Document:

Exhibit 10.25

HAYNES INTERNATIONAL, INC.

2007 STOCK OPTION PLAN

As
adopted by the Board of Directors on January 18, 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
through the granting of stock options. 
The Haynes International, Inc. 2007 Stock Option Plan (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.

Accordingly, the Company’s Board of Directors adopts
this Plan, 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)      “Effective Date” means
the date this Plan is approved by the Board of Directors.

(i)       “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.

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

(k)      “Fair Market Value” per
share as of a particular date means the last reported sale price (on the last
trading day immediately preceding such date) of the Shares quoted on the NASDAQ
Global Select Market, the NASDAQ Global Market or the NASDAQ Capital 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.

(l)       “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.

(m)     “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.

(n)      “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.

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

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

(q)      “Plan” means this Haynes
International, Inc. 2007 Stock Option Plan as provided herein and as may be
amended from time to time.

(r)       “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.

(s)      “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.

(t)       “Share” means a share of
common stock, $0.001 par value, of the Company, as may be adjusted in
accordance with Section 5(b) below.

(u)      “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.

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(v)      “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.

(w)     “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.

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(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
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 may be made from time to
time in the discretion of the Committee to any Employee or Non-Employee
Director.  In determining the Employees
and Non-Employee Directors to receive Options and the extent of their
participation in the Options granted under this Plan, the Committee shall take
into account such factors as the Committee deems relevant in its discretion in
furtherance of the purposes of this Plan.

(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.

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(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 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 five hundred thousand (500,000)
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 

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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.

(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 

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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 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.  Unless specifically provided otherwise in the
Option Agreement, if the employment of an Optionee is terminated for any reason
other than Cause, death, Disability or Retirement, all unvested Options held by
the Optionee on the date of termination shall terminate immediately and any
vested Options shall remain exercisable for thirty (30) days following the date
of termination, 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)      DEATH, DISABILITY OR RETIREMENT.

(i)            In addition to any rights under
Section 10, upon the death or Disability of an Optionee, all unvested Options
shall vest immediately and all Options held by such Optionee 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.

(ii)           Upon the Retirement of the Optionee,
all unvested Options shall terminate immediately and all vested Options held by
such Optionee 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 

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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.  Notwithstanding the exercise
period described in Section 6(b), if the employment or service of an Optionee
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.

(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 Optionee but shall again be available for grant
by the Board or the Committee to other Participants.

7.             COMPLIANCE WITH SECURITIES LAWS.

(a)      ISSUANCE OF SHARES AND COMPLIANCE WITH
SECURITIES LAWS.  No Shares shall be
issued upon the exercise of any Option unless the issuance of such Shares is
the subject of an effective registration statement under the federal Securities
Act of 1933, as amended (the “Securities Act”), and applicable state securities
laws, or unless, in the opinion of counsel to the Company, the issuance would
be exempt from the registration requirements of the Securities Act and such
state laws.  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.

(b)      SECURITIES RESTRICTIONS.  All certificates for Shares delivered under
the Plan shall be subject to such stop-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 

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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 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 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) 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);

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(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, 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 more than 15% of
the Outstanding 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.

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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 respect to Options
at that time outstanding under the Plan; and provided further, that if and for
so long as the Company is subject to the NASDAQ Marketplace Rules or the
similar requirements of any other securities exchange on which the Shares are
listed or quoted, no such action shall, without the approval of the
stockholders of the Company, 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.

 11
 

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
January 18, 2017 (which is ten (10) years after the effective date of the
Plan).

 

 12Exhibit 10.26

 

 

	
  

  	
  Haynes International, Inc.

  
	
   

  	
  1020 West Park Avenue

  
	
   

  	
  P.O. Box 9103

  
	
   

  	
  Kokomo, Indiana 46904-9013

  
	
   

  	
  765-456-6000 / Fax: 765-456-6905

  

 

	
  

  	
  ,

  	
    20

  	
   

  	
   

  

 

FORM
OF

HAYNES INTERNATIONAL, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

	
  Dear

  	
   

  	
  :

  

 

The Compensation Committee of the Board of Directors
of Haynes International, Inc. (the “Company”) on                                  ,
20       (“Date of Grant”) has granted you an
option (the “Option”) to purchase                               
Shares of the Company’s Common Stock, $0.001 par value, pursuant to the Haynes
International, Inc. 2007 Stock Option Plan, dated as of January 18, 2007 (the “Plan”),
upon the following terms and conditions of this Nonqualified Stock Option
Agreement (“Agreement”):

