Shares.  The future market price, if any,
of the Shares may be highly volatile depending on a number of factors.  In addition, the ownership of the Company represented
by Options may be diluted by the future issuances of Shares or convertible
securities.

Accordingly, the Company’s Board of Directors adopts
this Plan in accordance with the Plan of Reorganization (as defined below),
effective as of the Effective Date.

1.             DEFINITIONS.  For
purposes of the Plan, the following terms, when capitalized, shall have the
meaning set forth below:

(a)           “Board” or “Board of Directors” means
the board of directors of the Company.

(b)           “CEO” means the Chief Executive
Officer of the Company.

(c)           “Code” means the Internal Revenue
Code of 1986, as amended.

(d)           “Committee” means the Compensation
Committee of the Board, and the composition of the Committee shall be governed
by the Compensation Committee Charter as adopted by the Board and as amended
from time to time.

(e)           “Company” means Haynes International,
Inc.

(f)            “Director” means any person serving
on the Board of Directors of the Company.

(g)           “Disability” means total and
permanent disability as defined in the Haynes International Inc. Pension Plan.

(h)           “Discretionary Participant” means any
additional Participant as may be designated on a limited basis by the Committee
upon the recommendation of the CEO to accommodate new hires, promotions and
other similar circumstances.

(i)            “Effective Date” has the meaning set
forth in the Plan of Reorganization.

(j)            “Employee” means any person,
including officers, employed by the Company or any Subsidiary.  The payment of a director’s fee by the
Company shall not be sufficient to constitute employment” by the Company.

(k)           “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

(l)            “Executive” means executives
occupying the management positions listed on EXHIBIT A attached hereto.

(m)          “Fair Market Value” per share as of a
particular date means the last reported sale price (on the day immediately
preceding such date) of the Shares quoted on the NASDAQ National Market or the
NASDAQ SmallCap Market (or any other exchange or national market system upon
which price quotations for the Shares are regularly available); provided,
however, if price quotations for the Shares are not regularly available on any
exchange or national market system, Fair Market Value per share shall mean, as
of any date, the fair market value of such Shares on such date as determined in
good faith by the Board or Committee.

(n)           “Good Reason” means the occurrence of
any of the following actions or failures to act, but in each case only if it is
not consented to by the Optionee in writing: (a) a material adverse change in
the Optionee’s duties, reporting responsibilities, titles or elected or appointed
offices as in effect immediately prior to the effective date of such change;
(b) a material reduction by the Company in the Optionee’s base salary or annual
bonus opportunity in effect immediately prior to the effective date of such
reduction, not including any reduction resulting from changes in the market
value of securities or other instruments paid or payable to the Optionee; (c)
solely in the case of the CEO, any change of more than fifty (50) miles in the
location of the principal place of employment of the CEO immediately prior to
the effective date of such change.  For
purposes of this definition, none of the actions described in clauses (a) and
(b) above shall constitute “Good Reason” with respect to the Optionee if it was
an isolated and inadvertent action not taken in bad faith by the Company and if
it is remedied by the Company within thirty (30) days after receipt of written
notice thereof given by the Optionee (or, if the matter is not capable of
remedy within thirty (30) days, then within a reasonable period of time
following such thirty (30) day period, provided that the Company has commenced
such remedy within said thirty (30) day period); provided that “Good Reason”
shall cease to exist for any action described in clauses (a) and (b) above on
the sixtieth (60th) following the later of the occurrence of such action or the
Optionee’s knowledge thereof, unless the Optionee has given the Company written
notice thereof prior to such date.

(o)           “New Common Stock” has the meaning
set forth in the Plan of Reorganization.

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(p)           “Non-Employee Director” means a
Director who is a “non-employee director” within the meaning of Rule 16b-3 and
who is also an “outside director” within the meaning of Section 162(m) of the
Code.

(q)           “Option” means any stock option
issued pursuant to the Plan.  Options
will be “Nonqualified Options” which are defined as options not intended to
meet the requirements of Section 422 of the Code.

(r)            “Option Agreement” means the written
agreement by and between the Participant and the Company setting forth the
terms and conditions of an Option.  Each
Option Agreement shall be subject to the terms and conditions of the Plan and
need not be identical.