1.             PURCHASE PRICE OF THE OPTION.  The purchase price of the Shares subject to
the Option is $                       
per Share which is equal to the Fair Market Value per Share as of the Date of
Grant.  You must pay this purchase price
by personal or bank cashier’s check at the time the Option is exercised;
provided, however, that, with the approval of the Committee, you may exercise
the Option by (i) tendering to the Company certificates representing whole
Shares owned by you duly endorsed for transfer, or (ii) surrendering a
sufficient portion of the vested Option based on the difference between the
exercise price of the Option and the Fair Market Value at the time of exercise
of the Shares subject to the Option, or (iii) any combination of (i) and/or
(ii) and cash, together having a Fair Market Value equal to the exercise price
of the Shares with respect to which the Option is exercised.  For this purpose, any Shares so tendered or
withheld shall be deemed to have a Fair Market Value as determined under the
Plan.

To exercise the Option, you must send written notice
to the Committee at the address provided in SECTION 11 of this Agreement.  Such notice shall (1) state the number of
Shares being purchased pursuant to the Option; (2) be signed by the person or
persons exercising the Option; and (3) be accompanied by payment of the full
purchase price of such Shares (as provided above).  Certificates evidencing Shares of the Company
shall not be delivered to you until an appropriate notice has been delivered
and payment has been made.

2.             OPTION TERM AND VESTING.  The term of the Option (the “Option Term”)
shall be a period of ten (10) years from the Date of Grant, subject to earlier
termination as provided in SECTIONS 3 and 4 or as may be provided in the Plan.  Except as otherwise provided below in SECTIONS
3 or 4 which provide for accelerated vesting under certain circumstances, the
Option shall become exercisable with respect to 33-1/3 percent of the total
number of Shares covered by the Option on the first anniversary of the Date of
Grant and with respect to an additional 33-1/3 percent on each of the second
anniversary and the third 

anniversary of the Date of Grant, respectively.  When the Option becomes exercisable with
respect to any Shares, those Shares may be purchased at any time, or from time
to time, in whole or in part, until the Option Term expires, subject to the
terms of this Agreement and the Plan.

3.             TERMINATION OF EMPLOYMENT OR SERVICE.

(a)           Notwithstanding the vesting schedule
set forth in SECTION 2, if you cease to be an Employee or a Non-Employee
Director (as applicable) of the Company or a Subsidiary (as applicable) due to
a Termination for Cause, all outstanding Options whether vested or unvested
shall be void and deemed to be forfeited upon the date your employment or
service ceases and shall not be exercisable to any extent whatsoever.

(b)           If you cease to be an Employee or a Non-Employee
Director (as applicable) of the Company or a Subsidiary (as applicable) for any
reason other than Cause, death, Disability or Retirement, the unvested portion
of the Option shall terminate immediately and the vested portion of the Option
that is exercisable as of the date employment ceases shall remain exercisable
for thirty (30) days following such termination, but not later than the
expiration of the Option Term.  If you do
not exercise the Option during such period, the Option shall be void and deemed
to have been forfeited upon the expiration of such period and shall be of no
further force or effect.

(c)           If you cease to be an Employee or a
Non-Employee Director (as applicable) of the Company or a Subsidiary (as
applicable) by reason of your death or Disability, the unvested portion of the
Option shall immediately vest and become exercisable and the Option shall
remain exercisable for six (6) months following the date of death or
Disability, but not later than the expiration of the Option Term.  If you, or your authorized representative in
the case of death, do(es) not exercise the Option during such period, the
Option shall be void and deemed to have been forfeited upon the expiration of
such period and shall be of no further force or effect.

(d)           If you cease to be an Employee or a
Non-Employee Director (as applicable) of the Company or a Subsidiary (as
applicable) by reason of your Retirement, the unvested portion of the Option
shall terminate immediately, and the vested portion of the Option that is
exercisable as of the date your employment or service ceases shall remain
exercisable for six (6) months following the date of such Retirement, but not
later than the expiration of the Option Term.  If you do not exercise the Option during such
period, the Option shall be void and deemed to have been forfeited upon the
expiration of such period and shall be of no further force or effect.

(e)           If you cease to be an Employee or a Non-Employee
Director (as applicable) of the Company or a Subsidiary (as applicable) by
reason of your Disability or death and only if price quotations for the Shares
are not available on any exchange or national market system, you or the
beneficial holder of the Option, as the case may be, shall have the right
during the exercise period provided in SECTION 3(c) above to demand that the
Company purchase the vested portion of the Option from you, or such beneficial
holder, at a value equal to the difference between the Fair Market Value of the
Shares subject to the Option and the exercise price of such Option.