(s)           “Optionee” means the holder of an
outstanding Option granted under the Plan.

(t)            “Participant” means the CEO,
Executive, Non-Employee Director or Discretionary Participant who has entered
into an Option Agreement with the Company pursuant to this Plan.

(u)           “Plan” means this Haynes
International, Inc. Stock Option Plan as provided herein and as may be amended
from time to time.

(v)           “Plan of Reorganization” means the
First Amended Plan of Reorganization for the Company that was filed with the
United States Bankruptcy Court Southern District Indianapolis Division and
approved on August 16, 2004.

(w)          “Retirement” means in the case of the
CEO, a resignation by the CEO after having reached age fifty-five (55), but in
no event prior to September 30, 2007, and, in the case of any other
Participant, a resignation after reaching age fifty-five (55) and completing at
least five (5) years of service with the Company, but in no event prior to
September 30, 2007.

(x)            “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect
from time to time.

(y)           “Share” means a share of common stock
of the Company authorized under the Plan of Reorganization, as may be adjusted
in accordance with Section 5(b) below.

(z)            “Shares Outstanding” means the total
number of Shares outstanding on a fully diluted basis, as reflected in the
Company’s financial statements for purposes of determining earnings per share.

(aa)         “Subsidiary” and “Subsidiaries” used
herein means a company or companies of which 80% or more of the total voting
power of the equity of each such company and 80% or more of the total value of
the equity of each such company are owned by the Company or a Subsidiary of the
Company.

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(bb)         “Terminated for Cause,” “Termination
for Cause” or “Cause” means, (i) if the Optionee is a party to an employment or
service agreement with the Company or its Subsidiaries and such agreement
provides for a definition of Cause, the definition therein contained, or, (ii)
if no such agreement exists, a termination by reason of the good faith
determination of the Board that the Optionee (A) continually failed to
substantially perform his duties with the Company (other than a failure
resulting from the Optionee’s medically documented incapacity due to physical
or mental illness), including, without limitation, repeated refusal to follow the
reasonable directions of the Board, knowing violation of the law in the course
of performance of the Optionee’s duties with the Company or a Subsidiary,
repeated absences from work without a reasonable excuse, or intoxication with
alcohol or illegal drugs while on the Company’s or a Subsidiary’s premises
during regular business hours, (B) engaged in conduct which constituted a
material breach of such Optionee’s employment agreement (if applicable), (C)
was indicted (or equivalent under applicable law), convicted of or entered a
plea of nolo contendere to the commission of a felony or crime involving
dishonesty or moral turpitude, or (D) engaged in conduct which is demonstrably
and materially injurious to the financial condition, business reputation, or otherwise
of the Company or its Subsidiaries or affiliates, or (E) perpetuated a fraud or
embezzlement against the Company or its Subsidiaries or affiliates, and in each
case the particular act or omission was not cured, if curable, in all material
respects by the Optionee within thirty (30) days after receipt of written
notice from the Board, which shall set forth in reasonable detail the nature of
the facts and circumstances which constitute “Cause;” provided, however, the
Optionee shall not be deemed to have been Terminated for Cause unless there
shall have been delivered to the Optionee a copy of a resolution duly adopted
by the Board.  If the Company has
reasonable belief that the Optionee has committed any of the acts described
above, it may suspend the Optionee (with or without pay) while it investigates
whether it has or could have Cause to terminate the Optionee.  The Company may terminate the Optionee for
Cause prior to the completion of its investigation; provided, that, if it is
ultimately determined that the Optionee has not committed an act which would
constitute Cause, Optionee shall be treated as if he were terminated without
Cause.

2.             ADMINISTRATION OF THE PLAN.

(a)           COMMITTEE.  The Plan shall be administered by the
Committee.  The Committee shall have full
authority to administer the Plan, authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for administering
the Plan as it may deem necessary in order to comply with the requirements of
the Plan, or in order to conform to any regulation or to any change in any law
or regulation applicable thereto.

(b)           ACTIONS OF THE COMMITTEE.  All actions taken and all interpretations and
determinations made by the Committee in good faith (including determinations of
Fair Market Value) shall be final and binding upon all Participants, the
Company, and all other interested persons. 
No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan,
and all members of the Committee shall, in addition to their rights as 

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Directors, be fully protected to the extent
permitted by law by the Company with respect to any such action, determination,
or interpretation.

(c)           POWERS OF THE COMMITTEE.  Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to determine, upon
review of the relevant information, the Fair Market Value of the Shares; (ii)
to determine the persons to whom Options shall be granted, the time or times at
which Options shall be granted, the number of Shares to be represented by each
Option, and the exercise price per Share; (iii) to interpret the Plan; (iv) to
prescribe, amend, and rescind rules and regulations relating to the Plan; (v)
to accelerate or defer (with the consent of the Participant unless otherwise
provided herein) the vesting of any Option; (vi) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted by the Board or the Committee; and (vii)
to make all other determinations deemed necessary or advisable for the
administration of the Plan.

3.             ELIGIBILITY AND PARTICIPATION.

(a)           ELIGIBILITY.  Grants of Options shall be made to the CEO
and the Executives in accordance with Exhibit A and, in the discretion of the
Committee, may be made to any Non-Employee Director or any Discretionary
Participant.

(b)           PARTICIPATION BY DIRECTOR.  Members of the Committee who are eligible
either for Options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant
to the Plan, except that no such member shall act upon the granting of an
Option to himself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Committee and may be counted as
part of an action by unanimous written consent during or with respect to which
action is taken to grant Options to him or her.

4.             EXERCISE PRICE, CONSIDERATION AND FORM OF OPTION
AGREEMENT.

(a)           EXERCISE PRICE.  The price to be paid for Shares upon the
exercise of an Option (“exercise price”) shall be determined by the Committee
at the time such Option is granted.

(b)           PAYMENT OF EXERCISE PRICE.  The exercise price shall be paid in full, at
the time of exercise of the Option, (i) by personal or bank cashier’s check,
(ii) if the Participant may do so without violating Section 16(b) or (c) of the
Exchange Act, and subject to approval by the Committee, by tendering to the Company
whole Shares owned by such Participant having a Fair Market Value at the time
of exercise equal to the exercise price of the Shares to which the Option is
being exercised, (iii) if the Participant may do so without violating Section
16(b) or (c) of the Exchange Act, and subject to approval by the Committee, by
surrendering sufficient vested options based on the difference between the
exercise price and the Fair Market Value at the time of exercise of the Shares
to equal the exercise price of the Shares to which the Option is being
exercised, or (iv) any combination of (i), (ii) or (iii).  Unless otherwise specifically 

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provided in an Option Agreement, the purchase
price of Shares acquired pursuant to an Option that is paid by delivery to the
Company of other Shares or attestation of ownership thereof acquired, directly
or indirectly from the Company, shall be paid only with Shares that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).

(c)           FORM OF OPTION AGREEMENT.  Each Option shall be evidenced by an Option
Agreement specifying the number of Shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Committee may
determine, subject to the provisions of the Plan.

5.             SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

(a)           NUMBER.  Subject to adjustment as provided in
paragraph (b) of this Section 5, the maximum aggregate number of Shares which
may be issued pursuant to Options granted under the Plan shall not exceed one
(1) million Shares.  To the extent any
Option granted under the Plan shall for any reason expire or otherwise
terminate or become unexercisable, in whole or in part, without having been
exercised in full, the Shares not acquired under such Option shall revert to
and thereafter be available for future grants under the Plan.

(b)           CAPITAL CHANGES.  In the event of any extraordinary dividend or
other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, reclassification, stock split, reverse stock
split, spin-off, or exchange of Shares or other securities of the Company,
issuance of warrants or other rights to purchase Shares or other securities of
the Company, or other similar corporate transaction or event (an “Event”), and
such Event affects the Shares such that an adjustment is reasonably determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan or with respect to an Option, then the Committee shall, in such manner as
it may reasonably deem equitable, take action to make the appropriate
adjustment, including, without limitation, adjusting any or all of the
following: (i) the number and kind of Shares (or other securities or property)
with respect to which Options may be granted or awarded; (ii) the number and
kind of Shares (or other securities or property) subject to outstanding Options;
and (iii) the grant or exercise price with respect to any Option; provided,
however, that no Committee action under this Section 5(b) shall result in a
reduction in the aggregate value of outstanding Options (whether or not vested)
held by any Participant immediately prior to the Event.  The Committee’s determination under this
Section 5(b) shall be final, binding and conclusive.  If any of the foregoing adjustments shall
result in a fractional Share, the fraction shall be disregarded, and the Company
shall have no obligation to make any cash or other payment with respect to such
a fractional Share.