 2
 

4.             ADJUSTMENT; CHANGE IN CONTROL.

(a)           The Option may be adjusted or
terminated in any manner as contemplated in the Plan.

(b)           Unless the Committee determines
otherwise in accordance with the terms of the Plan, upon the occurrence of a
Change in Control all Options shall become exercisable as and to the extent set
forth in Section 11 of the Plan.

(c)           Except as provided herein, the Option
may be exercised in whole at any time or in part at any time to the extent that
the Shares under the Option are then exercisable.  In no event, however, may the Option be
exercised after the expiration of the Option Term, as described in SECTION 6
below.

5.             TRANSFER RESTRICTIONS.  The Option is non-transferable otherwise than
by will or the laws of descent and distribution.  It may be exercised only by you, or if you
die, by your executor, administrator, or person(s) to whom the Option is
transferred by will or the laws of descent and distribution in accordance with
SECTION 3.

6.             EXPIRATION OF AGREEMENT.  All rights to exercise the Option shall expire,
in any event, upon the expiration of the Option Term.

7.             SHARE CERTIFICATES.  Certificates evidencing Shares issued upon any
exercise of the Option may bear a legend setting forth among other things such
restrictions on the disposition or transfer of the Shares as the Company may
deem appropriate to comply with federal and state securities laws.

8.             IMPACT OF AGREEMENT ON YOUR EMPLOYMENT OR SERVICE.  Nothing contained in this Agreement or the
Plan shall restrict the right of the Company or any of its Subsidiaries to
terminate your employment or service at any time with or without Cause subject
to any written employment agreement.

9.             AGREEMENT IS SUBJECT TO PLAN.  This Agreement is subject to all terms,
provisions, and conditions of the Plan, which is incorporated herein by
reference and to such regulation as may from time to time be adopted by the
Committee.  In the event of any conflict
between the provisions of the Plan and the provisions of this Agreement, the
terms, conditions, and provisions of the Plan shall control, and this Agreement
shall be deemed to be modified accordingly.

10.           NATURE OF OPTION.  This Agreement is intended to grant a
Nonqualified Option.

11.           NOTICE.  All notices by you to the Company and your
exercise of the Option shall be addressed to Haynes International, Inc., 1020
West Park Avenue, P.O. Box 9013, Kokomo, IN 46902, ATTENTION: Compensation
Committee, or such other address as the Company may, from time to time specify.

 3
 

12.           SECURITIES LAWS.  Notwithstanding anything contained in this
Agreement or in the Plan to the contrary, the Option may not be exercised until
all applicable federal and state securities requirements pertaining to the
offer and sale of the securities issued pursuant to the Plan have been met and
the Company has been advised by counsel satisfactory to the Company that all
applicable requirements have been met.  If
requested by the Committee, you agree to deliver to the Company such signed
representations and covenants as may be necessary, satisfactory to the Company
in the opinion of counsel, for compliance with applicable federal and state
securities laws and such other instruments and agreements as the Committee may
reasonably request.

13.           WITHHOLDING.  The Company shall have the right to withhold
from your regular cash compensation, if any, or from any payments under this
Agreement, or require you to submit, amounts sufficient to satisfy any federal,
state, or local income or employment tax withholding requirements arising from
your exercise of any rights under this Agreement or make such other
arrangements satisfactory to the Company with regard to such taxes, including
the withholding of Shares of common stock that are subject to the Option, at
such time as the Company deems necessary or appropriate for compliance with
such laws.

14.           DEFINITIONS.  All capitalized terms not otherwise defined
herein shall have the meanings assigned to them in the Plan.

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  HAYNES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Chairman of the Board

  

 4
 

ACCEPTANCE
OF NONQUALIFIED STOCK OPTION AGREEMENT

I hereby accept the terms and provisions of this
Nonqualified Stock Option Agreement, dated                 ,
20     (“Agreement”), and the Haynes International, Inc. (“Company”)
2007 Stock Option Plan dated as of January 18, 2007 (“Plan”).  I acknowledge that I have received a copy of
the Plan, and I am familiar with the terms and provisions of the Plan and the
Agreement.  I agree to accept as binding,
conclusive, and final all decisions and interpretations of the Company’s Board
of Directors and Committee upon any questions arising under the Plan or this
Agreement.

Dated this          
day of                                  ,
20   .

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Printed Name

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address

  

 

 5

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