(c)           SALE PROTECTION.  In the event that the Company’s Shares are
not readily traded on a national exchange or quotations system, and the Company
is sold in a sale or merger, the Fair Market Value of the Shares received upon
the exercise of each vested Option shall be the value per Share payable or used
in such transaction.

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(d)           TERMINATION OF OPTIONS. Unless
otherwise provided in an Option Agreement upon the occurrence of an Event, a
Change in Control (as defined in Section 11 below) or other corporate event or
transaction in which outstanding Options are not to be assumed or otherwise
continued following such an Event, Change in Control or other corporate event
or transaction, the Committee may, in its discretion, terminate any outstanding
Option without a Participant’s consent and (i) provide for the purchase of any
such Option for an amount of cash equal to the positive amount (if any) that
could have been attained upon the exercise of such Option or realization of the
Participant’s rights had such Option been currently exercisable or payable or
fully vested; and/or (ii) provide that such Option shall be exercisable
(whether or not vested) as to all Shares covered thereby for at least thirty
(30) days prior to such an Event, Change in Control or other corporate event or
transaction.

(e)           FUTURE TRANSACTIONS.  The existence of the Plan, any Option
Agreement and the Options granted hereunder shall not affect or restrict in any
way the right or power of the Company or the shareholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or other
change in the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Shares or the rights thereof
or which are convertible into or exchangeable for Shares, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

6.             EXERCISE OF STOCK OPTIONS.

(a)           VESTING.  Except as provided otherwise in this Plan or
the applicable Option Agreement, each Option shall become vested and
exercisable in three (3) equal installments such that the Option may be
exercised as to Shares covered by the first installment from and after the
first anniversary of the date of the grant of the Option, with the second and
third installments becoming vested and exercisable on the two succeeding
anniversary dates.  Except as provided
herein, or except as specifically restricted by the Committee, any Option may
be exercised in whole at any time or in part at any time to the extent that
such Shares under the Option are then vested and exercisable.  In no event, however, may any Option be
exercised after the expiration of its exercise period, as described in Section
6(b), below.

(b)           EXERCISE PERIOD.  Notwithstanding any provision herein to the
contrary, any Option granted pursuant to this Plan shall expire, to the extent
not exercised, no later than the tenth (10th) anniversary of the date on which
it was granted.  Such time or times shall
be set forth in the Option Agreement evidencing such Option.

(c)           NOTICE OF EXERCISE.  A Participant electing to exercise an Option
shall give written notice to the Company, as specified by the Option Agreement,
of his 

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election to purchase a specified number of
Shares.  Such notice shall be accompanied
by the instrument evidencing such Option and any other documents required by
the Company, and payment of the exercise price of the Shares the Participant
has elected to purchase.  If the notice
of election to exercise is given by the executor or administrator of a deceased
Participant, or by the person or persons to whom the Option has been
transferred by the Participant’s will or the applicable laws of descent and
distribution, the Company will be under no obligation to deliver Shares pursuant
to such exercise unless and until the Company is satisfied that the person or
persons giving such notice is or are entitled to exercise the Option.

(d)           TERMINATION OF EMPLOYMENT WITHOUT
CAUSE OR FOR GOOD REASON.

(i)            Unless specifically provided otherwise
in the Option Agreement, if the CEO’s employment is Terminated without Cause by
the Company or by the CEO for Good Reason during the term of his employment
agreement, all unvested Options of the CEO shall vest immediately and all
Options held by the CEO shall remain exercisable for one (1) year following
termination of employment, but in no event later than the expiration date of
such Option as specified in the applicable Option Agreement.  If the Option is not exercised during this
period it shall be void and deemed to have been forfeited and be of no further
force or effect.  In the CEO’s employment
terminates on September 30, 2007 upon expiration of the employment term under
his employment agreement, any unvested Options shall terminate immediately and
any vested Options shall remain exercisable for ninety (90) days following
termination of employment.  If the Option
is not exercised during this period, it shall be void and deemed to have been
forfeited and be of no further force or effect.

(ii)           Unless specifically provided
otherwise in the Option Agreement, if the employment of an Executive or
Discretionary Participant is Terminated without Cause by the Company or by the
Executive or Discretionary Participant for Good Reason, all unvested Options held
by the Executive or Discretionary Participant, as the case may be, shall
terminate immediately and any vested Options shall remain exercisable for six
(6) months following the date of such event, but in no event later than the
expiration of such Options as specified in the applicable Option
Agreement.  If the Option is not
exercised during this period, it shall be void and deemed to have been
forfeited and be of no further force or effect.

(e)           TERMINATION DUE TO DEATH, DISABILITY
OR RETIREMENT.

(i)            In addition to any rights under
Section 10, upon the death, Disability or Retirement of the CEO, all unvested
Options shall vest immediately and all Options held by the CEO shall remain
exercisable for one (1) year in the event of death or Disability and six (6)
months in the event of Retirement following the date of any such event, but in
no event later than the expiration date of Option as specified in the
applicable Option Agreement.  If the
Option is not 

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exercised during this period it shall be void
and deemed to have been forfeited and be of no further force or effect.

(ii)           In addition to any rights under
Section 10, upon the death or Disability of an Executive, a Director or a
Discretionary Participant, all unvested Options shall vest immediately and all
Options held by such Executive, Director, or Discretionary Participant, as the
case may be, shall remain exercisable for six (6) months following the date of
such event, but in no event later than the expiration date of such Option as
specified in the applicable Option Agreement. 
If the Option is not exercised during this period, it shall be void and
deemed to have been forfeited and be of no further force or effect.

(iii)          Upon the Retirement of the Executive,
a Non-Employee Director, or a Discretionary Participant, all unvested Options
shall terminate immediately and all vested Options held by such Executive,
Non-Employee Director or Discretionary Participant, as the case may be, shall
remain exercisable for six (6) months following the date of such event, but in
no event later than the expiration date of such Options as specified in the
applicable Option Agreement.  If the
Option is not exercised during this period, it shall be void and deemed to have
been forfeited and be of no further force or effect.

(f)            FORFEITURE BY REASON OF TERMINATION
FOR CAUSE OR WITHOUT GOOD REASON.

(i)            Notwithstanding the exercise period
described in Section 6(b), if the employment or service of a Participant or a
Director is Terminated for Cause by the Company, all rights or interests in any
Option, regardless of the extent to which it might otherwise have been vested
and exercisable on the date of such Termination for Cause, shall be void and
forfeited effective on the date of such Termination for Cause, and such Option
shall no longer be exercisable to any extent whatsoever.

(ii)           Unless specifically provided
otherwise in the Option Agreement, if the CEO’s employment is terminated by the
CEO without Good Reason, all unvested Options held by the CEO shall terminate
immediately and all vested Options held by the CEO shall remain exercisable for
thirty (30) days following termination, but in no event later than the
expiration date of such Option as specified in the applicable Option
Agreement.  If the Option is not
exercised during this period, it shall be void and deemed to have been
forfeited and be of no further force or effect.

(iii)          Unless specifically provided otherwise
in the Option Agreement, if the employment of any Participant other than the
CEO is terminated by the Participant without Good Reason, all vested and
unvested Options held by the Participant shall terminate immediately and all
rights or interests therein shall be void and forfeited effective on the date
of such termination.

 

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(g)           DISPOSITION OF TERMINATED STOCK
OPTIONS.  Any Shares subject to Options
which have been terminated and forfeited as provided above shall not thereafter
be eligible for purchase by the Participant but shall again be available for
grant by the Board or the Committee to other Participants.

7.             RESTRICTIONS ON RESALE OR DISPOSITION OF SHARES.

(a)           Reserved.

(b)           ISSUANCE OF SHARES AND COMPLIANCE
WITH SECURITIES LAWS.  The Shares are
being offered in reliance upon an exemption from registration provided by the
federal Securities Act of 1933, as amended (the “Securities Act”), and an
exemption from registration provided by applicable state securities laws.  Accordingly, a Participant may not sell or
transfer the Shares to any person other than the Company without registering
the Shares under the Securities Act or until the Participant has obtained an
opinion of legal counsel satisfactory to the Company that the sale or
disposition is exempt from such registration requirements.  A Participant has no right at any time to
require the Company to register the Shares under federal or state securities
laws.  Any person purchasing Shares upon
exercise of an Option issued pursuant to the Plan may be required to make such
representations and furnish such information as may, in the opinion of counsel
for the Company, be appropriate to permit the Company, in light of the
existence or nonexistence with respect to such Shares of an effective
registration under the Securities Act, or any similar state statute, to issue
the Shares in compliance with the provisions of those or any comparable
acts.  These restrictions are imposed by
federal and state securities laws.

(c)           SECURITIES RESTRICTIONS.  All certificates for Shares delivered under
the Plan shall be subject to such stock-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions.  If the Committee determines that the issuance
of Shares hereunder is not in compliance with, or subject to an exemption from,
any applicable federal or state securities laws, such shares shall not be
issued until such time as the Committee determines that the issuance is
permissible.

8.             NO CONTRACT OF EMPLOYMENT.  Unless otherwise expressed in a separate
writing signed by an authorized officer of the Company, all Employees are
employed for an unspecified period of time and are considered to be “at-will
employees.” Nothing in this Plan shall confer upon any Participant the right to
continue in the employ of the Company or any Subsidiary, nor shall it limit or
restrict in any way the right of the Company or any Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.

9.             NO RIGHTS AS A STOCKHOLDER.  A Participant shall have no rights as a
stockholder with respect to any Shares subject to an Option unless and until
the Participant duly exercises the Option, makes full payment of the Option
price and certificates evidencing 

 10
 

ownership of Shares are issued to the Participant.  Thereafter, cash dividends, stock dividends,
stock splits and other securities and rights to subscribe shall be paid or
distributed with respect to Shares acquired pursuant to the Plan in the same
manner as such items are paid or distributed to other shareholders of the
Company.  Adjustments to the number and
kind of Shares in the event of certain transactions shall be made as described
in Section 5(b).

10.           NONTRANSFERABILITY OF OPTIONS; DEATH
OR DISABILITY OF PARTICIPANT.  No Option
acquired by a Participant under the Plan shall be assignable or transferable by
a Participant, other than by will or the laws of descent and distribution, and
such Options are exercisable, during his lifetime, only by the Participant.  In the event of the Participant’s death or
Disability, the Option may be exercised by the personal representative of the
Participant’s estate or if no personal representative has been appointed, by
the successor(s) in interest determined under the Participant’s will or under
the applicable laws of descent and distribution during the exercise period set
forth in Section 6(e) herein.  During
such exercise period and only if price quotations for the Shares are NOT
available on any exchange or national market system, in the case of the death
or Disability of the CEO, an Executive, or a Discretionary Participant, such
individual in the case of Disability, or the beneficial holder of such Option
in the case of death, shall have the right during the exercise period provided
in Section 6(e)(i) or (ii), as applicable, and in accordance with procedures
that the Committee, in its discretion, may establish from time to time, to
demand that the Company purchase each vested Option at a value equal to the
value of the difference between the Fair Market Value of the Shares of the
Company and the exercise price of such Options.

11.           CHANGE IN CONTROL.  In the event of a “Change in Control” (as
defined below), the Board, in its discretion, may accelerate the vesting of all
Options without regard to the normal vesting schedule of the Options; provided
that, in the case of a Change in Control described in Sections 11(a) or (b), all Options shall vest immediately upon the occurrence of
the Change in Control.  If the Options
will continue to be outstanding following the Change in Control, such Options
will remain fully exercisable following the Change in Control and will not be
subject to any other vesting schedule, provided that such Options will expire
on the expiration date as specified in the applicable Option Agreement.  “Change in Control” shall mean the occurrence
of any one of the following events:

(a)           any “Person” other than an Existing
Substantial Shareholder (as defined below) becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing a majority of
the combined voting power of the Company’s then outstanding securities
(assuming conversion of all outstanding non-voting securities into voting
securities and the exercise of all outstanding options or other convertible
securities);

(b)           the following individuals cease for
any reason to constitute a majority of the number of Directors then serving:
individuals who, on the Effective Date, constitute the Board and any new Director
(other than a Director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to, 

 11
 

a consent solicitation, relating to the
election of Directors of the Company) whose appointment or election by the
Board or nomination for election by the Company’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the Directors then still
in office who either were Directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or recommended;

(c)           the consummation of a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation (other than with an Existing Substantial
Shareholder or any of its affiliates), other than (x) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent,
either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof, a majority of the combined voting
power of the securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (y) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person, is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing a
majority of the combined voting power of the Company’s then outstanding
securities; or

(d)           the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets, other than a sale or disposition
by the Company of all or substantially all of the Company’s assets to an entity
controlled by an Existing Substantial Shareholder or any of its affiliates, or
to an entity a majority of the combined voting power of the voting securities
of which is owned by substantially all of the stockholders of the Company
immediately prior to such sale in substantially the same proportions as their
ownership of the Company immediately prior to such sale.  As used herein the term “Existing Substantial
Shareholder” means any Person that alone or together with its affiliates shall
be the Beneficial Owner of or entitled to receive more than 15% of New Common
Stock as of the Effective Date.  As used
herein the term “Beneficial Owner” shall have the meaning set forth in Rule
13d-3 under the Exchange Act.  As used
herein the term “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any subsidiary of the Company, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities or (iv) a corporation
owned, directly or indirectly, by substantially all of the stockholders of the
Company in substantially the same proportions as their ownership of stock of
the Company.

12.           AMENDMENTS; DISCONTINUANCE OF
PLAN.  The Board may from time to time
alter, amend, suspend, or discontinue the Plan, including, where applicable,
any modifications or amendments as it shall deem advisable for any reason,
including satisfying the requirements of any law or regulation or any change
thereof; provided, however, except as provided in Section 5, that no such
action shall adversely affect the rights and obligations with 

 12
 

respect to Options at that time outstanding under the Plan;
and provided further, that no such action shall, without the approval of the
stockholders of the Company, (a) increase the maximum number of Shares of
common stock that may be made subject to Options (unless necessary to effect
the adjustments required by Section 5(b)).

13.           WITHHOLDING TAXES; TAXES SATISFIED BY
WITHHOLDING OPTIONED SHARES.

(a)           GENERALLY.  The Company or any Subsidiary may take such
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company or any Subsidiary is required by law or regulation of any
governmental authority, whether federal, state, or local, domestic or foreign,
to withhold in connection with any Option including, but not limited to,
requiring the Participant to pay such tax at the time of exercise or the
withholding of issuance of Shares to be issued upon the exercise of any Option
until the Participant reimburses the Company for the amount the Company is
required to withhold with respect to such taxes, or, at the Company’s sole
discretion, canceling any portion of such issuance of Shares in any amount
sufficient to reimburse itself for the amount it is required to so withhold.

(b)           SATISFYING TAXES BY WITHHOLDING
OPTIONED SHARES.  Option Agreements under
the Plan may, at the discretion of the Board or the Committee, contain a
provision to the effect that all federal and state taxes required to be
withheld or collected from a Participant upon exercise of an Option may be
satisfied by the withholding of a sufficient number of exercised Shares that
are subject to the Option which, valued at Fair Market Value on the date of
exercise, would be equal to the total withholding obligation of the Participant
for the exercise of such Option; provided, however, that if the Company is a
public reporting corporation, no person who is an “officer” of the Company, as
such term is defined in Rule 3b-2 under the Exchange Act, may elect to satisfy
the withholding of federal and state taxes upon the exercise of an Option by
the withholding of exercised Shares that are subject to the Option, unless such
election is made either (i) at least six (6) months prior to the date that the
exercise of the Option becomes a taxable event or (ii) during any of the
periods beginning on the third business day following the date on which the
Company issues a news release containing the operating results of a fiscal
quarter or fiscal year and ending on the twelfth business day following such
date.  Such election shall be deemed made
upon receipt of notice thereof by an officer of the Company, by mail, personal
delivery, or by facsimile message, and shall (unless notice to the contrary is
provided to the Company) be operative for all Option exercises which occur
during the twelve-month period following the election.

14.           EFFECTIVE DATE AND TERM OF PLAN.  The Plan is effective as of the Effective
Date and Options may be granted at any time on or after such date.  No Options shall be granted subsequent to August
30, 2014 (which is ten (10) years after the effective date of the Plan).

 13

EXHIBIT A

	
  Position

  	
   

  	
   

  	
   

  	
  % of Options

  	
   

  	
  Option Shares

  	
   

  
	
  President & CEO

  	
   

  	
   

  	
   

  	
  20

  	
   

  	
  200,000

  	
   

  
	
  VP Finance & CFO

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  100,000

  	
   

  
	
  VP Marketing &
  International

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  100,000

  	
   

  
	
  VP Operations — Kokomo

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  100,000

  	
   

  
	
  VP IT & Business
  Planning

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Corporate Affairs

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Engr. & Tech.

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  Controller & CAO

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Sales

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Manufacturing
  Planning

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  GM Arcadia

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  Options reserved for
  distribution to Directors

  	
   

  	
   

  	
   

  	
  9

  	
   

  	
  90,000

  	
   

  
	
  Options reserved for
  distribution to Discretionary Participants

  	
   

  	
   

  	
   

  	
  6

  	
   

  	
  60,000

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  100

  	
   

  	
  1,000,000EXHIBIT
10.31

FORM OF INDEMNIFICATION AGREEMENT

This Indemnification Agreement (this “Agreement”),
dated as of this      day of March, 2007, is made by and
between Haynes International, Inc., a Delaware corporation (the “Company”),
and Anastacia S. Kilian (“Indemnitee”).

RECITALS:

WHEREAS, Indemnitee, in her
capacity as Vice President — General Counsel of the Company, may be asked to
deliver legal opinions (collectively, the “Opinions”) in connection with
transactions the Company or its subsidiaries may enter into from time to time,
including, without limitation, the public offering of shares of the Company’s
common stock, par value $0.001 per share, in an offering underwritten by a
syndicate of underwriters represented by J.P. Morgan Securities Inc., or any
other offering of the Company’s securities;

WHEREAS, Indemnitee’s
willingness to provide Opinions is predicated, in substantial part, upon the
Company’s willingness to indemnify her in connection therewith to the fullest
extent permitted by the laws of the State of Delaware, and upon the other
undertakings set forth in this Agreement;

WHEREAS, in recognition of the
need to provide Indemnitee with substantial protection against personal
liability, in order to procure Indemnitee’s consent to deliver Opinions and in
order to provide such protection pursuant to express contract rights, intended
to be enforceable irrespective of, among other things, any provision of the
Company’s Restated Certificate of Incorporation, as amended from time to time,
or Amended and Restated By-Laws, as amended from time to time, the Company
desires to provide in this Agreement for indemnification of, and advancement of
Expenses (as defined below) 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)           “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.

(b)           ““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.

(c)           “Expenses”
means all attorneys’ 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

(d)           “Indemnifiable
Claim” means any Claim based upon, arising out of or resulting from any
actual, alleged or suspected incorrect statement of law or fact set forth in
any of the Opinions.

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

(f)            “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.

 2
 

(g)           “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.

(h)           “Opinions”
has the meaning set forth in the Recitals to this Agreement.

(i)            “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 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 

 3
 

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, 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 

 4
 

Indemnifiable Claim (a “Standard of Conduct Determination”)
shall be made as follows: (i) if 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 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
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 evaluating of 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 

 5
 

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 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 

 6
 

has satisfied the applicable standard of conduct, and the Company may
overcome such presumption only by 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.

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 an 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
and would provide coverage for acts of the Company’s in-house general counsel.
The Company shall provide Indemnitee with a copy of all directors’ and officers’

 7
 

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. 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 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). 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 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 

 8
 

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)
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 

 9
 

“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.

(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.: Chief Financial Officer

  
	
   

  	
   

  	
  Tel.: (765) 456-6129

  
	
   

  	
   

  	
  Fax: (765) 456-6985

  
	
   

  	
   

  	
   

  
	
  If to
  Indemnitee:

  	
   

  	
  Anastacia S. Kilian

  
	
   

  	
   

  	
  ___________________

  
	
   

  	
   

  	
  ___________________

  
	
   

  	
   

  	
  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 

 10
 

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
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.

 11
 

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.

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]

 12
 

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: Marcel
  Martin

  
	
   

  	
   

  	
  Title: Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “INDEMNITEE”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Anastacia S.
  Kilian

  

 

 13

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